DIRECTORS REPORT

To

The Shareholders

Your Directors have pleasure in presenting this SIXTY EIGHTH ANNUAL REPORT along with the Audited Statement of Accounts for the year ending 31st March, 2015.

PERFORMANCE:

For the year 2014-15 your Company made a Profit of Rs. 7.64 Crores (before tax) against Rs. 76.22 Crores made last year. The Net Profit (After Tax) was Rs. 3.38 Crores against Rs. 54.54 Crores made last year. The steep fall in Sugar Prices, increase in Power tariff and reduction in the quantum of Power supplied by Andhra Prades Gas Power Corporation Limited due to the shortage of Gas have been the main reasons for the fall in profit.

DIVIDENDS:

A Dividend of Rs. 5/- per Equity Share was paid for the year 2013-14. Your Directors recommend a Dividend of Rs.3/- per Equity Share (Rs.10/- paid up Equity Share) for the year 2014-15. The outflow towards Dividend payment (including tax on distributable profits) would be Rs.9.29 Crores. This Dividend, if approved by the Shareholders, will be paid to all the eligible Shareholders.

CAPITAL & RESERVES:

Authorised and Paid Up Capital:

As on 31.3.2015, the Authorised Capital of the Company is Rs. 30.00 Crores and the Paid-up Capital is Rs. 27.11 Crores.

Reserves:

With the transfer of Rs. 3.00 Crores during the year under report, the total Reserves as on 31.3.2015 stands at Rs. 528.01 Crores against Rs. 536.52 Crores on 31.3.2014.

REVIEW OF OPERATIONS:

SUGAR UNITS:

The three Sugar Units together crushed 5,65,781 M.T. of cane during the 2014-15 season against 5,71,449 M.T. crushed last year. The crushing operations and cane price paid to cane suppliers for the 2014-15 season are:

SUGAR UNIT – I SUGAR UNIT – II SUGAR UNIT - III TANUKU TADUVAI BHIMADOLE

Fin. Year Fin. Year Fin. Year Fin. Year Fin. Year Fin. Year 2014-15 2013-14 2014-15 2013-14 2014-15 2013-14  

• inclusive of an Incentive of Rs.60/- per M.T.

• Cane crush at sugar units I & III was lower compared to the last season due to lower availability of cane and lower number of days of cane crush. Cane crushed at Sugar Unit II was higher.

• Recovery achieved at Sugar Unit II was higher compared to Units I and III.

• Unfavourable weather conditions affected the cane yield per acre thereby reducing the quantity of cane crush. This also affected the recovery.

• Due to non availability of harvesting labour and increase in the cost of hiring the labour, farmers opted for cultivation of other crops.

• To encourage farmers to plant cane, your Company opted to pay a cane price higher than the “Fair Remunerative Price” fixed by the Government.

POWER GENERATION :

During the year under report the Co-generation Unit at Taduvai generated 1,31,30,300 Units of Power against 1,50,63,200 Units generated last year.

PERFORMANCE OF CHEMICAL DIVISION:

During the year under report the Caustic Soda Division at Saggonda made a turnover of Rs.370.11 Crores compared to Rs. 410.45 Crores made last year. Profit after depreciation made by this Division this year was Rs.62.12 Crores against Rs. 82.95 Crores made last year. During the year under report Power supply from Andhra Pradesh Gas Power Corporation Limited (APGPCL), a Gas based Power Generating Company, of which your company is a shareholder, was restricted due to non-availability of Gas to meet their Power Generating Capacity. This impacted the performance of Chemical Units as there was a need to purchase additional Power from Power Exchanges and from State Electricity Board at a higher tariff.

WIND POWER UNITS:

The Power generated at Ramagiri Wind Mills during the year is Units 22,86,500 against 25,40,290 Units generated last year.

The Power generation at the Tamil Nadu Wind Mills during the year under report is 2,31,02,512 Units against 2,69,55,509 Units of last year. This Power is being fed into the Tamil Nadu State Electricity Board grid.

PROJECTS:

Your Company continues to focus its strategy on expansion and diversification programme.

An Energy Efficient Caustic Soda plant is in operation at Saggonda.

