Kohinoor Foods Ltd Directors Report.

The following report should be read in conjunction with the audited financial statements and notes for the year ended March 31, 2018 and the audited financial statements and notes for the year ended March 31, 2017. This report contains forward looking statements, which may be identified by their use of words like plans, expects, will, anticipates, believes, intends, projects, estimates or other words of similar meaning. All statements that address expectations or projections about the future, including but not limited to statements about the Companys strategy for growth, market position, expenditures, and financial results, are forward looking statements. Forward looking statements are based on certain assumptions and expectations of future events. The Company cannot guarantee that these assumptions and expectations are accurate or will be realized. The Companys actual results, performance or achievements could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent developments, information or events.

Company – In General

Synonymous with the fine taste of India in its absolute authentic form, the sole objective of Kohinoor Foods Limited, since its inception, has been to make the world experience the true Indian flavor. The Company offers an extensive range that caters to consumers need in all parts of the world – a wide variety of Basmati Rice, Ready to Eat Curries & Meals, Readymade Gravies, Cooking Pastes, Chutneys, Spices and Seasonings to Frozen Breads, Snacks & Paneer (Indian Cottage Cheese), healthy grains, edible oils. Today, the most powerful brand of the Company "Kohinoor" is a household name in the countries like UK, USA, UAE, Canada, Australia, Middle East, Singapore, Japan, Mauritius & other European countries. As of now, the brand Kohinoor is known worldwide. During the current year the company is promoting its "MONSOON" brand in India as well as worldwide and started selling product under this new brand as well.

Your Directors have pleasure in presenting the 29th Annual Report and the Audited Annual Accounts of the Company for the Financial Year ended 31st March, 2018.

Financial Overview

The financial highlights for the year ending 31st March, 2018 are as under:

(Rs. In Million)

Particulars FY18 FY17
Total Turnover 8623.96 10533.35
Profit/(Loss) Before Interest, Depreciation and Tax (PBIDT) 274.87 (800.90)
Profit/(Loss) Before Tax (695.80) (1908.58)
Less: Tax Expense 14.48 (722.35)
Profit/(Loss) After Tax (710.28) (1186.24)
Total Comprehensive income for the year (709.73) (1086.27)

The Board’s Report shall be prepared based on the stand alone financial statements of the Company.

Operations:

For the financial year under review 2017-18, the company Export stand at INR 5,322 million as against INR 7,797 million in previous year while as the Domestic Sales stood at INR 3,262 million as against INR 2,708 million in the last financial year.

The contribution made by Rice to the Company’s business is INR 7531 million as against INR 9063 million in the last financial year, while the Food Business stood at INR 728 million as against INR 587 million in the previous year.

The year saw a decrease of 31.11% in basmati rice exports from India in value terms in comparison to last year sales. Export market was down due to political instability in countries such as Iraq & Syria. During the year under review export relisation price had an upward trend as it is evident from the fact that average sale price was Rs 70987 per MT as compared to Rs 56090 during the last year. These phenomena in the pricing led to the sub-dude sentiment. Focused sales and marketing efforts in all the major basmati rice importing countries of the world viz. UK, Australia, Saudi Arabia, Iran, UAE, Yemen and US were exercised to control the steep debacle in sale of Basmati Rice in international market.

• Launch of new brand of Basmati Rice ‘Monsoon’ with parallel distribution of ‘Monsoon’ Brand of basmati Rice that was well accepted in market and distribution was finalized for 6 countries. As on date we are present in 22 countries & hope to increase our presence in rest of the countries by next financial year. We are putting our best efforts to establish our newly launched brand and are also further consolidating our flagship Brand "KOHINOOR’ in the international market.

• Acquired business from new countries such as –Australia, Greece, Sweden, USA, New Zealand, Russia, Bangladesh and Togo.

• We have entered domestic market settlement agreement between KSF & KFL. The company is free to sell basmati rice under various brands in the current financial year. In-fact we have already launched "MONSOON "brand of Basmati Rice in domestic as well as in the international market.

EXPORT MARKETS

Export- Basmati Rice

This year, in the Export of Basmati Rice, the company did the business of around INR 4,453 million as against INR 6,454 million in the previous financial year.

Export- Food

This year the export of processed & packaged food products has shown an increase in revenues and stood at INR 713 million as against INR 583 million in the previous year. The new food factory has started its operation effectively which improved our production & subsequent revenues.

Subsidiaries / Joint Venture:

U.K Operations

Indo European Foods Limited (IEFL) was incorporated in year 2000 in United Kingdom (UK), as a wholly owned subsidiary of Kohinoor Foods Limited (KFL), India, to cater the markets of UK and Europe.

