Directors' Report To The Shareholders of the Company, Your Directors take pleasure in presenting this Twentieth Annual Report together with the Audited Accounts for the year ended 30th June, 2015. REVIEW OF OPERATIONS The Financial Results for the year 2014-15 are for a period of 12 months & hence, are not comparable with the results of 2013-14 which were for a period of 15 months. Sugar Division The Company registered a gross turnover of Sugar of Rs.65090 lacs for the 12 months ended 30th June, 2015 against Rs. 76109 lacs for the 15 months ended 30th June, 2014 (Gross Turnover of Sugar of Rs 59459 lacs for the 12 months ended 30th June, 2014), an increase of gross turnover of 9.47 % on Pro rata Basis. The sales realization at Rs.3179 per qtls was lower as compared to Rs.3183 per qtls for the previous year 15 months ended 30th June, 2014. During the current season, Company commenced its crushing season on 1 st December 2014. The results were better as compared to previous season both in terms of Recovery and Crushing mainly due to the following reasons: (i) Improved productivity, yield and sugar recovery, company's continuous effort in Cane Development activities like varietal replacement with proven high sugared varieties, Change in Pattern of Sowing, Ratoon Management, Encouraging use of Bio Fertilizers and Bio Pesticides etc. (ii) Recovery was higher on account of optimum mix of better Cane Varieties. Sugar: The Company's aggregate sugar cane crushing was higher at 234.33 lakhs qtls during the season 2014-15 as against 193.94 lakhs qtls in 2013-14 season due to higher cane availability. The Company had a higher recovery of 9.73% as against 8.97% in previous season. The higher recovery was mainly due to Cane Development Activities. The Company continued to focus on cane development activities, comprising of varietal replacement and modern agricultural practices due to which the recovery and crushing will improve in the coming season. The Uttar Pradesh Government announced a State Advised Price (SAP) for sugarcane at Rs.280 per quintal for season 2014-15, which was the same as in the previous season. SAP price of Rs.280 per quintal was unreasonable, unaffordable and irrational; most UP-based sugar companies were compelled to suspend crushing for season 2014-15 and commenced after extensive deliberations between millers and the State Government the following consensus was arrived at: i. The cane price of Rs.280 per quintal would be paid to farmers in two installments. The first installment of Rs.240 per quintal would be paid as per normal practice and the remaining Rs.40 per quintal would be paid within three months after the end of the crushing season. ii. State Govt. of U.P. / Uttrakhand had announced financial assistance of Rs. 28.60 per quintal of cane for the sugar season 2014-15 linked to average selling price of sugar and its by-products during the specified period from 1st October, 2014 to 31st May, 2015. However, this is subject to recommendation by the Committee constituted by the Government of Uttar Pradesh / Uttarkhand. The same has already been approved by the committee and payment of the same has already been made to the farmers directly by the government and adjusted in our cane dues in case of Uttar Pradesh. In case of Uttarkhand, part-payment has already made by the Government and remaining part is likely to be made in the month of November 2015. iii. U.P. Government also granted additional concessions/ reliefs of Rs.11.40 per quintal of cane to the millers for the season 2014-15 under the following heads: Rs. (per qtls) - Waiver of Entry Tax on sugar - 2.80 - Waiver of cane purchase tax - 2.00 - Waiver/ reimbursement of Society Commission - 6.60 Total 11.40 Similar relief also provided by Uttarakhand Government for Season 2014-15. Apart from the Cane Development Activities like varietal replacement, Change in Pattern of Sowing, Ratoon Management etc. company is further strengthening the Cane Development Activities by way of Development of In house Agri research centre, Integrated Pest Management Programme, Soil Testing Facilities, Encouraging use of Bio Fertilizers and Bio Pesticides and Training facilities for the farmers and the Cane Development staff. These efforts will produce the desired result in the form of improved recovery during the coming sugar season 2015-16. Co-generation Division During the period under review, your company produced 1842.64 Lakhs KWH units of power as compared to 1836.06 Lakhs units of power in the year 2013-2014 (15 Months). Out of total production, your company exported 992.49 Lakhs KWH units to UPPCL/UPCL for a total amount of Rs.4532.27 Lakhs against 955.72 Lakhs KWH for an amount of Rs. 4156.70 Lakhs in the previous year. The company has been awarded 60012 units of REC for all the four units and these REC units are trade able and an additional source of revenue to your company. During the F.Y.14-15 Company traded 15583 units of REC for Rs.233.75 lacs. Distillery Division Your company has a Distillery with an installed capacity of 75 KLPD at Barkatpur (Distt. Bijnor) in State of Uttar Pradesh. During the year under review 120.42 lacs Bulk Litres (BL) of Industrial Alcohol produced as compared to 105.94 lacs Bulk Litres in the year 2013-14 (15 