DIRECTORS' REPORT Dear Shareholders, Your Directors are pleased to present the Twenty - Third Annual Report for the financial year ended 31st March, 2015 along with the Audited Financial Statement of Accounts and the Auditor's Report. 2. Dividend: The Board of Directors are pleased to recommend a Dividend for the year of Rs.1/- per equity share on 15,000,000 Equity Shares of nominal value of Rs.5/- each, amounting to Rs. 180.54 lacs (inclusive of DDT of Rs.30.54 lacs). The dividend payout is subjects to approval of the members at the ensuing Annual General Meeting. During the year under review, no amount was transferred to General Reserve. 3. Consolidated Results: The Annual Report also includes the Consolidated Financial Statements of the Company, which include the results of the Company's subsidiaries; viz. Ihsedu Agrochem Private Limited, Ihsedu Itoh Green Chemicals Marketing Private Limited and Ihsedu Coreagri Services Private Limited and its share in the Associate Company, Vithal Castor Polyols Private Limited. The Standalone Financial results for the year show a Total Income of Rs. 66,216.13 Lacs compared to Rs.67,518.40 Lacs and standalone Net Profit after tax of Rs. 1,131.73 Lacs as compared to Rs. 3,731.61 Lacs in the previous year and the Consolidated Financial results for the year show Total Income of Rs.15,875.20 lacs compared to Rs. 15,611.55 lacs and Consolidated Net Profit after tax of Rs. 1,052.06 lacs compared to Rs. 4058.59 lacs in the previous year. 4. State of Company's Affair: In order to avoid duplication and for the sake of better understanding, state of company's affair is discussed in details in the management discussions and analysis which has been included in this section of the Directors Report. 5. Management's Discussion And Analysis: (a) Industry Structure and Developments and impact on the Company and its performance Year under review witnessed a fall in the worldwide demand of castor oil led by slowdown in China. During the last five years, China has emerged as the largest consumer of castor oil. Consequently, the demand for sebacic acid (where China is the largest producer and consumer) the largest derivative of castor oil declined sharply. As you are aware, your company has invested in a sebacic acid manufacturing plant. The plant continued to run below its capacity due to subdued demand and low prices. Your company is hopeful of running the plant at higher capacity once the demand for sebacic acid revives The demand for many of the company's products which compete with crude oil in many of the applications were affected by the steep fall in the prices of crude oil in the second half of the previous year. Domestic speculation in the castor seeds drove the castor oil prices against the fundamentals resulting frustration for manufacturers' and consumers alike. Such unwanted volatility if not checked, is likely to stall the development in research of castor oil based products, branding castor oil as an unreliable source material. India over the previous three decades has established itself as a reliable source of castor oil. Erratic supply and unwanted volatility , if not checked is likely to damage Brand India and also affect millions of farmers whose efforts along with the efforts of the agricultural scientists have placed our Country in the pre-eminent leadership position for world supply of castor oil. The castor seed production, since the introduction of hybrid seeds in early 1970 has gone up over Ten times, one of the highest amongst the major agri commodities. In December 2014, the forward market took some corrective measures to curb this speculation helping to restore sanity and balance to the market. The prices of castor seeds corrected by over 30% from the peak price in December, 2014 by end of February, 2015. The merger of the portfolio of the forward market commission with SEBI will hopefully help the regulator to take pro-active steps preventing such damage to the Industry. The Indian crop estimated at 1,232,000 Mtons for the year 2014-15 with a record carry forward of over 500,000 Mtons would be sufficient to fulfill the world demand. With the demand for seeds estimated in the range of 12 to 14 lac Mtons there should be no supply concern. The demand for castor oil based products continues to see a stable growth across the world except China, where a moderation in demand is being witnessed. In the current scenario India should be able to satisfy the world demand. However, the weather disruption due to the El Nino, may affect the sowing and the yields in the coming season. In this second year of El Nino your Company will be keeping a close watch on the monsoon and sowing data. (b) Opportunities & Threats. The world economic growth for the last quarter was at 0.7% against the forecast of 3.3%. The clouds over world economic growth due to slow down in China and the credit default by Greece remain a major concern. The road to growth is likely to become steeper with the increase in interest rates by the FED, USA. However, a benign environment in the Middle East, low crude oil prices will benefit the world economy, which should see the benefits of this positive events in the longer run, especially for the crude oil importing countries. With 70% to 80% of your Company's production being exported, the state of the world economy, besides other industrial and scientific developments has an important bearing on its growth. Your