Aspinwall & Company Ltd Management Discussions.

This report includes M.D.& A as appropriate so that duplication and overlapping between Boards Report and the entire material is provided in a composite and comprehensive document.

4. BUSINESS PORTFOLIOS AND PERFORMANCE:

Our Company is a multi-line business organization and is engaged in Logistics services, Coffee processing and trading, Rubber plantations, manufacture and trading of Natural Fibre products.

Coffee Division:

Coffee is seasonal, especially the Divisions Monsooned coffee business. Monsooned Coffees are Specialty Coffees from India that are considered Specialty owing to its unique processing method, physical traits and Cup quality.

Monsooned coffees are produced only in the Malabar coast, especially in Mangalore. It is listed under the GI products. Mangalore, which experiences the South West Monsoon rains in abundance during June – Septem-ber became an established region for processing of Monsooned Coffee owing to the humid climatic conditions that was ideal for recreating Monsooned Coffees. There are two types of Monsooned Coffees – Arabica & Robusta. The primary processing is done during the Monsoon period i.e. June- September months. Our processing unit is ideally located to produce the finest quality of Monsooned coffees.

Harvesting of coffee will take place between the months of Dec-Mar. We have to procure raw coffee for monsooning during Dec-July to take care of our 11 months shipments i.e., from October to next year Septem-ber. Monsooned coffees cannot be bought off the shelf, as and when it is required for the shipments. Our sales take place in the first half around 30-35% and the balance 65-70% will take place in the second half.

During the year 2018-19, the Division has recorded the highest volume and turnover, inspite of the substantial reduction of prices in Coffee. The price of Coffee reached the lowest in 13 years and therefore the Division could not achieve the Gross Profit levels as compared to the previous two years. The year under review, has therefore, been an year with normal Gross Profit level.

Natural Fibre Division:

During the year under review, export of coir products from India has decreased as compared to the previous year. However there was substantial growth in the export of Geotextiles and power loom mats. The wide applicability and eco friendly property of coir geotextiles are promoting growth in this segment. There was little to no gains for the standard PVC Tufted doormats of the division.

In contrast, the turnover for the division for the year under review was the highest till date both in export as well as domestic sales. The division was successful in achieving marked increase in profits compared to the previous year as a result of increased sales coupled with tight cost controls and the favorable exchange rates.

Selling margins were slightly reduced during the period under review due to severe pressure from business partners, however this was in effect compensated with increased business.

It is also to be noted that the period under review saw marked increase in operating expenses due to increase in raw materials costs. However, the collective efforts taken to control raw materials usage and minimize wastage at all levels, helped the division close the year with improved results.

Product and process quality control measures were strictly monitored in line with control of raw materials usage, to avoid wastage and quality issues. There were no quality issues/claims reported during the period under review.

The profit margins would have seen further improvement if printing of door mats at Pollachi, Tamil Nadu, factory was not disrupted by local agitation during the peak shipment period. Corrective action was taken by the division to move all painting to Alleppey based vendors. Although there was considerable increase in processing and transportation costs, the division managed to meet our delivery commitments without even a single failure. A strategy is being developed to address printing issues at our factory in consultation with the local Administration and the Pollution Control Board.

NFD has also articulated a vision to grow beyond its traditional doormat business by widening its scope to Natural products sourced from South India in the coming years. We have already started exploring opportunity products like Virgin Coconut oil, Lemongrass oil, Coconut Barbecue briquettes, Cotton and Jute textiles, Coir Mattresses, Coir Pith products, etc., for overseas markets under the Aspinwall brand name. Domestic sales are also showing good gains and poised for further growth. Setting up of our own office and a marketing person in USA (as we did for Europe) is also on the priority list.

Plantation Division:

Natural Rubber plantation industry in India was badly affected by torrential rains and floods hitting the state of Kerala in the month of August 2018.The unexpected floods have pushed the sector into more trouble especially when it was passing through a critical phase due to low prices, climate vagaries, high wages, etc. The torrential rains have taken a heavy toll on the rubber output in India, the worlds sixth-biggest producer and second-largest consumer.

Indias natural rubber production fell by 7.5% to 6.9 lac tonnes in 2018-19, even as consumption went up by 9% to 12.1 lac tonnes, compared to 2017-18. As per Rubber Boards provisional data, production was the second lowest in recent times after the FY 2015-16.

