DIRECTORS' REPORT TO THE MEMBERS, Your Directors are pleased to present the 71" Annual Report and audited Financial Statements of the Company and the report of the Auditors for the financial year2014-15. Your directors are happy to inform you that the company could sustain its operations at a reasonable level during the financial year 2014-15 despite the constraints and adversities. Financial Results Despite reasonable production and marketing performance of the company, the financial results for the year 2014-15 shows a loss of Rs.39990.79 lakh as against a loss of Rs.26495.63 lakh during theyear2013-14. Working capital constraints, High interest and finance charges, low level of operation, decrease in total revenue and non-operation of Caprolact am Plant through out the year, etc. are the main reasons for the negative working results. Total revenue earned by the Company during the financial year 2014-15 is Rs.1997 crore as against Rs.2223 crore during the financial year 2013-14. Total interest and finance charges incurred during the year is Rs. 96.28 crore. The Company has provided interest on GOI loan and penal interest totaling Rs.57.87 crore during the year 2014-15. Considering the poor financial performance of FRBL and as a prudent measure, during the financial year 2014-15, tne entire investment made in FRBL and the amount due from FRBL totaling Rs.40.84 crore was written off. Due to accumulated loss, your directors are not recommending any dividend for the financial year 2014-15. The Company has not transferred any amount to Reserve during the financial year 2014-15. Operations The fertilizer production and sales performance of the company during the year 2014-15 was affected by the dependency on import Ammonia for fertilizer production during the first ten months and severe working capital crisis. There were constraints in Ammonia import infrastructure and logistics limiting the production levels to about 70% - 80%. With the favorable international price situation, the Company has re-started LNG operations with effect from 10"1 February 2015 based on a letter of comfort facility issued by the Department of Fertilizers in favour of MMTC. In spite of this, during the fourth quarter of the aforesaid year 2014-15, Company was not in a position to ensure other raw-materials due to severe financial crunch. However with all out efforts, Company could achieve Factamfos production of 6.14 lakh MT and Ammonium Sulphate production of 1.2 lakh MT. Due to economic reasons, the Capraolactam plant remained shutdown through out the financial year 2014-15. However, in-house modification has been carried out in the plants to maintain production of Ammonium Sulphate at 100% capacity th roug h d irect neutralization. The sales performance during the year include sale of 6.22 lakh MTof Factamfos, 1.1 lakh MT of Ammonium Sulphate, 0.3 lakh MT of Traded MOP and 5.2 lakh MT of Gypsum, The sale of 66.235 MT of Bio-fertilizers is the highest sale in the last 4 years. FEDO completed its first year as a profit center in an excellent way. The turnover increased from Rs.11.05 crore in 2013-14 to Rs.18.48 crore in 2014-15. The loss of FEDO also came down from Rs.187.77 lakh in 2013-14 to Rs.36.55 lakh in 2014-15. During the financial year, FEDO has bagged orders worth Rs.860 lakh. The value of jobs on hand as on 31.3.2015 isRs.220 crore. Performance-2015-16 Your Directors are pleased to inform you that the annual maintenance work could be completed in time and the plants are restarted as per schedule to cater to the increasing fertilizer demand of the monsoon season. The production and marketing performance during the first quarter of the financial year 2015-16 is encouraging. The Company could produce 124550 tonnes of Factamfos and 24079 tones of Ammonium Sulphate during the f quarter of the financial year 2015-16. FACT has been exploring avenues to strengthen the organic nutrient source of the soil. FACT has entered into an MOU with Kerala Agricultural University for marketing of Bio-fertilizers being produced by the University, FACT has fixed an ambitious targets for production and marketing of fertilizers for the financial year 2015-16 and entered into a performance MOU with the Department of Fertilizers. As per the MOU, the Company envisage a sales turnover of Rs.2614 crore for the year 2015-16. The major physical targets for the year include production and marketing of 6.80 lakh tones of Factamfos, 1.89 lakh tones of Ammonium Sulphate and 150 tonnes of Bio-fertilizers. The company intends to augment its core competency sectors with a projected turn overofRs.66 crore for FEDO and Rs.22 crore for FEW, the Consultancy and Fabrication divisions, The financial relief package submitted by the company and cleared by the Board for Restructuring of Public Sector Enterprises (BRPSE) is still under the consideration of the Government of India. The sanctioning of the updated financial relief package is vital for the long term sustenance of the Company. Management Discussion and Analysis Report A Management Discussion and Analysis Report covering the operational aspects for the year under review, as stipulated under clause 49 of the listing agreement with the Stock Exchange is presented in a separate section forming part of the Directors Report. Directors and Key Managerial Personnel Appointments Governments of India, Ministry of Chemicals & Fertilisers, Department of Fertilisers vide Order No. 130/8/2003-HR-l dated 01s May 2014 notified the appointment of Shri K.M.Gupta, Economic Adviser, Department of Fertilizers, Ministry of Chemicals & Fertilizers, Government of India as a part time Government nominee Director on the Board of FACT in place of ShriV.K.Subburaj, Director. Government of India, Ministry of Chemicals & Fertilisers, Department of Fertilisers, vide Order No.130/8/2003-HR-l dated 19lh June 2014 notified the appointment of Shri S.K.Lohani, Joint Secretary, Department