At the Jawaharlal Nehru Pharmacity, at Parawada, Visakhapatnam, a Sodium Hypochlorite Plant is being set up.

Sodium Hydroxide and Chlorine Gas are the main raw material for this plant. Sodium Hydroxide and Chlorine Gas will be sourced internally from our Saggonda plants.

Site development and civil foundation works are in progress. Bought out components required for this project have been initiated. Fabrication of all the process equipment and storage tanks has been completed. Fabrication of the structures for the main process plant is in progress. Erection of Process Equipment in the main building is expected to commence shortly.

Sodium Hypochlorite is used in the drug and pharmaceutical industries, water treatment, paper and chemical industries. Since the plant is being put up at the Pharmacity, it will have the advantage of catering to the requirements of user Industries in and around Jawaharlal Nehru Pharmacity. This project is expected to be commissioned by the end of 2015.

As Power is an essential input for your Company's Chlor Alkali operations, a 33 MW Coal Based Power Project is being set up at the Chemical Complex at Saggonda. Required land has been procured. Foundation Stone has been laid. Public Hearing has been conducted by the Public Authorities and State Level Impact Assessment authority has recommended to the Appropriate Authority to issue Environmental Clearance. Industrial

Entrepreneur Memorandum filed has been acknowledged by the Ministry of Commerce. Orders have been placed for Boilers, Turbine and Air Cooler Condenser. After thorough deliberations it was felt to go in for a 33 MW with a view to operate at the optimum level considering the present demand and availability of power for captive requirement. Erection and Procurement orders for all works have been issued. The total cost of the Project has been estimated at Rs.200.00 Crores. Discussions are on with various Banks to firm up the available funding for the Project.

The Power generated from this Power Plant will be utilized for the Chemical Plants located at Saggonda. During the year under report a Solar Power Plant based on Photovoltaic Technology has been commissioned.

The Power generated by this plant is being utilized in house at Kovvuru.

After a review of market conditions and considering the implementation activities of Power project undertaken, setting up of Hydrogen Peroxide and Chlorinated Paraffins Plants is put on hold for the time being.

DEMATERIALISATION OF EQUITY SHARES:

As of 31st March, 2015 Equity Shares representing 44.63% of the Share Capital have been dematerialised.

AUDITORS:

M/s Brahmayya & Co., Chartered Accountants, Vijayawada, the present Auditors were appointed at the 67th Annual General Meeting for a period of 3 Financial Years i.e., 2014-15, 2015-16 and 2016-17.

They retire at this Annual General Meeting and offer themselves for re-appointment which requires ratification of Shareholders. Their remuneration for the current Financial Year 2015-16 also requires your approval.

COST AUDITORS:

M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad are appointed by your Board of Directors, as Cost Auditors of the Company for the products, which are subject to Cost Audit, for the year ended 31-3-2015. Cost Auditors Report and Compliance Report in respect of Financial Year 2013-14 has been filed with the Ministry of Corporate Affairs on 25.9.2014 and 24.9.2014 respectively i.e. within the stipulated due date of 27.9.2014. Their remuneration is being placed for your ratification at the ensuing 68th Annual General Meeting.

CORPORATE GOVERNANCE:

As per the amended provisions of the Listing Agreement, a Report on Corporate Governance along with Management Discussion and Analysis forming part of the Directors' Report is annexed. Annexure-I

COMPLIANCE CERTIFICATE OF THE AUDITORS:

The Statutory Auditors have certified that the Company has complied with the conditions of Corporate Governance as stipulated in the Listing Agreement with the Stock Exchanges and the same is annexed to the Report of Directors.

AUDIT COMMITTEE:

Audit Committee comprises of 3 non Whole-time, Independent Directors, Sri A. Ranga Rao, Dr. P. Kotaiah and Sri V.S. Raju. Sri A. Ranga Rao is the Chairman of this Committee.

DIRECTORS AND KMP:

Directors Sri M.Narendranath and Sri P. Achuta Ramayya retire by rotation at the ensuring 68th Annual General Meeting and being eligible offer themselves for re-appointment.

