DIRECTORS' REPORT Your Directors have pleasure in presenting their 24th Annual Report and the Audited Financial Statements of the Company for the year ended 31st March 2015 REVIEW OF OPERATIONS 2014-15 In the year under review, the total production was 57571 MT as compared to the previous financial year production of 77454 MT and thus the total production fell short by 19883 MT, of which the shortfall in production of Kraft Paper at Edayar Units is 6552 MT, and Duplex Board at Chalakkudy Unit is 13331 MT. The main reason for the shortage of production at Edayar Unit was due to frequent stoppage and repairs and the downtime of the boiler and also due to the breakdown of other equipments. Inorder to rectify and carry out repairs, the Company had a long shutdown. Chalakkudy Duplex Board Unit production for the Financial Year 2014-15 was 6779 MT. The Unit was closed and operations stopped from 1st October, 2014. The Company had to close down the operation due to severe market competitive conditions as very many number of Duplex Board Mills were commissioned in Tamil Nadu in and around consuming centers mainly Shivakasi. As Tamil Nadu Mills were servicing the consuming centers at economical prices, the transport charges of our product was an inhibiting factor which practically resulted in losing our competitiveness. Further, the Tamil Nadu News Print Limited (TNPL) is implementing a big Duplex Board Plant Project with a capacity of 1000 tonnes per day, and the same is expected to come into operation soon. The size and capacity of our Duplex Board Unit at Chalakkudy was insufficient and inadequate to enjoy economies of large scale operation and to compete with the Tamil Nadu Mills. As regards the Kraft Paper, the market conditions were sluggish from the year 2013-14 which continued affecting the profitability. With the completion of the repairs and maintenance work of the boiler and other equipments, the operation of the Kraft Paper Unit have been put into stable operation from the last Quarter of the financial year under review. The Company has now taken all possible steps for effecting cost control and, taking into account the market conditions and sales realization, the Company has drawn up plans for operation of the Kraft Paper Unit at 80% capacity to earn reasonable profits in the current year. The net loss of the Company for the year ended would have been lesser by Rs. 191.37 lacs if the REC income were recognized on the unsold stock (including opening stock) of REC Certificates (12758) as income at the floor price of Rs. 1500/- fixed by Government. DIVIDEND In view of loss, your Directors decided not to recommend payment of dividend on the equity shares and non convertible cumulative Redeemable Preference Shares for the financial year under review. EXPORT PERFORMANCE Your Company exported 1518.98 MT of paper and paper boards during the year as compared to 471 MT during the previous year. The export amounted to Rs.389.65 lacs as against Rs 129.74 lacs in the previous year. PROSPECTS The Company's performance in the first quarter of the current fiscal is not satisfactory due to the maintenance/ shut of the Power Plant and Market conditions. With the completion of the repairs and maintenance work of the boiler and other equipments, the operation of the Kraft Paper Unit have been put into stable operation from the Second Quarter of the current financial year. As mentioned above the Company has now taken all possible steps for effecting cost control and, taking into account the market conditions and sales realization the Company has drawn up plans for operation of the Kraft Paper Unit at 80% capacity to earn, barring unforeseen circumstances, reasonable profits in the current year. FINANCE All the repayment and interest commitments were met as per terms of arrangement with the Banks. SUBSIDIARY COMPANIES As of 31st March 2015 the Company had 3 subsidiaries viz. Sree Kailas Palchuram Hydro Power Limited, Sree Adisakthi Mukkuttathode Hydro Power Limited and Jalashaayi Alamparathode Hydro Power Limited by virtue of the Company having control on the Board of these Companies. Steps are being initiated to implement the project with the assistance of Government / Private parties. The Board of Directors of the Company at its meeting held on 30.05.2011 decided to avail the exemption under Section 212 of the Companies Act, 1956 pursuant to GC No.2/2011 dated 08.02.2011 issued by the Central Government. As required in the Circular, the consolidated financial statements audited by the Statutory Auditors of the Company attached along with the Annual Reports of the Company. Annual accounts of the subsidiary companies and the related detailed information would be sent to those shareholders seeking information in this regard at any point of time. Further annual accounts of the subsidiary companies would be available