Eastern Treads Ltd Directors Report.
Your Directors have pleasure in presenting the 26th Annual Report on the business and operations of the Company and the audited standalone and consolidated Ind AS financial statements for the financial year ended 31 st March, 2019 along with comparatives.
Financial Summary and Highlights
The following table shows the operational results of the Company for the year 2018-19 as compared to that of the previous year.
|(र in lakhs)|
|Year ended||Year ended|
|Revenue from Operations||9,745.88||9,539.36||9,745.88|
|Profit before Interest, Depreciation, Exceptional items and Tax||435.47||289.88||425.72|
|Profit (loss) before Finance Costs, Exceptional items and Tax||172.15||79.21||161.42|
|Profit (loss) before Exceptional items and Tax Expense||(-)189.18||(-)247 .71||(-)200 .18|
|Profit (Loss) before Tax||(-)189.18||(-)247 .71||(-)200 .18|
|Tax Expense (Current & Deferred)||(-)18.41||(-)18 .32||(-)18.66|
|Profit (Loss) for the year||(-)170.77||(-)229 .39||(-)181 .52|
|Other comprehensive income/ (loss) (net of tax expenses)||(-)19.84||(-)6.51||(-)19.84|
|Total comprehensive (loss)/income for the period||(-)190.61||(-)235 .90||(-)201 .36|
During the year the Company managed its revenue growthdespite the mid-year disruption created by the floods in Kerala which created logistics issues and adversely affected operations. The revenue has improved by 2.43%, when compared to the previous year. Gross product margins improved by ~300 basis points to 29.5%. PBIDT has improved by 50.23%. Key raw material prices were volatile in nature and this unpredictability impacted margins. We have taken steps to integrate production and enhance efficiencies and aggregated the production facility for conventional tread rubber and bonding gum to our own facility.
Your Company continue to judiciously expand volumes across all our sales channels which will help us deliver stronger volume by increasing utilization of our production facility in coming years. Exports are beginning to see a meaningful uptick with increased sales. As the capacity utilization increases, we expect higher contribution margin and profitability. The operations are exhaustively discussed in Management Discussion and Analysis forming part of the annual report.
The logistics sector has always been the backbone for growth in India. However, road transportation in India is largely unorganised and fragmented with a large number of players operating from different parts of India. Apart from a few leading players, most of the transporters are scattered and operate within their regional limits. Inability to optimise transportation routes, empty return loads, lack of information and transparency in pricing are some of the llengeskey cha faced by the stakeholders in this industry. Transport system was facing a number of challenges including inefficiency, corruption, theft of merchandise, delays in transit, and high cost of transportation. Despite these challenges this sector is crucial for economic and social development. The success of logistic business is depends on its capability to offer cost effective, flexible, and efficient services for transportation and applying information technology in B2B and B2C logistic space will address these challenges.
The logistics startups providing digital marketplace to the spectrum of logistics can capitalise this opportunity and change the industry through technology. Recently there has been increased investments in logistics startups providing a digital marketplace in the business to business (B2B) space. The Company has invested and hold 55% shareholding of Shipnext Solutions Private Limited, a logistics startup. Shipnext is engaged in the development of IT software and aims to bring the material transportation sector in India into the foray of information technology by bringing transporters and customers on a single technological platform. It is in the process of providing an intelligent platform for interaction between transporters and customers to fix the prices beforehand and proceed with the shipment. By this it can bridge the gap between transporters, customers and all others involved in this industry by bringing them together into a common platform for continuous interaction, which helps the transporters to operate without geographical limits and obtain complete information on the opportunities available that will enable them to plan and optimise their trips. It helps customers to obtain the best possible rates for their shipments with real time tracking of shipments, ensure fast and safe delivery and prompt release of payment to the transporters.
Shipnext has completed the development of first phase of application and are in the process of aggregation and incorporation transporters and customers data into the application. By investing in Shipnext the business of our Company will be benefited as the end consumers of the two business are the same and we will get an aggregated platform of our consumers to market our products as well.
In view of the loss incurred during the year, the Board of Directors of your company, has decided not to transfer any amount to the reserves for the year under review.
In view of loss incurred during the year under review and losses of earlier years, your Directors do not recommend any dividend during the year under review.
