DIRECTORS REPORT Dear Members, Your directors have pleasure in presenting their 31st Annual Report together with the audited financial statements for the financial year ended 31st March, 2015 2. PERFORMANCE REVIEW In view of the Accounting Standard (AS) - 17 (Segment Reporting). The Company operates in two main segments i.e. Textile and Sugar. i Textile : The textile division accounts for 93.30% of the total turnover of the company for the year ended 31st March, 2015. The Business wise performance of this segment is asunder: a. Yarn: The Company has produced 69,890 MTs of yarn as against 70,595 MTs in the previous year. b. Fabric: The Company has produced 702.33 Lacs meters of fabrics (both grey and processed) as against 728.78 Lacs meters in the previous year. The total turnover of this segment (Yarns and Fabrics) has decreased to Rs. 1,666.85 crores as against Rs.1,704.42 crores in the previous year. ii. Sugar: The Company has produced 393,430 Qtls. of sugar as against 412,720 Qtls. in the previous year. The total turnover of this segment is Rs. 119.58 crores as against Rs. 121.66 crores in the previous year. Overall Performance During the year the company has achieved operational income of Rs. 1,807.40 crores as against Rs. 1,854.57 crores. The company has earned Profit before finance cost, Depreciation and tax of Rs. 204.88 crores as against f331.26 crores in the previous year. After providing for Finance Cost of Rs.104.88 crores (previous year Rs.105.87 crores), Depreciation of Rs. 135.24 crores (previous year Rs. 120.31 crores) and Tax Expenses of Rs. (7.23) crores (previous year Rs.35.83 crores) (inclusive of Deferred Tax) the Profit/(Loss) for the year comes to Rs. (28.01) crores as against Rs. 69.25 crores in the previous year. 2014-15 was the challenging year for the Indian Textile industry. There was sluggish demand of the textile products both in the domestic as well as export market dueto steep decline in export of cotton yarn to China which hascreated excess supply in the domestic market and the pressure of finished goods was mounted at mills level, pushed the Companies to sell its products at lower prices which in turn affected the Company's financial performance The Sugar Unit of the Company had suffered a Cash Loss of Rs.2,290 Lacs during the year under review in comparison to the Cash Profit of Rs. 402 Lacs earned during the previous year due to higher MSP of the Sugar Cane (basic Raw material) fixed by the Govt. Our company could not even recover its raw material cost in the realized value of the sugar. Consequent to the enactment of the Companies Act, 2013 and its applicability for accounting periods commencing from 1st April, 2014, the Company has recalculated the remaining useful life of fixed assets in accordance with the provisions of Schedule-II of the Act. The depreciation and amortization expenses charged for the year ended 31st March, 2015 would have been lowered by Rs. 1,966.66 Lacs had the company continued with the previously prescribed depreciation rates as per Schedule XIV of the Companies Act, 1956. 3. STATUS OF DISTILLERY PROJECT The Company is setting up a distillery unit with a capacity of 200 KLPD and 5 MW co-generation power plant at Village Salana Jeon Singh Wala , Tehsil Amloh , District Fatehgarh Sahib in the State of Punjab. After obtaining all necessary approvals for setting up the unit, orders for purchase of plant and machinery was placed and civil construction has also started. Unfortunately, farmers of the nearby area have filed an appeal in the National Green Tribunal (NGT), Delhi challenging Environmental Clearance and the central ground water approval regarding extraction of water through bore-wells. The Tribunal heard the arguments from both the sides and the order was reserved on 19.3.2015 and the same is pending till date. In the meantime Company has incurred Rs. 16.61 crore as capital expenditure in the project. 4. CREDIT RATING The rating committee of ICRA Limited has given long term rating as [ICRA] A- (pronounced ICRA A minus). The outlook on the long term rating is stable. The rating committee of ICRA has also given short term rating as [ICRA] A2+ (pronounced ICRA A two plus). 5. DIVIDEND Your directors express their inability to recommend dividend for the Financial Year ended on 31st March, 2015 due to loss suffered by the Company. 6. SHARE CAPITAL The paid up Equity Share Capital as at 31st March, 2015 stood at f 39,83,51,410/- divided into 3,98,35,141 Equity Shares of the face value of f 10/- each. During the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. As on 31st March, 2015 none of the Promoters / Directors of the Company hold instruments convertible into equity shares of the Company. 7. DEPOSITS During the year, the Company has not accepted any deposits from the public. As such, there are no outstanding deposits within the meaning of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. 8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT BY THE COMPANY Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Financial Statements. 