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Directors Report of Simbhaoli Sugars Ltd.

Mar 31, 2014

The members of Simbhaoli Sugars Limited

The directors have pleasure in placing the directors'' report together with management discussion and analysis report for the financial year ended on March 31, 2014.

FINANCIAL RESULTS, ANALYSIS AND REVIEW

A summary of the stand alone financial results of the Company for the year ended March 31, 2014 is stated as under.

Particulars Year ended Year ended Mar 31, 2014 Mar 31,2013

Net Sales/Income from operations 83,578 88,494

Other Income 2,812 1,704

Profit/(Loss) before Interest, depreciation 835 (1,695) and exceptional items

Interest expense 14,181 11,198

Depreciation 2,795 3,591

(Loss) before tax & exceptional items (16,142) (16,484)

Exceptional Gains/(Loss) (1,058) 17,486

Tax expense 23 20

Deferred tax benefit/(charge) - (4,748)

Net (Loss) afteTTx (17,223) (3,946)

During the year, the business of the Company has been affected adversely on account of delay in start of the sugar plants, high sugarcane prices, low sugar prices, and high finance and other fixed costs. In view of the absence of distributable profits, and substantial carried forward business losses, the directors express their inability to recommend any dividend for the year.

The Company is implementing a Scheme of Amalgamation with Simbhaoli Spirits Limited, having appointed date as March 31, 2014 (the Scheme). The financial figures of the amalgamated entity after implementation of the Scheme will significantly vary particularly with reference to the share capital structure, reserves and surplus, and net worth. The impact of these changes pending final approval of the Scheme has not been considered in these accounts and therefore, not commented.

The following is summary of financial review for the year: Share Capital: There was no movement in share capital during the year.

Reserves and Surplus: The following movement has taken place during the year:

(i) Revaluation reserve: Deduction of Rs. 37.42 lacs, (previous year Rs. 57.05 lacs) being amount transferred to Profit and Loss Account.

(ii) Capital grant in aid: Increased by Rs. 112.89 lacs, Rs 120 lacs received during the year on account of Bio-gas Engine set up in Brijnathpur Ethanol Unit and adjustments for amount utilised during the year, Rs 7.11 lacs.

(iii) Share option account: Rs 37.11 lacs transferred to P&L account.

Pending completion of restructuring under the Scheme, the Net worth of the Company shows a negative balance of Rs 163.46 crore (previous year Rs 8 crore positive). However, on implementation of the Scheme, the net worth will turn into positive.

Long term borrowings: Long term borrowings have reduced by Rs. 64.68 crore during the year. Against this, Rs 46.38 (net) has been repaid to the lenders, (previous year Rs. 62.34 lacs). The loan accounts of the Company remained regular with the lending banks.

Short term borrowings: Unsecured short term borrowings have increased by Rs 459.83 crore (net) principally on account of re-classification of agri loan liabilities due to certain banks from Current liabilities to Short term borrowings. Fixed assets: Addition to the fixed assets aggregating Rs 16.10 crore (previous year Rs 15.52 crore) includes the following:

i) Rs. 6.48 crore for setting up Biogas engine at Brijnathpur ethanol division

ii) Rs. 7.02 crore for setting up Zero mill house at Chilwaria Sugar division

iii) Rs. 2.60 crore on account of miscellaneous assets

The Company has deducted Rs. 2.83 crore (previous year Rs 183.6 crore) from fixed assets:

i) Diesel generating sets of Rs. 73.21 lacs,

ii) Components of the boiler of Rs 31.38 lacs, and

iii) Rs. 1.75 crore on account of miscellaneous assets.

Investments: The Company has following investments as on March 31, 2014:

(Rs in lacs)

Particulars Opening Additions Balance as balance during the on March 31 as on year 2014 April 1 2013

(i) 2,00,800 equity shares of Rs 10 38 - 38 each in Integrated Casetech Consultants Private Limited

(ii) 2,74,56,690 Equity shares of 6,994 232 7226 Rs. 10 each in Uniworld Sugars Pvt. Ltd

(iii) 300 Equity Shares of AED 1000 40 - 40 each in Simbhaoli Global Commodities DMCC

(iv) 3,18,00,000 Equity shares of 25,405 - 25,405 Rs. 10 each in Simbhaoli Spirits Ltd

(v) 19,29,705 Equity shares of 517 1,368 1,885 Rs. 10 each in Simbhaoli Power Pvt Ltd

(vi) 28,94,573 debentures of 0 2,894 2,894 Rs. 100 each of Simbhaoli Powers Pvt.Ltd

(vii) Others 2 - 2

Investments at the end of the year 32,996 4,494 37,490

Inventories: : Inventory amounting to Rs 456.60 crore (previous year Rs 544.16 crore) includes finished goods, raw material, process stocks, and store items. The sugar at the year end is valued at net realizable value of Rs 3,231 per qtl (previous year Rs 3,233 per qtl).

Sundry debtors: Sundry debtors (net) amounting to Rs. 65 crore (previous year, Rs. 74.03 crore), are considered good and realisable. Provisions are generally made for all debtors outstanding for over 360 days subject to their scope of realization, industry trend and management''s perception. Debtors are at 7.53% (previous year 8.12%) of gross revenues, representing an outstanding of 27 days (previous year 30 days).

Cash and Bank Balance: Cash and bank balance of Rs 34.31 crore (previous year Rs 83.33 crore) includes fixed deposits of Rs 25.82 crore out of which Rs 22.30 crore are

pledged with banks for securing certain loans, letters of credit, guarantees and other facilities.

