DIRECTORS' REPORT To The Members, We are delighted to present the report on our business and operations for the year ended March 31, 2016. OVERVIEW OF THE ECONOMY India is the biggest source of castor oil to the world market. It is by far the largest producer and exporter of castor oil, followed by China and Brazil. As the prices remained lower during the period, demand increased and as a result exports from the country increased. As per Solvent Extractors Association of India (SEA) data, during April-February 2015-16, India had exported 4,34,645 tones of castor oil as against 4,00,084 tones in corresponding period of 2014-15. Castor oil and castor seeds are known for the volatility in their prices. Castor crop cultivators, castor oil derivatives producers, and consumers have a critical need to factor in this price volatility in their business modeling and planning. The Company is focused on producing the basic castor oil grades. The Company is also engaged in trading of castor oil derivatives mainly HCO which the Company gets manufactured on job work basis. The Company is also manufacturing other derivatives viz.12 HSA and ricionic acid etc, The Company has a capacity to crush over 27000 MT of castor seeds per month. It is currently operating with crushing capacity in excess of 18000 MT per month. (Note: The data mentioned herein above are as available from statistics provided in public domain on the website of The Solvent Extractors Association of India.) FINANCIAL RESULTS: REVENUES- STANDALONE Our total income on a Standalone basis increased to Rs. 8470.61 lacs from Rs. 6795.84 lacs in the previous year at a growth rate of 24.64%. Net Loss for the year decreased by Rs. 2221.74 lacs from Rs. (2464.65) lacs in the previous year to Rs. (242.91) lacs in the current year. REVENUES- CONSOLIDATION As the Company has prepared it's consolidated financial statement for the first year, therefore no previous year figures are available for comparison. SUBSIDIARY/ JOINT VENTURE COMPANIES At the beginning of the year the Company had one Joint Venture Company and it did not have any subsidiary. As on March, 2016, it has two domestic subsidiaries. The Board of Directors have reviewed the affairs of the subsidiaries. In accordance with the provisions of Section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and its subsidiaries, which form part of the Annual Report except consolidation of Joint Venture i.e. AWN Agro Private Limited. The reason for non-consolidation is due to discontinuation of control on the management and financial affairs of the Joint Venture Company. Further a statement containing the salient features of the financial statements of our subsidiaries and Joint Venture Company in the prescribed format AOC-1 is appended as "Annexure-A-1"to the Board's report. During the year, investments were made in the following subsidiaries: 1. M/s. Banpal Oilchem Private Limited 2. M/s. N K Oil Mills Private Limited SHARE CAPITAL The paid up Equity Share Capital of the Company as at March 31, 2016 stood at Rs. 6,00,99,000. During the year under review, the Company has neither issued shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31, 2016, none of the Directors of the Company hold any instruments convertible into equity shares of the Company. During the year under review the BSE and NSE had issued a notice of intimation dated 23rd March, 2016 for revoking the suspension in trading in the equity share of the company with effect from 31st March, 2016. DIVIDEND AND RESERVES Your Directors express their inability to recommend any dividend for the year 2015-16 owing to accumulated losses of the Company. As a result, your Company was unable to transfer any funds to the Reserves and Surplus Account. FIXED DEPOSITS: The Company has neither invited nor accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 from the public during the year ended March 31, 2016. There were no unclaimed or unpaid deposits as on March 31, 2016. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUBSECTION (1) OF SECTION 188 The details of related party transactions entered into by the Company are provided in Form AOC-2 given as "Annexure A-2" of Boards' Report. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. The Company has developed a Related Party Transactions Policy through Standard Operating Procedures for the purpose of identification and monitoring of such transactions. All the related party transactions are placed before the Audit Committee as also before the Board for approval. The policy on Related Party Transactions as approved by Board of Directors has been placed on the Website of the Company. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT There are no material changes and commitment affecting the financial position of the Company occurred between the end of the financial year and date of this report. MANAGEMENT DISCUSSION AND ANALYSIS REPORTS In terms of the Regulation 34(e) of SEBI (LODR) Regulations, 2015, Management Discussion and Analysis is set out in the Annual Report as "Annexure B". PARTICULARS OF EMPLOYEES Disclosure pertaining to remuneration and other details as required under section 197(12) of the Act, read with Rule 5(1) of the companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report as "Annexure C" Further no employee of the Company was employed during the year drawing remuneration exceeding the limits as prescribed under Rule 5(2) of the (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Hence the information under Rule 5(2) is not applicable. BOARD DIVERSITY The Company recognizes and embraces the benefits of having a diverse Board of Directors and sees increasing diversity at Board level as an essential element in maintaining a competitive advantage in the complex business that it operates. The Board of Directors has also adopted a policy on Board Diversity which sets out the approach to diversify the Board of Directors. The Board Diversity Policy is available at our website: <http://www.nkindustriesltd.com/> Governance. html. DIRECTORS In accordance with the provisions of Section 152(6) of the Companies Act and Articles of Association, Mr. Nimish K. Patel (DIN_00240621) shall retire by rotation and being eligible offers himself for reappointment at the ensuing Annual General Meeting of the Company. Further, during the year under review Mr. Jayesh D. Thakkar resigned w.e.f 07/05/2015 and Mrs. Neha Modi was appointed as an Independent Woman Director w.e.f 23/05/2015 in casual vacancy caused by the resignation of Mr. Jayesh D. Thakkar. NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS The details of the number of meetings of the Board held during the financial year are as follow: Board Meetings held during the year 2015-16 Date of Board Meeting 1 23/05/2015 2 08/07/2015 3 08/08/2015 4 07/11/2015 5 05/02/2016 NOMINATION AND REMUNERATION POLICY: The Policy of the Company on Directors' appointment and remuneration including criteria for determining qualifications, positive attributes, Independency of a Director and other matters provided under sub-section (3) of section 178 of the Companies Act, 2013, adopted by the Board is available on our website We affirm that the remuneration paid to the Directors is as per the term laid out in the Nomination and Remuneration policy of the Company. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS: The Company has not given any loans or guarantees during the year under review within the purview of section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the notes to the financial statements. DECLARATION BY INDEPENDENT DIRECTORS: The Company has received declaration from each Independent Director of the Company under section 149 (7) of the Companies Act, 2013 that he/she meets the criteria of independence laid down in section 149 (6) of the Companies Act, 2013. BOARD EVALUATION: The Companies Act, 2013 states that the formal annual evaluation needs to be done by the Board of its own performance and that of its Committees and Individual Directors. Schedule IV of the Companies Act, 2013 states that performance evaluation of the Independent Directors shall be done by the entire Board of Directors, excluding the Director being evaluated. The evaluation of all the Directors and the entire Board was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as allotted by the Nomination and Remuneration committee. COMMITTEES OF BOARD Currently, the Board has four committees i.e. Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee. All committees constitute proper composition of Independent Directors as mentioned in relevant provisions of Companies Act, 2013. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134 (5) of the Companies Act, 2013, the Board of Directors to the best of their knowledge and ability confirm that: i) in the preparation of the annual accounts for the year ending March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departure; ii) The directors have selected such accounting policies and applied them consistently and made judgments 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 profit or loss of the Company for the year under review. iii) 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. iv) The annual accounts have been prepared on going concern basis; v) The Directors have laid down internal financial controls, which are adequate and are operating effectively. vi) The Directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such