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Kothari Fermentation & Biochem Ltd

BSE: 507474 | NSE: ISIN: INE991B01010
Market Cap: [Rs.Cr.] 16.88 Face Value: [Rs.] 10
Industry: Food - Processing - Indian

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Director's Report
DIRECTORS

TO THE MEMBERS OF

KOTHARI FERMENTATION AND BIOCHEM LTD.

Your directors are pleased to present the 24th Annual Report together with the Audited Accounts for the year ended on 31st March 2014:

1. FINANCIAL RESULTS (Rs. in lacs)

2013-2014 2012-2013
Turnover 5062.57 4390.50
Profit before Finance Charges & Depreciation 372.22 505.48
Finance Charges 126.93 118.22
Depreciation 189.82 149.43
Profit before Tax 55.47 237.83
Taxes:
Current Tax 10.57
Less: MAT Credit Entitlement (10.57)
Deferred Tax 17.54 73.86
Net Profit/ (Loss) after Tax 37.93 163.97

2. OPERATIONS

The company achieved production of 11462 MT during 2013-14 as compared to 9702 MT in previous year. Resultantly the turnover of the company from manufacturing activities has increased to Rs. 5062.57 Lacs during the year 2013-14 as compared to Rs. 4390.50 Lacs during previous year recording a growth of 15%. The profitability of the company is Rs. 37.93 Lacs during the year 2013-14 as compared to profit of Rs. 163.97 Lacs during previous year. Despite achieving higher production and turnover, the profits during 2013-14 are low in comparison to 2012-13, due to increase in raw material prices and power costs, whereas the market prices of company's products remained stagnant during the year 2013-14.

It is noteworthy to mention that the company achieved positive results even against the backdrop of general slowdown in the economy and greater stress in several other industries.

Dividend for the year has not been proposed in order to plough back profits for the growth of the Company.

3. CURRENT YEAR’S OUTLOOK

Since the beginning of the current financial year 2014-15, the prices of the basic raw material of the company, i.e. Molasses have gone up due to prevailing conditions of the sugar mills. Due to its low availability in the subsequent months also, it is expected that it may increase further and would affect the profitability of the company.

The management has streamlined the manufacturing process to optimally utilize the limited resources available with the company and is making all efforts to improve the production and profitability of the company during the current year.

4. FIXED DEPOSITS

The Company has not accepted any deposit from public during the year under review, which would fall under section 58-A of the Companies Act, 1956.

5. DIRECTORS

In accordance with the provisions of the Companies Act, 2013 and pursuant to the company's new set of Articles of Association which is being adopted at the ensuing AGM, the Independent Directors of the Company, namely, Mr. Kapil Dev Puri, Mr. Prasanna Kumar Pagaria and Mr. Ratan Lal Dudheria, whose offices were liable to retire by rotation in terms of the provisions of the Companies Act, 1956, are now required to be appointed by the members for a term of five consecutive years and they shall not be liable to retire by rotation.

The Company has received requisite notices in writing from members proposing Mr. Kapil Dev Puri, Mr. Prasanna Kumar Pagaria and Mr. Ratan Lal Dudheria for appointment as Independent Directors for a term of 5 years. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013.

In view of the above, and pursuant to Section 152(6), the remaining directors, being Executive Directors, are now made liable to retire by rotation at every Annual General Meeting. Thus, Mr. Pramod Kumar Kothari, Chairman & Managing Director and Mrs. Kavita Devi Kothari, Whole - Time Director, would be liable to retire by rotation.

Mr. Pramod Kumar Kothari, being longest in office, would retire at this AGM. He was appointed as the Chairman & Managing Director of the company for a period of 5 years w.e.f. 1st April, 2013. The said appointment was approved by the members of the company at their 23rd AGM held on 28.09.2013 by way of an Ordinary Resolution. Such determination of office by retirement and then re-appointment would not constitute a break in his tenure of service as the Chairman & Managing Director of the Company. The Board recommends their appointment as such.

6. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Sec. 217 (2AA) of the Companies Act, 1956 the directors hereby report: i that in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; ii that the directors have selected accounting policies and applied them consistently and made judgment 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 2013-14 and of the profit of the company for the year, iii that the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities, iv that the directors have prepared the annual accounts on a going concern basis.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The statement containing the necessary information under section 217(1)(e) of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988, is annexed to this report as Annexure-I.

8. PERSONNEL

Your company maintains harmonious and cordial relations with all its employees. No employee is drawing salary more than the limits prescribed under section 217 (2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

9. AUDITORS

M/s Nahata Jain & Associates, Chartered Accountants (Regn. No. 016351N), auditors of your company retire at the ensuing annual general meeting and being eligible offers themselves for re-appointment. The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment.

The Board recommends their appointment as auditors from the conclusion of this AGM to the conclusion of next AGM. The notes on accounts are self-explanatory with regards to auditors' observations.

10. COMPLIANCE CERTIFICATE FROM COST AUDITORS

Pursuant to section 233B of Companies Act, 1956 read with Cost Audit Rules 2011, the Company will receive the Cost Audit Report for the Financial Year - 2013-14 from M/s HMVN & Associates, Cost Accountants, Delhi and would file the same with the Government within stipulated time.

