Andhra Sugars Ltd Directors Report.

To

The Shareholders

Your Directors have pleasure in presenting this SEVENTY THIRD ANNUAL REPORT along with the audited Statement of Accounts for the year ending 31st March, 2020.

Financial Results:

(Rupees in lakhs)

Particulars This Year Last Year
Sales 104068.14 97436.36
Other Income 2702.27 3742.69
106770.41 101179.05
Profit for the year 25974.96 30375.06
Depreciation 5649.03 4972.53
Profit after depreciation 20325.93 25402.53
Add: Income Tax Refund received (200.42) 3.00
Short entitlement of MAT Credit --
Less:
Provision for Current Tax 5300.00 8360.00
Provision for Deferred Tax (3789.24) 473.52
Profit after Tax 19015.59 16572.01
Add: Balance brought forward from last year 28583.71 30259.51
Profit available for utilisation 47599.30 46831.52
UTILISATION
Equity Dividend 2710.71 2710.71
Interim Equity Dividend (2019-20) 5421.42 --
Tax on Distributed Profits 1661.54 537.10
Transfer to General Reserve 10000.00 15000.00
Balance carried forward to next year 27805.63 28583.71
47599.30 46831.52

PERFORMANCE:

Your Directors are glad to report that for the year 2019 – 2020, your Company made a Profit of Rs.203.26 Crores (before tax) against a Profit of Rs. 254.03 Crores made last year, which reflect another year of consistent performance. The Net Profit (After Tax) was Rs.190.16 Crores against Rs. 165.72 Crores made last year.

DIVIDENDS:

Your Directors paid an Interim Dividend of Rs. 20 /- per Equity Share i.e., 200% (Face Value Rs.10/-) for the year 2019-20. This is the highest Dividend paid since inception. Your Directors recommended this interm Dividend as Final Dividend for the year 2019-20.

CAPITAL & RESERVES:

Authorised and Paid Up Capital:

As on 31.3.2020, the Authorised Capital of the Company is Rs.30.00 Crores and the Paid-up Capital is Rs. 27.11 Crores.

Reserves:

With the transfer of Rs.100. Crores during the year under report, the total Reserves as on 31.3.2020 stands at Rs. 693.30 Crores against Rs. 593.46 Crores on 31.3.2019.

REVIEW OF OPERATIONS: SUGAR UNITS:

The Sugar Units II and III crushed in aggregate 4,84,820 M.T. of cane during the 2019-2020 season against 7,69,073 M.T. crushed by Two Units last year. The crushing operations and cane price paid to cane suppliers for the 2019-2020 Season are:

SUGAR UNIT – II SUGAR UNIT – III
TADUVAI BHIMADOLE
Fin.Year Fin.Year Fin.Year Fin.Year
2019-20 2018-19 2019-20 2018-19
(A) Crushing details:
Total cane crushed (MT) 311510 4,62,325 173310 3,06,748
Total No. of days crushed 91 148 71 113
Total Sugar produced(MT) 31372 47822 16523 30707
Average Recovery 10.07% 10.34% 9.53% 10.01%
(B) Cane price:
Fair & Remunerative price (per M.T.) 2845.00 2,950.00 2755.00 2,670.00
Cane price paid (per M.T)* 3010.74 3029.31 2910.95 2928.52

? Includes Transport Subsidy.

? Crushing Operations for the Season 2019-20 has been lower compared to Season 2018-19 due to non-availability of Cane.

? Operations of Sugar Unit-I was suspended for the Season 2019-2020.

? To encourage farmers to plant cane, your Company opted to pay a cane price higher than the Fair Remunerative Price fixed by the Government.

? Board of Directors decided to suspend Operations at Sugar Unit-III, Bhimadole for the Crushing Season 2020-21.

POWER GENERATION:

During the year under report the Co-generation Unit at Taduvai generated 1,53,05,000 Units of Power.

PERFORMANCE OF CHEMICAL DIVISION:

During the year under report the performance of Caustic Soda Division at Saggonda was good. Turnover of Rs.496.79 Crores was achieved, Profit after depreciation achieved this year was Rs 152.57. Crores against Rs. 214.90 Crores last year.

Aspirin Division has also performed impressively by posing a profit of Rs.11.72 Crores as against 9.73 Crores.

WIND POWER UNITS:

The Power generated at Ramagiri Wind Mills during this year is Units 14,95,250.

The Power generation at the Tamil Nadu Wind Mills during the year under report is 2,67,54,863. Units. This Power is being fed into the Tamil Nadu State Electricity Board grid.