for inspection by any shareholders at the registered office of the Company. INDUSTRIAL RELATIONS The industrial relations remained cordial and satisfactory during the year under review. CHANGES IN NATURE OF BUSINESS No significant changes had been made in the nature of the Company during the financial year. MATERIAL CHANGES AND COMMITMENTS OCCURRED BETWEEN THE DATE OF BALANCE SHEET AND THE DATE OF AUDIT REPORT No significant material changes and commitments have occurred between the date of the balance sheet and the date of the audit report. FINANCE A) Deposits The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposits) Rules, 2014. B) Particulars of Loans, Guarantees or Investments Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. INTERNAL CONTROL SYSTEM Your Company has adequate internal control and internal check system commensurate with size of the organization. The Company has appointed M/s. Pooja A Nayak & Co., Chartered Accountants, Ernakulam as the Internal Auditor of the Company to monitor and evaluate the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies of the Company and its subsidiary. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL With deep regret we report the sad demise of Mr. A.S. Unny, Chairman of the Company on 17th May 2015. The Board records their deep appreciation for the valuable guidance and leadership rendered by Mr. A.S. Unny, Chairman of the Company. In terms of Article 83 of the Articles of Association of the Company, Mrs.E. Kamalam, Director retire on rotation, and being eligible offer herself for re-appointment. Mr. T S Anantharaman who was appointed as Independent Director as per SEBI Guidelines is disqualified to act as Independent Director under the provisions of Companies Act, 2013 and his appointment is categorized as Director liable for retirement by rotation. Accordingly he is retiring by rotation and being eligible offers himself for re-appointment. In the Annual General Meeting held on 30st September 2014 Dr. A.R.K. Rao was appointed as Independent Director for a term of one year and he will be retiring at the ensuing Annual General meeting. The Company has received requisite notices in writing from members proposing Dr. A.R.K. Rao for re-appointment as Independent Director for another consecutive term of one year. The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of Independence as prescribed both under sub section (6) of Section 149 of the Companies Act, 2013 and under Clause 49 of the Listing Agreement with the Bombay Stock Exchange. During the period under review, Mrs. Usha Venugopal, was appointed as Chief Financial Officer of the Company, as one of the Key Managerial Personnel in compliance with the provisions of Section 203 of the Companies Act, 2013 BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Revised Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committee. The manner in which the evaluation has been carried out has been explained in the Governance Report. REMUNERATION TO DIRECTORS The Remuneration paid to the Executive Directors and the Sitting Fees paid to the Non Executive and Independent Directors are disclosed in the Extract to the Annual Return i.e Annexure IV to the Board's Report. AUDIT COMMITTEE The Audit Committee of the Board was reconstituted on 30-5-2015 and consists of Mr. Deveshwer Kumar Kapila, Independent Director, Mr. U.Gururaja Bhat, Independent Director, Dr. A R K Rao, Independent Director and Mr. S. Giridhar Non Independent Director. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE The Corporate Social Responsibility Committee of the Company consists of Mr. Deveshwer Kumar Kapila, Independent Director, Dr. S Rajkumar, Managing Director and Mr. A Padmanabhan, Whole Time Director. The Committee has taken steps for the preparation of CSR policy, projects and programs proposed to be undertaken by the Company for approval of the Board. The Annual Report on CSR Activities for the Financial Year 2014-15 is annexed at Annexure VII to the Directors Report. NOMINATION AND REMUNERATION COMMITTEE The Nomination and Remuneration Committee was reconstituted on 30-05-2015 and consists of Mr. Deveshwer Kumar Kapila, Independent Director, Mr. U.Gururaja Bhat, Independent Director, Dr. A R K Rao, Independent Director and Mr. S. Giridhar Non Independent Director. REMUNERATION POLICY The Company's Remuneration Policy for Members of the Board and Executive Management is annexed at Annexure IIIA to the Directors' Report. The Company's remuneration policy is directed towards rewarding performance based on review of achievements periodically. The remuneration policy is in consonance with the existing industry practice. SHAREHOLDERS RELATIONSHIP COMMITTEE Composition of the Committee as from 30th July 2015: Dr S. Rajkumar, Managing Director Mr U.G. Bhat, Independent Director Dr. A R K Rao, Independent