9. DIRECTORS Appointment and Change in Directors • In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association Sh. Jawahar Lal Oswal (DIN: 00463866) and Sh. Dinesh Oswal (DIN: 00607290), Directors of the Company retire by rotation at the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. • During the year under review, Sh. Kanwar Sain Maini (DIN: 00454686), an Independent Director of the C om pan y, wh o was associated wi th th e Company since 30.6.2001 had resigned w.e.f 14.2.2015 from the directorship of the Company. The Board has placed on record its appreciation for the services rendered by him during his tenure as a Director. • During the year under review, the Company has appointed Dr. Vijay Asdhir (DIN: 06671174) as Additional Director, in the category of an Independent Director, in its Board Meeting held on 14.2.2015 to hold such office up to the date of forthcoming Annual General Meeting of the Company. In the ensuing Annual General Meeting, the Company is appointing Dr. Vijay Asdhir as an Independent Director, not liable to retire by rotation, to hold the office for three consecutive years for a term upto the conclusion of 34th Annual General Meeting to be held in calendar year 2018. • During the current financial year, Sh. Narayan Dass Jain (DIN: 00493334), a Non-Executive Director of the Company, who was associated with the Company since 30.4.1999 had resigned from the directorship of the Company w.e.f. 11.08.2015. The Board has placed on record its appreciation for the services rendered by him during his tenure as a Director. • During the current financial year, the Company had appointed Sh. Navdeep Sharma (DIN: 00454285) as Additional Director, in the category of Non-Executive Director in its Board Meeting held on 12.8.2015 to holdsuch office up to the date of forthcoming Annual General Meeting of the Company. In the ensuing Annual General Meeting, the Company is appointing Sh. Navdeep Sharma as a Non-Executive Director, who shall be liable to retire by rotation as per the provisions of the Companies Act, 2013. Declaration by Independent Directors Necessary declaration has been obtained from all Independent Directors under sub-section (6) of Section 149 of the Companies Act, 2013. Number of Meetings of the Board During the year four Board Meetings were convened and held. The details thereof are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 Appointment and Remuneration Policy The Board has on recommendation of the Nomination and Remuneration Committee framed a policy for appointment of Directors, Senior Management and their remuneration. The salient features of this policy has been stated in the Corporate Governance Report forming an integral part of the director's report. Board Evaluation Pursuant to the provisions of Companies Act, 2013 and clause 49 of the Listing Agreement, the Company has devised a policy for performance evaluation of Independent Directors and the Board. This policy on board evaluation is stated in Corporate Governance Report forming an integral part of the director's report. Independent Director's Meeting During the financial year 2014-15, the independent directors met on 30.03.2015 inter-alia to discuss: (i) the performance of non-independent directors and the Board as a whole; (ii) the performance of the chairman of the Company, taking into account views of executive and nonexecutive directors and (iii) to access the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties. All the independent directors were present at the meeting except Dr. Amrik Singh Sohi. 10. DIRECTORS RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)(c) & (5) of the Companies Act, 2013:- a) that in the preparation of the Annual Accounts for the year ended on 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; 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 as at 31st March, 2015 and of the profit of the Company for the year ended on that date; c) that the directors have 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 annual accounts have been prepared 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. 11. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013 is included in this Report as Annexure-A and forms an integral part of this Report. 12. RELATED PARTY TRANSACTIONS The Company has not entered into any contract or arrangement with Related Parties/ group companies other than in ordinary course of business. During the financial year under review, all transactions entered into with Related Parties as defined under the Companies Act, 2013 and clause 49 of the Listing Agreement were in the ordinary course of business and are at arm's length basis. These transactions were entered into as per the Company's Policy on Related Party Transactions and are approved by the Audit Committee, Board and also by Shareholders. The company's policy on Related Party Transactions is available at the weblink: www.owmnahar.com/nahar_ie/pdf/RPT_Policy.pdf <http://www.owmnahar.com/nahar_ie/pdf/RPT_Policy.pdf> The details of Related Parties Transactions are given in note no 38 of the Notes to Financial Statements. Pursuant to the provisions of section 134(3) Form AOC-2 is annexed herewith in Annexure-B. 13. AUDIT COMMITTEE The Company has constituted an Audit Committee pursuant to Section 177(8) read with Rule 6 of the Companies (Meetings of the Board and its Powers) Rules, 2014 and clause 49 of the Listing Agreement. Presently, the Audit Committee consists of Sh. Dinesh Gogna and Dr. (Mrs) Harbhajan Kaur Bal as Members and Dr. Vijay Asdhir is the Chairman of the Audit Committee. The detailed information regarding Audit Committee and its terms of reference is given in Corporate Governance Report forming an integral part of the director's report. 14. RISK MANAGEMENT The Company has laid down a Risk Management Policy and identified threat of such events which if occurs will adversely affect the ability of company to achieve its objectives. The Audit Committee has also been delegated the responsibility for assessment, mitigation, monitoring and review of all elements of risks which the Company may be exposed to. The Board also reviews the risk management and minimization procedures. 15. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Board adopted a Vigil Mechanism/ Whistle Blower Policy as per clause 49 of the Listing Agreement and section 177 of the Companies Act, 2013 to report genuine concerns or grievances about unethical behavior of employees, actual or suspected fraud or violation of the Company's Code of Conduct. The Company's Vigil mechanism/ Whistle Blower Policy is available at the Company's website i.e. www.owmnahar.com <http://www.owmnahar.com>. 16. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company is having adequate internal control systems and procedures which commensurate with the size of the Company. The Company is having Internal Audit Department which ensures that the internal control systems are properly followed by all concerned departments of the Company. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. 17. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant and material orders passed by the Regulators / Courts that would impact the going concern status of the Company and its future operations. 18. CORPORATE SOCIAL RESPONSIBILITY (CSR) The company has constituted a Corporate Social Responsibility (CSR) Committee of the board with Mr. Kamal Oswal as its Chairman and Mr. Dinesh Gogna & Mr. Yash Paul Sachdeva as its members. The Corporate Social Responsibility Committee (CSR) has formulated and recommended to the board Corporate Social Responsibility Policy (CSR Policy) mentioning the activities to be undertaken by the Company which has been approved by the board. The CSR policy may be accessed on the Company's website i.e. www.owmnahar.com <http://www.owmnahar.com>. The Annual Report on CSR activities is annexed herewith marked as Annexure-C. During financial year 2014-15 no e xp e n d i tu re wa s incurred because the board was in the process of identifying specific projects/ programs for undertaking CSR activities. The company was undertaking surveys for identifying the projects in thematic areas. The company, therefore, decided to undertake its CSR activities in collaboration with our Group companies, under one umbrella, i.e. through Oswal Foundation, which is a Registered Society formed in 2006 having its charitable objects in various fields. Our Company has already started contributing the sum for the expenditure to be incurred by the said Oswal Foundation on CSR activities. Till date the Oswal Foundation has incurred the expenditure on a project to save water pollution on Sidhwan Canal, near PAU, Ludhiana. The said Society has also adopted two govt. Schools situated at Giaspura & Dhandari Khurd, Distt. Ludhiana for promoting education. The said projects will be undertaken in the current financial year. The Foundation has already obtained permission from the Education Department in this regard. 19. NOMINATION & REMUNERATION POLICY Th e Board has , on the recommen dation of Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report forming an integral part of this report. 20. AUDITORS i. STATUTORY AUDIT & AUDITOR'S REPORT M/s Raj Gupta & Co., Chartered Accountants, Auditors of the Company shall retire at the conclusion of the forthcoming Annual General Meeting and being eligible offer themselves for re-appointment. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under Clause 49 of the Listing Agreement, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The auditor's report on the accounts of the Company is self-explanatory and requires no comments. ii. COST AUDITOR & COST AUDIT REPORT Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its textiles and sugar segments are required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Ramanath Iyer & Co., Cost Accountants, New Delhi to audit the cost accounts of the Company for the financial year 2015-16. The cost audit report for the financial year 2013-14 was filed with the Ministry of Corporate Affairs on 22nd September, 2014. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s. Ramanath Iyer & Co.,Cost Accountants is included in the Notice convening the Annual General Meeting. iii. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed M/s. P.S.Bathla & Associates, a firm of Company Secretaries in Practice (C.P. No. 2585) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is attached as Annexure-D and forms an integral part of this Report. There is no secretarial audit qualification for the year under review. 21. KEY MANAGERIAL PERSONNEL 22. PARTICULARS OF EMPLOYEES The information required pursuant to Section 197 read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, forming part of the Directors' Report for the year ended 31st March, 2015 is given in the Annexure-E of this Report. None of the employees of the Company is covered under section 197(12) of the Companies Act, 2013 read with rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. 23. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of The Companies (Accounts) Rules, 2014, is annexed herewith as Annexure-F. 24. CORPORATE GOVERNANCE REPORT Your Company continues to follow the principles of good corporate governance. The corporate governance report along with auditor's certificate regarding compliance of the conditions of corporate governance as stipulated in clause 49 of the Listing Agreement with the stock exchanges confirming compliance is attached herewith as Annexure-G and forms part of this Report. 25. ASSOCIATE COMPANIES Pursuant to section 129(3) of the Companies Act, 2013 a statement containing salient features of financial statements of Associate Companies in Form AOC-1 is annexed with financial Statements. 26. INDUSTRIAL RELATIONS Industrial relations throughout the year continued to be very cordial and satisfactory. 27. ACKNOWLEDGMENT Your directors would like to express their appreciation for the assistance and co-operation received from financial institutions, banks and shareholders. They also place on record their appreciation for the co-operation of employees at all levels. For and on behalf of the Board of Directors Jawahar Lal Oswal Chairman Date: 12.08.2015 Place: Ludhiana |