company's products are competing with end products manufactured from crude oil and other vegetable oils. The price behavior of castor oil in relation to them is likely to have a bearing on the growth of the company. Environment being a major concern, the search for green products is likely to intensify in the future. Castor Oil being a natural, organic, renewable and bio-degradable product is gaining importance as a green product. With improved irrigation, better quality inputs and scientific farming there is a substantial scope to improve yields per hectare of castor seeds. Besides due to its unique chemical structure, it finds myriad applications in virtually every industry be it agriculture, lubricants, paints, inks, surface coatings, pharmaceuticals, food, engineering plastics, cosmetics, perfumeries, electricals, rubber and so on. Your Company continues to endeavor to tap these opportunities by focusing on Research & Development and investing in new capacities, new technologies, new applications, and new products. Castor Seeds continue to be a volatile raw material in terms of its price. Being an agricultural product, it depends on the rainfall and weather conditions prevailing in the area of castor growing states in the country, though it is a sturdy crop. The limited size of the crop makes it susceptible to speculation and wild gyration in prices. To mitigate the effect of uncertain weather, the Company has laid down parameters for inventory management. The Company has proper mechanism in place to immediately respond to any unforeseen eventualities. The Company is also cultivating hybrid seeds to improve the productivity of commercial Castor Seeds (c) Segment: The Company is organised into three business segments - Castor Oil, Derivatives and Power Generation. (d) Outlook: The long term demand outlook for your Company's products remains positive although the near term uncertainties remain due to the low crude oil prices. Emphasis on green eco-friendly products is likely to lead to increase in innovation of new products and uses of castor oil by the chemical industry. Your Company continues to invest in Research & Development to tap on new growth opportunities. Your Company is also undertaking a backward integration program in order to increase the availability of castor seeds. Barring unforeseen circumstances, your Directors expect satisfactory growth. (e) Risks and Concerns: The Company's products are used across geographies in a variety of industries, thereby to a great extent, mitigating the risks associated with demand for its products on a long-term basis. The price behavior of raw material depends on the weather pattern in the castor growing regions, the impact of El Nino on monsoon in these regions, global demand and inventory, and prices of other oils including Crude Oil and therefore can be volatile as well as unpredictable. The Company is closely watching the development of factors affecting the castor seed prices. The Company restricts its exposure to the price fluctuation of raw materials by limiting its un hedged exposure. With the business of the Company growing steadily and demand for trained and experienced manpower in excess of the supply, the risk of managing the people is very big. The Company has to retain its existing trained workforce and also attract new talent for its different operations. To improve the performance of the staff at work; various refresher training courses are organized to update their knowledge with the latest technologies and management ideas. The demand for castor oil and its products is dependent on the overseas markets as more than 80% of the industries production is exported. The threat of new entrants and competition due to aggressive trading policies adopted by them continue to be of concern. The Company has focused its efforts on marketing and introducing new products thereby mitigating to a certain extent, the effect of recession / slowdown in the industry. Unrestricted speculation and high volatility due to trading in commodity exchange could have a negative effect on the growth of the industry Your Company has been engaged in several legal cases in connection with or incidental to its business operations. These include service, excise and customs cases, etc. filed by and against the Company. These cases are being pursued with due importance and in consultation with legal experts in the respective areas. Your Board believes that the outcome of these cases is unlikely to cause a material adverse effect on the company's profitability or business performance. Your Company has a contingent liability of 7581.57 lacs (net of advances) as on March 31, 2015 . Attention of the shareholders is drawn to the explanations mentioned in point no. 31 of the Notes to Financial statements forming integral part of the balance sheet as on March 31, 2015. In view of the present status and based on legal advice received, your Board of Directors are of the opinion that no provision is required to be made against these contingent liabilities as of now. 6. Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report: There has been no Material changes occurred subsequent to the close of the financial year of the Company to which the Balance Sheet relates and the date of the report. 