According to the Association of Natural Rubber Producing Countries (ANRPC), world production of natural rubber (NR) also has experienced a fall of 10.1%.

Our plantation could harvest a crop of 788477 Kgs only against a budget of 950000 Kgs mainly on account of the heavy rains and landslide calamity. The Division has taken maximum efforts to bring in more cost efficiency in its operations.

Despite of the adverse conditions, the division could register a slender operational profit by cutting down costs, generating additional income, enhancing productivity and improving the sales premium through better quality/services. The division has successfully started a new venture utilizing the improved brand image and sales premium. The newly launched Bought Latex operations is making good strides by generating additional revenue, enlarging the customer base apart from helping in combating the negative effects of low market price. The division is also exploring the possibility of inter-cropping like Coffee etc. The Wage Settlement is under negotiation and adequate provision has been considered in the financials to take care of estimated rise in wages.

The price situation may slightly improve in the FY 2019-20 on account of the increasing demand - supply gap and expected rise in crude oil prices due to obvious reasons which could in turn boost synthetic rubber prices.

Logistics Division:

During 2018-19 the division has handled new commodities viz. Met Coke, River Sand, Bauxite & Raw Cashews, through its Mangalore Branch.

The Division is specialised in food grains import through its major bulk-cargo handling locations. The volumes of the said cargo are largely controlled by the Government policies and therefore, can vary from time to time. The performance of the Division is not strictly comparable with the previous year, which was an exceptionally good year, considering the large volumes of wheat and fertilizers which were handled during the said year. This has also led to the substantial higher income from warehouses at our major Bulk cargo handling locations for the previous year.

5. INTERNAL CONTROL SYSTEM AND ITS ADEQUACY:

The Company has in place adequate systems of internal control commensurate with its size and the nature of its operations. These have been designated to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance of corporate policies.

The Company has appointed M/s.Suri & Co., Chartered Accountants, to oversee and carry out internal audit of its activities. The audit is based on an internal audit plan, which is reviewed every year in consultation with the Statutory Auditors and the Audit Committee.

The Audit Committee of the Board of Directors of the Company reviews the Audit Reports submitted by the internal auditors. Suggestions for improvement are considered and the Audit Committee follows up on corrective action and reviews the positive remedial actions taken.

Cautionary Statement

Certain statements made in this Report relating to the Companys objectives, projections, outlook, expectations, estimates and others may constitute ‘forward looking statements within the meaning of applicable laws and regulations. Actual results may differ from such expectations whether expressed or implied. Several factors could make significant difference to the Companys operations. These include climatic and economic conditions affecting demand and supply, government regulations and taxation, natural calamities over which the Company does not have any direct control.

6. PERFORMANCE OF THE COMPANY:

The revenue from operations for the FY 2018-19 was at Rs.27,242 lacs which was marginally lower in comparison to the previous years figure of Rs.28,094 lacs. EBITDA (before exceptional items) was Rs.967 lacs during the FY 2018-19 as compared to the EBITDA of Rs.2658 lacs (before exceptional items) in the FY 2017-18. During the year, the total comprehensive income was Rs.738 lacs as against Rs.1317 lacs for the last year.

Transfer to Reserves

The Company proposes to transfer Rs.450 lacs to the General Reserve out of the amount available for appropriation and an amount of Rs.1643 lacs is proposed to be retained in the profit and loss account (excluding Other Comprehensive Income).

Dividend

The Board of Directors are pleased to recommend a first and final dividend of Rs.3/- per equity share for the year 2018-19 as compared to Rs.3.5/- per equity share for the year before.

7. DEVELOPMENTS IN HUMAN RESOURCES AND INDUSTRIAL RELATIONS:

Human potentials has been perceived as powerful resource right from founding stage of Aspinwall wherein Company makes continuous and concerted efforts to groom its HR to meet with the present and future challenges in the field of Technology and Management functions and also focuses on providing an environment conducive for grooming employees to enable them to contribute on a continuous basis for the growth of the organization and also to meet with the rapidly changing industrial scenario.

The company is deeply concerned about its Human Resource (HR) which is a prime asset for improvement and enhancement of productivity and profitability. Very harmonious, cordial and healthy industrial relations prevailed throughout the year.

The total strength of human asset of the Company as on March 31, 2019 was 776.