of Fertilizers, Ministry of Chemicals & Fertilizers as Part-time Government nominee Director, in place of Shri S.C.Gupta, Director on the Board of FACT. Government of India, Ministry of Chemicals & Fertilizers, Department of Fertilizers, vide Order No.130/8/2003-HR-1 dated 2T April 2015 notified the appointment of Shri Sham Lai Goyal, Join! Secretary (SLG), Department of Fertilizers, Ministry of Chemicals & Fertilizers as Part-time Government Nominee Director, in place of Shri K.M.Gupta, Ex-EconomicAdvisor. The Board at its meeting held on 12.2.2015 appointed Shri Jaiveer Srivastava, C&MD, Shri P. Muthusamy, Director (Finance), Shri V.K. Anil, Director (Technical), Shri V.Subramanian, Director (Marketing) and Shri K.V. Balakrishnan, Company Secretary as Key Managerial personnel of the company. Retirements and resignations Consequent to the appointment of Shri Sham Lai Goyal as Government of India nominee Director of FACT, Shri K.M.Gupta, Director retired from the Board of FACT with effect from 6.5.2015, Shri V.Subramanian, Director (Marketing) resigned from the Board of FACT and Government of India vide Order No.82/3/2006-HR-l dated 9th June 2015, accepted the resignation of Shri V.Subramanian with effect from 9.6.2015. The Board place on record its appreciation of the valuable services rendered by Shri K.M.Gupta, Director and Shri V.Subramanian, Di rector (Marketi ng). Annual Evaluation of Board. FACT being a Government Company, all appointments in the Board is made by the Government of India, Ministry of Chemicals and Fertilizers, Department of Fertilizers. The performance of Directors are evaluated by the Ministry of Chemicals & Fertilizers, Department of Fertilizers, Government of India. As per Government of India, Ministry of Corporate Affairs notification dated 5* June 2015, clause (e) and (p) of sub-section 3 of Section 134 of the Companies Act 2013 relating to appointment, remuneration and Annual evaluation of Board on its performance are not applicable to FACT. Meetings of the Board During the financial year 2014-15, ten meetings of the Board were convened and held. The details of the meetings of the Board of Directors are given in the report on Corporate Governance, which is a part of this report. The intervening gap between the meetings was within the period prescribed under the Companies Act 2013. Director's Responsibility Statement Pursuant to Sec.134(3)©of the Companies Act, 2013, your Directors hereby state that: (a) in the preparation of annual accounts for the year ended March 31, 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures. (b) the directors 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 31,2015 and of profit and loss statement for the year ended March 31,2015. (c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. (d) the directors have prepared the annual accounts on a going concern basis. (e) the directors have 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Corporate Governance The Company is committed to maintain the highest standard of Corporate Governance and adhere to the Corporate Governance requirements set out by SEBI. The Board lays emphasis on transparency and accountability for the benefit of all stakeholders of the Company. The Report on Corporate Governance as stipulated under the listing agreement annexed to this report forms an integral part of this report. AUDITORS (1) Statutory Auditors, M/s. K.Varghese & Co., Chartered Accountants, Kochi, was appointed as Statutory Auditors of the Company for the year 2014-2015 by the Comptroller and Auditor General of India. M/s.Praturi & Sriram, Chartered Accountants, Hyderabad, and M/s. R. Sadasivan & Co, Chartered Accountants, Chennai, were re-appointed as Branch Auditors for the year 2014-2015, by the Comptroller and Auditor General of India. The Statutory Auditors in their report has emphasized certain issues which are being addressed by the Company. (2) Cost Auditors M/s. BBS & Associates, Cost Accountants, Kochi has been re-appointed as Cost Auditors of the Company for the year 2014-2015. (3) Secretarial Auditors M/s.SVJS & Associates, Company Secretaries, Kochi, has been appointed as Secretarial Auditors of the Company for the year 2014-15. The report of the Secretarial Auditor is annexed to this report as An nexure-1 Clarification/reply to the remarks of Secretarial Auditor is annexed as Annexure. 2. Audit Committee In line with the provision of Section 177 of the Companies A c t 2013 and Clause 49 of the listing agreement with Stock Exchange, an Audit Committee of the Board has been constituted. Details of Members/ Meetings of the Audit Committee is elaborated in the report on Corporate Governance. Associate Company FACT-RCF Building Products Limited (FRBL) is the only associate company of FACT. During the financial year 2014-15 no Company has become/ ceased to become subsidiaries/ Joint Ventu res a nd Associate Company of FACT. Public Deposit During the financial year 2014-15, the company has not accepted any deposit from public, However, as on 31.3.2015,Rs.0.49 lakh is lying in unclaimed matured fixed deposit account. Contract or arrangement with related parties During the financial year 2014-15, FACT has not entered into any contracts or arrangements with related parties referred to in subsection (1) of section 188 of the Companies Act 2013. Corporate Social Responsibility FACT continues to give priority on various Social Responsibility measures during the financial year 2014-15. The Company has constituted a Board level Committee as per the provisions of Companies (Corporate Social Responsibility Policy) Rules 2014, Annual Report on CSR as per the provisions of Companies (Corporate Social Responsibility Policy) Rules 2014 is annexed to this report as Annexure.3 Material changes and commitments There were no material changes and commitments affecting the financial position of the company between the end of financial year (31 st March 