The Board in its meeting dated 30.05.2014 and pursuant to Section 148 and all other applicable provisions of the Companies Act, 2013, the Companies (Audit and Auditors) Rules, 2014 and the Cost Audit Rules, 2011, appointed M/s HMVN & Associates, Cost Accountants, Delhi as Cost Auditors for the Financial Year - 2014-15 at a remuneration recommended by the Audit Committee and approved by the Board of Directors. The same is being proposed to be ratified by the shareholders at the ensuing AGM.

The Company has received letter from the Auditors to the effect that their re-appointment, if made, would be within the prescribed limit under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. The Board recommends for the ratification of the remuneration payable to the Cost Auditors.

11. CORPORATE GOVERNANCE

The Company is complying with Clause 49 of the Listing Agreement with regard to Corporate Governance and reports to that effect are being regularly filed with the Stock Exchanges. Pursuant to Clause 49 of the Listing Agreement, a Corporate Governance Report is made a part of this annual report.

A certificate from the auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated by Clause 49 of the Listing Agreement is attached with this report.

The Company has also obtained declaration from the Directors and Senior Management members of the Company for compliance of the Code of Conduct and Ethics and the Certificate from CEO/CFO was placed before the Board of Directors.

12. MANAGEMENT DISCUSSION AND ANALYSIS

A report on Management Discussion and Analysis (MDA), which forms part of this Report, inter-alia, deals adequately with the operations and also the current and future outlook of the Company.

ACKNOWLEDGEMENTS

Your Board of Directors is thankful to all the Shareholders for their constant faith reposed in the company. They also placed on record their sincere appreciation for the wholehearted devotion and co-operation extended by the employees at all levels, which has been a source of strength to the company.

The Directors also wish to thank and deeply acknowledge the continued support, guidance and co-operation of the Customers, Auditors, Legal Advisers, Bankers, Dealers, Vendors and other stakeholders of the Company.

For and on behalf of the Board
Place: New Delhi Pramod Kumar Kothari
Date : 14th August, 2014 Chairman & Managing Director

ANNEXURE – I

INFORMATION AS PER SECTION 217 (1) (e) READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORT FOR THE YEAR ENDED MARCH 31, 2014

(I) CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO.

FOR THE YEAR ENDED ON 31ST MARCH, 2014 FOR THE YEAR ENDED ON 31ST MARCH, 2013
1. CONSERVATION OF ENERGY, POWER AND FUEL CONSUMPTION
The company is taking all measures to conserve Energy, Power and Fuel Consumption.
a) Electricity
Units Consumed 10640490 8586000
Total Amount (Rs. in Lacs) 786.37 553.30
Rate/Unit Rs. 7.39 6.44
b) HSD/Furnace Oil
Quantity (litres) 128800 228000
Total Amount (Rs. in Lacs) 72.37 92.13
Average Rate per Ltr. (Rs.) 56.19 40.41
c) Agro Fuel
Quantity (MT) 7329.75 3541.18
Total Amount (Rs. in Lacs) 265.16 125.76
Average Rate per MT (Rs.) 3617.56 3551.76

2. TECHNOLOGY ABSORPTION & RESEARCH AND DEVELOPMENT

Through continuous Research and Development efforts, the company has been able to maintain the quality of yeast products as compared with its competitor multinational companies. The company is constantly upgrading its technology by R&D to help in the overall development of the company.

EXPENDITURE ON RESEARCH AND DEVELOPMENT
a) Capital (Rs. in lacs) 2.66
b) Recurring (Rs. in lacs) 24.65 17.59
c) Total (Rs. in lacs) 24.65 20.25
d) Total R & D expenditure as percentage of turnover of Manufacturing activity 0.49 0.46
3. FOREIGN EXCHANGE EARNINGS AND OUTGO
Foreign exchange earnings (Rs.in lacs)
Foreign exchange outgo (Rs.in lacs) 63.93 42.46

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

The Management of Kothari Fermentation & Biochem Ltd. is pleased to present its Twelfth Analysis report covering segment wise performance and outlook.

Indian economy passed through one of its toughest phases in the financial year 2013-14. High inflation, weak demand, depreciating currency, rising cost of industrial input, tight liquidity with high cost of borrowing - all this took the consumer and investment sentiments to a new low. At 4.7%, the country recorded its second successive year of sub 5% GDP growth.

In such an environment, the growing companies are often hampered by business systems that simply cannot keep up with the changing requirements. Your company too faced with high costs of raw materials, consumables, etc. The power costs also rose by around 15% which too decelerated the growth of the company.

The company operates in only one segment of Manufacturing Yeast during the year 2013-14.

Industry Structure and Developments

The Indian Yeast Industry comprises of three major companies which are manufacturing yeast including our company. The other two companies are multi-nationals. Your company is the only Indian Company which is in the business of manufacturing of Yeast. With an excellent team of technical and commercial professionals with expertise in yeasts manufacture, we offer better quality products in comparison to the products of the other multinational companies.

