Karur KCP Packkagings Ltd Directors Report

TO THE SHAREHOLDERS

Your Directors have pleasure in presenting the Twenty Fifth Annual Report of your Company and the Audited Statements of Accounts for the year ended 31st March, 2015.

I. FINANCIAL RESULTS:-

DESCRIPTION	2014-15	2014-15	2013-14	2013-14
	(Rs. in Lakhs)	(Rs. in Lakhs)	(Rs. in Lakhs)	(Rs. in Lakhs)
	(Standalone)	(Consolidated)	(Standalone)	(Consolidated)
SALES - Domestic	47,279	47,279	45,028	45,028
- Exports	14,194	14,194	10,908	10,908
- Trading	-	17,823	-	-
Total	61,473	79,296	55,936	55,936
Operating Profit	6,116	7,538	6,398	6,381
Less:- Financial charges	3,979	4,893	4,066	4,734
Profit Before Depreciation, Preliminary / FCCB & GDR Expenses W/o	2,137	2,645	2,332	1,647
Depreciation, Preliminary / FCCB & GDR Expenses W/o	1,722	1,722	2,093	2,092
Net Profit Before Tax	415	923	239	(445)
Less : Provision for Taxation	56	56	(180)	(180)
Less : Provision for Deferred Tax	(28)	(28)	307	307
Profit After Tax	387	895	112	(572)
Add : Balance brought forward	6,004	5,304	5,892	5,952
Profit available for appropriation	5,680	5,488	6,004	5,381
Appropriation:
Proposed Dividend	-	-	-	-
Corporate Dividend Tax	-	-	-	-
Transfer to Reserve	-	-	-	-
Balance Profit carried to Balance sheet	5,680	5,488	6,004	5,381
Earnings per share: (Face Value Rs. 10/-)
Basic (Rs.)	3.44	7.96	1.00	(5.08)
Diluted (Rs.)	3.02	6.98	0.88	(4.48)

II. PERFORMANCE:-

Standalone Performance :

• The Turnover during the year under review was Rs. 614.73 Crores as against Rs. 559.36 Crores for the previous year, a growth of 9.90% over the previous year. Increase in revenue was due to rise in volumes and prices as well. During the year under review, exports were higher by 30.12 % at Rs. 141.94 Crores.

• Profit before tax was Rs. 4.15 Crores as against Rs. 2.39 Crores for the previous year, a increase of 73.64%

• FCC Bonds which are maturing on 26th April, 2016 carrying 5%YTM. The Company is confident of generating sufficient cash flows at maturity if the bond holders opt for redemption on due date.

• The Company is having 3.30 MW Windmills capacity and 10 MW Co-gen Power Plant, and its generation is being utilised by the Company apart from its outside energy sales.

A more detailed discussion is provided in the Management Discussion and Analysis Report.

III. DIVIDEND:-

Considering the significant expansion plans of your company which require substantial investments and the dip in Profits for the year, the Board of Directors think it prudent to conserve the resources. The Directors regret their inability to recommend any dividend.

IV. MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed discussion on the industry structure as well as on the financial and operational performance is contained in the Rs.Management Discussion and Analysis ReportRs. that forms an integral part of this Report (Annexure-1).

V. CORPORATE GOVERNANCE:-

Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, Corporate Governance report together with the certificate from the companyRs.s auditors confirming the compliance of conditions on Corporate Governance is given in (Annexure -2)

Section 134(3) of the Companies Act, 2013 requires the BoardRs.s report to include several additional contents and disclosures compared to the earlier Law. Most of them have accordingly been made in the Corporate Governance report at the appropriate places that forms an integral part of this report.

A Certificate from the Auditors of the Company regarding Compliance with the conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement is attached to this report.

VI. EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 is given in (Annexure-3).

VII. INFORMATION PURSUANT TO SECTION 134(3)(m):-

a) CONSERVATION OF ENERGY, TECHONOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO, RESEARCH AND DEVELOPMENT:-

Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in (Annexure - 5(i)).

The Company has incurred Rs. 4.87 Lakhs (Previous Year Rs. 5.08 Lakhs) towards the recurring expenditure on Research and Development. The R & D expenditure as a % of sales is 0.008% (Previous Year 0.009%)

VIII. PARTICULARS OF REMUNERATION PURSUANT TO SECTION 197(12):-

The information required pursuant to Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexure here to as (Annexure- 4)

IX) DIRECTORSRs. RESPONSIBILITY STATEMENT PURSUANT TO SECTION 134(3)(c):-

Pursuant to Section 134(3)(c) of the Companies Act, 2013 with respect to the Directors Responsibility Statement, your Board confirms 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 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 the year.

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 have laid down internal financial controls to be followed by the company and that said internal financial controls are adequate and were operating effectively.