Material Changes and Commitments
There have been no material changes and commitments, which affect the financial position of the company which have occurred between the end of the financial year to which the financial statements relate and the date of this Report
Capital and Debt Structure
About 34.61% of the paid up equity share capital of the Company are held by a large number of public shareholders. The category-wise shareholdings are reported in the "Ex nnual Return" forming part of the annual report. Yourtract of A Company has neither issued any shares with differential voting rights nor has granted any stock options or sweat equity. None of the Directors or the Key Managerial Personnel of the Company holds instruments convertible into equity shares of the Company.
As per the terms of issue (as varied), the outstanding Zero Coupon Redeemable Preference Shares are liable to be redeemed at the rate of Rupees One Crore every year in a phased manner. The Company has the opti on to stretch the redemption until 9 th February 2029, being the date of expiry of 20 (twenty) years from the date of the original allotment of Preference Shares viz., 9th February 2009.
While the first tranche of redemption of Rupees One Crore was made in FY 2016-17; no redemption was made in FY 2017-18 and FY 2018-19. The Board of Directors at its meeting held on 14 th February, 2019 approved the proposal to convert 9,00,000 Outstanding Redeemable Preference Shares of र100/- each aggregating to र900 Lakhs into Equity Shares of र10/- each by issue of equity shares through Preferential Allotment route to the Preference Shareholders; as consented by them on that date.
The Preferential allotment proposed shall be for such number of shares and at such issue price per equity share as may be discovered in accordance with the provisions of Section 62(1)(c) of Companies Act, 2013 read with Rule 13 of Companies (Share Capital and Debentures) Rules, 2014, the applicable provisions of Rule 14 of Companies (Prospectus and Allotment of Securities) Rules, 2014, and in compliance of Chapter V of SEBI (Issue of Capital and Disclosure Requirements) Regul 2018ations, and SEBI (Substantial Acquisitions of Shares and Takeovers) Regulations, 2011; for a value not exceeding र900 Lakhs, subject to obtaining Equity shareholders approval and other regulatory approvals, as may be required. The Outstanding Redeemable Preference Shares shall upon approval of Equity shareholders be treated as Convertible Preference Shares with effect from the date of Equity Shareholders approval till the date of the completion of the conversion.
Considering that Kerala State Industrial Development Corporation (KSIDC) is also a Promoter Shareholder, the Board has expressed the need to obtain their consent prior to proceeding with the Equity Shareholders Approval. Company is in the process of getting approval from KSIDC to take further steps for the proposed conversion of Preference Shares.
Directors and Key Managerial Personnel
Mr. M.E. Mohamed, Managing Director, Mr. Mohammed Sherif Shah, Chief Financial Officer and CS. Baiju T., Company Secretary are the Whole-time Key Managerial Personnel of the Company. Mr. Rajesh S., resigned from the office Chief Executive Officer with effect from 11th November 2018.
Mr. K.V Rajagopalan Nair, Nominee Director vacated from the office of director of the company with effect from 13 th September 2018. Kerala State Industrial Development Corporation Limited has nominated Mr. Rajesh Jacob (DIN: 06443594) as their nominee in the Board in this vacancy and as recommended by Nomination and Remuneration Committee, the Board at its meeting held on 9 th November, 2018 appointed him as additional director in the category of Nominee Director. As recommended by Nomination and Remuneration Committee, the Board recommends the appointment of the Nominee Director till such date upon withdrawal by KSIDC. Mr. Navas M Meeran, (DIN: 00128692), Chairman, retires by rotation at the ensuing Annual General Meeting and being eligible, offer himself for re-appointment. The Board recommends his appointment. None of the Directors is disqualified under Section 164 of the Companies Act, 2013.
Mr. K.S. Neelacanta Iyer (DIN: 00328870), Mr. M.S. Ranganathan (DIN: 00254692) Mrs. Rani Joseph (DIN: 07423144) are the Independent Directors of the Company. As the initial period of office of Independent Director expired on 31 st March, 2019 Mr. K.S. anta Iyer and Mr. M.S. Ranganathan have vacated the office ofNeelac Independent Directors with effect from 01/04/2019. The Board at its meeting held on 09/05/2019 appointed them as additional directors in the category of Independent director and in the intermittent vacancy of Independent Directors. Mrs. Rani Joseph (DIN: 07423144), was appointed as an additional director in the category of Independent director. As recommended by Nomination and Remuneration Committee, the Board recommends the appointment of the above Independent Directors for a term of 5 years with effect from 9th May, 2019 to 8th May 2024.
Declaration by Independent Directors and statement on compliance of code of conduct
The Board has considered the declarations given by independent directors under Section 149 (7) stating that they meet the criteria of independence, complied with the Code for Independent Directors and that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duti es objective independent judgment and without any external influence and are independentwith an of the management.