2015) and the date of the report (19th August 2015). In the Audit Report for the Financial Year 2012-13, the Statutory Auditors have made certain qualification on valuation of closing stock of Gypsum having an impact of Rs.53.64 crore on the financial results. The Securities and Exchange Board of India (SEBI) vide letter dt. 27.04.2015 advised the Company to restate the financial results for the financial year 2012-13 and 2013-14 (if the same qualification is repeated in 2013-14 also), and the effect of these restated adjustment may be carried out in the annual accounts of the financial year 2014-15 as a prior period item. Without prejudice to the right of the company to challenge the advice of SEBI in the appropriate forum, the Company has given effect to the restatement adjustment on valuation of gypsum as a prior period item in the financial statement of 2014-15. Subsequently, FACT has approached Hon'ble High Court of Kerala by way of Writ Petition, requesting to quash the Order issued by SEBI directing FACT to restate the financial year statement for the financial year 2012-13. The Hon'ble High Court of Kerala has set aside the Order issued by SEBI. The Hon'ble High Court of Kerala has also directed that the order of QARC, if any, shall be communicated to the petitioner and the petitioner shall be heard by the SEBI and orders passed clearly showing the reasons for ordering a restatement of accounts. Risk Management FACT has formulated a risk management policy for identification of potential area of risk and mitigation of the same. FACT is having adequate risk management infrastructure in place capable of addressing all potential risks. Internal Financial Control FACT is having an Internal Control System, commensurate with the size, scale and complexity of its operations. The Internal Audit wing of FACT headed by a General Manager monitors and evaluate the efficacy and adequacy of Internal Control System in the Company. The observation of internal audit and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board. Based on the recommendation of Internal Audit, the functional heads take necessary corrective actions in their functional area thereby strengthen internal control. Vigil Mechanism FACT has finalized a vigil mechanism for directors and employees to report their concerns. The Directors and employees can approach Chairman Audit Committee of the Board directly and report their concern in appropriate case. The vigil mechanism and whistle blower policy is published in the web site of the Company www.fact.co.in Code of Conduct FACT is having a code of conduct known as FACT Code of Business Conduct and Ethics applicable to the members of the Board and all senior executives of the Company. The code has been posted on the Company website www.fact.co.in The code lays down the standard procedure of business conduct which is expected to be followed by the Directors and senior executives of the Company. The functional Directors and senior management personnel have confirmed compliance with the code of conduct. Prevention of Insider Trading No instances of insider trading have been reported on FACT shares till date. None of the Directors and key managerial personnel is holding any shares in FACT. A code of conduct for prevention of insider trading and code for corporate disclosure is published in the website of the company. Particulars of Loan given, Investment made, Guarantees given and securities provided Particulars of Investment made and guarantees given along with the purpose for which the guarantee is given are provided in the financial statement forthe year 2014-15 (Note No. 11 & 29(1 )(b)) During the financial year 2014-15, FACT has not provided any loan/guarantee or made any investment within the purview of Section 186 of the Companeis Act 2013. However, the Board of FACT has decided to convert Rs.752.33 lakh due from FACT-RCF Building Products Limited (FRBL), the 50:50 Joint Venture of FACT and RCF, as equity of FRBL, subject to the approval of the Department of Fertilizers, Government of India. Approval is awaited from the Department of Fertilizers. General Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review. 1. Details relating to deposits covered under Chapter V of the Act. 2. Issue of equity shares with differentiate rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employees of the company under any scheme. 4. Neither the Managing Director nor the whole time Directors of the Company receive any remuneration or commissi or from its Associate Company. 5. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future, Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Work Place (Prevention, Prohibition and Resressal) Act 2013. Extract of Annual Return Extract of Annual Return of the Company in Form MGT9 is annexed asAnnexure.4 to this report Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo Information regarding the conservation of energy, technology absorption, and foreign exchange earnings and-outgo as required to be disclosed under the Act is set out in a separate statement annexed to this report. Acknowledgement Your Directors gratefully acknowledge the valuable guidance and support extended by the Department of Fertilisers, Department of Public Enterprises and other Departments of Government of India, and the State Governments of Kerala, Tamilnadu, Karnataka, Puducherry, Andhra Pradesh and Telangana, The Directors deeply appreciate the committed efforts put in by the employees and look foiward to their dedicated services and endeavor in the years ahead to enable the Company to scale greater heights. The Directors also acknowledge the continued support extended by the Shareholders, Dealers, Suppliers, Bankers and Customers of the Company, the Press and Electronic Media. Forandon behalf of the Board of Directors, Sd/- JAIVEER SRIVASTAVA CHAIRMAN AND MANAGING DIRECTOR DIN:01858412 Place : Udyogamandal Date: 19-08-2015 |