DIRECTORS' REPORT Your Directors are pleased to present the Thirtieth Annual Report of the Company together with the Audited Accounts for the financial year ended March 31, 2016. OPERATIONS REVIEW Total income increased from Rs.259.88 Crores in 2014-15 to Rs.268.47 Crores in 2015-16 - increase of 3.30%. Profit after Tax was Rs. 23.26 Crores (previous year : Rs.30.08 Crores) With Fixed Assets of Rs.59.02 Crores (previous year Rs.55 crores), our Asset Turnover ratio is a healthy 4.53 with Return on Sales of 21.98%. Interest cost for the year is decreased by Rs.2.31 crores. DIVIDEND Your Directors are pleased to recommend a final dividend of 20% on Equity Share Capital, for the year ended 31.03.2016, amounting to Rs. 304.57 Lakhs, excluding dividend tax. During the year, the Board declared an Interim Dividend of 20%, amounting to Rs. 304.57 Lakhs, excluding dividend tax. The aggregate of dividend declared for the year was 40% amounting to Rs. 609.14 Lakhs, excluding dividend tax. TRANSFER TO GENERAL RESERVE Your directors are pleased to transfer a sum of Rs.15 crore towards the General Reserve FINANCE Cash and cash equivalents as at 31st March 2016 was Rs 743.57 lakhs (previous year Rs. 1027.76 lakhs). The Company continues to focus on judicious management of its working capital, receivables, inventories and other working capital parameters and which were kept under strict check through continuous monitoring. WINDMILL The wind mill of the Company located at Kokkampalayam village, Dharapuram Taluk, Erode District, Tamil Nadu generated 6,50,659 units of electricity in the year 2015-16 against 8,01,130 units generated in 2014-15. The Company had utilized the 3,94,068 units generated as captive consumption during 2015-16 for its Satyamangalam plant and the balance 2,56,591 units are being sold to TNEB. BOARD MEETING The Board of Directors met five times during this financial year. The details of the Board meeting are given in the Corporate Governance report. The intervening gap between the meetings were within the period stipulated under Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. AUDIT COMMITTEE MEETING The Audit Committee of the Company met four times during the current financial year. The details of the Audit Committee meetings are given in the Corporate Governance report. The intervening gap between the meetings were within the period stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. PARTICULARS OF LOANS, GUARANTEE OR INVESTMENTS The Company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013 except the 'Corporate Guarantee' given on behalf of AVT Tea Services Ltd., London, which is given in the Note No. 27 to the financial statements. The details of investments made by the Company are given in the Note Nos. 11 &13to the financial statements. LISTING WITH STOCK EXCHANGES The equity shares of the Company are continued to be listed in BSE Limited, (BSE) and the National Stock Exchange of India Ltd., (NSE). The Company confirms that it has paid the annual listing fees for the year 2016-17 to both the stock exchanges, as on date. During the year, as envisaged under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has executed a fresh Listing agreement with both BSE and NSE, before 1st March 2016. DSIR APPROVAL FOR IN-HOUSE R&D FACILITY AT SOUTH VAZHAKULAM AND BANGALORE Department of Scientific and Industrial Research (DSIR), New Delhi, has renewed its' recognition for both our R&D facilities at South Vazhakulam, Aluva, Kerala and the Manchenahaili Village, Kasabe Hobari, Bangalore. The said recognition is valid till 31st March, 2019. MATERIAL CHANGES AND COMMITMENTS There are no material changes or events that have occurred since the date of the Balance Sheet which could have any effect on the financial position of the Company. DIRECTORS & KEY MANAGERIAL PERSONNEL i) Director retiring by rotation In accordance with the provisions of Companies Act, 2013 and the Articles of Association of the Company, Mr. Ajit Thomas, Director retires by rotation at the 30th Annual General Meeting and being eligible, offers himself for re-appointment. ii) Declaration from Independent Directors on Annual Basis The Company has received necessary declarations from all the three Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6) of the Companies Act, 2013. iii) Key Managerial Personnel Mr. M.N. Satheesh Kumar, President & COO -Manager, Mr. A. Ramadas, Sr. Vice President & CFO and Mr. Dileepraj. P, Company Secretary are the Key Managerial Personnel of the Company PERFORMANCE OF SUBSIDIARY / JOINT VENTURE /ASSOCIATES a) AVT Tea Services Ltd., London, UK (AVTTSL): The present authorized share capital of the Company is Pound Sterling (GBP) 1.00 million (Rs.9.41 Crores approx.). The paid up capital of the Company as on 31st March 2016 is Pound Sterling (GBP) 1 million (Rs.9.41 Crores approx.). AVTTSL is the marketing arm of your Company for de-caffeinated tea and instant tea. The AVTTSL recorded sales of Rs.48 Crores (previous year Rs.43.14 crore) and loss of Rs.1.63 crores (previous yearloss of Rs.2.35 crore) for theyear2015-16. b) Closure of AVT Natural Pte. Ltd., Singapore: During the year, the