DIRECTORS' REPORT TO THE MEMBERS, The Directors present their Thirty-Sixth Annual Report along with the Audited Financial Statement for the Financial Year ended 31st March 2015. 1. Performance of the Company Operations The Company's Total Income for the year under review aggregated Rs. 65.09 Crore (Previous year -Rs. 79.61 Crore). The operations of the Company for the year under review resulted in a Loss after Tax of Rs. 1.99 Crore (Previous year - Loss after Tax Rs. 8.33 Crore). The Company commenced the financial year with an order backlog of about Rs. 56 Crore. During the year under review, the Company received new orders with estimated value of about Rs. 60 Crore and thus, the orders available for execution aggregated approx. Rs. 116 Crore. During the year under review, the Company successfully restarted its operations in United Arab Emirates (UAE) and commenced the execution of the works entailing fabrication, erection and painting of tanks and pipe rack along with exports of fabricated items and fabrication and storage of chemical tanks at Sharjah, UAE. In respect of the tankage order being undertaken at Gujarat, the Company has nearly completed civil works and shortly, it will commence the execution of mechanical portion of the order. In addition to the execution of the order pertaining to manufacture of buffer vessels, Nashik factory was also occupied with the execution of crude tank pre-fabrication and piping spooling and it is presently under final stage of completion. Majority of the orders which are being executed in Sharjah, UAE, were awarded only in the 3rd quarter of the Financial Year ended 31st March 2015. Although the Company could complete the order pertaining to design, engineering, manufacturing, supply, testing and commissioning of buffer vessels, it could not garner similar such orders due to lack of activity in the market. Demand at Gamharia (Jamshedpur) slowed after KPO related fabrication dispatches. During the year under review, the Company has also completed major portion of the order entailing fabrication and supply of structurals at the Company's manufacturing facility at Nagpur. The Company intends to undertake Nagpur yard development activity. Cumulative effect of the above has resulted in the Company's Turnover for the Financial Year 2014-15 falling below expectations. The Company's Nashik factory has started manufacturing bottling plant and machinery for overseas and domestic markets. With renewal of the existing certifications and new certifications of American Society of Mechanical Engineers (ASME), the Company is hopeful of booking new orders for manufacturing pressure vessels. As a matter of fact, the Company is the first pressure vessel manufacturing unit in the Nashik industrial area. It has obtained ISO 9001-2008 certification for manufacturing & supply of Engineering, Procurement, Construction of Oil & Gas Process & Storage System, structure for power & steel plant, including various types of process industries. 2. Rehabilitation Scheme sanctioned by the Board for Industrial and Financial Reconstruction The Company's Miscellaneous Application (MA) with the Board for Industrial and Financial Reconstruction (BIFR), containing a proposal for modification of the Sanctioned Scheme, by converting the total outstanding loan, availed from Tata Projects Limited (TPL), the Holding Company, aggregating Rs. 44.18 Crore (including interest upto 31st March 2013) into 44,18,22,878 4 % Optionally Convertible Cumulative Redeemable Preference Shares of Rs. 1/- each to be allotted to TPL on preferential allotment basis and also extension of the rehabilitation period, is still pending with the BIFR. During the year under review, the Company had also filed one more MA with the BIFR seeking certain reliefs and concessions from the Income Tax Department which are perceived to be in the interest of the Company. 3. Borrowings As mentioned above, the Miscellaneous Application pertaining to financial restructuring proposal is pending consideration by the BIFR. Accordingly, the Company was not required to repay the balance installments of term-loan as well as the outstanding Inter-Corporate Deposits availed from Tata Projects Limited (TPL). At the hearings granted by the BIFR from time to time, TPL and Bank of India (the Monitoring Agency) have informed the BIFR about their approval for the modifications proposed in the Miscellaneous Applications. 4. Short- term loan from Tata Capital Financial Services Limited During the Financial Year under review, the Company has borrowed a short term loan aggregating Rs. 21 Crore (Working Capital Demand Loan: Rs. 1 Crore and Short term loan: Rs. 20 Crore) from Tata Capital Financial Services Limited. The Company has also retired the Corporation Bank loan of Rs. 20 Crore. 5. Extract of the Annual Return An extract of the Annual Return as provided under Section 92 (3) of the Companies Act, 2013 is annexed to this Report and forms part of this Report. 6. Number of meetings of the Board of Directors 6 (six) Board Meetings were held during the year under review. The dates of these Board Meetings are 14th May 2014, 19th July 2014, 17th October 2014, 19th November 2014, 16th January 2015 and 12th March 2015. 7. Directors' Responsibility Statement Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the Internal, Statutory and Secretarial Auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the Financial Year 2014-15. