Empee Sugars & Chemicals Ltd Directors Report.

The Directors have pleasure in presenting their Report together with audited accounts for the year ended March 31, 2017.

Financial Results : (Rs. in lacs)
2016-17 2015-16
Particulars (Year ended 31.3.2017) (Year ended 31.3.2016)
Operating Profit/(Loss) before Interest and Depreciation (1163.70) (2829.33)
Other income 44.14 250.51
Less: Interest 46.22 5687.45
Less: Depreciation 2474.81 2473.58
Profit / (Loss) before Tax (3684.73) (10739.85)
Prior period items - -
Provision for Taxation (earlier year) - -
Deferred Tax Liability/(Asset) - -
Profit/(Loss) after Tax (3684.73) (10739.85)
Brought Forward Profit /(Loss) (55220.78) (44480.93)
Carry Forward Profit/(Loss) (58905.49) (55220.78)

Present status of the Company - referring to NCLT:

Pursuant to last years annual report, the Company which was registered as a Sick Company under the provisions of Sick Industries (Special) Provisions Act with BIFR continued to be under the purview of BIFR upto the November 2016. Consequent to the abolition of BIFR w.e.f. 1.12.2016, the Company falls under the provisions of insolvency and Bankruptcy Act(IBC) 2016 and the Company has taken all efforts to register the Company as corporate debtor under the said provisions of IBC with National Company Law Tribunal, Hyderabad.

Assigning of Bank loans to Edeweiss Reconstruction Company (ARC):

As reported in the last years Directors Report, the total borrowing of the Company from Banks viz. (IOB, BOI, PNB, UBI, IB, AB, QBC, BOM, FB) led by BOI in the consortium amounted to Rs.706.66 Crs. Besides this, the Company had also borrowed from Sugar Development Fund to the tune of Rs.57.47 Crs. These loans were availed for the units located at Naidupet and Ambasamudram. As on the date of this report the banks comprising OBQ, UBI, IB, AB, PNB, FB and BOM have assigned their loans aggregating Rs 512.47 Crs to Edelweiss ARC . It is apprised that the balance amount of Rs 194.07 Crs of the total outstanding in respect of BOi and IOB is outstanding. BOI has taken legal action underline provisions of SARFAESI Act to attach the assets located at Ambasamudram and the Company has taken suitable action to address the same. Besides this, the Company is in discussion with BOI for a possible assignment of outstanding loans to ARC. Likewise the Company is in discussion with IOB for assignment of loans with ARC. This apart, the Company had to repay Sugar Development Fund of Rs. 57.47 Cr as on 31st March, 2017.

Review of Financial Performance:

The operating loss before interest and depreciation for the year under review was Rs.1163.70 lacs. As reported in the Annual Report last year, the Sugar mill at Ambasamudram could not be operated due to non-availability of sugar cane. As a consequence of non-operations of the sugar mill, the 50 MW power plant had to be shut due to dearth of Bagasse from Sugar plant and non availability of sufficient working capital for purchase of coal, being an alternate fuel.

However with the purchase of coal on credit basis, Ambasamudram generated 40489500 units of power resulting in a turnover of Rs 20.71 crs with a loss of Rs 5.46 crs.

During the year under review Sugar Unit at Naidupet crushed 1,28,398 MTs of cane and produced 10780.60 MT of Sugar and achieved a recovery rate of 8.40.% as against 8.86% in the previous year.

The IAP Unit has produced 65,41,560 litres of ENA, RS, IS/DS during the year under review.

Future Outlook:

Having been referred to BIFR and being referred to NCLT underIBC, and due to lack of finance, the Company may continue to perform at nominal levels in respect of Sugar (by operating Naidupet Sugar Unit), Power and IAP portfolios. Further due to non-availability of sugar cane in and around Ambasamudram, the chances to restart crushing operations continues to be remote.

Change in the nature of business, if any:

There is no change in the nature of the business during the year under review.

Material Changes and commitments affecting The Financial position of the Company between the end of the Financial Year and the date of the Report:

There are no material changes and commitments affecting the financial position of the company between the end of the financial year and the date of the report.