Other Current Assets: Other current assets of Rs 153.08 crore (previous year Rs 162.68 crore), comprise a receivable of Rs 134.74 crore (previous year Rs 145.23 crore) against slump sale of Power business of the Company to Simbhaoli Power Private Limited. A part of this has been realized subsequent to the end of financial year.

Trade payables, other current liabilities, and provisions: Trade payables at Rs 453.58 crore (previous year Rs 868.15 crore) are reduced by Rs 414.57 crore, on account of reclassification of agri loan liabilities to short term unsecured borrowings. The liability includes amount payable against sugarcane supply, other raw materials, stores and services. The other current liabilities of Rs 152.77 crore (previous year Rs 112.0 crore) reflects amount payable against finance charges and other miscellaneous liabilities. There is no significant movement under the head short term provisions during the year.

Sales and other income: Sales and other income (net of excise) is Rs. 863.90 crore (previous year Rs. 901.98 crore). The segment wise allocation of revenues for the year 2013- 14 and for preceding two accounting years is as under: (Rs. in lacs)

Years/ Sugar Alcohol Power Segment Turnover %age Turnover %age Turnover %age

2010-12* 107,206 86.75 10,389 8.41 5,987 4.84

2012-13 80,841 88.65 8,258 9.06 2087 2.29

2013-14 78,331 90.68 8,050.40 9.32 - -

*consisting of a period of 18 months

The other income of Rs 28.12 crore (previous year Rs 17.04 crore) comprises interest, rent, dividend from subsidiary companies, foreign exchange fluctuation and miscellaneous earnings.

Raw Material Consumption: Sugarcane, molasses and raw sugar are the principal raw materials purchased by the Company. There has been a reduction of Rs 50.10 crore in raw material consumption on account of lower raw sugar procured and consumed during the year and accounting of benefits announced by the State Government related to sugarcane price.

Employees cost: The employee cost at Rs 46.77 crore (previous year Rs 43.52 crore), has increased by Rs 3.25 crore on account of higher provisions for retirement benefits and general increments.

Finance cost: Finance costs of Rs 141.81 crore (previous year Rs 111.98 crore) has increased by Rs 29.83 crore on account of resetting of rate of interest on certain loans for current as well as previous years and high utilization of working capital limits.

Other Expenses: Other expenses at Rs 82.75 crore are showing a reduction of Rs 26.73 crore, on account of overall cost reduction measures implemented by the Company. Extraordinary Expenditure and Event: During the year, based upon the findings of internal enquiries and investigations, a shortage of finished goods amounting to Rs. 10.58 crore has been detected in the Simbhaoli and Brijnathpur sugar units of the Company. Following its internal policies, the Company has initiated requisite legal actions including termination of employment of certain senior executives for misappropriation of the Company''s assets, financial irregularities and breach of fiduciary duties committed by them. The resultant loss to the Company has been written off in the books of accounts; though, steps have been initiated for recovery of direct and indirect losses caused by such mis-appropriation.

Accounting policies

The financial statements of the Company have been prepared in accordance with the Generally Accepted Accounting Principles in India (Indian GAAP) to comply with the Accounting Standards notified under Section 211(3C) of the Companies Act, 1956 (which continue to be applicable in respect of Section 133 of the Companies Act, 2013 ("the 2013 Act") in terms of General Circular 15/2013 dated 13th September, 2013 of the Ministry of Corporate Affairs) and the relevant provisions of the 1956 Act/ 2013 Act, as applicable. The financial statements have been prepared on accrual basis under the historical cost convention method as modified to include the revaluation / business valuation of certain fixed assets as indicated in Notes to account. The accounting policies adopted in the preparation of the financial statements are consistent with those followed in the previous year.

The Board of Directors of the Company accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair view of the state of the affairs of the Company.

Debt servicing and public deposits

The Company has been able to meet its obligations towards the lenders for principal and interest, in terms with the respective letter of sanctions/approvals. The Company does not have any public deposits.

AUDITORS'' REPORT

The comments on the statement of account referred to in the report of the auditors are self-explanatory and explained in the appropriate notes to accounts.

DIRECTORS

At the forthcoming 77th Annual General Meeting (AGM) of the Company, Mr. Sanjay Tapriya, Director on the Board of the Company, is retiring by rotation and is being eligible, has offered himself for re-appointment. During the year, Justice C K Mahajan and Mr S N Misra have been appointed as additional directors on the Board of the Company to broad base the composition of the Board. Mr. Mahajan is an independent director and Mr. Misra is designated as Group Technical Advisor. Their brief profiles are given below:

(i) Justice Mahajan(Retd.), M.A. LL.B. has practiced in Delhi High Court, Supreme Court, Subordinate Courts and other Tribunals in Delhi, apart from High Courts of Himachal Pradesh and Punjab and Haryana in Civil, Service and Company matters. He was appointed as an Additional Judge of the Delhi High Court and then became permanent Judge.

(ii) Mr. S N Misra, is B. Sc. from Gorakhpur University,

A.N.S.I. from National Sugar Institute, Kanpur. He worked in Simbhaoli Sugars Limited (SSL) for about 22 years and then joined Bajaj Hindustan Ltd., and Balrampur Chini Mill Group. He rejoined the Company at the Board level last year.

The directors welcome Mr. Misra and Justice Mahajan on the Board of the Company.

During the year, the services of Dr G S C Rao, the then Whole Time Director and Group Chief Executive Officer were terminated as whole time director and considering his resignation, he ceased to be a director on the Board of the Company with effect from Sept 11, 2013.