As required by the Provisions of the Companies Act, 2013, Sri A. Ranga Rao, Dr. P.Kotaiah, Sri V.S.Raju, Dr.A.V. Rama Rao, Sri P.A. Chowdary and Dr. D. Manjulata were appointed as Independent Directors by the Shareholders at the 67th Annual General Meeting for a period of 5 years with effect from the conclusion of the 67th Annual General Meeting i.e., 10-09-2014.

Dr. D. Manjulata was appointed as Director at the 67th Annual General Meeting on the Board in compliance with the Provisions of the Companies Act, 2013 and Listing Agreement with regard to the appointment of Woman Director on the Board.

Independent Directors have given a statement of declaration as per Section 149(7) of the Companies Act, 2013.

To be in line with provisions of the companies Act, 2013 Dr. B.B. Ramaiah, Chairman & Managing Director, Sri M. Palachandra, Company Secretary and Sri P.V.S. Viswanadha Kumar, G.M. (Finance) & Asst. Secretary has been designated as Key Managerial Personnel.

COMPLIANCE UNDER COMPANIES ACT, 2013:

(Pursuant to Sec.134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014), your company complied with the compliance requirement the details of which are enumerated hereunder.

DIRECTORS' RESPONSIBILITY STATEMENT:

Pursuant to the requirements of Section 134(1)(c) of the Companies Act, 2013 and subject to disclosures in the Annual Accounts and also on the basis of discussions with the Statutory Auditors of the Company from time to time, we state as under :

a) that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departure;

b) that 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 of the Company for that period;

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

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

e) that 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) that 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.

BOARD MEETINGS:

The Board of Directors met 5 times during the financial year 2014-15 on 26-05-2014, 28-07-2014, 23-08-2014, 01-11-2014 and 31-01-2015.

INDEPENDENT DIRECTORS MEETING:

A Meeting of Independent Directors was held on 26th March, 2015. The Independent Directors have evaluated the performance of the Non-independent Directors, the Board as a whole and Chairman of the Board. The Board was briefed on the deliberations made at the Independent Directors Meeting.

FAMILARISATION PROGRAMME:

Your Company through a Policy has in place a familiarisation programme to all the Directors with a view to update them on the Company's Policies and Procedures. Independent Directors make a periodical visit to plants to keep themselves abreast of the plant operations. Respective Plant Heads interact with the Independent Directors and explain to them about the various process operations. The same has been posted on Company’s website www.theandhrasugars.com

FORMAL ANNUAL EVALUATION OF THE BOARD

The Board evaluated its own performance and that of its Committees and Directors in terms of :

- Measured and appropriate contribution by the Directors to the discussions on the Agenda Items,

- Each Director exercising the responsibilities in a bonafide manner.

- Understanding of the Company's business, strategic plans and other key issues.

-Special Skills and expertise of each Director contributing to the Board's overall effectiveness.

-Respecting the confidentiality of the Company's business information and Board's deliberations.

- Satisfactory attendance and active participation of each Director at the meetings of the Board and Committee.

The Board members were of the opinion that the Board as a whole and Directors have performed effectively as per the terms of the above parameters. The respective Committee performed as per its terms of reference.

VIGIL MECHANISM:

As a part of Vigil Mechanism, a Whistle Blower Policy has been established and approved by the Board. This Policy envisages reporting of wrong doing or non-ethical activities observed by Employees at any level directly to the Chiarman of the Audit Committee or to the Chairman & Managing Director. The matter reported will be investigated and if the wrong doer is found guilty, a disciplinary action will be initiated depending upon the materiality of the non-ethical doings. During the year under report there has been no instances which required reporting. The same has been posted on Company’s website www.theandhrasugars.com

NOMINATION AND REMUNERATION COMMITTEE :

As required by the Provisions of the Companies Act, 2013 and listing Agreement, a Nomination and Remuneration Committee has been constituted by the Board comprising of Independent Directors Sri V.S. Raju (Chairman), Sri P.A.Chowdary and Sri A. Ranga Rao.