8. WHOLLY-OWNED SUBSIDIARIES:

The Company has four wholly-owned subsidiaries as on March 31, 2019. There are no associate companies or joint venture companies within the meaning of Section 2 (6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of business of the subsidiaries. Pursuant to the provisions of the Section 129 (3) of the Act, a statement containing the salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is attached to the financial statements of the Company. Further, pursuant to the provisions of the Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with the relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

Following are the brief description of the wholly-owned subsidiaries of the Company:

8.1 Aspinwall Technologies Ltd

The main activities of the Company are the development and trading of business automation systems and programmes in software for Aspinwall and Company Limited and its subsidiaries.

8.2 Malabar Coast Marine Services Pvt. Ltd.

The main activities of this Company are stevedoring and freight forwarding. Stevedoring is carried out mainly in the port of Mormugao (Goa). Freight forwarding is carried out in locations like Goa, Bangalore and Mangalore.

8.3 Aspinwall Geotech Ltd.

Aspinwall Geotech Limited was formed for carrying on the business of Geotextiles. However, a major fire accident in the year 2002 had damaged a critical machinery and since then no commercial activity has been possible.

8.4 SFS Pharma Logistics Private Limited

SFS Pharma is engaged in the business of specialized logistics service and provides service for Door to door transportation of temperature/time sensitive shipments in India and abroad.

SFS Pharma handles clinical trial/Pharmaceuticals/Biological sample and other temperature sensitive ship- ments by providing a validated VIP packaging as well as data loggers.

The company has made made improvements in operations during the last two years FY 2017-18 and 2018- 19 which is very encouraging and likewise the Company is confident to make decent margins in the years to come.

The company has a plan to further invest in infrastructure, manpower, packaging etc in this FY2019-20 to strengthen its capability.

9. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the Section 134 (5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures;

ii. they 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 the affairs of the Company at the end of the financial year and of the profit of the Company for that period;

iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. the directors have prepared the annual accounts on a going concern basis;

v. the directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively;

vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

10. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Changes in Directors

During the year under review, Mr.Venkitraman Anand (DIN: 07446834), Executive Director, resigned from the Board of Directors of the Company, effective from the close of business hours of August 31, 2018.

Mr.Adithya Varma (DIN: 02213375), retires by rotation and being eligible, has offered himself for re-appoint- ment.

Mr.Mahadev Lakshminarayanan (DIN:05003710), was appointed as an Additional Director under the Independent category, by the Board of Directors effective from May 01, 2018. The shareholders at the AGM held on August 01, 2018, had regularised the said appointment by passing a Special Resolution, for a period of five years, effective from May 01, 2018.

Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel ("KMP") of the Company as on the end of the FY 2018-19 are – Mr.Rama Varma, Managing Director, Mr.T.R.Radhakrishnan, Chief Financial Officer, Mr.Rajesh.S, Chief Executive Officer and Mr.Neeraj R Varma, Company Secretary.

The following were the changes to the list of KMPs of the Company during the FY 2018-19:

a) Mr.Venkitraman Anand, Executive Director, resigned from the Board of Directors of the Company, effec- tive from the close of business hours of August 31, 2018.

b) Mr.Rajesh.S, was appointed as CEO of the Company effective from November 12, 2018.

The Independent Directors of the Company have submitted a Declaration under Section 149 (7) of the Act, declaring that they meet the criteria of independence under the said Act.

Number of meetings of the Board

Four meetings of the Board of Directors were held during the year. For details of the meetings of the Board, including the attendance details, please refer to the Corporate Governance Report, which forms part of this report.

Board Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual directors pursuant to the provisions of the Act and the Corporate Governance requirements as prescribed by SEBI (LODR) Regulations, 2015 and based on the Guidance Note on Board Evaluation issued by SEBI. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination and Remuneration Committee reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc.

In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of the independent directors, performance of non-independent directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into the views of the Managing Director and Non-Executive Director. The same was discussed in the Board Meeting that followed the meeting of the independent directors, at which the performance of the Board, its committees and individual directors was also discussed. Performance evaluation of independent directors was done by the entire Board, excluding the independent director being evaluated.

Policy on directors appointment and remuneration and other details

The brief description of the Companys policy on Directors appointment and remuneration and other matters, has been disclosed in the Corporate Governance Report, which forms part of this Report.

Audit committee

The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this Report.