IEFL Sales show marginal decreases from last year i.e GBP 24.15 Millions in comparison of last year GBP 24.49 Millions. The Profit of this company decreases due to increase in Administration cost and some adjustment in pre period items. This operation continues to focus on profitable growth both in Rice and processed food range of products.

IEFL, has created a wide network of distribution for our Rice & Processed food items in UK market. In Rice market ‘Kohinoor’ has achieved number "2" position in terms of market share. (Source: The Grocer December-2017.)

IEFL, in recent times has focused more on Kohinoor processed food products and achieved a growth of more than 200%. Kohinoor cooking sauces and ready meals are currently listed and placed with prestigious multiple retail chains like -Tesco, Asda, Sainsburys, Aldi & Bookers etc.

IEFL is poised to move to the next level in business growth as after having established the ‘Kohinoor’ brand in UK for the last 15 years and attaining the pivotal position of No. 2 in SKU’s of 5 kg. segment. We are expecting quantum jump in coming years in its volumes and market share;

IEFL marketing team is also focused in doubling the ‘Kohinoor’ processed foods, having re-launched the sauces & RTE lines in fresh packaging & refurbished recipes.

USA Operations:

Kohinoor Foods USA Inc. was incorporated in year 2000 in the state of New Jersey, USA, as a wholly owned subsidiary of Kohinoor Foods Limited (KFL), India, to cater to the markets of US

& Canada. The brand ‘Kohinoor’ is well known in USA for its quality rice and food items.

However during the last year the business model of this company is changed to work on commission basis for undertaking and improving sales in USA. The Company however was making losses on account of huge operational cost, the loss in the current year is mainly on account of huge interest payment for its debts. We expect the company will improve its sales in USA and also improve its commission earnings to make it a profitable venture.

With the launch of ‘KOHINOOR’ Extra Fine (Silver) Rice in the US leading catering wholesalers viz. ‘Restaurant Depot’, we are expecting large volume sales; in the recent months the marketing team has prepared an aggressive promotional plan for the forthcoming festival seasons in October and November. A new Distributor has also been appointed in Canada for rice and food products launch in ‘Walmart’; with all these activities, the next year sales are looking to increase to the levels of highest ever.

UAE Operations

The Rich Rice Raisers Factory LLC, (RRR) is a Joint Venture Company having 25% equity of KFL. The RRR is not doing any business activity since the inception of Al Dahra Kohinoor Joint Venture. As per the terms of the JV agreement with Al-Dahra; Kohinoor Foods Ltd., have already initiated steps to exit from Rich Rice Raisers Factory LLC, Dubai."

During this financial year, the export sale of Rice from Kohinoor Foods Limited to Al Dahra Kohinoor LLC, stood at 22,486 MTs as against 30,094 in last year.

FOOD BUSINESS:

During the year 2017-18, the export of processed & packaged food products has shown an increase in revenues and stood at INR 713 million as against INR 583 million in the previous year. The new food factory has started its operation effectively which improved our production & subsequent revenues.

UK, Australia, USA, Canada are major markets for our range processed & packaged food products. Kohinoor has introduced the new packaging of ready to eat curries and simmer sauces to the World market where UK has got the maximum appreciation from the entire mainstream and got listed with top retails of the country such as TESCO, ASDA, COOP & many more...

It’s not just stop here strong Research and Development team has gained appreciation from leading retail giants like as ALDI Australia, ALDI UK, Coles, etc by submitting their new developments to these clients and same would definitely go for the launch once their respective procedure will be completed.

Highlights (2017-18)

• Developed new range of Namkeens with improved packaging & product quality to increase our market share

• New Clients added such as Gourmet Foods to cater the Meal Kits requirement of UK Market with all international flavours like as Japnese Katsu Curry, Caribbean Jerk Chicken, Chinese Kung Pao, Indonesian Nasi Goreng & many more...

• Have developed new categories in Institutional business by importing Retorted jars from UK to develop Indian range of products like as Madras Curry, Tikka Masala, Dal Mkahani in 2.2 Kg jars to cater the QSR, Restaurants & hotel market.

• Added new market such as Fiji, Thailand for introductions of entire range Namkeens & Simmer Sauces.

CHALLENGES:

• Intermittent supplies from our major business partner resulted in delayed the shipment.

• Export of ready to eat rice to US with respective allowed MRL’s limit.

• Major changes in import procedures in markets like Australia, US & UK.

FINANCIAL YEAR (2019-20)

• Kohinoor has obtain has obtained 100% Export Oriented Unit (EOU) status for its food processing unit to fetch new businesses from Australia, UK & USA to import all restricted Grains.