Four Board meetings were held during the year. Details of Board meetings are included in Corporate Governance Report.
Committees of the Board
The Company is having five Board Committees, Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee and Share Trans fer Committee. Details of all the committees along with their main terms, composition and meetings held during the year under review are provided in the Report on Corporate Governance, a part of this Annual Report. The Board has accepted all recommendations of the Audit Committee during the year under review.
The Board has annually evaluated the performance of the Board, its committees and individual directors. The Board evaluated the performance of Non-executive and Independent Directors. All the Directors are eminent personalities having wide experience in the field of business, industry and administration. Their presence on the Board is advantageous and fruitful in taking business decisions. Further details of Board evaluation are provided in the Report on Corporate Governance.
Remuneration of Directors and Employees
The Board has considered the Companys policy on directors appo ent andintm remuneration including criteria for determining qualifications, positive attributes and independence of a director. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company and Directors are annexed as Annexure -1 and forms part of this Report. No Directors of the Company has received any remuneration from the subsidiary company.
Directors Responsibility Statement
Pursuant to the requirement of Section 134 (3) and (5) of the Companies Act, 2013, your Directors confirm that:-
(a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures.
(b) Selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of your Company at the end of the financial year and of the profit of the Company for that period.
(c) 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 your Company and for preventing and detecting fraud and other irregularities.
(d) Prepared the Annual Accounts on a going concern basis.
(e) Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
(f) Had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.
Internal Financial Controls
Internal financial control and their adequacy are included in the Management Discussion and Analysis, forming part of this report.
Frauds reported by the Auditor
The Statutory Auditors of the Company have not reported any fraud as specified under the second proviso to Section 143(12) of the Act.
Performance and financial position of the subsidiaries, associates and joint ventures
Pursuant to Section 129(3) of the Companies Act, 2013 ("Act"), the consolidated financial statements of the Company and its subsidiary, prepared in accordance with the relevant Accounting Standard under Section 133 of thespecified Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, form part of this Annual Report.
Pursuant to the provisions of the said section, a statement containing the salient features of the financial statements of the Companys subsidiary in Form AOC-1 is given in this Annual Report as Annexure - 2. Further, pursuant to the provisions of Section 136 of the Act, the standalone financial statements of the Company, consolidated financial statements of the Company, and the relevant consolidated financial statements and separate audited financial statements along with other relevant documents, in respect of subsidiaries, are available on the website of the Company. Except Shipnext Solutions Private Limited, the Company do not have subsidiaries, associates and joint ventures.
The Company has not accepted any fixed deposits during the year to which the provisions of Section 73 of the Companies Act, 2013 are applicable.
Particulars of Loans, Guarantees or Investments
Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement. Company has invested र2.59 Lakhs in Shipnext Solutions Private Limited and hold 55% shareholding (1441550 Equity shares of र1/- each) by share purchase from its shareholders at the agreed price of Re.0.18 per share. Company has further agreed to provide financial assistance to Shipnext Solutions Private Limited in the form of loan or to give guarantee or provide security in connection with a loan taken by it up to limit र100 Lakhs on requirement basis.
Contracts or Arrangements with Related Parties
There were no materially significant related party transactions which could have had a potential conflict with the interests of the Company. Transactions with related parties are in the ordinary course of business on arms length and are periodically placed before the Audit Committee and Board for its approvals and the particulars of contracts entered during the year, in Form AOC-2 is enclosed as Annexure - 3.
The Board of Directors, as recommended by the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules thereunder and the Listing Agreement. The policy on Related Party Transactions as amended in line with SEBI (LODR) (Amendment) Regulations, 2018 is available on the website of the Company. The details of the transactions with related parties during the financial year are provided in the financial statements.
Corporate Social Responsibility
Company has generally taken corporate social responsibility (CSR) initiatives. However, the present financial position of the Company does not mandate the implementation of CSR activities pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
Your Company continues its efforts to improve energy conservation and utilization most efficiently to nurture and preserve the environment and to exploit all its avenues to adopt latest technology in its operations. The information required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, regarding Conservation of Energy, Technology Absorption, Foreign Exchange Inflow and Outflow are given in Annexure - 4 to this report.
Company has developed and implemented a risk management policy, and formed a Risk Management Committee to address and evaluate various risks impacting the Company and a report on risk management is provided in this Annual Report in Management Discussion and Analysis.