SUBSIDIARY COMPANIES

The Company has four subsidiary Companies, viz. Simbhaoli Spirits Limited, Simbhaoli Power Private Limited, Integrated Casetech Consultants Private Limited, and Simbhaoli Global Commodities DMCC, Dubai. The consolidated financial statements presented by the Company include financial information of its subsidiary companies prepared in compliance with applicable accounting standards.

As per the general exemption granted by Ministry of Corporate Affairs, from attaching the balance sheet of subsidiary company (s) with the balance sheet of the holding company, statement showing the financial parameters is forming part of this annual report. The Company also confirms that the annual accounts of the subsidiary companies and the related detailed information will be made available to any investor at the corporate/registered office of the Company and that of the subsidiary company.

EMPLOYEE STOCK OPTION SCHEME Under Simbhaoli Sugars Limited-Employee Stock Option Scheme 2007, all the balance stock options have lapsed on expiry of vesting period. No fresh stock options have been introduced during the year.

CORPORATE GOVERNANCE

The report on corporate governance along-with certificate from the practicing company secretary and certificate from Chairman, Managing Directors, and Chief Financial Officer form part of this annual report.

LISTING OF SECURITIES

The equity shares of the Company are listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, Foreign exchange aggregating to Rs 19.91 crore (previous year Rs. 27.07 crore) was earned by the Company against the export and no amount was spent in foreign currency.

RESEARCH AND DEVELOPMENT

The details relating to Research and Development activities carried out by the Company are stated in Annexure of this Report.

CONSERVATION OF ENERGY

Details of steps taken for conserving the energy are stated in Annexure to this report.

PARTICULARS OF EMPLOYEES

None of the employees are being paid the remuneration, as required to be disclosed under the relevant provisions of the Companies Act, 1956/2013 and rules made there under. AUDITORS

The Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, New Delhi, retire at the ensuing annual general meeting of the Company and, being eligible, offers themselves for re-appointment. You are requested to re-appoint them for the next three financial years 2014-15, 2015-16 and 2016- 17 and empower the Board to fix their remuneration based on the actual cost incurred on time scale basis. The aforesaid appointment shall be subject to the ratification each year by the shareholders of the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(5) of the Companies Act, 2013, read with the Rules made there under, with respect to the Directors'' responsibility statement, it is hereby confirmed:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as on March 31, 2014 and of the profit and loss of the Company for the year ended on that date;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 and the transitional provisions under Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

(f) the directors had devised proper systems to ensure compliance with the provisions of all the applicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

The Board of Directors acknowledge the continued assistance and guidance provided by the Government of India, State Government of Uttar Pradesh, lender banks and institutions and the co-operation and assistance received from all executives, staff and workmen of the Company. The Directors also wish to emphatically state their gratitude to the Indian Sugar Mills Association, farmers, suppliers and all other concerned persons who have continued their valuable support to your Company.

For and on behalf of the Board of Directors Simbhaoli Sugars Limited

New Delhi Gurmit Singh Mann May 27, 2014 Chairman


Mar 31, 2013

To the members of Simbhaoli Sugars Limited

The directors have pleasure in placing the directors'' report together with management discussion and analysis report for the financial year ended on March 31, 2013.

FINANCIAL RESULTS AND ANALYSIS

A summary of the stand alone financial results of the Company for the year ended March 31, 2013 is stated as under. The results do not include the results of Simbhaoli Spirits Limited for full year and Simbhaoli and Chilwaria power businesses from the period starting January 26, 2013 onwards.

(Rs in lakh)

Particulars Year ended 18 months Mar 31, 2013 period ended Mar 31, 2012

Net Sales/Income from operations 88,424 1,19,953

Other Income 1,774 5,131

Profit/(Loss) before Interest, depreciation and exceptional items (1,695) 9,318

Interest expense 11,198 15,415

Depreciation 3,591 5,745

Profit /(Loss) before tax & exceptional items (Loss) (16,484) (11,840)

Exceptional Gains (net) 17,486 9,306

Tax expense 201 378

Deferred tax benefit/(charge) (4,748) 4,455

Net Profit/(Loss) after Tax (3,946) 1,542

During the year, the business of the Company has been affected adversely on account of lower capacity utilisation, low sugar recoveries in the state of Uttar Pradesh, lower sugar prices, and higher finance cost. In view of absence of distributable profits, substantial carried forward business losses, and need to conserve cash, the directors express their inability to recommend any dividend for the year.

The current financial year is for twelve months from April 1, 2012 to March 31, 2013 whereas the corresponding previous period figures are for a period of eighteen months from October 1, 2010 to March 31, 2012 and the same are not directly comparable. The analysis of the audited Balance Sheet of the Company as at March 31, 2013 and Profit and Loss account for the 12 months period ended on that date is reported as under:

Share Capital

The following movement in the share capital has taken place during the year:

(i) Authorised Share Capital: The authorised share capital of the Company is increased and rescheduled from Rs. 40 crore divided into 3.8 crore equity shares of Rs.10 each and 2 lakh preference shares of Rs. 100 each to Rs. 75 crore divided into 3.5 crore equity shares of Rs.10 each and 40 lakh preference shares of Rs. 100 each.

(ii) ESOPs: Nil (previous period 32,190) equity shares were issued and allotted to the employees under ESOP.

(iii) Issue of Equity shares: Nil (previous period 30,00,000) equity shares were issued on preferential basis.

(iv) Issue of warrants: Nil (previous period 25,00,000) equity warrants were issued and allotted to specified promoters.

(v) Issue of Cumulative Redeemable Preference Shares (CRPS): 32,00,000 (previous period Nil) 8 percent CRPS of Rs. 100 each at par of value of Rs. 32 crore were issued and allotted to the specified promoters and selective investors of the Company.