The Power generated by 33 MW Coal Based Power Plant put up by the Company at Saggonda is 21,89,40,800 units during this year. This Power is being used for operation of Our Chemical Plants at Saggonda.

PROJECTS:

Your Company has successfully expanded 100 TPD Caustic Soda Plant at Saggonda in the Financial Year 2019-20. With this the total Plant Capacity is 500 TPD. The Plant is based on the latest 6th Generation Membrane Technology. This process has the lower production cost, simple operations, Energy Efficient & Environmental friendly. Salt and Power constitute two main inputs for production of Caustic Soda. As your Company is already in the production of Caustic Soda, procurement of Salt can be sourced from the existing vendors. Power, another major input, can be availed from 33 MW Coal based Captive Power Plant in operation.

Hydrochloric Acid Plant is operating at capacity of 600 TPD in order to utilize Chlorine emerging from the production of Caustic Soda.

Your company is setting up a project at J.N.Pharmacity, Parawada, Visakhapatnam in non-sez area to manufacture 100 TPD Sodium Hypochlorite. The estimated project cost is about Rs.10 crores. The important raw materials required are Sodium Hydroxide and Chlorine gas, which can be supplied from our Chemicals Division, Saggonda. Sodium Hypochlorite has its applications in Bulk drugs / Pharmaceuticals, Fine chemicals, Water treatment and Sea food industries. Most of the civil construction works are completed. All the bought-out components required for this project have already been procured. Fabrication of all the process equipments and main storage tanks are completed. Fabrication and erection of pipe racks / bridges are also completed. Erection of process equipment is in progress. It is expected to complete the project by the end of December, 2020.

Keeping in view the need for your Company to expand the base of its Chlor-Alkali operations an application to the concerned authorities has been made for establishment of Plants at J.N.Pharmacity, Parawada, Visakhapatnam for 245 TPD Caustic Soda, 50 TPD Caustic Potash, 600 TPD Hydrochloric Acid, 300 TPD Sulphuric Acid and 200 TPD Chlorine.

To meet the International customers requirement, capacity of Aspirin Plant has been expanded to 2000 TPA from 1000 TPA.

DEMATERIALISATION OF EQUITY SHARES:

As of 31st March, 2020 Equity Shares representing 53.81% of the Share Capital have been dematerialised.

AUDITORS:

M/s K.S. Rao & Co., Chartered Accountants, Hyderabad, the present Auditors were appointed at 70th Annual General Meeting for a period of 5 Financial Years i.e., 2017-18, 2018-19, 2019-20, 2020-21 and 2021-22. Their remuneration for the Financial Year 2020-21 of Rs17,00,000./- is being sought for your approval at the ensuing Annual General Meeting.

COST AUDITORS:

For the year 2019-2020 M/s Narasimha Murthy & Co., Cost Accountants, Hyderabad were the Cost Auditors of the Company for the products, which are subject to Cost Audit. For the year ended 2020-21, your Board of Directors have approved the appointment of M/s. Narasimha Murthy & Co., Hyderabad as Cost Auditors and recommend to Shareholders to ratify the remuneration of Rs.6,00,000/- as fixed by the Board on the recommendation of Audit Committee.

CORPORATE GOVERNANCE:

As per the amended provisions of the Listing Agreement, a Report on Corporate Governance along with Management Discussion and Analysis forming part of the Directors Report is annexed.

As per the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 top listed Companies based on the Market Capitalization Business Responsibility Report is annexed.

COMPLIANCE CERTIFICATE OF THE AUDITORS:

The Statutory Auditors have certified that the Company has complied with the conditions of Corporate Governance as stipulated in the Listing Agreement with the Stock Exchanges and the same is annexed to the Report of Directors.

AUDIT COMMITTEE:

Consequent up on the sad demise of Independent Director Sri A. Ranga Rao, who was the Chairman of the Audit Committee, the Audit Committee was re-constituted by the Board by inducting Sri P.A. Chowdary, Independent Director on the Committee. As such the Audit Committee presently comprises of 3 non Whole-time, Independent Directors, Dr. P. Kotaiah, Sri V.S. Raju and Sri P.A.Chowdary.

DIRECTORS AND KMP:

Sri A. Ranga Rao, ceased to be Director due to his sad demise on 08.03.2020. The Board places on record its commendable appreciation of the service and guidance received from him during his tenure as Director for more than two and half decades.