7. Performance /Financial Position of each of subsidiaries/associates/joint venture companies as included in the consolidated financial statements The Company (including its subsidiaries and associates) operates in three segments: 1. Consolidated Results : The consolidated turnover of the Company has been 7158,071.80 Lacs against 7153,780.53Lacs in the previous year. The EBDITA has fallen from 710,056.33 lacs to 76,477.53 lacs. Depreciation has been computed in accordance with the New Companies Act, 2013 and the estimates of the use life made by the management and certified by a Chartered Engineer . However, the finance cost increased during the year under review as compared to the finance cost of the previous year. The interest subvention scheme applicable to exporters lapsed in 31st March, 2014. The subvention scheme was expected to be renewed with retrospective effect. Under drying market circumstances, the effective withdrawal of the interest subvention increased the finance cost by over 25%. 2. Derivatives : The turnover of the derivatives has been Rs.63,451.45 Lacs against Rs.61,119.98 Lacs in the previous year. The EBDITA has fallen from Rs.5,232.55 lacs to Rs.3,672.52 lacs. 3. Castor Oil: The operation of castor oil are mainly carried out in Ihsedu Agrochem Pvt. Ltd and have been discussed thereunder. 4. Power: The company has installed wind turbines of 2.4 MW and 0.8 MW in Jayant Agro-Organics Ltd and Ihsedu Agrochem Pvt. Ltd. respectively. The performance of the power segment has been steady with the EBIDTA at Rs.267.79 Lacs Your directors are pleased to announce that nearly 50% of the electricity at its Ranoli unit and 10% of its power requirement at its crushing plant in Jagana, Palanpur is met by green energy produced from the wind mills. We would also like to state that more than 95% of its steam requirement is met by using its own product De-oiled Cake, making your company an environment friendly manufacturer of environmentally friendly products Subsidiary Companies: Ihsedu Agrochem Pvt. Limited (IHSEDU): During the year under review, the IHSEDU a material subsidiary of the Company achieved a turnover of Rs.97,899.18 lacs as compared to Rs.93,557.51 lacs in the previous year. The Company made loss of Rs. 85.91 lacs as against profit of Rs.321.80 lacs in the previous year. Ihsedu Coreagri Service Pvt. Limited ( ICAS): During the year under review, the ICAS a subsidiary of the Company incurred loss of Rs. 3.74 Lacs as against Loss of Rs. 2.94 lacs in the previous year. Ihsedu Itoh Green Chemicals Marketing Pvt. Limited (IIGCM): During the year under review, the IIGCM achieved a turnover of Rs.20.82 lacs as compared to Rs.18.60 lacs in the previous year. The profit after tax was Rs. 6.17 lacs against profit after tax of Rs. 4.69 lacs in the previous year. Associate Company Vithal Castor Polyols Private Limited (VCP): VCP is the Indo - Japanese Joint Venture Company, and your company owns 50% equity shares. VCP is in the process of setting up a manufacturing plant at GIDC Jhagadia, Gujarat. The project is under implementation and yet to commence the commercial production. VCP financials for the year ended 31st March, 2015 has been considered in the consolidated results of the Company. The Policy on material subsidiary is available on weblink <http://www.jayantagro.com/pdf/annoucement/> Policy%20on%20Material%20Subsidiaries.pdf The audited accounts of the subsidiary companies are placed on the Company's website and the same are open for inspection by any member at the Registered Office of the Company on any working day between 10.00 a.m to 5.00 p.m. 8. Research and Development: The Company's R & D, which is recognized by the DSIR, Govt. of India, continues its work on the development of castor-based value-added products, applications and processes. It has recently procured several application-oriented equipment. These will be useful in developing products with superior properties and will thus create added value to the products for the users in various industries. Also recently a pilot reactor with its ancillary equipment has been procured and which is under process of installation. The pilot reactor will be useful in the scaling up of the processes for new products being developed at the R & D and will be useful for the samplings for test marketing. The R & D is also providing technical support to the manufacturing plants for improving the quality of products & improving the process efficiencies. 9. Details in respect of adequacy of internal financial controls with reference to the Financial Statements: The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The management 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. Periodical reports on the same are presented to the Audit Committee. 10. Deposits: During the year under review, the Company has not accepted any deposit from falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 as amended from time to time. 11. Particulars of loans, guarantees or investments under section 186: Particulars of loans given, investments made, guarantees given and securities provided by the Company as on 31st March, 2015 are given in the notes no. 9 and 10 forming part of the financial statement. 12. Particulars of contracts or arrangements with related parties: All Related Party Transactions that were entered into during the financial year were on arm's length basis and in ordinary course of business. There are no materially significant related party transactions made by the Company during the year. All the Related Party Transactions are placed before the Audit Committee and also the Board for approval. Accordingly, no transactions are being reported in Form No. AOC-2 in terms of Section 134 of the Companies Act, 2013 read with rules made thereunder. A policy on Related Party Transactions is uploaded on the Company's website. 