(vi)Conversion of Warrants: 6,57,500 (previous period 13,42,500) equity shares issued and allotted on conversion of 6,57,500 warrants. The warrant holders have not exercised the conversion option and remaining 5,00,000 warrants have lapsed due to non-subscription.

Reserves and Surplus

The following movement has taken place during the year under the reserves and surplus head:

(i) Revaluation reserve: Deduction of Rs. 57 lakh due to depreciation charged on re-valued amount of fixed assets.

(ii) Securities Premium account: Increased by Rs. 2.4 crore on account of issue and allotment of equity shares on conversion of warrants.

Total shareholders'' funds of the Company are Rs 8 crore (previous period Rs. 14.55 crore). The book value of each equity share is Rs. 2.8 (previous period Rs. 5.3).

Secured loans

The loan accounts of the Company remained regular with the lending banks. The revision in the last restructuring carried out under corporate debt restructuring scheme of RBI has been recognised during the year under report.

Unsecured loans

Short term loans standing at Rs 25 lakh at the beginning of the year increased to Rs. 54.4 crore.

Deferred tax liabilities/assets (net)

The Company follows Accounting Standard-22, Accounting for taxes on income, and in consideration of prudence and current status of the industry in which it is operating, has recognised deferred tax asset, only to the extent of deferred tax liability of Rs. 82.7 crore on unabsorbed depreciation, and brought forward business losses, out of total deferred tax assets of Rs 131.7 crore.

Fixed assets

Capital expenditure: Addition to the fixed assets aggregating Rs 15.52 crore was made during the year which includes the following:

i) Rs 2.04 crore on account of the exchange differences on long term monetary items related to the acquisition of fixed assets,

ii) Rs 6.41 crore for setting up a new digester plant at Chilwaria ethanol division,

iii) Rs 2.5 crore, for installing an AC drive at one of the mill in Chilwaria Sugar Division, and

iv) Rs 4.57 crore on account of miscellaneous assets.

Retirement of assets: The Company has deducted Rs. 183.6 crore (previous year Rs 90.18 crore) from fixed assets during the year which includes the following:

i) Rs 182.07 crore to Simbhaoli Power, comprising Rs 157.88 crore on business transfer and Rs 24.19 crore on lease rental,

ii) Rs 1.23 crore to Simbhaoli Spirits Limited as land transfer, and

iii) Balance Rs 0.3 crore on miscellaneous assets.

Investments

The Company has following investments as on March 31, 2013:

Amount in Rs/laks

Particulars Opening Additions Balance as balance during the on March 31, year 2013

(a) 2,00,800 equity shares of Rs 10 each in Integrated Casetech Consultants Private Limited 18 20 38

(b) 2,69,93,950 Equity shares of Rs. 10 each in Uniworld Sugars Pvt. Ltd 3445 3549 6994

(c) 300 Equity Shares of AED 1000 each in Simbhaoli Global Commodities DMCC 40 0 40

(d) 3,17,99,990 Equity shares of Rs. 10 each in Simbhaoli Spirits Ltd 5 25400 25405

(e) 5,62,031 Equity shares of Rs. 10 each in Simbhaoli Power Pvt Ltd 5 512 517

(f) Others neg 2 2 Investments at the end of the year 3513 29483 32996

Inventories

Inventory amounting to Rs 544.16 crores (previous period Rs 528.96 crores) includes finished goods, raw material, process stocks, and store items. The sugar at the year end is valued at Rs 3233 per qtl (previous period Rs 3079 per qtl).

Sundry debtors

Sundry debtors (net) amounting to Rs. 74.03 crore, (previous period Rs. 74.79 crore), are considered good and realisable. Provisions are generally made for all debtors outstanding for over 360 days subject to their scope of realisation, industry trend and depending on the management''s perception in this regard. Debtors are at 8%, representing an outstanding of 30 days (previous period 22 days) of gross revenues.

Cash and Bank Balance

Cash and bank balance of Rs 83.33 crore (previous period Rs 67.45 crore) includes fixed deposits of Rs 23.34 crore out of which Rs 31.83 crore are pledged with banks for securing certain loans, letters of credit, guarantees and facilities etc.

Loans and Advances

Loans and advances stand at Rs 49.98 crore (previous period Rs 77.99 crore). During the year, claim against the vessel owner/consignor for raw sugar loss took place in 2009 has been partially realised.

Current liabilities and provisions

Current Liabilities are on higher side because of increase in sugarcane price dues for the current year, operations, arrangement of payment of cane arrears through the farmers'' tie up loans and operational losses incurred during the last two financial years.

Current Liabilities of Rs 927 crore (previous period Rs 805 crore) comprises Rs 9.3 lakh (previous period Rs 30.64 lakh) amount due to small scale industries, the suppliers of raw materials, stores and services and other expenses. Other provisions include provisions for compensated absences.

Sales and other income

Sales and other income (net of excise) is accounted at Rs. 901.98 crore (previous period Rs. 1250.84 crore). The other income comprises interest, rent, profit on sale of fixed assets, and miscellaneous earnings.

The negative EBIDTA under sugar segment is attributed to high cost of production during the year on account of higher raw material and consistent decline in sugar prices after October 2012.