Directors Sri Mullapudi Thimmaraja and Sri P. S.R.V.K. Ranga Rao retire by rotation at the ensuring 73rd Annual General Meeting and being eligible, offer themselves for re-appointment.

Approval for the appointment of Sri P. Narendranath Chowdary as Managing Director for a period of 5 years with effect from 12.01.2021 is being placed at the ensuing Annual General Meeting.

Statements of declaration as per Section 149(6) of the Companies Act, 2013 have been given by the Independent Directors.

Sri P. Narendranath Chowdary, Chairman & Managing Director, Sri M. Palachandra, Company Secretary and Sri P.V.S. Viswanadha Kumar, General Manager (Finance) & Addl. Secretary (CFO) have been designated as Key Managerial Personnel.

Compliance under Companies Act, 2013

Pursuant to Sec.134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, your company has complied with the compliance requirement the details of which are enumerated hereunder.

DIRECTORS RESPONSIBILITY STATEMENT:

Pursuant to the requirements of Section 134(1)(c) of the Companies Act, 2013 and on the basis of explanation and compliance certificate given by the executives of the Company, and subject to disclosures in the Annual Accounts and also on the basis of discussions with the Statutory Auditors of the Company from time to time, we state as under :

a) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departure;

b) that the directors selected such accounting policies and applied them consistently and made judgments and estimates that they 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) 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, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d) that the Directors have got prepared the annual accounts on a going concern basis;

e) that the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

f) that the Directors got devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

BOARD MEETINGS:

The Board of Directors met 5 times during the financial year 2019-2020 on 29.05.2019, 10.08.2019, 07.11.2019, 08.02.2020 and 14.03.2020.

INDEPENDENT DIRECTORS MEETING:

A Meeting of Independent Directors was held on 14th March, 2020. The Independent Directors have evaluated the performance of the Non-independent Directors, the Board as a whole and Chairman of the Board. The Board was briefed by Lead Independent Director on the deliberations made at the Independent Directors Meeting.

FAMILARISATION PROGRAMME:

Your Company through a Policy, has in place a familiarisation programme to all the Directors with a view to update them on the Companys Policies and Procedures. Independent Directors make a periodical visit to plants to keep themselves abreast of the plant operations. Respective Plant Heads interact with the Independent Directors and explain to them about the various processes and operations.

FORMAL ANNUAL EVALUATION OF THE BOARD

The Board evaluated its own performance and that of its Committees and Directors in terms of : Measured and appropriate contribution by the Directors to the discussions on the Agenda Items, - Each Director exercising the responsibilities in a bonafide manner.

- Understanding of the Companys business, strategic plans and other key issues.

- Special Skills and expertise of each Director contributing to the Boards overall effectiveness. - Respecting the confidentiality of the Companys business information and Boards deliberations.

- Satisfactory attendance and active participation of each Director at the meetings of the Board and Committee. The Board members were of the opinion that the Board as a whole and the Directors have performed effectively as per the terms of the above parameters. The respective Committee performed as per its terms of reference.

VIGIL MECHANISM:

As a part of Vigil Mechanism, a Whistle Blower Policy has been established and approved by the Board.

This Policy envisages reporting of wrongdoing or un-ethical activities observed by Employees at any level directly to the Chairman of the Audit Committee or to the Chairman & Managing Director.

The matter when ever reported is investigated and if the wrong doer is found guilty, disciplinary action will be initiated depending upon the materiality of the un-ethical doings. During the year under report there has been no instances which required reporting.

NOMINATION AND REMUNERATION COMMITTEE :

As required by the Provisions of the Companies Act, 2013 and Listing Agreement, a Nomination and Remuneration Committee comprising of Independent Directors Sri V.S. Raju (Chairman), Sri P.A. Chowdary and Sri A. Ranga Rao was constituted by the Board. Member Sri A. Ranga Rao passed away on 08.03.2020 and in his place Dr. D. Manjulata was appointed as Member of the Committee with effect from 14.03.2020.

This Nomination and Remuneration Committee has formulated Nomination and Remuneration Policy which has been approved by the Board. This Nomination & Remuneration Policy has laid down criteria and terms and conditions with regard to identifying persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration based on the Companys size and financial position and trends and practices on remuneration prevailing in the industry. Appointment of Managing Director / Whole-time Director / KMP and Functional Heads are placed before Nomination and Remuneration Committee for its consideration and recommendation to the Board.