Dividend:

Due to a reference being made to NCLT under the provisions of IBC, and in view of accumulated losses in the successive years from FY 2013, the Company is unable to declare any dividend.

Share Capital:

The paid up share capital of the Company is 41972900 equity shares of Rs.10 &ach. The share application money of Rs.140.36 crs remains unallotted in favour of the holding company namely Empee Distilleries Ltd due to a)non-obtainment of statutory approvals and b) the Company is under BIFR/IBC.

Deposits:

Your Company has not invited or accepted any fixed deposits either from the public or from the shareholders of the Company, duringthe period under review.

Transfer to Reserves:

Due to losses of the Company for the year ended 31.3.2017, your Directors have not proposed any amount to be transferred to the General Reserves of the company.

Particulars of Loans, Guarantees or Investments under section 186 ;

The particulars of loans, guarantees and investments u/s 186 of the Companies Act, 2013 is annexed herewith as Annexure-A.

Management Discussion and Analysis Report:

The Management Discussion and Analysis Report is annexed herewith as Annexure-B.

Details of Directors or Key Managerial personnel who were appointed or have resigned during the year:

Chief Financial Officer:

The Companys effort to recruit CFO could not materialize for 1) the Professionals demand huge salaries and perks 2) the Company is unable to match to the requirements of the professionals in view of present financial condition. However constant efforts are being made by the Company to recruit CFO.

Number of Board Meetings held during the year 2016-17 :

The Company has duly complied with the provisions of the Companies Act, 2013 in holding Board meetings and the details of the meetings are furnished in the Corporate Governance Report.

Changes in the Directorate of the Company:

Due to sudden death of Mr. Shankar Menon on 22.01.2017, he ceased to be a Director of the Company. The Board recorded his valuable services and advice to the Company.

Mr. Suresh Raj Madhok was appointed as an Additional Independent Director vide a Board resolution dated 13.02.2017 and will hold office till the conclusion of this Annual General Meeting. A notice in writing to appoint him as an independent Director has been received pursuant to Sec. 160 of the Companies Act, 2013 alongwith requisite deposit sum. A resolution to appoint him as an independent Director is included in the AGM notice for the approval of the shareholders.

Ms.Nisha Purushothaman who retires by rotation offers herself for re-appointment. /

Declaration by Independent Directors :

The Independent Directors namely, Mr.R.Rangachari and Mr.Suresh Raj Madhok have given declarations that they meet the criteria required under section 149(6) of the Companies Act, 2013. Details of web link for familiarization program of Independent Directors are given at www.empeegroup.co.in

Details of Polices.

a. Nomination and Remuneration Policy: I

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and payment of their remuneration. The Companys Remuneration Policy is available on the Companys website www.empeegroup.co.in and the same is attached herewith as Annexure - C.

b. Risk Management Policy:

Business Risk Evaluation and Management is an ongoing process within the Organization.

Pursuant to Section 134(3}(n) of the Companies Act, 2013, the Board has framed a Risk Management Policy for the Company. The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified by the business and functions are systematically addressed through mitigating actions on a continuing basis.

c. Whistle Blower Policy:

Your Company has formulated a Vigil Mechanism Policy with a view to provide a mechanism for employees and directors of the Company to approach the Audit Committee to ensure adequate safeguards against victimisation. This policy would help to create an environment wherein individuals feel free and secure to raise an alarm, whenever any fraudulent activity takes place or is likely to take place. It will also ensure that complainant(s) are protected from retribution, whether within or outside the organization. The details of establishment of the Vigil Mechanism 1 Policy as per Annexure - D is displayed on the website of the Company www.empeegroup.co.in .

Corporate Governance:

As required by Regulation 27 of SEBIs LODR, 2015 with the Stock Exchanges, the Corporate Governance Report and the Auditors Certificate regarding compliance of Corporate Governance, forms part of the Annual Report.