This Nomination and Remuneration Committee has formulated Nomination and Remuneration Policy which has been approved by the Board. This Nomination & Remuneration Policy has laid down criteria and terms and conditions with regard to identifying the persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration based on the Company's size and financial position and trends and practices on remuneration prevailing in the industry. The same has been posted on Company’s website www.theandhrasugars.com

CORPORATE SOCIAL RESPONSIBILITY (CSR) :

As required by the Provisions of the Companies Act, 2015, a Corporate Social Responsibility (CSR) Committee has been constituted by the Board of the Company with Dr. B.B.Ramaih, Chairman & Managing Director (Chairman of the Committee), Sri P.Narendranath Chowdary, Managing Director, Sri M. Thimmaraja, Joint Managing Director and Sri V.S. Raju, Independent Director as members of the Committee. This Committee has formulated a CSR Policy which has been approved by the Board. This Policy envisages CSR Activities to be taken up, amount of expenditure to be incurred and monitoring of CSR Activities from time to time. The same has been posted on Company’s website www.theandhrasugars.com

This Policy aims towards the achievement of CSR objectives by undertaking any one or more of the activities to be in alignment with Schedule VII of the Companies Act, 2015 either on own or through any Trust / Society or any other recognized Agency.

As per the provisions of Section 135(5) of the Companies Act, 2013, company should spend in every Financial

Year at least 2% of the average net profits of the company made during the three immediately preceding Financial Years. In pursuance of its Corporate Social Responsibility Policy, the company gives preference to the local area and areas around it where it operates or any other permissible location for spending the amount earmarked for Corporate Social Responsibility activities.

As required by Rule 8 of the Companies (CSR Policy) Rules, 2013 a Report on CSR Activities and the amount of expenditure incurred are annexed to this Report. -Annexure-VI

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS :

The Company has duly complied with the Provisions of Section 186 of the Companies Act, 2013 with regard to Loans, Guarantees or Investments, the details of which, as applicable, are provided in the Notes to Balance Sheet.

RISK MANAGEMENT POLICY:

The company has framed a Risk Management Policy which envisages the following

• Identification of areas of Risk

• Assessing the impact of Risks

• Steps taken to mitigating the Risk

The Major Segments of operations of the Company are Sugar and Chlor Alkali.

The major aspects of concern for the Sugar Sector are:

1) Harvesting Labour

2) Power to operate the irrigation requirements

3) Proper Cane Varieties that give good Cane and Sugar yield and that are suitable for mechanical harvesting.

To get around the 1st aspect, the Company has embarked upon locating the right Cane Harvester suited to our Grower Farm sizes. The 2nd aspect is being taken care of by setting up a Solar Powered Pumping System at our R & D Farm so that our Growers could ultimately be provided the right guidance in this aspect. The 3rd aspect is being met by the Cane Breeding Programme undertaken by the Company.

Chlor Alkali segment is power intensive where Power constitute a major input cost. Restricted power supply and increased power cost have become a cause of concern. To mitigate this impact, a Solar Power Plant has been commissioned at Kovvur. At Saggonda location a 33MW coal based Power Plant is being set up. This would improve the power availability to the Chemical Plants.

The above policy has been posted on Company’s website www.theandhrasugars.com

INDUSTRIAL RELATIONS:

The relations with your Company's employees continue to be cordial and harmonious during the year under report.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE POLICY:

To be in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Act.) an Internal Compliance Committee (ICC) has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this Policy. As on the date of this report, there were no complaints received by the ICC.

SAFETY, HEALTH AND ENVIRONMENT:

Safety, Occupational Health and Environment Protection continue to be accorded high priority.

EXTRACT OF ANNUAL RETURN :

As required by Section 92 (3) of the Companies Act, 2013 and relevant rules, an Extract of Annual Return in MGT9 is annexured as a part of this Annual Report. -Annexure-III

RELATED PARTY TRANSACTIONS:

As per the provisions of Clause 49 of Listing Agreement, your Company has established a policy on materiality of Related Part Transactions and on dealing with Related Parties.

The policy on Related Party Transactions as approved by the Board of Directors is available on the website of the Company www.theandhrasugars.com

All transactions entered with Related Parties for the year under review were on Arm’s length basis and in the ordinary course of Business.

All Related Party Transactions are placed before the Audit Committee and the Board for approval. Omnibus approval was granted by the Audit Committee on yearly basis for transactions which are repetative nature. A statement giving details of all Related Party Transactions are placed before the Audit Committee and the Board for review and ratification on quarterly basis.