CORPORATE SOCIAL RESPONSIBILITY (CSR):

As required by the Provisions of the Companies Act, 2013, a Corporate Social Responsibility (CSR) Committee has been constituted by the Board of the Company with Sri P.Narendranath Chowdary, Managing Director Chairman of the Committee, Sri Mullapudi Thimmaraja, Joint Managing Director and Sri V.S. Raju, Independent Director are Members of the Committee.

This Committee has formulated a CSR Policy which has been approved by the Board.

This Policy envisages CSR Activities to be taken up, amount of expenditure to be incurred and monitoring of CSR Activities from time to time.

This Policy aims to achieve the CSR objectives by undertaking one or more of the activities to be in alignment with Schedule VII of the Companies Act, 2013 either on own or through any Trust / Society or any other recognized Agency.

As per the provisions of Section 135(5) of the Companies Act, 2013, company should spend in every Financial Year at least 2% of the average net profits of the company made during the three immediately preceding Financial Years. In pursuance of its Corporate Social Responsibility Policy, the company gives preference to the local area and areas around it, where it operates or any other permissible location for spending the amount earmarked for Corporate Social Responsibility activities.

Accordingly, for achieving its CSR objectives through implementation of meaningful and sustainable CSR programmes, your Company allocates at least 2% of its average Net Profits calculated as per Section 198 of the Companies Act, 2013, as its Annual CSR Budget in each Financial Year.

From the Annual CSR Budget allocation, a provision is made towards the expenditure to be incurred on identified areas, for undertaking CSR activities on a year to year basis.

Allocation of the Annual Budget for CSR activities in any given year would be as per the provisions of the Companies Act, 2013 and rules made thereunder as amended from time to time. Any unspent / unutilised CSR allocation of a particular year, will be carried forward to the next year, i.e., the CSR budget will be non-lapsable in nature.

As required by Rule 8 of the Companies (CSR Policy) Rules, 2013, a Report on CSR Activities and the amount of expenditure incurred are annexured to this Report.

Covid-19:

With a view to support the State Government in its efforts to tackle the crisis arising from Pandemic Covid-19 your Company contributed Rs2.00 Crores to Chief Ministers Relief Fund. Besides this, Company also supplied 800 MT of Sodium Hypochlorite and 7,500 Liters of Sanitizers to the required Villagers/ Persons.

There has been no material impact on the operations of the Company due to Covid-19. The Company is taking all steps to adhere to the guidelines of Ministry of Home Affairs with a view to ensure that appropriate precautionary measures are in place for the prevention of the effects of Covid-19 on the work force.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

The Company has duly complied with the Provisions of Section 186 of the Companies Act, 2013 with regard to Loans, Guarantees or Investments, the details of which, as applicable are provided in the Notes to Balance Sheet.

RISK MANAGEMENT POLICY:

The company has framed a Risk Management Policy which envisages the following Identification of areas of Risk Assessing the impact of Risks Steps taken to mitigate the Risk

The Major Segments of operations of the Company are Sugar and Chlor Alkali.The major aspects of concern for the Sugar Sector are:

1) Lack of Harvesting Labour

2) Power to operate the irrigation requirements

3) Proper Cane Varieties that give good Cane and Sugar yield that are suitable for mechanical harvesting. To get around the 1st aspect, the Company has embarked upon locating the right Cane Harvester suited to our Grower Farm sizes. The 2nd aspect is being taken care of by setting up a Solar Powered Pumping System at our R & D Farm so that our Growers could ultimately be provided the right guidance in this aspect. The 3rd aspect is being met by the Cane Breeding Programme undertaken by the Company. Chlor Alkali segment is power intensive where Power constitute a major input cost. Restricted power supply and increased power cost have become a cause of concern. To mitigate this impact, a Solar Power Plant has been commissioned at Kovvur. At Saggonda a 33 MW Coal Based Power Plant has been commissioned. This would improve the power availability to the Chemical Plants at Saggonda.

INDUSTRIAL RELATIONS:

The relations with employees continue to be cordial and harmonious during the year under report.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE POLICY:

The Company has in place a Prevention of Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (Act.) An Internal Compliance Committee (ICC) has been set up to redress the complaints received regarding sexual harassment. All employees are covered under this Policy. As on the date of this report, there were no complaints received by the ICC.

SAFETY, HEALTH AND ENVIRONMENT:Safety, Occupational Health and Environment Protection continue to be accorded high priority.