Board Committees:

Name of the Committee Composition Details of Meetings held during the year 2016-17
Mr.R.Rangachari-Chairman
Audit Committee Mr.Suresh Raj Madhok 30.5.2016,11.8.2016, 12.11.2016 and 13.02.2017
Ms.Nisha Purushothaman
Nomination & Remuneration Committee Mr.Suresh Raj Madhok - Chairman 30.5,2016,11.08.2016,12.11.2016 , 13.2.2017
Mr.R.Rangachari
Ms.Nisha Purushothaman
Stakeholders Relationship Mr.R.Rangachari - Chairman 18.4.2016,13.5.2016,4.6.2016, 10.6.2016,20.6.2016,30.6.2016 8.8.2016,12.10.2016,19.10.2016 12.11.2016,2.12.2016,27.12.2016, 31.12.2016,18.1.2017,31.1.2017, 22.3.2017,31.3.2017
Committee Mr.Suresh Raj Madhok
Ms.Nisha Purushothaman

Details of recommendation of audit committee which were not accepted by the Board along with reasons:

The same is not applicable as the Audit Committees recommendations were accepted and implemented by the Board.

Names of Companies which have become or ceased to be its subsidiaries, joint ventures or associate Companies during the year - Not applicable

Subsidiaries

The consolidated accounts of the company includes the audited accounts of subsidiaries namely Empee Power Company (India) Ltd and M/s.Appollo Wind Energy Pvt Ltd.

A statement containing salient features of the subsidiaries in form AOC1 is annexed herewith marked as Annexure - E and forms part of this report. Details of web link for Policy for determining material subsidiaries are given at www.empeegroup.co.in .

Auditors

Statutory Auditors:

M/s. Venkatesh & Co, Chartered Accountants, who was appointed as Statutory Auditors for five years in terms of Sec. 139,141 of the Companies Act, 2013 shall hold office till the conclusion of the 28th AGM of the Company to be held in the year 2019, however subject to ratification of their appointment at every AGM.

The Company has received a letter from the Statutory Auditors of the Company, Venkatesh & Co, (ICAI Firm Registration Number: 0046365) Chartered Accountants, to the effect that the ratification of their appointment, if made, will be as per the requirements laid down under Section 139 and 141 of the Companies Act, 2013 read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 subject to approval of the Members..

Accordingly, a resolution is being placed before the Members for their approval as given in the AGM notice.

Audit Qualification :

a. Qualification: The accumulated losses of the company have exceeded the net worth of the company. Hence the company has made a reference to BIFR under the sick industrial companies Act and the Company has been registered under BIFR vide case no:69/2014. However, effective from December 2016 BIFR proceedings have been abated. The Company is to make an application under Insolvency and Bankruptcy Code, 2016 before NCLT, Hyderabad. However, the accounts have been prepared on a going concern basis.

Reply:

The Company has filed an application before NCLT, Hyderabad and hence restructuring the operations of the Company is dependent on admission of the Company under IBC and on the Resolution process to be finalised by NCLT.

b. Qualification: The company has received amount of Rs. 140.37 crores from 7th July 2008 to 30th September 2012 {refer note no 4) towards share application money from holding company Empee Distilleries Ltd. These shares could not be allotted to the applicant company in view of the non-receipt of approval from the SEBI and stock Exchange. By virtue of the Rules of the Companies Acceptance and Deposit Rules, these are public deposits to be repaid. However the Company is of Opinion that this issue will have to be decided by NCLT, Hyderabad as the proceedings under BIER have since been abated.

Reply: Since the Companys net worth has been eroded and admission of the Company before NCLT, Hyderabad as Corporate debtor is pending, the status of share application money can be decided only by NCLT under resolution process.

c. Qualification: Confirmation of Sundry debtors, Trade payables, Advance to suppliers, Cane advances, Harvester Advances and other deposit is subject to confirmation and reconciliation.

Reply: The same has since been reconciled.

d. Qualification: The Sugar Unit at Ambasamudram has not been functioning for the last 4 years, However no impairment of assets in accordance with AS 28 (impairment of Assets) at the sugar unit at Ambasamudram has been considered in accounts and the financial impact of the same is not presently ascertainable.