Director Mr. S.Giridhar, Non Executive/ Non Independent Director AUDITORS M/s Balan & Co. Chartered Accountants, the present Auditors of the Company retire and are eligible for reappointment and the proposal has been placed before you. Necessary certificate has been obtained from the Auditors as per Sections 139 and 141 of Companies Act, 2013 FOREIGN EXCHANGE EARNINGS AND OUT-GO During the year under review, the foreign exchange earned by the Company by way of exports proceeds is Rs. 389.65 lacs. The foreign exchange outgo for the company for import purchases Rs. 5831.15 lacs PARTICULARS UNDER SECTION 134 Conservation of Energy, Technology Absorption Statement of particulars under Section 134 (3) (m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed as Annexure - I Particulars of Employees None of the employees of the Company are coming under the provisions of Section 197(12) of the Companies Act, 2103, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. CORPORATE GOVERNANCE The Company's Equity Shares are listed with Bombay Stock Exchange. The Company has implemented all the mandatory provisions of Clause 49 of the Listing Agreement relating to the Corporate Governance. The Report on Management's Discussion and Analysis and Report on Corporate Governance are forming part of Directors' Report and are annexed as Annexure -II and Annexure - III respectively. As required by the Listing Agreement, an Auditors' Certificate on Corporate Governance and a Declaration by the Vice Chairman and Managing Director with regard to Code of Conduct are attached to the said Report. Further, as required by Clause 49 of the Listing Agreement, a Certificate, duly signed by the Vice Chairman and Managing Director and CFO, was submitted to the Board of Directors on the financial statements and cash flow statement of the Company for the year ended March 31, 2015 at the Meeting held on May 30, 2015. EXTRACT OF ANNUAL RETURN Extract of Annual Return in Form MGT 9, of the Company is annexed as Annexure IV to this Report. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee for approval. Further prior approval of the Shareholders of the Company at the Annual General Meeting dated 30th September, 2014 has been taken for the business related transactions entered into with the Related Parties during the year. Particulars of contract or arrangements with related parties is annexed in Form AOC 2 as Annexure V. SECRETARIAL AUDITOR The Board has appointed M/s. Lakshmmi Subramonian & Associates, Practising Company Secretary, to conduct Secretarial Audit for the financial year 201415. The Secretarial Audit Report for the financial year ended March 31, 2015 is annexed herewith marked as Annexure VI to this Report. WHISTLE BLOWER POLICY/ VIGIL MECHANISM In accordance with Section 177 of the Companies Act, 2013 and revised Clause 49 of the Listing Agreement, the Company has constituted a Whistle Blower Policy Vigil Mechanism to establish a vigil mechanism for the Directors and employees to report genuine concerns in such manner as may be prescribed and to report to the management instances of unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct. The detail of the Whistle Blower Policy has been posted on the website of the Company, www.sree kailas.com DIRECTORS RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(3) (c) of the Companies Act, 2013 Directors report that: 1. In the preparation of the annual accounts for the financial year ended 31st March 2015 the applicable accounting standards had been followed along with proper explanation relating to material departures. 2. The Directors had selected such accounting policies and applied them consistently and made judgment and estimates that were 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 lose of the Company for the year under review. 3. 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. 4. The Directors had prepared the Annual Accounts for the financial year ended 31st March 2015 on a 'going concern' basis. 5. That proper internal financial controls were in place and that the financial controls were adequate and were operating effectively. 6. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 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 differential 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 commission from any of its subsidiaries. 5) No significant or material orders were passed by the Regulators or Courts or Tribunal 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 Workplace (Prevention, Prohibition and Redressal) Act, 2013 ACKNOWLEDGEMENT The Board places on record, its appreciation for the cooperation and support received from shareholders, customers, suppliers, employees, government authorities and banks. By and on behalf of the Board of Directors Sd/- Deveshwar Kumar Kapila Chairman PLACE : Cochin -16 Date :30/7/2015 |