The segment wise allocation of revenues for the year 2012- 13 and for proceeding two accounting years is as under:

(Rs. in lakh)

Years/ Sugar Alcohol Power Turnover %age Turnover %age Turnover %age

2009-10 110,592 74.12 36,146 24.23 2,467 1.65

2010-12* 107,206 86.75 10,389 8.41 5,987 4.84

2012-13 80,841 88.65 8,258 9.06 2,087 2.29

*consisting of a period of 18 months

Exceptional Income

The exceptional incomes of the Company during the year have been:

a) Profit on transfer of land to Simbhaoli Spirits, Rs 117.79 crore

b) Profit on transfer of power undertakings, Rs 54.69 crore

c) Profit on transfer of assets on finance lease, Rs 2.38 crore

Accounting policies

The Company''s financial statements are prepared as per revised Schedule VI under the Companies Act, 1956 and Generally Accepted Accounting Principles, as applicable w.e.f. April 1, 2012. Therefore, previous year figures have been regrouped/ reclassified wherever necessary to correspond with the current year''s classification/disclosure. The Board of directors of the Company accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair view of the state of the affairs of the Company.

Debt servicing and public deposits

The Company has been able to meet its obligations towards the lenders for principal and interest, in terms with the respective letter of sanctions/approvals. The lenders of the Company have approved certain modification in the previous restructuring carried out under CDR arrangement on August 27, 2012. This includes the re-phasing of repayment obligations of certain loans for a period of 12 months within the overall repayment period envisaged under CDR scheme. The Company does not have any public deposits.

AUDITORS'' REPORT

The comments on the statement of account referred to in the report of the auditors are self-explanatory and explained in the appropriate notes to accounts.

DIRECTORS

At the forthcoming 76th Annual General Meeting (AGM) of the Company, Mr. S C Kumar and Mr. Yashwant Varma, Directors on the Board of the Company, are retiring by rotation. Mr. S C Kumar, being eligible, has offered himself for re-appointment. Mr. Yashwant Varma, has expressed his inability to continue as director on the Board of the Company.

During the year, Justice Chander Kishan Mahajan has been appointed as an additional director on the Board of the Company to broad base the composition of the Board. Mr. Mahajan is an independent director within the meaning of clause 49 of the listing agreement with stock exchanges. The brief profile of Mr. Mahajan is given below:

Justice Mahajan (Retd.), M.A. LL.B. has practiced in Delhi High Court, Supreme Court, Subordinate Courts and other Tribunals in Delhi, apart from High Courts of Himachal Pradesh, Punjab and Haryana in Civil, Service and Company matters. He was appointed as an Additional Judge of the Delhi High Court and then became permanent Judge in July 1999.

SUBSIDIARY COMPANIES

The Company has four subsidiary Companies, viz. Simbhaoli Spirits Limited, Simbhaoli Power Private Limited, Integrated Casetech Consultants Private Limited, and Simbhaoli Global Commodities DMCC, Dubai.

The consolidated financial statements presented by the Company include financial information of its subsidiary companies prepared in compliance with applicable accounting standards. The Ministry of Corporate Affairs, Government of India has vide its general circular no. 2/2011 and 3/2011 dated February 8, 2011 and February 21, 2011 respectively has granted general exemption from attaching the balance sheet of subsidiary company (s) with the balance sheet of the holding company after fulfilment of specified conditions thereon. The Company therefore, hereby confirms that the annual accounts of the subsidiary companies and the related detailed information will be made available to any investor at the corporate/registered office of the Company and that of the subsidiary company. A statement pursuant to Section 212 (8) of the Companies Act, 1956, is attached to the Accounts in this annual report.

EMPLOYEE STOCK OPTION SCHEME

The Company is carrying Employee Stock Option Scheme, 2007 in compliance with the provisions of SEBI (Employee stock option scheme and employee stock purchase scheme) Guidelines, 1999 and the resolutions passed by the shareholders of the Company.

Under Simbhaoli Sugars Limited - Employee Stock Option Scheme 2007, the Company has issued stock options convertible into equity shares of the Company in following manner:

I. 81,300 stock options on May 18, 2009, at an exercise price of Rs. 39/- per share.15,500 stock options have lapsed up to March 31, 2013. The remaining options have expired on May 17, 2013.

II. 5,16,500 stock options on August 10, 2009, at an exercise price of Rs. 49/- per share. 74,730 stock options have lapsed up to March 31, 2013.

The details of stock options as on March 31, 2013 are given in Annexure A to the report.

CORPORATE GOVERNANCE

As per clause 49 of the listing agreement with the stock exchange, the report on corporate governance along-with certificate from the practicing company secretary and certificate from Chairman and Managing Director, Deputy Managing Director, Chief Executive Officer and Chief Financial Officer form part of this annual report.

LISTING OF SECURITIES

The equity shares of the Company are listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited.

FOREIGN EXCHANGE EARNINGS AND OUTGO

During the year, Foreign exchange aggregating to Rs 27.07 crore (previous year Rs. 176.49 crore) was earned by the Company against the export of sugar and alcohol. A sum of Rs. 90.50 crore (previous year Rs. 30.69 crore) inclusive of import of raw material was spent in foreign currency. Foreign currency loans aggregating to Rs 35.32 crore (USD 6.9 mn) have been repaid by the Company during the year.

RESEARCH AND DEVELOPMENT

The details relating to Research and Development activities carried out by the Company are stated in Form B of this Report as required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

CONSERVATION OF ENERGY

Details of steps taken for conserving the energy are stated in Annexure to this report.

PARTICULARS OF EMPLOYEES

The details of the employees, who are being paid the remuneration, as required to be disclosed under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended from time to time is given in the Annexure-B forming part of this report.

AUDITORS

The Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, New Delhi, retire at the ensuing annual general meeting of the Company and, being eligible, offer themselves for re-appointment. You are requested to re-appoint the Auditors for the financial year 2013-14 and fix their remuneration.