A Vigil Mechanism for directors and employees to report genuine concerns has been established as required under the provisions of Section 177 of the Companies Act, 2013. The Vigil Mechanism Policy has been uploaded on the website of the Company.
Material Orders of Judicial Bodies / Regulators
No significant and material orders were passed by Courts, Tribunals and other Regulatory Authorities affecting the going concern status of the Companys operations.
Statutory Auditors and Auditors Report
M/s. Walker Chandiok & Co LLP, Chartered Accountants, Kochi, were appointed as the Auditors of the Company at the Annual General Meeting held on 6th July 2017 to hold office for a period of 5 consecutive years. Necessary certificate and consent has been obtained from the Auditors as per Section 139(1) and 141 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules 2014 for their continuance as the Auditors of the Company. They Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI. Since ratification by Shareholders every year for the appointment of the Statutory Auditors is not required the Notice of ensuing Annual General Meeting does not include the proposal for seeking Shareholders approval for ratification of Statutory Auditors appointment.
The Auditors Report on the financial statement of the Company forms part of this Annual Report and it does not contain any qualif ications, reservations or adverse remarks or disclaimer. The Auditors observations are suitably explained in notes to the Accounts and are self-explanatory.
Secretarial Audit Report
The secretarial audit report on the compliance of the applicable Acts, Laws, Rules, Regulations, Guidelines, Listing Agreement, Standards etc. as stipulated by Section 204 of the Companies Act 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of this report as Annexure - 5. The findings of the audit have been satisfactory.
Compliance with Secretarial Standards
The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board meetings and Annual General Meetings.
Corporate Insolvency Resolution Process
No application filed for corporate insolvency resolution process, by financial or operational creditor or by the company under The Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal during the year.
The Board of Directors approved the proposal to convert 9,00,000 Outstanding Redeemable Preference Shares into Equity Shares by issue of equity shares through Preferential Allotment route to the Preference Shareholders. Company is in the process of getting approval from Kerala State Industrial Development Corporation to take further steps for the proposed conversion of Preference Shares.
In compliance with Section 134 of the Act, the Annual Return is uploaded on Companies website and can be accessed at www.easterntreads.com. Extract of Annual Return in Form MGT 9, pursuant to Section 92 of Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, is annexed herewith as Annexure 6.
Corporate Governance Report
Your Company has been complying with the principles of good Corporate Governance over the years and is committed to the highest standards of compliance. Pursuant to the Listing Agreement read with Regulation 15(2) of the SEBI (LODR) Regulations 2015, the compliance with the corporate governance provisions as specified in regulations 17 to 27 and clauses (b) to (i) of Regulation 46(2) and para C , D and E of Schedule V shall not apply the Company. However, as a good Corporate Governance practice the Company has generally complied with the Corporate Governance requirements and a report on Corporate Governance is annexed as Annexure - 7 and forms part of this Report.
Management Discussion and Analysis Report
As required under SEBI (LODR) Regulations 2015 the Management Discussion and Analysis Report is annexed as Annexure 8 and forms part of this Report.
Employee Wellbeing and Safety
Your Company has implemented policies and procedures with the objective of ensuring employee safety, security and wellbeing at the workplace. As stated in our Code of Conduct, we are committed to provide gender friendly workplace,a equal opportunities for men and women, prevent/redress sexual harassment and institute good employment practices. The Company has adopted policy on prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the work place (Prevention, Prohibition and Redressal) Act, 2013.
Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The following is a summary of sexual harassment complaints received and disposed of during the year:
|a) Number of complaints pending at the beginning of the year||: Nil|
|b) Number of complaints received during the year||: Nil|
|c) Number of complaints disposed off during the year||: Nil|
|d) Number of cases pending at the end of the year||: Nil|
Cost Records and Cost Audit
Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 the Cost Audit Report is not mandatorily applicable to our Company for the financial year, hence, no such audit has been carried out during the year. The Cost accounts and records as required to be maintained under Section 148 (1) of Act are duly made and maintained by the Company.
Listing and Dematerialisation
The equity shares of the Company are listed on the BSE Limited. Shareholders are requested to convert their holdings to dematerialized form to derive its benefits by availing the demat facility provided by NSDL and CDSL.
Your Directors wish to place on record their gratitude to Bankers, Share Transfer Agents, Auditors, Customers, Suppliers and Regulatory Authorities for their timely and valuable assistance and support. The Board values and appreciates the professionalism, commitment and dedication displayed by employees at all levels. Your Directors are thankful to the shareholders for their continued support and confidence.
|For and on behalf of the Board|
|Kochi||Navas M Meeran|