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: a. in the preparation of the annual accounts, the applicable accounting standards had been followed and there was no material departures from them; 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 at the end of the financial year and of the profit or loss of the Company for that period; c. the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act 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 financial controls are adequate and were operating effectively; and f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 8. Directors and Key Managerial Personnel Based on the recommendations of the Nomination and Remuneration Committee, Ms. Leja Hattiangadi was appointed as an Additional Director (Non-Executive and Independent) effective 12th March 2015. The Board has formed an opinion that Ms. Leja Hattiangadi possesses the requisite skills and knowledge and it would be in the interest of the Company to appoint Ms. Leja Hattiangadi as an Independent Director of the Company. Pursuant to Section 161 of the Companies Act, 2013, Ms. Leja Hattiangadi holds office as Additional Director, upto the ensuing Annual General Meeting, but is eligible for re-appointment. The Company has received notice in writing from a member proposing the candidature of Ms. Leja Hattiangadi for the office of Director. Accordingly, proposal for appointment of Ms. Leja Hattiangadi as Director is being placed before the shareholders for their approval at the ensuing Annual General Meeting. Pursuant to Section 149 of the Companies Act, 2013, the Board has, subject to the approval of the Members at the ensuing Annual General Meeting, approved the appointment of Ms. Leja Hattiangadi, as an Independent Director on the Board of the Company for a term of 5 consecutive years effective from 12th March 2015. Ms. Hattiangadi satisfies the criteria for independence laid down in the Companies Act, 2013 and accordingly, the Board recommends the proposal for appointment of Ms. Leja Hattiangadi as an Independent Director for approval by the shareholders at the ensuing Annual General Meeting. As per the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Pralhad Pawar retires by rotation and being eligible, offers himself for re-appointment. Mr. A. K. Misra, a non-executive Director and nominee of Tata Projects Limited resigned as a Director of the Company effective 5th May 2015. The Board has placed on record its appreciation of the significant role played by Mr. Misra during his tenure as a Director. There has been no change in the composition of the Board of Directors except the induction of Ms. Leja Hattiangadi as an Additional Director (Non-Executive and Independent) and cessation of Mr. A. K. Misra as a Director on the Company's Board. During the year under review, Mr. Pratik Agrawal, was appointed as Chief Financial Officer (CFO) effective 21st July 2014 and he ceased to be the CFO of the Company effective 12th December 2014. In his place Mr. Rajesh Mandale has been appointed as the CFO effective 2nd February 2015. No other Key Managerial Personnel has been appointed or has tendered resignation during the Financial Year 2014-15. The Company has filed a Miscellaneous Application (No. 536/ 2013 dated 14th October 2013) ['MA'] with the Board for Industrial and Financial Reconstruction (BIFR), seeking amongst others, the exemption from the mandatory requirement pursuant to Section 269 of the Companies Act, 1956 or any such provision under the Companies Act, 2013 regarding the appointment of Managing Director/ Whole Time Director / Manager until the period of rehabilitation of the Scheme. The said MA is pending consideration by the BIFR. In view thereof, the Company has not appointed Managing Director/ Whole Time Director / Manager. 9. Declaration given by Independent Directors As per the requirement of Section 149 (7) of the Companies Act, 2013, Mr. Nalin Shah, Mr. Michael Bastian and Ms. Leja Hattiangadi, Independent Directors have given their respective declarations that they meet the criteria of independence as specified under Section 149 (6) of the Act. 10. Particulars of Loans, guarantees or investments The Company has neither given any loans or guarantee nor provided any security in connection with loan to any body corporate or person nor has it acquired by subscription, purchase or otherwise, the securities of any body corporate as provided under Section 186 of the Companies Act, 2013. 11. Remuneration Policy Based on the recommendations of the Nomination and Remuneration Committee, the Board of Directors has approved and adopted a Remuneration Policy for Directors, Key Managerial Personnel and other employees of the Company as required under Section 178 (3) of the Companies Act, 2013. The Company has adopted Governance Guidelines which inter-alia covers composition and role of the Board, Board Appointment, Induction & Development, Director Remuneration, Code of Conduct, Board Effectiveness Review and mandates of the Board Committees. The Remuneration Policy is annexed to this Report and forms part of this Report. 12. Particulars of contracts or arrangements with related parties Particulars of contracts or arrangements with related parties in form No. AOC- 2 as required pursuant to the provisions of Section 134(3)(h) and Rule 8 of the Companies (Accounts), Rules, 2014 is annexed to this Report and forms part of this Report. 13. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgoings Particulars prescribed under Section 134(3)(m) of the Companies Act, 2013 are given in an Annexure to this Report and forms part of this Report. 14. Risk Management Policy The Company has adopted a Risk Management and Mitigation Policy. A formal Risk reporting system has been devised by the Company. Risk Management Committee has also been constituted comprising of a Director and senior officials of the Company. 15. Annual Evaluation The performance of Board of Directors and the Committees constituted by the Board and the individual directors has been evaluated during the Financial Year ended 31st March 2015. 