13. Directors: A) Changes, if any, in Directors and Key Managerial Personnel ("KMP"): As per the provisions of the Companies Act, 2013 and Article of Association of the Company, Mr. Abhay V. Udeshi retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The Board recommends his re-appointment. Mr. Abhay V. Udeshi and Dr. Subhash V Udeshi are been re-appointed as Whole-time Director for a period of 3 years w.e.f. 1st June, 2015 subject to approval of the members at the ensuing Annual General Meeting. During the year under review, Mrs. Sucheta N. Shah was appointed as an Additional Director w.e.f. 8th November, 2014 and she will hold office up to the date of ensuing Annual General Meeting of the Company and being eligible offers herself for re-appointment. Notice under section 160 has been received by the Company from a member signifying their intention to propose the candidature of Mrs. Sucheta N. Shah as an Independent Director of the Company. The Board of Directors recommended appointment of Mrs. Sucheta N. Shah as Independent Director for a period of 5 year commencing from the conclusion of the 23rd Annual General Meeting. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges. Necessary resolutions for the re-appointment / appointment of Mr. Abhay V. Udeshi ,Dr. Subhash V. Udeshi and Mrs. Sucheta N. Shah, have been included in the Notice convening the ensuing AGM and requisite details have been provided in the explanatory statement and annexure to the Notice. Your Directors recommend their re-appointment/appointment. The Company has devised a Policy for remuneration for the Directors, KMPs and other employees. The policy also includes performance evaluation of the Board which includes criteria for performance evaluation of the Independent Directors, Non-Executive Directors and Executive Directors. The details of programs for familiarisation of Independent Directors with the Company are put up on the website of the Company (<http://jayantagro.com>) 14. Number of meetings of the Board of Directors: During the year the Board of Directors met five times. For further details, please refer report on Corporate Governance forming part of the Annual Report. 16. Corporate Social Responsibility ("CSR"): Pursuant to the provision of Section 135 of the Companies Act, 2013 ("the Act") read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted a CSR Committee. Mr. Deepak V. Bhimani is the Chairman of the Committee and Mr. Abhay V. Udeshi and Mr. Hemant V. Udeshi are the other members of the Committee. The Board of Directors, based on the recommendations of the Committee, formulated a CSR Policy encompassing the Company's philosophy for describing its responsibility as a Corporate citizen, laying down the guidelines and mechanisms for undertaking socially relevant programmes for welfare and sustainable development of the community at large. CSR Policy is available on weblink <http://www.jayantagro.com/pdf/annoucement/CSR%20Policy> new.pdf The amount required to be spent on CSR activities during the year under report in accordance with the provisions of Section 135 of the Act is 7 64.22 lacs and the Company has spent 7 28.51 lacs during the current financial year. The Company is in process of identifying suitable projects which would be within the framework of Company's CSR Policy. The requisite details on CSR activities pursuant to Section 135 of the Act and as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 are annexed as Annexure II to this Report. 17. Risk Management Policy: The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company's competitive advantage. 18. Auditors Statutory Auditors: At the 22nd Annual General Meeting held on 27th September, 2014, M/s. T. P. Ostwal & Associates, Chartered Accountants, Mumbai, (Firm Regn. No. 124444W) were appointed as Statutory Auditors of the Company to hold office from the conclusion of the 22nd Annual General Meeting until the conclusion of the 25th Annual General Meeting, subject to ratification by the Members at every Annual General Meeting on such remuneration as may be fixed by the Board in consultation with the Auditors, apart from reimbursement of out of pocket expenses as may be incurred by them for the purpose of audit. There are no qualifications, reservations or adverse remarks or disclaimers made by the Auditors in their report on the Financial Statements of the Company for the Financial Year ended 31st March, 2015. Cost Audit: As per the requirements of Section 148 of the Act, read with The Companies (Cost Records and Audit) Rules, 2014, the Audit of the Cost Accounts relating to chemical products is being carried out every year. The Board of Directors have, based on the recommendation of the Audit Committee, appointed M/s. Kishore Bhatia & Associates, Cost Auditor, Mumbai to audit the cost accounts of the Company for the year 2015-16 from 1st April 2015 to 31st March 2016 on a remuneration of 7 1lac plus applicable taxes and out of pocket expenses. As required under the Act, necessary resolution seeking member's ratification for the remuneration payable to M/s. Kishore Bhatia & Associates is included in the Notice convening the 23rd Annual General Meeting. The Cost Audit Report in respect of Financial Year 2014-15 will be filed within the due date. Secretarial Auditor: Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the rules therein, the Secretarial Audit Report for the financial year ended 31st March, 2015 given by M/s. V V Chakradeo & Co., a firm of Practising Company Secretaries forms part of this report as Annexure III There is no qualification in the Secretarial Audit Report Extract of the Annual Return: As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 as a part of this Annual Report forms a part of the Board's Report as Annexure IV 19. Conservation of energy, technology absorption, foreign exchange earnings and outgo: The particulars of the conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure V to this Report. 