11. AUDITORS:

Statutory Auditors

Pursuant to the provisions of the Companies Act, 2013, the Company, at its AGM held on August 02, 2017, had appointed M/s.BSR & Associates LLP, Chartered Accountants (Firm Registration No.116231W/W-100024), as the Statutory Auditors of the Company for a period of five years till the conclusion of the 102nd AGM of the Company to be held in the year 2022.

Cost Auditors

M/s BBS & Associates, Cost Accountants (Registration No.00273), were the Cost Auditors of the Company for the FY 2018-19. The Board of Directors at their meeting held on May 27, 2019, has approved the reappointment of the said firm as the Cost Auditors of the Company for the FY 2019-20 and has also recommended the Audit Fee payable to them. As per the provisions of the Companies Act, 2013, read with Companies (Audit and Auditors) Rules, 2014, audit fee payable to the Cost Auditors is to be ratified by the members of the Company.

Secretarial Auditors

M/s BVR & Associates, Company Secretaries LLP (AAE-7079), were appointed as the Secretarial Auditors of the Company for the FY 2018-19.

Auditors Report and Secretarial Audit Report

The Auditors report and the Secretarial Audit Report does not contain any qualifications, reservations or adverse remarks. The report of the Secretarial Auditor is given as an Annexure, which forms part of this Report.

12. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

The Company has not advanced any loans/guarantees, under section 186 of the Act, during the year. The details of the loans granted by the Company to its wholly-owned subsidiaries of the Company is given as an Annexure to this Report.

13. TRANSACTIONS WITH RELATED PARTIES

None of the transactions with related parties falls under the scope of Section 188 (1) of the Act. Information on transactions with related parties pursuant to Section 134 (3) (h) of the Act read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, are given as an Annexure in Form AOC-2 and the same forms part of this Report.

14. CORPORATE SOCIAL RESPONSIBILITY

The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out as an Annexure of this Report in the format prescribed in the Companies (Corporate Social Responsibility) Rules, 2014. For other details of the CSR Committee, please refer to the Corporate Governance Report, which forms part of this report. The Policy is available on the website of the Company (URL: http://aspinwall.in/corporate-governance.php).

15. EXTRACT OF ANNUAL RETURN

Pursuant to the provisions of Section 92(3) of the Act, the extract of the Annual Return is given as an Annexure in the prescribed Form MGT-9, which forms part of this Report.

16. PARTICULARS OF EMPLOYEES

There are no employees drawing remuneration more than the prescribed levels as mentioned under Section 197 of the Act read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, and the subsequent amendments thereto. The other information required under the said provisions are given below: a) The ratio of the remuneration of each director to the median remuneration of the employees of the Company for the financial year:

Name of Directors Ratio to median remuneration
Non Executive/Independent Directors*
Mr. C.R.R. Varma* 2.25
Mr. Adithya Varma* 0.97
Mr. K.R.N. Menon* 2.35
Mr. M. Lakshminarayanan # 1.80
Vice Admiral Sushil Krishnan Nair (IN Retd.)* 2.35
Ms.Nina Nayar* 2.66
Whole-Time Directors
Mr. Rama Varma – Managing Director 51.50
Mr. Venkitraman Anand - Executive Director@ 27.97

*The remuneration for Non-Executive/Independent Directors are the Sitting Fees paid to them for attending the Board/Committee meetings held during the year. The same, varies, based on their attendance at the meetings.

#Inducted to the Board of Directors w.e.f. May 01, 2018.

@Resigned from the Board of Directors w.e.f. August 31, 2018.

b) The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer and Company Secretary in the financial year:

Directors, Chief Financial Officer and Company Secretary % increase in remuneration in the financial year
Mr. C.R.R. Varma* 96.97%
Mr. Adithya Varma** N.A.
Mr. K.R.N. Menon* 54.55%
Vice Admiral Sushil Krishnan Nair (I. N. Retd.)* 142.86%
Ms. Nina Nayar* 75%
Mr. M. Lakshminarayanan # N. A.
Mr. Rama Varma (Managing Director) 27.35%
Mr. Venkitraman Anand (Executive Director) $ (44.54%)
Mr. T.R.Radhakrishnan (Chief Financial Officer)& (4.92%)
Mr. Neeraj R Varma (Company Secretary)@ 23.80%

* The remuneration for Non-Executive/Independent Directors are the Sitting Fees paid to them for attending the Board/Committee meetings held during the year. The same, varies, based on their attendance. Also, the Sitting Fee for the Non-Executive/Independent Directors was increased, during the FY 2018-19, with the approval of shareholders, at the Annual General Meeting.