Months) and your company sold 90.87 lacs Bulk Litres Industrial Alcohol (including Ethanol) as compared to 108.45 lacs Bulk Litres in the previous year (15 Months). Future Outlook For the state of U.P., the industry have requested the State Government for fixing of cane price based on the revenue sharing of realisation from sugar and by-products. The State Government has already constituted a committee under the chairmanship of Chief Secretary of the state to submit its recommendations. Your company expects positive outcome on the same. The state of Maharashtra and Karnataka producing above 50% of country sugar production, have already implemented the Rangrajan Committee formula based on revenue sharing. The Central Government is considering increasing the blending % of Ethanol in Petrol from 5% to 10%. This will improve the demand of Ethanol. Industry through association is also approaching to the government regarding restructuring the accounts of the sugar companies by converting Working Capital into term loan with 2 year moratorium. This will enable the factories to clear cane arrears. Compulsory export scheme has already been announced by the Central Government resulting in lower stock of sugar and realization will be better. It is also expected that subsidy on export of raw sugar will further be extended. DIVIDEND In view of the losses incurred during the financial year under review and carried forward losses, your Directors are unable to recommend any dividend. The Dividend on Cumulative Redeemable Preference Shares (Series I - 6.5% and Series II - 10%) are being accumulated and will be paid in the year of profit. FIXED DEPOSITS Your Company has neither accepted nor renewed any deposit within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014. There were no unclaimed deposits at the end of Financial Year i.e. 30th June, 2015. DIRECTORS In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of the Company, Mr. Raj Kumar Adlakha, Managing Director (DIN 00133256) of the Company retire by rotation and being eligible, offers himself for reappointment. During the year under review, Mr. Narendra Kumar Sawhney and Mrs. Rutuja Rajendra More have been appointed as Additional cum Independent Directors on the Board of the Company w.e.f 14th May, 2015 and 05th June, 2015 respectively. In compliance of Section 149 of the Companies Act, 2013 it is proposed to re-appoint Dr. R. Vasudevan and Mr. G. S. Matta as Independent Directors to hold office for a period of 5 (five) years commencing from this Annual General Meeting upto the conclusion of Annual General Meeting to be held in calendar year 2020. In compliance of Section 160 and 149 of the Companies Act, 2013 it is proposed to regularize Mr. Narendra Kumar Sawhney and Mrs. Rutuja Rajendra More as Independent Directors to hold office for a period commencing from this Annual General Meeting upto the conclusion of Annual General Meeting to be held in calendar year 2019. Brief profile of the Directors proposed to be appointed / re-appointed and their Qualification, Experience alongwith the name of Companies in which they hold the Directorship and Public Companies in which they hold Chairmanship/membership of the Committees of the Board, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, are given as Annexure to the Notice convening the Annual General Meeting. DIRECTORS' RESPONSIBILITY STATEMENT The Board of Directors acknowledges the responsibility for ensuring compliance with the provisions of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013 and Clause 49(III)(D)(4)(a) of the Listing Agreement with the Stock Exchange in the preparation of Annual Accounts for the year ended 30th June, 2015 and state that: i. in the preparation of Annual Accounts for the year ended 30th June, 2015, the applicable accounting standards had been followed with proper explanation relating to material departures; ii. we have selected appropriate accounting policies and have 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 30th June, 2015 and of the losses of the Company for the year ended on that date; iii. we 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. we have prepared the annual accounts on a 'going concern' basis; v. we have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and vi. we have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. AUDITORS M/s B. K. Kapur & Co., Chartered Accountants, Ghaziabad, Statutory Auditors of the Company will retire at the forthcoming Annual General Meeting and are eligible for re-appointment. M/s B. K. Kapur & Co., was appointed as Statutory Auditors in the previous Annual General Meeting for a tenure of three years, i.e. till the conclusion of 22nd Annual General Meeting to be held in the year 2017. In view of due compliance of the provisions of Section 139(1), their continuance of appointment is required to be ratified by the members of the Company in the ensuing Annual General Meeting. Therefore, your Directors recommended the ratification of appointment of M/s B. K. Kapur & Co., Chartered Accountants as Statutory Auditors in the ensuing Annual General Meeting. The Company has received consent letters and certificate from the Auditors to the effect that their appointment, if made, shall be in accordance with the