Opportunities and Threats

The growth of yeast market is directly linked to the increasing trend of processed and fast food items, especially bakery items. As per the current trend, India is presently one of the most promising markets for Baker's yeast, as its demand is continuously increasing with the rise in population and changing habits of Bakery products. India's estimated per capita consumption of bread, as compared to other European and developing countries of Asia is amongst the lowest.

The company is constantly working to enter into markets, other than Bakeries, and had engaged a team of talented scientists and engineers to develop technologies for the manufacturing of Yeast based products needed for Distilleries, Feed, Food Pharmaceuticals and Biotech Industries.

But a major threat to the growth of the company is competition from Multi National Companies (MNCs) in yeast industry in India. The company through its continuous Research and Development efforts has been able to maintain the quality of yeast products as compared with the multinational companies. Also continuous increase in cost of raw materials, power tariffs and fuel costs are deterrent to the growth and profitability of the company.

Further the yeast industries are subjected to pollution problems and the company has achieved zero discharge of polluted water by installing MEE (Multi Effect Evaporator).

Awards and Recognitions

The company has received the First Award under the category of Private Manufacturing (Small) Organization by the prestigious Institute of Cost Accountants of India on the occasion of its "11th National Award for Excellence in Cost Management, 2013". The Jury was headed by Dr. Justice Arijit Pasayat, former Justice of Supreme Court of India.

Segment wise Performance

Manufacturing of Yeast is the only business segment of the Company during the year 2013-2014. The brand names - Kothari "SUNRISE", "KF" and "FOUR SEASONS" have been well established in the domestic market.

The comparison of financial data with previous year's data, is provided under the heading "Discussion on Financial Performance with respect to Operational Performance" later in this Report.

Future Outlook

The company is regularly reviewing its whole structure and making changes for future improvements. Your directors are making all efforts for increasing production during the current year. The company is constantly working to enter into markets for the manufacturing of Yeast based products needed for Distilleries, Feed, Food Pharmaceuticals and Biotech Industries. But, various control systems have been deployed for the reduction of costs and improving of the operating efficiencies 'Molasses', the basic raw material of the company, is a by-product of the sugar mills. And the Sugar Mills are not running in a comfortable position, thereby, affecting the availability of molasses. This fall in the supply, have considerably increased the prices. However, continuous increase in cost of raw materials, power tariffs and fuel costs are deterrent to the growth and profitability of the company. The Company is making all efforts to earn profits in current year by utilizing its available resources more effectively and efficiently.

Internal Control System and their adequacy

The Company has an internal control system with proper internal delegation of authority, supervision, checks and procedures. This system is reviewed and updated periodically in order to improve the same to meet the business requirements. The Internal Auditor of the Company has ensured adequacy and compliance of Internal Control System and that it commensurate with the size and nature of the Company and also suggests necessary checks and balances to increase the effectiveness of the system. The Board of Directors, Audit Committee and the Management ensure that the internal control system operate effectively within the organization.

Discussion on Financial Performance with respect to Operational Performance

2013-14 (Rs. in lacs) 2012-13 (Rs. in lacs)
Particulars Manufacturing of Yeast Manufacturing of Yeast
a) Production (MT) 11462 9702
b) Revenue
— Net sales 5062.57 4390.50
b) Result
— Before Tax & Interest 182.40 356.05
Less:
i) Finance Exp. 126.93 118.22
ii) Other Unallocable Exp.
Net Profit before Tax. 55.47 237.83
c) Capital Employed 2807.84 2769.91

Material Developments in Human Resources/Industrial Relations Front, including number of people employed

The Company believes that the competence and commitment of its people are the key drivers for growth of the organization. There have been excellent relations between the employees at various levels and the management. The managers' help employees identify obstacles and teach them leadership techniques through training, mentoring and coaching. The Company responds to genuine grievances of employees in order to foster warm and cordial relationships between the management and the employees, increases job satisfaction of employees and ensures that employees can add value to their lives. There were 152 persons directly employed by the Company during the previous financial year on an average basis.

Cautionary Statement

Statements in this report on Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws or regulations. These statements are based on certain assumptions and expectations of future events. Actual results may differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include global and domestic demand supply conditions, finished goods prices, raw material cost and availability, changes in Government regulations, tax regimes, economic developments within India and other factors such as litigation and industrial relations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

For and on behalf of the Board
Place: New Delhi Pramod Kumar Kothari
Date : 14th August, 2014 Chairman & Managing Director
   
Futures & Options Quote
Future Data Not present
Key Information

Key Executives:

Pramod Kumar Kothari , Chairman & Managing Director

Prasanna Kumar Pagaria , Director

Ratan Lal Dudheria , Director

Kapil Dev Puri , Director


Company Head Office / Quarters:

16 Community Centre,
1st Floor Saket,
New Delhi,
New Delhi-110017
Phone : New Delhi-91-011-26963167 / New Delhi-
Fax : New Delhi- / New Delhi-
E-mail : kfbl@airtelmail.in
Web :

Registrars:

Abhipra Capital Ltd
GF Abhipra Complex,A-387 G T Karnel Rd,Azadpur,Delhi - 110033

 
Fund Holding
Scheme Name No. of Shares
 
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