Jhaveri Flexo India Ltd Management Discussions

1. REVIEW OF OPERATIONS

Company is engaged in the business of manufacturing of polymer packaging products such as Laminated Packaging Material, PVC Cling Film, CPP Metalized Film, Surface Protection Tapes, Lamination Film, LLDPE Stretch Film etc. The Company provides end to end packaging solutions to food and FMCG Sector and is also serving the hospitality industry. At present products are sold in local as well as overseas market.

a) Performance review

During financial year 2015-16, company achieved sales turnover of Rs.263.14 crores in comparison to Rs.283.04 crores during F.Y. 2014-15. However, it is important to note that in spite of reduction in turnover, Company has been able to achieve better profitability in comparison to F.Y. 2014-15. Profit before finance cost, depreciation and bad debts amounted to Rs. 34.45 crores as against Rs 10.42 crores in the previous year.

During the year, the company continued with its efforts to undertake various measures to control cost and improve margins. Company achieved cost reduction in various others heads such as employee cost, finance cost, stores and spares, repairs and maintenance etc.

During the year, company either reduced or not taken orders of the products which are having no margin or very low margin. This was well considered decision by the company in order to protect margins rather than go for higher sales. Company mainly focused on to new product and customer development.

Company decided tq write off debts which are unrecoverable and outstanding for the period of more than 12 months. However, company would continue its efforts to recover these debts.

b) Dividend

Your Directors do not recommend any dividend for the financial year ended on 31 st March, 2016.

c) Share Capital

The paid up Equity Share Capital as at March 31, 2016 stood at ‘1913.30 lacs. Further, during the year under review, the Company has not issued shares with differential voting rights nor has granted any stock options or sweat equity. As on March 31, 2016, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

d) Transfer of amount of investor education and protection fund

The Company has transferred unclaimed dividend of Rs.1,62,491/- for the financial year 2007-08 to Investors Education Protection Fund (IEPF)on November26,2015.

e) Sale of factory land and building

During the year company sold factory land and building located at Village Dapada, Silvassa. All the machinery and equipments are transferred to its another unit at Village Luhari, Silvassa. This would help company to consolidate its flexible laminate packaging business at one unit and to exercise better control and achieve cost reduction.

2. EMPHASIS MATTERS-SEARCH AND SEIZURE

During financial year 2014-15 a search and seizure operation under Section 132 of the Income Tax Act, 1961 was carried out by the Income Tax Authorities on the Companys premises. During the year company filed revised returns for the respective previous years with the Income Tax Department for amount contended. The resulting tax is paid by the company and disclosed in financial statements.

3. FINANCIAL IRREGULARITY AND MISCONDUCT

During financial year 2014-15 company reported about the conduct of the Companys business, and the financial irregularities and misconduct by Jt. Managing Director, Mr. Krishna Kumar Sadani. The same was also reported by statutory auditors in their report for the financial year 2014-15. He was removed from managerial position by shareholders in their meeting held on September 1, 2014. The company has taken appropriate steps to take action against him and has filed legal cases against him.

4. VIGIL MECHANISM POLICY

Pursuant to Section 177 of the Companies Act, 2013 the rules made there under, the Company has established a Vigil Mechanism for directors and employees to report genuine concerns about any instance of any irregularity, unethical practice and/or misconduct.

5. INTERNAL CONTROL SYSTEM

Adequate internal control systems commensurate with the nature of the Companys business and size and complexity of its operations are in place. Internal control systems ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with applicable laws and regulations and that all assets and resources are acquired economically, used efficiently and adequately protected.

Board is in the process of further strengthening the internal control system.

6. INTERNAL FINANCIAL CONTROLS

Company has laid down Internal Financial Control Policy which would help in ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the Accounting records and timely preparation of reliable financial information.

Board is in the process of making further improvement in the policy.

7. RISK MANAGEMENT:

The Board is continuously analyzing and assessing the Risk areas to avoid events, situations or circumstances which may lead to negative consequences on the Companys businesses and define a structured approach to manage uncertainty and to make use of these in their decision making pertaining to all business divisions and corporate functions. Key business risks and their mitigation are considered in the business plans and in periodic management reviews.

Some of the risks and threats that the company is exposed to are-

Technological obsolescence

The company strongly believes that technological obsolescence is a practical reality. Technological obsolescence is evaluated on a continual basis. The use of technology is mainly concentrated in the area of manufacturing. The innovation and advancement in technology is concentrated on improving the quality of the product, increasing the output by reducing the time-lag involved and reducing the wastages.

Fluctuations in Foreign Exchange

While our functional currency is the Indian rupee, we transact a significant portion of our business in USD, Euro, and other currencies and accordingly face foreign currency exposure from our sales in other countries and from our purchases from overseas suppliers in U.S. dollars and other currencies and are exposed to substantial risk on account of adverse currency movements in global foreign exchange markets. In case of major fluctuation either upwards or downwards, the company has hedged foreign currency exposure based on expert advice.

Client Retention

We aim to build long-term relationships with our clients based on quality and value. Company is making constant effort to add new customers and thereby reducing dependence on few large customers.

Industrial Safety, Employee Health and Safety Risk

The Packaging industry is labour intensive and are exposed to accidents, health and injury risk due to machinery breakdown, human negligence etc. Company has developed and implemented critical safety standards across the various departments of the factory, establishing training need identification at each level of employee.

8. APPOINTMENT AND QUALIFICATION OF DIRECTORS

As per the requirement of Section 178 of the Companies Act, 2013, Board has constitutes the Nomination and Remuneration Committee. The Nomination and Remuneration committee determines the qualification, positive attributes and independence of Director and also recommend the Board on remuneration of the Director and Key Managerial Personnel.

9. SEXUAL HARRASMENT POLICY

Considering gender equality, the company has zero tolerance for sexual harassment at workplace. The Company has an SEXUAL HARASSMENT (PREVENTION AND REDRESSAL) POLICY in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

10. HEALTH AND SAFETY MEASURES

The standards of health of workers and safety measures to be taken as provided by the Factories Act, 1948 and the rules framed there under have been maintained by your Company.

11. CAUTIONARY STATEMENT

Statements in this Boards Report describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. Actual results may differ materially from those expressed in the statement. Important factors that could influence the Companys operations include change in government regulations, tax laws, economic & political developments within and outside the country and such other factors.