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

X. PUBLIC DEPOSITS:-

The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and The Companies (Acceptance of Deposit) Rules, 2014 during the year under review. There are no outstanding deposits as on March 31, 2015.

XI. LISTING WITH STOCK EXCHANGES:-

The Shares of the Company are listed with the following Stock Exchanges:

Bombay Stock Exchange Limited

Phiroze Jeejeebhoy Towers, 25^th Floor, Dalal Street, Mumbai - 400 001.

The Company has paid the annual Listing fees for the period 2015 - 2016 to Bombay Stock Exchange Limited,

Madras Stock Exchange Limited, and Cochin Stock Exchange Limited has been allowed to exit as stock exchange vide SEBIRs.s order dated 03.04.2013.

The Foreign Currency Convertible Bonds and Global Depository Receipts of the Company are listed with Luxembourg Stock Exchange, R.C.B, 6222, B.P 165 L-2011, Luxembourg.

XII. WHOLLY OWNED SUBSIDIARY COMPANY :-

The Company has a Wholly Owned Subsidiary Company in the name M/s Shriudha Ventures Pte Ltd, which has been incorporated on 9th April, 2012 in Republic of Singapore for the purpose of carrying the business of importers, exporters, whole salers and agents of Urea, Packaging materials and other general commodities.

XIII. COMMITTEES OF THE BOARD

In compliance with the provisions of Sections 135, 177, 178 of the Companies Act, 2013, the Board constituted Corporate Social Responsibility Committee, Audit Committee, Nomination and Remuneration Committee and Stakeholders Relationship Committee (Committees). The details of composition of the Committees, their meeting and attendance of the members are given in the Corporate Governance Report forming part of this annual report.

XIV. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The brief outline of the CSR Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are given in (Annexure-6) to this report in the format prescribed in Companies (Corporate Social Responsibility Policy) Rules, 2014. The said policy is available on the CompanyRs.s website.

XV. NOMINATION AND REMUNERATION POLICY

The Board has on the recommendation of Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management Personnel and their remuneration. The Nomination and Remuneration Policy adopted by the Board is available on the CompanyRs.s website www.Karurkcp.in

XVI. EVALUATION OF THE BOARD

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the listing agreement entered into with the Stock Exchanges, the Board had carried out an annual performance evaluation of its own performance, the directors individually as well as committees of the Board.

A structured questionnaire was prepared after taking into consideration inputs received from the Directors, covering aspects of the BoardRs.s functioning such as adequacy of the composition of the Board and its committees, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of Individual Directors including the Chairman of the Board. The Directors performance was evaluated on parameters such as level of engagement and contribution in safeguarding the interest of the Company etc. The performance of every Director was evaluated by the Nomination and Remuneration Committee.

The Independent Directors at their separate meeting reviewed the Performance of the Board as a whole, Non independent Directors and the Chairman of the Board.

XVII. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuant to requirement of Clause 49 of the Listing Agreement, Company has a familiarization programme for the Independent Directors with regard to their role, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company etc. The Board Members are provided with all the necessary documents / reports and internal policies to enable them to familiarize with the CompanyRs.s procedures and practices .

XVIII. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS

The Company has not given any loans, guarantees or security in connection with loans or made any investments falling within the ambit of Section 185/186 of the Companies Act, 2013.

XIX. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTY

The Corporate Governance Report contains relevant details on the nature of Related Party Transactions (RPTs) and the policy formulated by the Board on Material RPTs. Particulars of contracts or arrangements with Related Parties referred in Section 188(1) of the Companies Act, 2013 is furnished in accordance with Rule 8(2) of the Companies (Accounts) Rules, 2014.

All related party transactions that were entered into during the financial year were on armRs.s length basis and were in the ordinary course of business.

During the financial year 2014-15, there were no materially significant transactions with the related parties which might be deemed to have had a potential material conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for transaction with the related parties which are routine and repetitive in nature.

The summary statement of transactions entered into with the related parties pursuant to the omnibus approval so granted are reviewed and approved by the Audit Committee and the Board of Directors on a quarterly basis.

The particulars of Contracts or arrangements with the related parties under section 188 in Form AOC-2 is enclosed herewith (Annexure-7).

XX. INTERNAL CONTROLS

The details of internal control system and the adequacy of internal financial controls with respect to financial statements are given in the corporate governance report which forms part of the annual report.

The company has laid down adequate systems and well drawn procedures for ensuring internal financial controls. It has appointed an external audit firm as internal auditors for periodically checking and monitoring the internal control measures.

Internal auditors are present at the Audit Committee meetings where their reports are discussed alongside of management comments and the final observation of the internal auditor.