conditions as prescribed in the Companies (Audit and Auditors) Rules, 2014, and that they are not disqualified for appointment within the meaning of Section 139 and 141 of the Companies Act, 2013. Auditors' Observations Your Directors wish to clarify the certain observations reported by the Statutory Auditors, as under: - a) Observation in Para 8 of annexure to the Report regarding erosion of net worth of more than 50% as on 30th June, 2015, your Directors wish to state that the Company is incurring continuous losses due to fixation of unreasonable, unaffordable and irrational State Advised Price (SAP) by the State Government over the last several years. There is no transparent basis or formula for fixing SAP. The Indian Sugar Mills Association (ISMA) has already represented to State Government to implement the long term mechanism for determination of viable sugar cane price as per the recommendations of Dr. C. Rangarajan Committee. Unless the cane price is linked to sugar price it will be impossible for the sugar industry to improve the performance. b) Observation in Para 9 of annexure to the Report relating to delays in the repayment of installment/ interest to the Banks, there has been liquidity problems due to losses incurred by the company during the current financial year and previous financial years. COST AUDITORS The Board on the recommendation of the Audit Committee has re-appointed M/s M. K. Singhal & Company (Firm Regn. No. 00074), Cost Accountants, to audit the Cost Accounting records relating to Sugar, Cogeneration and Industrial Alcohol for Financial Year 2015-16. In accordance with the provisions of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, the remuneration payable to the Cost Auditors has to be ratified by the members of the Company. The Board recommends the same for approval of members in the ensuing Annual General Meeting. SECRETARIAL AUDIT REPORT Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and other applicable provisions, if any, the Company has appointed M/s N K Rastogi & Associates (Firm Regn No.3785), Practicing Company Secretaries, to do Secretarial Audit of the Company for the Financial Year 2014-15. The Secretarial Audit Report for the financial year ended 30th June, 2015 is attached and marked as "Annexure-I" and forms part of the Board Reports. The observation made by the Secretarial Auditors in their report are self explanatory and therefore do not call for any further explanations/comments. The Secretarial Auditors' Report does not contain any qualification, reservation or adverse remark. MEETINGS The details of Board Meetings and Audit Committee Meetings held during the period under review are given in Corporate Governance Report. AUDIT COMMITTEE The Company has constituted Audit Committee as per the provisions of Companies Act and Listing Agreement. The details of terms of reference of the Audit Committee, number and dates of meeting held, attendance, among others are given separately in the attached Corporate Governance Report. The Audit Committee satisfies the requirements of Section 177 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement. During the year there were no instances, where the Board had not accepted the recommendations of the Audit Committee. EXTRACT OF ANNUAL RETURN The extracts of the Annual Return as per the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014 is annexed herewith and marked as "Annexure-II" to this Report. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Company has in place a whistleblower policy to deal with unethical behavior, victimization, fraud and other grievances or concerns, if any. The aforesaid policy can be accessed on the Company's website www. uttamsugar.in and weblink of the same is <http://uttamsugar.in/pdf/whistle-blower-&-vigil-mechanism.pdf>. NOMINATION & REMUNERATION COMMITTEE Pursuant to the provisions of Section 178 of the Companies Act, 2013 read with Rules made thereunder, the Board has constituted a Nomination & Remuneration Committee and the details of terms of reference, number & dates of meeting held, attendance and other details are given separately in the attached Corporate Governance Report. The Board on the recommendation of Nomination & Remuneration Committee framed a policy i.e. Nomination and Remuneration Policy for selection and appointment of Directors, senior managerial personnel and their remuneration. The aforesaid policy can be accessed on the Company's website www. uttamsugar.in and weblink of the same is <http://uttamsugar.in/pdf/nrc-policy.pdf>. BOARD EVALUATION Pursuant to the provision of Company Act, 2013 and clause 49 of listing agreement, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of its committees comprising of audit, nomination, remuneration and other committees. The detailed analysis of performance evaluation is incorporated in Corporate Governance Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT UNDER SECTION 186 OF THE COMPANIES ACT, 2013 The Company has not given any loan or made any investment during the period under review in terms of section 186 of the Companies Act, 2013. However, the Company has provided guarantee in favour of IDBI Bank Ltd. for the Crop Loan given to cane growers under Corporate Tie-up Scheme, the details whereof are given in the accompanying Financial Statement under Note. No. 33. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT, 2013 There have been no materially significant related party transactions made by the Company with the promoters, key managerial personnel and/ or with any director of the Company. All related party transactions are negotiated on an arms-length basis and are in ordinary course of business. The suitable disclosure as required in AS-18 regarding Related Party transactions has been made in the notes to financial statements. The Company has formulated a policy for Related Party Transaction and placed it on Company website www.uttamsugar.in and weblink of the same is <http://uttamsugar.in/pdf/PolicyonRelatedPartyTransaction.pdf>. PARTICULARS OF EMPLOYEES The particulars of employees, as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) and 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are given in a separate annexure attached hereto and forms part of this Report and marked as "Annexure-III". CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars in respect of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134(3)(m) of the Companies Act, 2013, are given in a separate annexure attached hereto and forms part of this Report and marked as "Annexure-IV". INTERNAL FINANCIAL CONTROLS The Company has an adequate system of internal control relating to the nature of the business of the Company. A detailed note has been provided under Management Discussion and Analysis Report. The Company has an Audit Committee which ensures proper compliance with the provisions of the Listing Agreement with Stock Exchanges, Companies Act, reviews the adequacy and effectiveness of the internal control. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS There were no significant or material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status and Company's operations in future. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Directors confirm that during the year under review, there were no complaints received pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. CORPORATE SOCIAL RESPONSIBILITY (CSR) With the enactment of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014 read with various clarifications issued by the Ministry of Corporate Affairs, every Company having the net worth of Rs. 500 Crores or more or turnover of Rs.1000 Crores or more or net profit of Rs. 5 Crores or more during any financial year have to spend at least 2% of the average net profit of the Company made during the three immediately preceding financial years. Therefore, a CSR Committee was constituted by the Company and details of the same are given separately in the attached Corporate Governance Report. The Committee had finalised the CSR policy which was approved by the Board. The CSR policy of the Company can be accessed on the Company's website: www.uttamsugar.in and weblink of the same is <http://uttamsugar.in/pdf/CorporateSocialResponsibiltyPolicy.pdf>. Your Company has incurred losses for the financial year 2011-12, 2013-14 and meagre profit of Rs. 5.46 Crores for the financial year 2012-13. Since the aggregate of profit of previous three financial years is negative, your company is not required to spend any amount on Corporate Social Responsibility Activities. RISK MANAGEMENT PLAN The Company has a Risk Management plan to identify and evaluate Business Risk and opportunity of Risk Management to minimize the adverse impact on Business Objectives and enhancement the company's competitive advantage. The plan facilitates to identify the risk at appropriate time and necessary steps to be taken to mitigate the risk. The detailed risk analysis and their mitigation have already been incorporated in the Management discussions and analysis report. SUBSIDIARY COMPANIES The Company does not have any Subsidiary, Associate and/or any Joint Venture Company. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY There were no material changes and commitments affecting the financial position of the Company occurred between the end of the financial year of the Company to which this financial statement relate and on the date of this report. CORPORATE GOVERNANCE As per clause 49 of the Listing Agreement with the Stock Exchanges, a report on Corporate Governance together with Certificate from a Practicing Company Secretary forms part of the Annual report are attached hereto and forms part of this Report and marked as "Annexure-V". MANAGEMENT DISCUSSION & ANALYSIS REPORT A separate Report on Management Discussion and Analysis for the year under review, as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, is presented in a separate section and forms part of this Report and marked as "Annexure-VI". INDUSTRIAL RELATIONS Industrial relations continued to remain cordial throughout the period under review. ACKNOWLEDGEMENT Your Directors thank the customers, suppliers, farmers, financial institutions, banks and shareholders for their continued support and co-operation. Finally, your Directors acknowledge the dedicated services rendered by all the employees of the Company. By Order of the Board for UTTAM SUGAR MILLS LTD. (RAJ KUMAR ADLAKHA) CHAIRMAN OF THE BOARD (DIN :00133256) Place: Noida Date : 14th November, 2015 |