SECRETARIAL AUDIT REPORT :

As required by the Provisions of the Companies Act, 2013, Secretarial Audit Report provided by Nekkanti SRVV Satyanarayana & Co., Hyderabad, Company Secretaries in practice is annexed to this Report. Annexure-IV

RATIO OF REMUNERATION OF EACH DIRECTOR :

Details of ratio of Remuneration of each Director to the median employees remuneration is enclosed. Annexure-V

Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company

There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

Information pursuant to Section 134 of the Companies Act, 2013 read with relevant rules forming part of this Report is given in Annexure-II

FIXED DEPOSITS:

As required by the Companies Act, 2013 the details of Fixed Deposits as on 31.3.2015 is given hereunder.

The Andhra Sugars Limited

2014-15 2013-14

(a) Accepted during the year. 502905000 357935000

(b) Remained unpaid or unclaimed as at the end of the year. 2645000 4120000

(c) Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved.

i) at the beginning of the year NOT APPLICABLE NOT APPLICABLE

ii) maximum during the year -do- -doiii) at the end of the year -do- -do-

(d) Details of deposits which are not in compliance with the requirements of Chapter V of the Act. NIL NIL NO NO

CONSOLIDATED ACCOUNTS:

In accordance with the Accounting Standards, consolidated financial statements of the Company and its Subsidiaries form part of the Report and Accounts. These consolidated statements have been prepared on the basis of audited results received from the Subsidiary Companies as approved by their respective Boards.

The Accounts of the Subsidiary Companies for the year 2014-15 have not been attached to the Company's Accounts. However, Shareholders desirous of obtaining the Annual Accounts of the Subsidiaries may obtain them upon request. The Annual Report and the Accounts of the Subsidiary Companies will be kept for inspection

at the Company's Registered Office as well as at the offices of your Subsidiary Companies and are also placed on Company’s website www.theandhrasugars.com

SUBSIDIARIES AND ASSOCIATE:

JOCIL LIMITED:

For the Financial Year ending 31.3.2015, your subsidiary Company, JOCIL Ltd., posted a profit of Rs. 1967.91 lakhs (before taxation) against Rs. 1630.46 lakhs (before taxation) last year. The Board of this Subsidiary recommended a Dividend of Rs.6/- per share on the Capital of 88,81,150 Equity Shares. Dividend paid last year was Rs.5/- per share.

THE ANDHRA FARM CHEMICALS CORPORATION LIMITED:

The Company achieved a sales of Rs. 99.00 lakhs against Rs. 159.98 lakhs and incurred a loss (before Tax) of Rs.51.11 lakhs against the loss of Rs. 79.42 lakhs last year.

HINDUSTAN ALLIED CHEMICALS LIMITED:

The Directors are on the look out for a suitable project to be taken up by the Company.

THE ANDHRA PETROCHEMICALS LIMITED: (ASSOCIATE)

The Company achieved a sales of Rs.14026.17 lakhs against Rs. 25929.25 lakhs and incurred a loss (before Tax) of Rs.4749.04 lakhs against the loss of Rs.3023.99 lakhs last year. During the year under report the Plant was shut down over a prolonged period due to non-remunerative selling prices of the product and HUD-HUD cyclone. Hence the company incurred loss.

INTERNAL CONTROL SYSTEM:

Your Company conducts a review of the financial and operating controls of the various Units. The Internal Control System of your Company is commensurate with its size and nature of business. The Board has also laid down a policy on Internal Financial Control as required by the provisions of the Companies Act, 2013. The same has been posted on Company's Website www.theandhrasugars.com

LISTING ON STOCK EXCHANGE:

Company's Equity Shares are listed on National Stock Exchange and Annual Listing Fee for the Financial Year 2014-15 has been paid.

ACKNOWLEDGEMENT:

Your Directors wish to place on record their appreciation for the co-operation extended by the State and Central Government authorities, Financial Institutions and Banks. They also express their appreciation to the employees at all levels for the successful working of the Company.

For and on behalf of the Board

TANUKU Dr. B.B.RAMAIAH

Chairman & Managing Director  

Date : 28.07.2015