The Board of Directors have adopted various policies like Related Party Transactions Policy and Whistle Blower Policy and put in place budgetary control and monitoring measures for ensuring the orderly and efficient conduct of the business of the company, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information

XXI. RISK MANAGEMENT

During the year, the risk assessment parameters were reviewed and modified. The audit committee reviewed the element of risks and the steps taken to mitigate the risks. Except for the risk stated in para (i) (e) of the management and analysis report in the opinion of the Board, there are no major elements of risk which has the potential of threatening the existence of the Company.

XXII. WHISTLE BLOWER POLICY / VIGIL MECHANISM

The Company has established a whistle blower policy/vigil mechanism to provide an avenue to raise concerns. The mechanism provides for adequate safeguards against victimization of employees who avail of it and also for appointment of an Ombudsperson who will deal with the complaints received. The policy also lays down the process to be followed for dealing with the complaints and in exceptional cases, also provides for direct access to the Chairperson of the Audit Committee. The Whistle Blower Policy established by the Board is available on the CompanyRs.s website.

XXIII. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy, technology absorption, foreign exchange earnings and outgo as per Section 134(3)(m) of the Act read with Rule 8 of The Companies (Accounts) Rules 2014, are annexed here to as (Annexure-5 (ii)) and forms part of this annual report.

XXIV. INDUSTRIAL RELATIONS:-

During the year under review, industrial relations remained cordial and stable. The directors wish to place on record their sincere appreciation for the co-operation received from employees at all levels.

XXV. SBLC FACILITY:-

Your Company has availed Stand By Letter of Credit Facility with The Karur Vysya Bank Ltd., for USD 28.36 million favouring Bank of India, Dubai Branch on behalf of its Wholly Owned Subsidiary Company M/s. Shriudha Ventures Pte Ltd., Singapore above said facility is exempt with in the purview of Section 185 and 186 of the Companies Act, 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014.

XXVI. DIRECTORS:-

Smt. P. Annammal (DIN 00060871) retires by rotation at the ensuing Annual General Meeting and in accordance with the requirements of the Act and Articles of Association of the Company, she being eligible offer herself for reappointment, is hereby reappointed as Director of the Company.

Shri V.S. Murali Kriishanan (DIN 00527793) Non-executive - Independent Director has submitted his resignation on 1st August,2015 and the Board has accepted his resignation with regrets.

Shri A. Ganesh Kumar (DIN 07278155), who was appointed by the Board as an Additional Director w.e.f 7th September, 2015, of the Company in the casual vacancy caused by the resignation of Shri V.S. Murali Kriishnan.

All the Independent Directors have given the declaration that they met the criteria on independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. The performance evaluation of Independent directors has been done by the entire Board of Directors meeting. The Board on the basis of such performance evaluation determined to continue the term of appointment of all the independent directors who have been appointed by the company at its Twenty Fifth Annual General Meeting for a fixed tenure of Five years till Twenty Nineth Annual General Meeting.

XXVII. AUDITORS:-

i) Statutory Auditor

M/s. MSS SRIRAM & Co., Chartered Accountants, Karur (FRN:007909S) has been appointed as Statutory Auditors of the Company till the conclusion of Twenty Seventh Annual General Meeting respectively subject to ratification by members at every Annual General Meeting. Accordingly requisite resolution for ratifying their appointment is proposed in the manner stated in the Notice for the Twenty Fifth Annual General Meeting.

ii) Cost Auditor

Shri B. Venkateswar, Cost Accountant (Registration No.M-27622), has been appointed by the Board of Directors on recommendation of Audit Committee in terms of Section 148 and other applicable provisions of the Companies Act, 2013, read with Companies ( Cost records and Audit) Rules 2014, to conduct the Cost Audit in respect of Paper and Paper Products for the financial year 2014-15, whose appointment has been approved by the Central Government. The Cost Audit Report for the financial year ended 31st March, 2014 had been e-filed with the Ministry of Corporate Affairs, New Delhi, vide, SRN S38045092 dated 01-06-2015. The remuneration of the Cost Auditor is subject to ratification by the member at the ensuing Annual General Meeting.

iii) Secretarial Auditor

Shri V.Suresh, Practicing Company Secretary (Registration Number :2969), pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed him as Secretarial Auditor to undertake the Secretarial Audit of the Company.

The Report of the Secretarial Audit in Form MR3 for the financial year ended March 31, 2015 is annexed as (Annexure - 8) to the Report.

The following qualifications were observed by the Secretarial Auditor in his Report to which the Board has shared the following explanations:

Qualification 1:

The Company has appointed a CFO (Chief Financial Officer) before 31st March 2015 but the ROC compliances are made belatedly.

Response.1:

The Company has subsequently filed necessary forms with the Registrar of Companies, Pondicherry in respect of said appointment.

Qualification 2:

The Company has not regularized an Independent DirectorRs.s appointment as required under Section 149 of the Act. Response 2:

The Company shall regularize the appointment of Independent Director in the upcoming Annual General Meeting. Qualification 3:

The following Policies are framed by the Company, but not placed before the Audit Committee/Nomination and Remuneration Committee/Board of Directors:

- Nomination and Remuneration Policy under Section 178 of the Act.

