Kothari Fermentation & Biochem Ltd

BSE: 507474 | NSE:  | ISIN: INE991B01010 
Market Cap: [Rs.Cr.] 14.82 | Face Value: [Rs.] 10
Industry: Food - Processing - Indian

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 AuditedAccounts 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 inprevious year. Resultantly the turnover of the company from manufacturing activities hasincreased to Rs. 5062.57 Lacs during the year 2013-14 as compared to Rs. 4390.50 Lacsduring 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 duringprevious year. Despite achieving higher production and turnover, the profits during2013-14 are low in comparison to 2012-13, due to increase in raw material prices and powercosts, whereas the market prices of company's products remained stagnant during the year2013-14.

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

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

3. CURRENT YEAR’S OUTLOOK

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

The management has streamlined the manufacturing process to optimally utilize thelimited resources available with the company and is making all efforts to improve theproduction 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 thecompany'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 KumarPagaria and Mr. Ratan Lal Dudheria, whose offices were liable to retire by rotation interms of the provisions of the Companies Act, 1956, are now required to be appointed bythe members for a term of five consecutive years and they shall not be liable to retire byrotation.

The Company has received requisite notices in writing from members proposing Mr. KapilDev Puri, Mr. Prasanna Kumar Pagaria and Mr. Ratan Lal Dudheria for appointment asIndependent Directors for a term of 5 years. The Company has received declarations fromall the Independent Directors of the Company confirming that they meet the criteria ofindependence 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, beingExecutive Directors, are now made liable to retire by rotation at every Annual GeneralMeeting. Thus, Mr. Pramod Kumar Kothari, Chairman & Managing Director and Mrs. KavitaDevi 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 wasappointed as the Chairman & Managing Director of the company for a period of 5 yearsw.e.f. 1st April, 2013. The said appointment was approved by the members of the company attheir 23rd AGM held on 28.09.2013 by way of an Ordinary Resolution. Such determination ofoffice by retirement and then re-appointment would not constitute a break in his tenure ofservice as the Chairman & Managing Director of the Company. The Board recommends theirappointment as such.

6. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Sec. 217 (2AA) of the Companies Act, 1956 the directors hereby report: ithat in the preparation of the annual accounts, the applicable accounting standards havebeen followed along with proper explanation relating to material departures; ii that thedirectors have selected accounting policies and applied them consistently and madejudgment and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the company at the end of the financial year 2013-14 and of theprofit of the company for the year, iii that the directors have taken proper andsufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act, 1956 for safeguarding the assets of the company and forpreventing and detecting fraud and other irregularities, iv that the directors haveprepared the annual accounts on a going concern basis.

7. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO

The statement containing the necessary information under section 217(1)(e) of theCompanies Act, 1956 read with the Companies (Disclosure of Particulars in the Report ofthe 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. Noemployee is drawing salary more than the limits prescribed under section 217 (2A) of theCompanies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975.

9. AUDITORS

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

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

10. COMPLIANCE CERTIFICATE FROM COST AUDITORS

Pursuant to section 233B of Companies Act, 1956 read with Cost Audit Rules 2011, theCompany 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 Governmentwithin stipulated time.

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

The Company has received letter from the Auditors to the effect that theirre-appointment, if made, would be within the prescribed limit under Section 141(3)(g) ofthe Companies Act, 2013 and that they are not disqualified for re-appointment. The Boardrecommends 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 toCorporate Governance and reports to that effect are being regularly filed with the StockExchanges. Pursuant to Clause 49 of the Listing Agreement, a Corporate Governance Reportis made a part of this annual report.

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

The Company has also obtained declaration from the Directors and Senior Managementmembers of the Company for compliance of the Code of Conduct and Ethics and theCertificate 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 outlookof the Company.

ACKNOWLEDGEMENTS

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

The Directors also wish to thank and deeply acknowledge the continued support, guidanceand co-operation of the Customers, Auditors, Legal Advisers, Bankers, Dealers, Vendors andother 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 PARTICULARSIN THE REPORT OF BOARD OF DIRECTORS) RULES, 1988 AND FORMING PART OF THE DIRECTORS REPORTFOR THE YEAR ENDED MARCH 31, 2014

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

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 tomaintain the quality of yeast products as compared with its competitor multinationalcompanies. The company is constantly upgrading its technology by R&D to help in theoverall 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 itsTwelfth 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, tightliquidity with high cost of borrowing - all this took the consumer and investmentsentiments to a new low. At 4.7%, the country recorded its second successive year of sub5% GDP growth.

In such an environment, the growing companies are often hampered by business systemsthat simply cannot keep up with the changing requirements. Your company too faced withhigh 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 year2013-14.

Industry Structure and Developments

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

Opportunities and Threats

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

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

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

Further the yeast industries are subjected to pollution problems and the company hasachieved 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 theoccasion 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 ofIndia.

Segment wise Performance

Manufacturing of Yeast is the only business segment of the Company during the year2013-2014. The brand names - Kothari "SUNRISE", "KF" and "FOURSEASONS" have been well established in the domestic market.

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

Future Outlook

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

Internal Control System and their adequacy

The Company has an internal control system with proper internal delegation ofauthority, supervision, checks and procedures. This system is reviewed and updatedperiodically in order to improve the same to meet the business requirements. The InternalAuditor of the Company has ensured adequacy and compliance of Internal Control System andthat it commensurate with the size and nature of the Company and also suggests necessarychecks and balances to increase the effectiveness of the system. The Board of Directors,Audit Committee and the Management ensure that the internal control system operateeffectively 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 numberof people employed

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

Cautionary Statement

Statements in this report on Management Discussion and Analysis describing theCompany's objectives, projections, estimates, expectations or predictions may be"forward looking statements" within the meaning of applicable securities laws orregulations. These statements are based on certain assumptions and expectations of futureevents. Actual results may differ materially from those expressed or implied. Importantfactors that could make a difference to the Company's operations include global anddomestic demand supply conditions, finished goods prices, raw material cost andavailability, changes in Government regulations, tax regimes, economic developments withinIndia and other factors such as litigation and industrial relations. The Company assumesno responsibility to publicly amend, modify or revise any forward looking statements, onthe 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

 
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