system are adequate and operating effectively. AUDITORS i. Statutory Auditors M/s Parikh and Majmudar, Chartered Accountants, (Firm Registration No: 107525W), were appointed as the Statutory Auditors of the Company for a consecutive period of 5 years from 26th AGM till the conclusion of 31st AGM subject to ratification at each AGM. The Company has obtained from them written consent from them and a certificate to the effect that ratification of their appointment if made at the ensuing AGM will be in accordance with the provisions of Section 139 of the Companies Act, 2013 and such conditions as may be prescribed. The members are requested to consider the matter of ratification of appointment of Auditors and also to fix their remuneration. There are certain qualifications made by the Auditors in their Standalone Report for which the Board of Directors hereby give its comments/explanation as under: i. National Spot Exchange Limited (NSEL) has served a notice to N K Proteins Private Limited (Formerly known as 'N K Proteins Limited') who was a Trading and Clearing member at NSEL and N K Industries Limited was only a client Company of Trading Member i.e. N K Proteins Limited. As regards, the balance of trade receivables and trade payables arising out of the transactions through NSEL, the same cannot be confirmed pursuant to the pendency of litigations and as the matter is still pending before the respective authorities. Further the Home Department has issued a notification attaching the properties of the Company. However, the Company has challenged the said notification before the Hon'ble High Court of Gujarat and the matter is subjudice. ii. With respect to point no. 2 of qualified opinion of the Auditors Report it is hereby clarified that the Company has preferred an appeal before the Hon'ble Appellate Tribunal under the Prevention of Money Laundering Act, 2002. The matter is sub-judice. In addition to the above, the Auditors have made observations under the head "Emphasis of Matter", reply thereof is as under:- i. The Company still continues to be a Sick Unit as the Company has incurred huge losses in the past years and the net worth of the Company is negative. The Board of Directors has already made reference to the Board for Industrial Finance and Reconstruction (BIFR) and BIFR has appointed Canara Bank as Operating Agency (OA) vide its order dated 1st March, 2012. Further the Company has submitted a Draft Rehabilitation Scheme (DRS) to Canara Bank, (OA). The BIFR will examine the said DRS and finalise the same after submission of viability report by Canara Bank (OA). ii. (A) During the year under review, the Income Tax department has raised a demand of Rs.60.33 crores on the Company for the Assessment Year 2012-13 making the demand of Rs.210.82 crores in aggregate (Rs.150.49 crores for A.Y 2011-12). The said matter being disputed is still pending before the Income Tax Authorities. In this regard, the Income Tax Authorities have also attached the properties of the Company against the said demand as mentioned by the Auditors in their Report. (B) The demand raised by the Income Tax Authorities under Section 132 of the Income Tax Act, is disputed and presently pending before the Hon'ble High Court of Gujarat. Therefore as the Company is hopeful of getting favorable order by the Hon'ble High Court no provision is made with regard to the interest payable on the disputed demand. iii. The demand raised by the Sales Tax Authorities is disputed and the Company has shown the said liability as Contingent Liability under Note No. 36 of the notes forming part of the Accounts. Therefore, the Company has not made any provision for the said disputed liability. iv. As also explained at point no. i above, the Company has filed a Draft Rehabilitation Scheme before the BIFR and a report from Canara Bank the Operating Agency is still awaited. The BIFR will examine the said DRS and finalise the Rehabilitation Scheme after submission of viability report by Canara Bank (OA). v. As explained by the Auditors in their report at point no. 5 the Company has sent letters obtaining confirmation of balances to various parties but due to non-receipt of replies the balances of parties, customers as well as various lonas and advances given have been are still awaited from various parties. Further the Auditors of the Company has emphasized on some additional points in their Consolidated Auditors Report on which the management has to reply as under: vi. An amount of Rs.34.58 lacs was incurred in cash towards land development expenses in Banpal Oilchem Private Limited by the erstwhile Promoters during financial year 2015-16. However, as confirmed by the erstwhile management, there