Liquidation of AVT Natural Pte. Ltd., Singapore was completed at Singapore. c) Accounts of subsidiaries: Pursuant to Section 136 (1) (b) of the Companies Act, 2013, a copy of the audited financial statements of AVT Tea Services Ltd., London for the year ended 31.03.2016, the overseas subsidiary of your Company shall be furnished to any shareholder on demand. The Consolidated financial statements audited by the statutory auditors of the Company have been attached to this Report. d) Joint Venture / Associate Company The Company does not have any Joint Venture / Associate Company CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The particulars prescribed by the section 134 (3) (m) of the Companies Act 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 relating to Conservation of Energy, Technology Absorption, Foreign Exchange earnings and outgo are furnished in the Annexure-I to this Report. CORPORATE SOCIAL RESPONSIBILITY (CSR) Pursuant to the provisions of Section 135 of the Companies Act 2013, CSR Committee of the Board of Directors was formed to recommend a. the policy on Corporate Social Responsibility (CSR) and b. implementation of the CSR Projects to be undertaken by the Company as per the CSR Policy for consideration and approval by the Board of Directors. Annual Report on CSR in the prescribed format is enclosed as Annexure - II. The CSR policy of the Company has been already uploaded in the web site: www.avtnatural.com CONTENTS OF CSR POLICY The CSR policy of the Company was approved by the Board of Directors on 28.01.2015. The Company's commitment to CSR projects and programs will be to focus on holistic development of host communities and create social, environmental and economic value to the society. Company's commitment to CSR projects and programs will be by investing resources into any of the following areas: a) Development of skill among various sections of society b) Development of Infrastructure c) Empowerment of Women d) Promotion of Health Care e) Old age homes / day care facilities for Senior Citizens f) Promotion of Education g) Swachh Bharat and; h) All other activities envisaged in the Schedule VII of the Companies Act 2013 AUDITORS Pursuant to Section 139 of the Companies Act 2013, the appointment of M/s. Suri & Co., Chartered Accountants, Chennai - 600017, (Firm's Registration No. 004283S), the Statutory Auditor of the Company needs to be ratified by the shareholders in every Annual General Meeting. Your directors recommends ratifying their appointment at the forthcoming Annual General Meeting. AUDITORS' REPORT There are no qualifications or adverse remarks mentioned in the Auditors' report. The notes to accounts forming part of financial statements are self-explanatory and needs no further clarification. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointaient and Remuneration of Managerial Personnel) Rules 2014, the Company has appointed Mr. V. Suresh, Practising Company Secretary (C.P. No.6032), Chennai - 600 018 to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure - III and forms an integral part of this Report. There is no secretarial audit qualification for the year under review. INTERNAL AUDITORS During the year under review, M/s. PKF Sridhar & Santhanam LLP, Chartered Accountants, Chennai - 600 004 carried out the internal audit of the Company and submitted their reports. COST AUDIT REPORT Cost Audit is not applicable to the Company as per the Companies (Cost Records & Audit) Rules, 2014, however, the cost records are maintained by the Company. INSURANCE The Company continues to carry adequate insurance for all assets against unforeseeable perils. RELATED PARTY TRANSACTIONS All transactions entered with related parties for the year under review were at arm's length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. No Material Related Party transactions i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, were entered during the year by your Company. Accordingly, the disclosure of Related Party transactions to be provided under section 134 (3) (h) of the Companies Act 2013, in Form AOC -2 is not applicable Further, there are no material related party transactions during the year under review with the Promoters, Directors or Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All related party transactions are placed before the Audit Committee and also the Board. Prior omnibus approval of the Audit Committee is obtained on yearly / quarterly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted has been placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on Related Party Transaction as approved by the Board of Directors has been uploaded on the website of the Company and the website link is www.avtnatural.com SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS AND COURTS. There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in Form MGT - 9 is enclosed herewith as 'Annexure - IV'. STATUTORY INFORMATION The information required under section 197 of Companies Act 2013 and pursuant to rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company have been given in the Annexure - V. The information required under section 197 (12) of the Companies Act 2013 read with rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of the Company have been given in the Annexure - VI. INDUSTRIAL RELATIONS During the year under review, your Company enjoyed cordial relationship with workers and employees at all levels NOMINATION AND REMUNERATION POLICY The Board on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel, Key Managerial Personnel and their remuneration etc. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has a Vigil Mechanism / Whistle Blower Policy in place pursuant to Section 177 (9) of the Companies Act 2013 and as per the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The said policy is available in the website of the Company which can be accessed from the link -www.avtnatural.com RISK MANAGEMENT Pursuant to Section 134 (3) (n) of the Companies Act, 2013 and the Regulation 21 (5) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Company had laid down the procedures to inform Board members about the risk assessment and mitigation procedures. Mr. A. Ramadas, Sr. Vice President & CFO has been assigned the task of informing the Board about the various risks and its mitigation by the Company from time to time. At present the Company has not identified any element of risk which may threaten the existence of the Company. INTERNAL FINANCIAL CONTROL The Company has established an Internal Financial Control framework and operating control framework. The framework will be reviewed regularly by the management. Internal Financial Controls are adequate and operating effectively. ENVIRONMENT AND SAFETY The Company is conscious of the importance of environmentally clean and safe operations. The Company's policy requires conduct of operations in such a manner, so as to ensure safety of all concerned, compliances environmental regulations and preservation of natural resources. BOARD EVALUATION The performance of Board, Committees and all individual directors, including Independent Directors are evaluated by number of meetings held, time spent in each meeting deliberating the issues, statutory compliance, contribution of each director, the details of decision taken and measures adopted in implementing the decision and monitoring the continuous implementation and feed back to the Board. DISCLOSURE OF ACCOUNTING TREATMENT In the preparation of the financial statements, the Company has followed the Accounting Standards referred to in Section 133 of the Companies Act, 2013. The significant accounting policies which are consistently applied are set out in the Notes to the Financial Statements. CORPORATE GOVERNANCE Pursuant to Regulation 34(3) read with schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Management Discussion & Analysis Report, Report on Corporate Governance with Auditors' Certificate on compliance with conditions of Corporate Governance have been annexed in Annexure VII & VIII to this Report. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Act and that an Internal Complaints Committee has been set up for redressal of complaints and that all employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year the Company has not received any complaint under Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. CAUTIONARY STATEMENT Statements in this Directors' Report & Management Discussion and Analysis Report describing the Company's objectives, projections, estimates, expectations or predictions may be 'forward looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include raw material availability and its prices, cyclical demand and pricing in the Company's principle markets, changes in Government regulations, Tax regimes, economic developments within India and the countries in which the Company conducts business and other ancillary factors. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134 (3) (c) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that: 1. In the preparation of the accounts for the financial year ended 31st March 2016, the applicable accounting standards had been followed along with proper explanation relating to material departures; 2. The Directors have 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; 3. The Directors had 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; 4. The Directors have prepared the accounts for the financial year ended 31st March 2016 on a 'going concern' basis. 5. The directors have laid down internai financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively. 6. The directors have devised proper system to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. ACKNOWLEDGEMENT Your Directors acknowledge the support from customers, shareholders, farmers, Bankers, Cameo Corporate Services Limited, BSE Limited, the National Stock Exchange of India Limited, National Securities Depository Limited, Central Depository Services Limited, Central / State Government authorities for the co-operation and assistance provided to the Company. The Directors also place on record their gratitude to the employees for their continued support, commitment, dedication and co-operation. For and On behalf of the Board Ajit Thomas Chairman Date : 30th May 2016 Place : Chennai |