** Inducted as Additional Director w.e.f. August 17, 2017.

# Inducted as Additional Director during the FY 2018-19.

$ Resigned from the Board of Directors w.e.f. August 31, 2018.

& Decrease is due to the reduction in Variable Pay component.

@ The increase is due to the Variable Pay component as per the Policy of the Company and due to the annual increments.

c) The percentage increase in the median remuneration of employees in the financial year: -2.03%

d) The number of permanent employees on the rolls of the Company as on March 31, 2019: 776.

e) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

The average annual increase made in the salaries of employees other than managerial personnel was 13.28%.

Increase in the remuneration of managerial personnel for the year was 7.50% (the said variation is due to the Variable Pay component based on the Policy and the change in the eligibility criteria of the said Policy).

f) The Company affirms that the remuneration is as per the remuneration policy of the Company.

g) The top 10 employees of the Company in terms of the remuneration drawn during the year 2018-19 are enclosed as Annexure to this Report.

17. DEPOSITS FROM PUBLIC

As reported last year, the Company has stopped accepting/renewing Fixed Deposits and has repaid all the Fixed Deposits as on March 31, 2015. The unclaimed interest amounts relating to the earlier Fixed Deposits are lying in the Interest Warrant Bank Account of the Company and is being transferred to the Investors Education and Protection Fund ("IEPF") as and when it is due to be transferred, pursuant to the provisions of the Act.

18. FOREIGN EXCHANGE EARNINGS AND OUTGO

(a) Export activities, initiatives taken to increase export, etc.

Coffee and Coir are the major export oriented business of the Company.

Our representative based at Netherlands over the past several years has been able to promote the activities of the Company across Europe. His efforts along with the visits of senior executives from India have helped the Company to retain and improve the customer base across Europe. During the year, the Companies Executives along with our representative in Europe have participated/attended various exhibitions/trade fairs.

(b) Total foreign exchange used and earned

During the year under review, the Companys foreign exchange earnings amounted to Rs.13,249 lacs compared to Rs.12,623 lacs in the previous year. The total outgo of foreign exchange amounted to Rs.72 lacs as against Rs.42 lacs in the previous year.

19. BUY-BACK

The Company has not contemplated any buy-back of shares.

There has been no change in the share capital of the Company during the FY 2018-19.

20. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION

The particulars as prescribed under Section 134 (3) (m) of the Act, read with the Companies (Accounts) Rules, 2014, are not applicable to your Company.

21. SIGNIFICANT AND MATERIAL ORDERS

There are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and the Companys operations in future.

22. ENTERPRISE RISK MANAGEMENT

The Board of Directors had also formulated a Risk Management Policy for identification, assessment, monitoring, mitigation and reporting procedures of enterprise risks. The Risks have been categorised under Strategic, Operational, Financial, Compliance and Project headings.

23. MENTORSHIP AND SUCCESSION PLANNING POLICY

The Board of Directors has formulated a comprehensive policy for establishing a structured approach to ensure an internal supply of competent employees who can take up key positions when necessary. The roles, eligibility, time frame, integration with other Human Resource functions and Succession Planning process for the senior management has been spelt out in the Policy.

24. VIGIL MECHANISM/WHISTLE-BLOWER POLICY

Vigil Mechanism is created pursuant to the provisions of Section 177 of the Act, which is an instrument, through which, genuine complaints regarding the Company can be reported by both the Directors as well as Employees of the Company to an authority. The Audit Committee has been identified for this purpose. The mode of operation of Vigil Mechanism has been defined by the Audit Committee. Adequate safeguards against victimisation of persons who use Vigil Mechanism to make a direct access to the Chairman of the Audit Committee is provided.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank our customers, shareholders, suppliers, bankers, business partners/ associates, financial institutions and Central and State Governments for their consistent support and encouragements to the Company. We would also place on record our sincere appreciation to all employees of the Company for their hard work and commitment.

The Directors appreciate and value the contributions made by every employee of the Aspinwall family.

By The Order of the Board
KRN MENON RAMA VARMA
Kochi, Chairman Managing Director
May 27, 2019. DIN 00877505 DIN 00031890