DIRECTORS'' RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 as amended, with respect to the Directors'' responsibility statement, it is hereby confirmed:

(a) that in preparation of accounts for the financial year ended on March 31, 2013, the applicable accounting standards have been followed along-with proper explanation relating to the material departures.

(b) that the directors of the Company have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2013 and of the profits of the Company for the financial year ended on that date.

(c) that the directors of the Company have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, and

(d) that the directors of the Company have prepared the accounts of the Company for the year ended on March 31, 2013, ongoing concern basis.

CAUTIONARY STATEMENT

Certain statements in the Report of the Directors and Management Discussion and Analysis with words or phrases such as "will", "should", etc., and similar expressions or variation of these expressions or those concerning our future prospects are forward looking statements. Such statements represent intention of the management and the efforts put in to realise certain goals. Actual results may differ materially from those suggested by the forward-looking statements due to a number of risks or uncertainties associated with the expectations. These risks and uncertainties include, but are not limited to, our ability to successfully implement our strategy and changes in government policies. The Company and its subsidiary/associated companies may, from time to time, make additional written and oral forward looking statements, including statements contained in the Company''s filings with the stock exchanges and our reports to the shareholders. The Company does not undertake to update any forward-looking statements that may be made from time to time by or on its behalf. Investors/stakeholders, therefore, are advised to make their own judgments before taking any investment, business decisions.

ACKNOWLEDGEMENT

The Board of Directors places on record their gratitude to all the lender banks and institutions for their continued assistance and guidance. The Directors acknowledge with gratitude the co-operation and assistance received from all executives, staff and workmen of the Company.

The Directors also wish to emphatically state their gratitude to the Government of India, State Government of Uttar Pradesh and Indian Sugar Mills Association, farmers, suppliers and all other concerned persons who have continued their valuable support to your Company. For and on behalf of the Board of Directors

Simbhaoli Sugars Limited

New Delhi Gurmit Singh Mann

May 28, 2013 Chairman and Managing Director


Sep 30, 2010

The directors have pleasure in placing the directors report together with management discussion and analysis for the financial year ended on September 30, 2010.

FINANCIAL RESULTS AND ANALYSIS

A summary of the financial results of the Company for the year under report is stated as under:

(Rs in mn)

Particulars Year ended Year ended Sept 30, 2010 Sept 30, 2009

Net Sales/Income from operations 12,616 7063

Other Operating Income 570 183

Total operating income 13,187 7,246

Profit/(Loss) from Operations before (477) 578 other income and interest

Other Income 64 740

Profit/(Loss) before Interest (413) 1319

Interest and finance cost 8,47 631

Profit /(Loss) before tax (1,260) 688 Tax expense

Deferred tax benefit 513 -

Fringe benefit tax - 29

Net Profit/(Loss) after Tax (747) 717

In view of substantial business losses, and need to conserve cash, the directors express their inability to recommend any dividend for the year.

During the year, the business of the Company has been affected adversely by a sudden fall in sugar prices in a short span of time. The ex-factory prices of the sugar sold by the Company came down by 40% between February to August 2010. The Company has been carrying large inventories of white sugar, both from raw and cane, and unprocessed raw sugar, including raw sugar in transit. On such sales, it had to incur the operational losses on account of valuation of the stocks at NRV and the net sugar realisation falling lower than the cost of production. The valuation fall and lower realization of sugar inventory resulted in one-time exceptional loss of nearly Rs 4 per kg, and a non recovery of off season expenses including the interest expense.

This has adversely affected the financial ratios and created liquidity constrains. The management is consciously aware of the situation and is confident that despite such valuation related losses, which have been common to the sugar industry, the measures taken by the Management, to improve its business viability by cost controls, product improvements and financial engineering, will improve the financial position of the Company. It is considering the options of carrying out business restructuring, future capitalisations, replacement of short term loans with the long term ones etc to tie over the liquidity constrains. Your directors are confident that the measures stated herein above, would be sufficient to continue the businesses of the Company viable both for short and long term.

The analysis of the balance sheet of the Company as at September 30, 2010 and profit and loss account for the year ended on that date is reported as under:

Share capital

The following movement in the share capital has taken place during the year:

Preference shares: 2,16,000, 8% Cumulative Redeemable Preference shares of Rs. 100 each have been redeemed. There is no outstanding preference share capital at the end of the year.

Equity shares: 28,140 (previous year 1,75,836) equity shares of Rs 10 each were issued and allotted under Employee Stock Option Scheme, 2007 as fully paid-up at an exercise price of Rs. 39 per equity share.

Reserves and surplus

The following movement has taken place during the year under the reserves and surplus head:

(i) Revaluation reserve: Deduction of Rs. 0.15 crores due to depreciation charged on re-valued amount of fixed assets.

(ii) Securities premium account: Increased by Rs. 0.08 crores on account of issue and allotment of equity shares under ESOP at a premium of Rs 29 per share and Rs 0.73 crores on account of reversal of premium on buy back of USD 1.5 mn FCCBs. The securities premium amount is further reduced by Rs 0.35 crores being the premium payable on redemption of securities.

Total equity shareholder funds excluding revaluation reserve of the Company reduced to Rs. 42.02 crores (previous year Rs. 116.21 crores). The book value per equity share is Rs. 18.12 (previous year Rs. 50.16).

Secured loans

Additional foreign currency loan of Rs. 5.52 crores (previous year Rs 64.86 crores) has been taken during the year to repurchase the USD 1.50 million FCCBs. Sugar Development Fund loan of Rs 40.61 crores has been availed during the year and Rs 5.45 crores has been repaid. Besides, a sum of Rs 65.4 crores has been repaid to banks and other lenders.