Reply: This will be addressed only upon NCLT, Hyderabad admitting the Companys application as Corporate Debtor under IBC.

e. Qualification:

Interest has not been provided on loans amounting in all to Rs.486 Crores availed from banks and including Loans assigned by the banks in favor of Edelweiss Asset Reconstruction Company Ltd.

Reply: This will be addressed only upon NCLT, Hyderabad admitting the Companys application as Corporate Debtor under IBC.

f. Qualification:

Bank Balances amounting to Rs.35.63 lakhs is subject to Confirmation.

Reply: Bankers confirmations have since been obtained.

Secretarial Auditors: ^

M/s. S Dhanapal & Associates, a firm of Practicing Company Secretaries, Chennai has-been appointed as Secretarial Auditors of the Company for the Financial Year 2017-18 in the Board meeting held on 29.05.2017.

The Secretarial Audit Report received from the Secretarial Auditors is annexed to this report marked as Annexure-F and forms part of this report.

Cost Auditors :

The Board has appointed Mr.N.Thagarajan as Cost Auditor of the Company in terms of Section 148 of the Companies Act, 2013 for the financial year 2017-18 in the Board meeting held on 29.05.2017. A resolution to ratify the payment of remuneration to Mr.N Thiagarajan, Cost Auditor for the financial year 2016-17 is set out in the notice convening the AGM.

Conservation of Energy, Technology Absorption and Foreign Exchange outgo :

Information regarding conservation of Energy, Technology absorption and Foreign Exchange earnings and outgo is given as Annexure - G and forms part of this Report.

Related party Transactions:

The details of Related Party Transactions during the year ended 31.03.2017, being arms length transactions have been reported in the Financial statements and forms part of this report as per Annexure -H.

Details of Pecuniary relationship or transaction of the non-executive independent directors Vis a Vis the Company:

There is no pecuniary relationship or transactions of the Non-Executive Independent Directors vis-a-vis the company for the year ended 31.3.2017.

Managerial Remuneration/ Particulars of Employees :

The details/ particulars of employees/manageriai;persons remuneration as required fo be given u/s 197 of the Companies Act, 2013 read along with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 as applicable is attached herewith as Annexure-I.

Boards Evaluation:

Pursuant to the provisions of the Companies Act, 2013, Listing Agreement and Regulations of the LODR, 2015, the Board has carried out the annual performance evaluation, performance of the Directors as well as the evaluation of the working of its Audit, Nomination and Remuneration and Compliance Committees.

While independent directors in their separate meeting have carried out to assess the performance of Chairman and Managing Director and other Directors of the Board more particularly about their business acumen and contribution to the Company, the performance evaluation of the Independent Directors was carried out by the entire Board.

The Independent Directors expressed their satisfaction with the evaluation process, functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution apd performance of duties, obligations, responsibilities and governance.

Adequacy of Internal Financial Controls:

The Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorised, recorded and reported correctly.

The Internal Audit/Control is exercised through an external auditor namely, M/s. Ramesh Subramaniam & Co., Chartered Accountants, Chennai. The audit observations and corrective action taken thereon are periodically reviewed by the audit committee to ensure effectiveness of the internal audit/control system.

Significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future:

There is no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future

Extract of Annual Return:

The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure-J.

Industrial Relations:

The Industrial relations continued to remain congenial during the year.

Directors Responsibility Statement:

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that:

a. In the preparation of the annual accounts, the applicable accounting standards have been followed.

b. The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 or loss of the Company for the year under review.

c. The directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

d. The directors have prepared the annual accounts on a going concern basis.

e. The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

f. The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

Acknowledgement:

Your Directors wish to express their gratitude for the continuous assistance and support extended by the Banks, Financial Institutions, Customers and Government authorities and also to the shareholders for their confidence in the management. Further, your Directors also place on record their deep sense of appreciation for the contributions made by employees at all levels to the growth and success of the company.

For and on behalf of the Board of Directors
M.P. Purushothaman
Place: Chennai Chairman & Managing Director
Date: 21.08.2017