16. Particulars of Subsidiary companies or Joint ventures or associate company The Company does not have any joint venture with any person or an associate company as defined under Section 2 (6) of the Companies Act, 2013 ('the Act') or subsidiary company as defined under Section 2 (87) of the Act. 17. Particulars of Deposits During the year under review, the Company has neither accepted any deposit covered under Chapter V of the Companies Act, 2013 nor has it accepted deposit which are not in compliance with the requirements of Chapter V. 18. Particulars of Material Orders During the year under review, neither any Regulator nor any Court or Tribunal has passed any significant and material order impacting the going concern status and the Company's operations in future. 19. Audit Committee The Audit Committee comprises of Mr. Nalin Shah, Mr. Michael Bastian, the Independent Directors and Mr. Shashikant Oak, the BIFR Nominee. Mr. Nalin Shah and Mr. Michael Bastian are Chartered Accountants by profession and Mr. Oak has vast experience in the Ministry of Finance. The composition of the Committee is as per the provisions of Section 177 of the Companies Act, 2013. The Audit Committee continues to provide valuable advice and guidance in the areas of costing, finance and internal controls. 20. Auditors M/s. Chokshi & Chokshi LLP, Chartered Accountants, the Statutory Auditors of the Company are due to retire at the ensuing Annual General Meeting. The Company has received a written consent and a certificate from the Statutory Auditors, under Section 139 of the Companies Act, 2013, stating that the appointment, if made will be in accordance with Rule 4 (1) of the Companies (Audit and Auditors) Rules, 2014. 21. Cost Auditors The Company has filed the Cost Compliance Report and the Cost Audit Report for the Financial Year ended 31st March 2014 with the Ministry of Corporate Affairs (MCA) on 14th August 2014 and 18th August 2014 respectively, which is within the prescribed time. Considering then prevailing provisions, the Company had appointed M/s. R. Nanabhoy & Co., Cost Accountants, Mumbai, as the Company's Cost Auditors for the Financial Year 2014-15 pursuant to the Companies (Audit and Auditors) Rules, 2014 ('Rules'). The said Rules were amended by MCA vide its Notification dated 31st December 2014. Consequently, the amended Rules are not applicable to the Company and hence, Cost Audit is not applicable to the Company for the year under review. 22. Particulars of Employees Information as per Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report and forms part of this Report. 23. Secretarial Audit Report During the year under review, the Company had appointed M/s. P. P. Shah, Practising Company Secretaries, Mumbai as the Secretarial Auditor for the Financial Year 2014-15. The report in form MR- 3 on the Audit carried out by the said Auditor is annexed to this Report. 24. Purchase of shares of the Company The Company does not give any loan, guarantee or security, or any financial assistance to the employees of the Company for the purpose of purchase or subscription for any shares of the Company or its Holding company pursuant to Section 67 (2) of the Companies Act, 2013. 25. Corporate Social Responsibility Committee The provisions of Section 135 of the Companies Act, 2013 are not presently applicable to the Company. 26. Vigil Mechanism The Company has adopted a Whistle Blower Policy to report to the Management instances of unethical behaviour, actual or suspected, fraud or violation of the Company's code of conduct or ethics policy. Under this policy, the employees can approach the Company's Ethics Counsellor/ Chairman of the Audit Committee. 27. Issue of shares with differential voting rights The Company has not issued any shares with differential voting rights pursuant to the provisions of Rule 4 of the Companies (Share Capital and Debenture) Rules, 2014. 28. Issue of sweat equity shares During the year under review, the Company has not issued any sweat equity shares to any of its employees, pursuant to the provisions of Rule 8 of the Companies (Share Capital and Debenture) Rules, 2014. 29. Employee Stock Option The Company does not have any Employee Stock Option Scheme for its employees. 30. Reports on Corporate Governance and Management Discussion and Analysis SEBI has vide its Circular (Ref No. CIR/CFD/POLICY CELL/7/2014 dated 15th September 2014) amongst others, made the compliance with the provisions of amended Clause 49 of the Listing Agreement, non-mandatory for time being, to those companies having paid-up equity share capital not exceeding Rs. 10 Crore and Net Worth not exceeding Rs. 25 Crore as on the last day of the previous financial year. Considering that the Company's paid-up equity share capital was Rs. 3.69 Crore and the Net Worth was negative as on 31st March 2014, compliance with the provisions of revised Clause 49 of the Listing Agreement is not mandatory to the Company. Accordingly, for the year under review, the reports stating compliance with revised Clause 49 of the Listing Agreement dealing with the Code of Corporate Governance and the Management Discussion and Analysis have not been annexed to this Report. 31. Acknowledgements The Directors wish to place on record their sincere appreciation for the unrelenting support received during the year from the Shareholders, Tata Projects Limited, customers - both in India and abroad, suppliers, vendors and service providers, Banks, the Board for Industrial and Financial Reconstruction (BIFR), the Appellate Authority for Industrial and Financial Reconstruction (AAIFR) and other Government and Regulatory authorities, Financing and lending institutions. The Board wishes to record its deep appreciation to all the employees and workers of the Company for their dedication and commitment. For and on behalf of the Board of Directors VINAYAK DESHPANDE Chairman Mumbai, 4th May 2015 |