Unsecured loans

Bought back FCCBs of USD 1.5 million (Rs 8.9 crores including premium) during the year at an average gain of 38.5% to book value. The outstanding FCCBs are USD 1.89 mn (Rs 11.26 crores including premium). The Company has taken unsecured loan from directors aggregating Rs 2.56 crores as short term borrowings.

Deferred tax liabilities/assets (net)

Deferred tax asset of Rs 70.41 crores (Rs. 19.27 crores) recognised in the accounts keeping in view that sufficient taxable income will be available in future, against which these assets will be realized in the normal course of business of the Company.

Fixed assets

The following movements have taken place under the head of fixed assets during the year:

a. Capital expenditure: Capital expenditure for the year, Rs 46.56 crores include setting up a new mill at Simbhaoli sugar plant, additions to the boilers at Chilwaria and Brijnathpur sugar division and new bio-digester at Brijnathpur ethanol division.

b. Retirement of assets: The Company has deducted from fixed assets Rs. 8.55 crores (previous year Rs 1.52 crores) including Rs 5.99 crores, being the exchange differences on long term monetary items relatable to the acquisition of fixed asset.

Pre-operative expenditure

The pre-operative expenses pending allocation are nil (Previous year Rs. 1.33 crores), after the capitalization/commissioning of concerned capital assets.

Inventories

Inventory amounting to Rs 400.5 crores (previous year Rs 430 crores) includes raw sugars, both at plants and ports, finished goods and process stocks. Raw sugar in hand will be refined in following months along with sugarcane. Loss on account of marking the value of inventories to market price of Rs 48 crores, has been fully provided for.

Sundry debtors

Sundry debtors (net) amounting to Rs. 72.7 crores as on September 30, 2010 (previous year Rs. 56.9 crores), are considered good and realizable. Provisions are generally made for all debtors outstanding for over 360 days subject to their scope of realization and depending on the managements perception. Debtors are at 4.9% (previous year 5.7%), representing an outstanding of 18 days (previous year 20 days) of gross revenues.

Cash and bank balance

Cash and bank balance of Rs 139.2 crores (previous year Rs 56.10 crores) includes fixed deposits of Rs 121.7 crores out of which Rs 119.5 crores are pledged with banks for securing various Letters of credit/guarantees etc.

Current liabilities and provisions

Sundry creditors of Rs 1 lacs comprises amount due to small scale industries, the suppliers of raw materials, stores and services and other expenses. Other provisions include provision of Rs. 2.81 crores (previous year Rs. 4.09 crores) towards premium on redemption of FCCBs and Rs. 1.97 crores (previous year Rs. 1.87 crores) towards provisions for leave encashment. Provision for taxation is reduced to Rs 2.79 crores (previous year Rs 10.65 crores) in view of lack of taxable profits.

Sales and other income

Sales and other income (net of excise) for the year was Rs. 1325.11 crores (Previous year Rs. 798.75 crores), higher by 65.9%. The other income comprises interest, rent, profit on sale of fixed assets, liability/provisions no longer required to be written back and miscellaneous earnings.

Negative EBIDTA under sugar segment is attributed to high cost of production in 2009-10 season, high value of raw sugar and sudden fall in sugar prices after February 2010. Negative EBIDTA under alcohol segment is attributed to lower capacity usage, higher molasses cost and steep discounts in potable liquor segment.

The segment wise allocation of revenues for 2009-10 and preceding three years is as under:

(Rs. in lacs)

Years/ Sugar Alcohol Power Others Segment Turnover %age Turnover %age Turnover %age Turnover %age

2006-07* 50,346 51.3 47,301 48.2 265 0.3 204 0.2

2007-08 30,291 45.8 33,540 50.72 1478 2.23 825 1.25

2008-09 58,909 58.8 38,739 38.8 1530 1.5 900 0.9

2009-10 110,592 74.12 36,146 24.23 2,467 1.65 -

*consisting of a period of 18 months

Accounting policies

The Companys financial statements are prepared in compliance with the requirements of the Companies Act, 1956 and Generally Accepted Accounting Principles. The management of the Company accepts responsibility for the integrity and objectivity of these financial statements, as well as for various estimates/ judgments used in preparation of these statements. The estimates and/or judgments have been made on a consistent, reasonable and prudent basis to reflect true and fair picture of the state of the affairs of the Company.

Debt servicing and public deposits

The Company has been able to meet its obligations towards the lenders for principle and interest, in terms with the respective letter of sanctions/ approvals. During the year, the Company has not accepted any fresh public deposit and no amount was outstanding at the end of the year.

AUDITORS REPORT

The comments on the statement of account referred to in the report of the auditors are self-explanatory, and explained in the appropriate notes to accounts. The Board has taken note of the qualification made by Auditors in their Report on Deferred Tax credit. Such credit is taken on the judgment exercised by the Company based on the following:

1. Recent increase in sugar prices and change in business cycles.

2. Changes in the Government policies deregulating the industry including reduction in levy quota, permitting exports, relaxing quantitative controls on sugar and permitting procurement of ethanol for admixing with petrol.

3. Emphasis on exports particularly export of sugar of 40,800 mt, which the Company is entitled under its past export obligations. Export of sugar is giving positive arbitrage over domestic price of sugar. Further, the Company is strengthening its ENA and IMFL export related activities and creating new markets.

4. The Company is enlarging its non cyclical business areas viz power and potable spirits which give higher margins. Increase in power export tariff will assist the Company to meet its plans. The new brands introduced in IMFL segment will yield higher margins.