• Focus on mainstream private label of world leading retail giants of their respective local product lines which have bigger chunk in the market.

• Further introductions of new range of Ready to eat Curries & Simmer Sauces under Kohinoor brand in UK market.

• Kohinoor Branded Namkeens will be under much focused category this year.

• New Dairy extensions such as Ras Malai, Khoya Butter under Kohinoor brand will be carried out after the success of Kohinoor Fresh & Frozen Paneer in world market.

Overview - Food Processing Industry

According to the data provided by the Department of Industrial Policies and Promotion (DIPP), the food processing sector in India has received around US$ 7.54 billion worth of Foreign Direct Investment (FDI) during the period April 2000-March 2017. The Confederation of Indian Industry (CII) estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days. The food industry is always looking for the best separation technology to obtain natural compounds of high purity, healthy products of excellent quality with several industrial applications. The Indian market offers a huge potential for the food processing industry -more so because of the fact that it promotes two main growing factors of our Indian Economy - Industry & Agriculture. During the last one decade, India moved from a position of scarcity to surplus in Food. Given the trade in production of food commodities, the Food Processing Industry in India is on an assured track of growth and profitability. It is expected to attract phenomenal investment in capital, human, technological and financial areas. A reason why the Food Processing Industry sector in India has been accorded high priority by the Government of India, with a number of fiscal relief and incentives, to encourage commercialization and value addition. As per a study conducted by McKinsey and Confederation of Indian Industry (CII), the turnover of the total food market is approximately Rs.2,50,000 Crores, out of which value-added food products comprise Rs.80,000 Crores.

Basmati Rice

In the last couple of decades, there has been considerable rise in disposable income, masses are rushing to the cities, the average age of a worker in India is the lowest in the world i.e. 35 years & the employment opportunities are also improving; all this has resulted in general improvement of life style, including eating habits, which has also brought BASMATI RICE into focus. Rice in past was perceived as low engagement category but with sustained growth in Indian economy and consumer’s gradual shift towards branded rice coupled with growth in modern retail have been major contributors. Though still majorly unorganized, but year on year this category is experiencing good number of conversions from unbranded to branded packaged Basmati Rice in terms of consumptions in India. This is mainly due to introduction of branded and package basmati rice in many retail outlets; pertinent to say here in the Indian market context the introduction of GST has helped in improving the sales of branded basmati rice. Indias growing middle class has augmented the domestic demand of branded rice. Moreover, introduction of modern food retail formats has also propelled the packaged food market, facilitating the availability, visibility and accessibility of branded products. The domestic branded market in India is expected to grow in double digits as compared to single digit growth for unbranded rice. Eating rice is common habit in most of the Indian households and it is usually a part of one of the 3 meals cooked every day. Geographically, the consumption of Basmati is higher in the Northern & Western part of the country while culturally, its consumption is quite high in the Punjabi & Gujarati families. With the view of serving the best to their customers & employees, Basmati consumption is also higher in well recognized hotels & large institutions. The consumption of branded packaged Basmati Rice is also being driven by the modern retail that allows every consumer to select what they want. Hence, basmati rice requirements shall keep increasing in volumes in India for many years to come.

Ambient Food - Ready Meals

Ready Meals, is a category which is gaining popularity globally though still at a growing stage; but the factors that has so far contributed to sales of Ready Meals have been increasing consumer base of working people who have less time to spend on cooking, Eating out of home becoming a common phenomena on weekends, growth of Modern trade, the Convenience of making exotic vegetarian & non-vegetarian dishes in just a few minutes, etc. As this category grows, an Innovative value addition to products with Health & Nutrition is expected to become an important aspect of it.

Frozen Food - Ready Meals

Though Frozen Food as a category constitutes many products, majority of it being the frozen unprocessed non-vegetarian food, but within this segment vegetarian Frozen Ready Meals, snacks too is growing at significant rate. Frozen Meals considered very close to Fresh Meals after re-constitution and hence preferred a lot by consumers. With various types of value added frozen products that are now being offered by food processors, this food category is growing a higher rate.

Risks & Concerns

The Banks have classified the Companys Accounts as Non Performing Asset and served Notice under section 13(2) of The Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002, in the month of July 2018. The Company is in the process of preparing reply of said notices and negotiating with different workable options.

The observations of the Auditor with regard to the management assessment of the company’s ability to continue as going concern in view of the liquidity problems/decrease in business. The management of the company believes that they can continue to retain as going concern, based on the Resolution plan submitted to the Banks by company and the interest shown by prospective investors in the company.