- Whistle Blower Policy under Section 177 of the Act.

- CSR Policy under Section 135 of the Act.

- Familiarization Programme for Independent Directors under Clause 49 of the Listing Agreement

- Risk Management Policy under Section 134(3)(n) of the Act.

- Related Party Transaction Policy as required under Clause 49 of the Listing Agreement.

Response 3:

The Company has since placed all the said policies before Audit Committee/Nomination and Remuneration Committee/Board of Directors, as required.

Qualification 4:

The Company has not constituted a CSR Committee as required under Section 135 of the Act, 2013.

Response 4:

CSR activities already commenced formally as in the past. The Company has constituted the CSR Committee during this Financial year , 2014-2015 and regularised subsequently as per Section 135 of the Act, 2013.

Qualification 5:

The Company has not filed Form 5 INV and Form 1 INV as required under Section 124 of the Companies Act, 2013. Response 5:

The Company is taking steps to file the said form 5 INV and 1 INV.

Qualification 6:

The Company has to upload the Letter of Appointment for Independent Directors and the above mentioned Policies stated in Point No.3 in its website.

Response 6:

The Directors are taking steps to upload the letter of appointment of Independent Director and other documents as mentioned in point no.3 in the CompanyRs.s website.

Qualification 7:

The Company has not filed the Form MGT-15 after the Annual General Meeting held on 29.09.2014, as required under Section 121 of the Companies Act, 2013.

Response 7:

The company has since filed the Form MGT 15 with the Registrar of Companies, Pondicherry.

Qualification 8:

Proper Compliances of The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 are not made, with specific reference to Regulation 30 of the stated Regulations;

Response 8:

Directors are taking steps to ensure proper compliance of the same in the current year.

Qualification 9:

Proper compliances of The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 are not made;

Response 9:

Directors are taking steps to ensure proper compliance of the same in the current year.

iv) Internal Auditor

Shri E. Muthuraman, Chartered Accountant (Membership Number:207028) had been appointed by the Company as an Internal Auditor to conduct the Internal Audit.

XXVIII. BANKERS:-

The Board of Directors thank the Consortium of Bankers consisting of State Bank of India (Lead Bank), Union Bank of India, The Karur Vysya Bank Limited, IDBI Bank Limited and Canara Bank, who have supported the Company for the credit requirements.

XXIX. ACKNOWLEDGEMENT:-

The Board of Directors takes this opportunity to place on record their appreciation for the co-operation, commitment and dedication of all the employees of the Company, and the support extended by the customers, vendors, business associates, banks, government authorities and all concerned, without which it would not have been possible to achieve all round growth of the Company.

The Directors are thankful to the shareholders for their continued patronage.

	On Behalf of the Board
Place : Karur	K. C. PALLANI SHAMY
Date : 7th September, 2015	Chairman

Annexure : 5

FORM - A

I DISCLOSURE OF PARTICULARS WITH RESPECT TO CONSERVATION OF ENERGY

DESCRIPTION	Current year 31st March, 2015	Previous Year 31st March, 2014
A. Power and Fuel Consumption
a) Electricity
Purchased (Units)	21,15,266	14,53,073
Total Amount (Rs.)	1,53,67,595	1,01,25,946
Rate / Unit (Rs.)	7.27	6.97
b) Own generation (Generator)
Captive Consumption (Units)	3,23,537	4,50,327
Total Amount (Rs.)	54,04,053	75,43,982
Rate / Unit (Rs.)	16.70	16.75
Diesel Consumed (Litres)	99,027	1,37,406
c) Own generation (Co Gen)
Captive Consumption (Units)	4,85,71,224	5,22,02,821
Total Amount (Rs.)	31,68,82,952	33,07,62,826
Rate / Unit (Rs.)	6.52	6.34
d) Wind Mills Generation
Captive Consumption (Units)	64,30,660	77,05,867
Total Amount (Rs.)	3,75,25,710	4,46,47,604
Rate / Unit (Rs.)	5.84	5.79
B. Consumption per M.T. of Production
Electricity - Units	Units/M.T.	Units / M.T.
- Paper & Paper bags	1,161.82	1,186.62
- PP & FIBC bags	1,256.42	1,211.03

II. Technology Absorption, Adaptation and Innovation

Research and Development activities are carried out on an ongoing basis for improving the efficiency and also for improving quality of products.

III. Foreign Exchange Earnings & Outgo

	2014 - 15	2013 - 14
	(Rs. In Lakhs)	(Rs. In Lakhs)
a) Earnings	14,194	10,908
b) Outgo	11,576	10,082

 

	On behalf of the Board
Place : Karur	K. C. PALLANI SHAMY
Date : 7th September, 2015	Chairman