20. Details of establishment of Vigil Mechanism for directors and employees: Pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and as per Clause 49 of the Listing Agreement, the Company has established a vigil mechanism for directors and employees to report genuine concerns. The details of the Whistle Blower Policy is available in the Corporate Governance report annexed to this report. The Whistle Blower Policy is also uploaded on the website of the Company. 21. Disclosure under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: The requisite details relating to the remuneration of the specified employees covered under the above Rules are annexed as Annexure VI to this Report. 22. Corporate Governance Certificate: A separate report on Corporate Governance is being incorporated as a part of the Annual Report along with a Compliance certificate from M/s. T.P. Ostwal & Associates., Chartered Accountants, Mumbai, regarding compliance of conditions of corporate governance as stipulated in Clause 49 of the Listing agreement with the stock exchange has been annexed to the Directors Report. 23. Directors' Responsibility Statement: Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, your directors report that— (a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) 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; (c) 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; (d) The Directors have prepared the annual accounts on a going concern basis; and (e) The Directors had laid down internal financial controls (as required by explanation to section 134 (5) (e) of the Companies Act, 2013) be followed by the company and that such internal financial controls are adequate and are operating effectively. (f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 24. Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future There has been no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future 25. Transfer of Unpaid/Unclaimed Dividend Amounts to IEPF: The unclaimed / unpaid Preference Share dividend for FY 2006 - 07 and Preference Share Capital and Dividend for F Y 2007 - 08 amounting to Rs. 37,651/- & Rs. 374,871/- respectively and Equity Dividend for F.Y. 2006-07 amounting to Rs. 219,464/- which remained unclaimed for the period of seven years has been transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government. 27. Industrial Relations: The Relations between the Employees and the Management have remained cordial, during the year. 28. Safety and Environment: Your Company has declared the Safety, Health and Environment Policy and continued their commitments towards safety and environment. The Committees formed for the purpose of safety and environments have continued to educate and motivate the employees on various aspects on safety and environment through training program and seminars. During the year following safety program where held on the dates mentioned therein. Fire Safety Day 11.10.2014 Safety Day Program 12.02.2015 The Company is a member of Effluent Channel Projects, for disposal of Effluent Water and also of Nandesari Environment Control Ltd., for disposal of solid waste. The Company is continuously monitoring its waste to ensure adherence to pollution control norms. The Ranoli Unit has achieved the ISO 14001 certification. 9. Insuran The properties and insurable interest of your Company like Building, Plant and Machinery, Stocks, etc are properly insured. 30. Personnel: No employee of the Company is in receipt of remuneration in excess of the sum prescribed under Rule 5 (2) of Chapter XIII, The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. 31. Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) The Company has in place a Code on Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has set up an Internal Complaints Committee to redress complaints received regarding sexual harassment. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 32. Acknowledgement: Your Directors wish to place on record their sincere appreciation for the whole hearted support extended by the Central Bank of India, State Bank of India, Kotak Mahindra Bank Ltd, Oriental Bank of Commerce, and ICICI Bank Ltd, Authorities of Government such as Ministry of Commerce and State Government of Gujarat, Gujarat State Electricity Board, Gujarat Pollution Control Board, Gujarat Industrial Development Corporation, Gujarat Alkalies & Chemicals Ltd., and Ranoli Panchayat. Also, we would like to thank our employees for their hard work and shareholders for their continued faith and support. For and on behalf of the Board of Directors ABHAY V. UDESHI CHAIRMAN Place: Mumbai, Date: July 25, 2015 |