5. The Company, having three integrated sugar refineries, is in the best possible position to reap benefits of changing sugar scenario.

6. The Company has developed risk assessment and mitigation skills over the years which will result in bringing stability in its earnings capability.

7. The Company has identified technical innovation as a key driver of growth. Under this approach, the Company is pursuing various technical and agricultural development models. It has created a new business vertical, Integrated Casetech Consultants Pvt Ltd, for this purpose.

The management is confident that the above steps initiated by the Company will have a positive impact on the Companys financial performance, therefore, its ability to utilize the deferred tax credit going forward in future.

DIRECTORS

At the forthcoming 74th Annual General Meeting (AGM) of the Company, Dr. G S C Rao and Mr. Sanjay Tapriya, Directors on the Board of the Company, are retiring by rotation and being eligible offers themselves for re-appointment. The Company has appointed Mr. Basant Kumar Goswami as additional director on the Board of the Company on June 11, 2010.

Mr. Goswami is a senior retired IAS Officer, who joined Indian Administrative Service in the year 1960. He has held important positions in various government/semi-government departments and has been awarded many times. Mr. Goswami has been director on the board and/or committees of various public and private limited companies in India. He has also been actively involved in various social, charitable and religious activities. He holds a Masters degree in English from the University of Punjab. Mr. Goswami is an independent director within the meaning of Clause 49 of the listing agreement with stock exchanges. Being eligible, he offers himself for re- appointment.

ICICI Bank has withdrawn the nomination of Mr. S D Saxena with effect from December 15, 2009. The Board of Directors places on record its appreciation for the advices and guidance extended by the outgoing director to the Company.

EMPLOYEE STOCK OPTION SCHEME

During the year, 28,140 (previous year 1,75,836) equity shares of Rs 10 each were issued and allotted under Employee Stock Option Scheme 2007 as fully paid-up at an exercise price of Rs. 39 per equity share in accordance with the provisions of SEBI (Employee stock option scheme and employee stock purchase scheme) Guidelines, 1999. The details for stock options issued and exercised are given in Annexure A to the report.

The scheme has been implemented in accordance with the said guidelines and the resolutions passed by the shareholders of the Company.

FOREIGN CURRENCY CONVERTIBLE BONDS

During the year, Company has bought back FCCBs of USD 1.5 mn out of total outstanding liability of USD 3.39 mn by raising additional external commercial borrowings from Punjab National Bank, Hong Kong in accordance with the guidelines issued by Reserve Bank of India. These Bonds were the part of the USD 33 mn FCCBs issued by the Company in 2006, to part finance its growth plan.

CORPORATE GOVERNANCE

As per clause 49 of the listing agreement with the stock exchange, the report on corporate governance along-with certificate from the auditors and certificate from Chairman and Managing Director, Chief Executive Officer and Chief Financial Officer form part of this annual report.

LISTING OF SECURITIES

The equity shares of the Company are listed with Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Foreign Currency Convertible Bonds are listed with the Singapore Stock Exchange.

FOREIGN EXCHANGE EARNINGS AND OUTGO

Foreign exchange aggregating of Rs. 53.17 crores (Previous year Rs. 24.3 crores) was earned by the Company against the export of sugar and cancellation of raw sugar contracts. A sum of Rs. 639.3 crores (previous year Rs. 334.1 crores) inclusive of import of raw material was spent in foreign currency.

RESEARCH AND DEVELOPMENT

The details relating to Research and Development activities carried out by the Company are stated in Form B of this Report as required under the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988.

CONSERVATION OF ENERGY

Details of steps taken for conserving the energy are stated in Annexure to this report.

PARTICULARS OF EMPLOYEES

Information relating to employees of the Company, as required under section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended is set out in the Annexure B to this report. However, as per the provisions of section 219(b) (iv) of the Companies Act, 1956, the report and the accounts are being sent to all the shareholders of the Company excluding the aforesaid information. Any shareholder interested in obtaining such information may write to the Company Secretary at the registered office of the Company. The said information is also available for inspection at the registered office during working hours up to the date of the annual general meeting.

AUDITORS

The Auditors, M/s Deloitte Haskins & Sells, Chartered Accountants, New Delhi, retire at the ensuing annual general meeting of the Company and, being eligible, offers themselves for re-appointment. You are requested to re-appoint the auditors for the financial year 2010-11 and fix their remuneration.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 217(2AA) of the Companies Act, 1956 as amended, with respect to the Directors responsibility statement, it is hereby confirmed:

(a) that in preparation of accounts for the financial year ended on September 30, 2010, the applicable accounting standards have been followed along with proper explanation relating to the material departures.

(b) that the directors of the Company have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at September 30, 2010 and of the loss of the Company for the financial year ended on that date.

(c) that the directors of the Company have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities, and

(d) that the directors of the Company have prepared the accounts of the Company for the year ended September 30, 2010 on going concern basis.

ACKNOWLEDGEMENT

The Board of Directors places on record their gratitude to all the lender banks and financial institutions for their continued assistance and guidance. The Directors acknowledge with gratitude the co operation and assistance received from all executives, staff and workmen of the Company.

The Directors also wish to emphatically state their gratitude to the Government of India, State Government of Uttar Pradesh, Indian Sugar Mills Association, and Sugar Technologist Association of India, farmers, suppliers and all other concerned persons who have continued their valuable support to your Company.

For and on behalf of the Board of Directors Simbhaoli Sugars Limited

New Delhi Gurmit Singh Mann

November 29, 2010 Chairman and Managing Director



 
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