EXTRACT OF ANNUAL RETURN:As required by Section 92 (3) of the Companies Act, 2013 and relevant rules, an Extract of Annual Return in MGT9 is placed on the Companys website. You can find the same on www.theandhrasugars.com

RELATED PARTY TRANSACTIONS:

There is no transaction with Related Party which requires disclosure under Section 134(3)(h) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014.

SECRETARIAL AUDIT REPORT:

As required by Provisions of Companies Act, 2013, Secretarial Audit Report has been provided by Nekkanti S R V V Satyanarayana & Co., Hyderabad, Company Secretaries in practice is annexured to this Report.

PARTICULARS OF EMPLOYEES:

Information in accordance with the provisions of the Companies Act, 2013, read with the relevant Rules made thereunder, regarding employees is annexed as Annexure "A" forming part of this Report.

RATIO OF REMUNERATION OF EACH DIRECTOR:

Details of ratio of Remuneration of each Director to the median employees remuneration is enclosed.

Significant and Material Orders Passed by the Regulators or Courts or Tribunals impacting the Going Concern status of the Company

There are no significant and material orders passed by the Regulators or Courts or Tribunals or Competiton Commission of India which would impact the going concern status of the Company.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

Information pursuant to Section 134 of the Companies Act, 2013 read with relevant rules is given in Annexure "B" forming part of this Report.

FIXED DEPOSITS:

As required by the Companies Act, 2013 the details of Fixed Deposits as on 31.3.2020 is given hereunder.

2019-2020 2018-19
a) Accepted during the year. 13,58,56,000 34,68,55,000
b) Remained unpaid or unclaimed as at the end of the year. 34,65,000 46,85,000
c) Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved. NO NO
i) at the beginning of the year NOT APPLICABLE NOT APPLICABLE
ii) maximum during the year -do- -do-
iii) at the end of the year -do- -do-
d) Details of deposits which are not in compliance
with the requirements of Chapter V of the Act. NIL NIL

CONSOLIDATED ACCOUNTS:

In accordance with the Accounting standards, consolidated financial statements of the Company and its Subsidiaries form part of the Report and Accounts. These consolidated statements have been prepared on the basis of audited results received from the Subsidiary Companies as approved by their respective Boards. The Accounts of the Subsidiary Companies for the year 2019-20 have not been attached to the Companys Accounts. However, Shareholders desirous of obtaining the Annual Accounts of the Subsidiaries may obtain them upon request. The Annual Report and the Accounts of the Subsidiary Companies will be kept for inspection at the Companys Registered Office as well as at the offices of your Subsidiary Companies.

SUBSIDIARIES AND ASSOCIATE:

JOCIL LIMITED:

For the Financial Year ending 31.3.2020 your subsidiary Company, JOCIL Ltd., posted a profit of Rs.1764.82 lakhs (before taxation) against Rs. 126.07 lakhs (before taxation) last year. Board of Directors of this Company has recommended a Dividend of Rs3/- per Share to Shareholders for the Financial Year 2019-2020.

THE ANDHRA FARM CHEMICALS CORPORATION LIMITED:

The Company incurred a loss (before Tax) of Rs.1,02,909/- against the loss of Rs. 54/- last year.

HINDUSTAN ALLIED CHEMICALS LIMITED:

Directors are on the look out for the suitable projects to be taken. The company has sold the only fixed asset i.e., Land during the year. Thus the company do not have any fixed assets at the end of the year.

THE ANDHRA PETROCHEMICALS LIMITED:

The Company achieved sales of Rs.45593.27 lakhs against Rs. 66586.22 lakhs and earned profit (before Tax) of Rs. 2102.31 lakhs against Rs. 9499.10 lakhs last year.

INTERNAL CONTROL SYSTEM:

Your Company conducts a review of the financial and operating controls of the various Units. The Internal Control System of your Company is commensurate with its size and nature of business. The Board has also laid down a policy on Internal Financial Control as required by the provisions of the Companies Act, 2013. The same has been posted on Companys Website.

LISTING ON STOCK EXCHANGE:

Companys Equity Shares are listed on National Stock Exchange and Annual Listing Fee for the Financial Year 2019-20 has been paid.

ACKNOWLEDGEMENT:

Your Directors wish to place on record their appreciation for the co-operation extended by the State & Central Government authorities, Banks, Farmers and all and one associated with the Company in its Business process. They also express their appreciation to the employees at all levels for the successful working of the Company.

For and on behalf of the Board
TANUKU P. NARENDRANATH CHOWDARY
27.06.2020 Chairman Managing Director