were no third party evidences available against the said land development cost incurred by them. The present management has fully relied upon the certified accounts given by the erstwhile management on the date of transfer i.e. 18.07.20 15. vii. In view of the fact that the Management of our Company do not have any control in the Joint Venture viz. AWN Agro Pvt. Ltd and as per the exemption provided under the rovisions of the Companies Act, 2013 and the Accounting standard 21 & 27, consolidation of the accounts ofAWN Agro Pvt. Ltd. is not required with our company. viii. As explained earlier at point no. i above, N K Proteins Private Limited (N K Proteins Limited) was a trading cum clearing member of National Spot Exchange (NSEL). In the said matter NSEL has filed a recovery suit in Bombay High Court against N K Proteins Private Limited and others. N K Oil Mills Private Limited was neither a trading member nor a client of N K Proteins Private Limited. In this regard a Notice of Motion is filed before the Hon'ble Bombay High Court on behalf of N K Oil Mills Private Limited and the matter is sub-judice. ix. The Home Department, Maharashtra has through notification under the Maharashtra Protection of Interest of Depositors Act, 1999, attached the properties of Banpal Oilchem Private Limited as mentioned by the Auditors. The said notification is challenged by the Company before the Hon'ble High Court of Gujarat and the matter is sub-judice. Further the said property has also been attached by the Enforcement Directorate through an attachment order, which has been challenged before the PMLA Appellate Tribunal, New Delhi and the matter is sub-judice. Clarification with regard to the remark in point no. (i)(c) of the CARO Report annexed with the Auditors Report on standalone financial statements. x. With reference to the said remark it is to be clarified that the Company is in process of transferring the properties as mentioned by the Auditors in their report in its name. ii. Secretarial Auditor Pursuant to provisions of section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed M/s Samdani Shah & Associates, Company Secretaries in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report is annexed herewith as "Annexure D" and forms an integral part of this report. iii. Cost Audit As per the requirement of Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, Cost Audit has been duly carried out of the Cost Records relating to oil manufacturing unit every year. The Board of Directors, on recommendation of the Audit Committee, has appointed M/s. N D Birla & Co., as Cost Auditors of the Company for the Financial Year 2016-17. As required under the Companies Act, 2013, a resolution seeking member's approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the ensuing Annual General Meeting. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS DURING THE YEAR: 1. The Company has received Attachment Order dated 14/08/2015 from the Income Tax Department with respect to the attachment of the following immovable property:- • Land, situated at Survey Nos.719, 720, 721, 732/1, 732/2, 733, 741, 743, 744, 745, Kadi Thol Road, Village Kadi Kasba , taluka- Kadi, District Mehsana-382715 • Factory Building Situated at survey No 745, Kadi Thol Road, Village Kadi Kasba , taluka- Kadi, District Mehsana-382715 2. Charge sheet filed against the Company by the Enforcement Directorate, Mumbai before the PMLA Court Mumbai under PMLA Special Case No. 04 of 2015. The said matter is sub-judice. 3. Order passed by the Appellate Tribunal, Prevention of Money Laundering Act, Delhi directing to submit monthly statement of accounts and trial balance by the 15th of the succeeding month and also to deposit net income after tax with the respondent (Enforcement Directorate) as an interim measure and the said matter is presently sub-judice. 4. Order was passed by the Adjudicating Authority under PMLA (The Prevention of Money Laundering Act, 2002 under OC No. 430/2015 attaching the following property of the Company. The said matter is sub-judice. • Plant of M/s. N K Industries Limited, comprising land, building, plant and machinery situated at Survey Nos. 719, 720, 721, 732/ 1, 732/2, 733, 741, 743, 744, 745, Kadi Thol Road, Village Kadi Kasba, Taluka-Kadi, District Mehsana - 382715. EXTRACTS OF ANNUAL RETURN The details forming part of the extracts of Annual return in form MGT-9, as required under Section 92 of the Companies Act, 2013 is included in this Report as "Annexure-E" and forms integral part of this report. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES As part of its initiatives under "Corporate Social Responsibility" (CSR), the Company was unable to contribute the funds due to huge losses in the previous years as well as in the current year. The Company is striving to make good profit in the coming years and the Board of Directors of the Company assures to contribute funds in future. VIGIL MECHANISM The Company has a Vigil Mechanism to report genuine concerns or grievances. The Vigil Mechanism has been posted on the Website of the Company <http://www.nkindustriesltd.com/vigilmechanism.html>. INTERNAL FINANCIAL CONTROL SYSTEM AND ITS ADEQUACY The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. To maintain its objectivity and independence the Company has appointed Independent Internal Auditor M/s. ADPRDP & Associates, Chartered Accountants to conduct Internal Audit & to submit Internal Audit Report to the Audit Committee of the Board. The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of Internal Auditor, Audit Committee undertakes corrective action, if any in their respective areas and thereby strengthens the controls. Significant audit observations and recommendations along with corrective actions, if any, thereon are presented to the Audit Committee of the Board. ENVIRONMENT AND SAFETY The Company is conscious of the importance of environmentally clean and safe operations. The Company is conducting operations in such a manner so as to ensure safety of all concerned, compliances of environmental regulations and preservation of natural resources. As required by the Sexual Harassment of Woman at Workplace (Prevention, Prohibition and Redressal) Act, 2013, the Company has formulated and implemented guidelines on prevention of sexual harassment at workplace with a mechanism of lodging and redressal of complaints. During the year under review, no complaints were reported to the Company. INDUSTRIAL RELATIONS: The Company is committed to nurturing, enhancing and retaining top talent through superior Learning and Organizational Management. During the year under review, your Company enjoyed cordial relationship with workers and employees at all levels. STATUTORY INFORMATION i. Conservation of Energy: a) Company ensures that the manufacturing operations are conducted in the manner whereby optimum utilization and maximum possible savings of energy is achieved. b) No specific investment has been made in reduction in energy consumption. c) As the impact of measures taken for conservation and optimum utilization of energy are not quantitative, its impact on cost cannot be stated accurately. d) Since the Company does not fall under the list of industries, which should furnish this information in Form-A as annexed to the aforesaid Rules, the question of furnishing the same does not arise. ii. Technology Absorption: Company's products are manufactured by using in-house know how and no outside technology is being used for manufacturing activities. Therefore no technology absorption is required. iii. Foreign Exchange Earning and Outgo: During the period under review the foreign exchange earnings and outflow was as follows: Year 2015-16 Amount in Rs. Foreign Earnings 3,47,24,640/- Foreign Outflow - PREVENTION OF INSIDER TRADING The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and during the period when the Trading Window is closed. The Board is responsible for implementation of the Code. OTHER INFORMATION The Company has considered the proposal for purchasing and setting up a refining unit at the factory premises for refining edible as well as non-edible oil with capacity of 400 TPD. The said consideration of proposal by the Board has been also intimated to the stock exchanges. RISK MANAGEMENT POLICY Pursuant to Section 134(3)(n) of the Companies Act, 2013 and Regulation 21 of SEBI (LODR) Regulations, 2015, the Company has framed Risk Management Policy to review Business Risk. The Company has devised and implemented a mechanism for risk management and has developed a Risk Management Policy. The Policy provides for the role of Audit Committee, which will identify internal and external risk and implement mitigation steps. The Committee will on quarterly basis, provide status updates to the Board of Directors of the Company. The Company is a BIFR Company and its entire Net worth has been eroded. Presently the matter is pending with the BIFR. The adverse decision of BIFR may affect the Company. ACKNOWLEDGEMENT Your Directors express their sincere thanks and appreciation to the Promoters, Shareholders, and Customers for their constant support and co operation. Your Directors also place on record their gratitude towards the Banks, Institutions and Government Departments for their confidence reposed in the Company. For and on behalf of the Board Nimish K. Patel Chairman & Managing Director DIN: 00240621 Date : 21st May, 2016 Place : Ahmedabad |