Macro-economic factors like recession, subdued demand and political uncertainty may affect the business of the Company and the industry at large as well. The Company is aware that uncertainties in business offer opportunities as well as downside risks and thus has identified and put in place mitigation tools for the same. Some key risk areas are:

Procurement risk:

In a country like India, where more than 60 per cent of the area under cultivation is not irrigated, farm production is highly vulnerable to fluctuations in rainfall. Beside production risk, Indian farmers also face high market risk. Farm harvest prices in the country show high inter and intra year volatility. Price variation is quite pronounced in the regions and commodities where price support mechanism is not operative. Further adequate availability of key raw materials at the right prices is crucial for the Company. Being a generic natural product with low yield concentrated in a small region of the World, production of Basmati depends on the vagaries of nature. Therefore, any disruption in the supply due to a natural or other calamity or violent changes in the cost structure could adversely affect the Companys ability to reach its consumers with the right value proposition. However, we are ready with plans that might help us at such times. However, the Companys long term relationship with farmers built on trust ensures constant supply and thus over the years it has not faced any procurement problems. Also, adequacy of irrigation facilities in the Basmati producing regions mitigates these uncertainties.

High working capital requirement: Basmati rice requires to be aged for 9-12 months before selling, leading to huge working capital requirements. This results in low ROCE for the industry. Combating this risk, efficient working capital management system has been set in place by the Company and cash flow is monitored on daily basis.

Intense competition from unorganized sector: Another characteristic of this industry is the presence of unorganized sector offering basmati in loose unbranded form which intensifies competition. The Company is moving towards branded products and has invested significantly in building a strong brand which helps in differentiating their product.

Dividend

Your Directors do not recommend any dividend for the financial year 2017-18.

Re-Appointment / Resignation of Directors

In accordance with the provisions of the Companies Act, 2013, Mr. Jugal Kishore Arora (holding DIN – 00010704), Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. Your Directors recommend this resolution for approval of the members.

The Re-Appointment and Remunerations of Mr. Jugal Kishore Arora (DIN 00010704), Mr. Satnam Arora (DIN 00010667) and Mr. Gurnam Arora (DIN - 00010731) had been approved by the Shareholders in the 28th Annual General Meeting of the Company held on 25th September, 2017 for the period of three years subject to the approval of the Central Government. Further the Company had already made application to the Central Government for approval in this regard.

During the year the company has received resignation of Mr. Khedaim Abdulla Saeed Faris Al Darei (Investor Director) of the Company from Board and Committees of Kohinoor Foods Limited w.e.f. 8th March, 2018. The Board has accepted the resignation and necessary form has been filed with Registrar of Companies, NCT of Delhi and Haryana.

Further in compliance of the provisions of Stock Exchanges Circular having Ref No. NSE/CML/2018/24 dated 20th June, 2018, Mr. Sandeep Kohli, Independent Director of the Company has voluntarily resigned from the Directorship of Kohinoor Foods Limited, effective from 22nd June, 2018 and necessary form has been filed in this regard.

This is to further inform that Mr. Nitin Arora, Executive Director of the company has resigned from the Board effective from 10th August, 2018 and necessary form has been filed in this regard.

Appointment / Resignation of Chief Financial Officer

This is to inform that Mr. Kamal Deep Chawla, has been appointed/designated as CFO of the Company w.e.f. 30th March, 2018. This is to further inform that earlier Mr. Kamal Deep Chawla was designated as General Manager, Finance of the Company and was handling all Finance functions of the Company since October, 2009.

This is to further inform that Mr. Prabhat Kumar (Ex-CFO) of the Company has attains retirement age and consequently offered to retire from full time service as CFO of the Company and hence resigned from the Company with effect from 28th February, 2018.

Re-Valuation of Property, Plant and Equipment

The Company has adopted revaluation model for Land & Building. All the assets belonging to these classes of assets are carried at revalued amount being its fair value at the date of revaluation less subsequent depreciation. The company shall carry out the revaluation of these assets periodically after every 3 to 5 years.

Property, Plant & Equipment under all other classes are stated at cost of acquisition/installation inclusive of freight, duties, and taxes and all incidental expenses and net of accumulated depreciation. In respect of major projects involving construction, related pre-operational expenses form part of the value of assets capitalized. Expenses capitalized also include applicable borrowing costs. Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the entity and the cost can be measured reliably.

Property, plant and equipment which are not ready for intended use as on the date of Balance Sheet are disclosed as "Capital work-in-progress" and stated at the amount spent up to the date of balance sheet.

Intangible assets are stated at their cost of acquisition.

Subsidiary, Joint Ventures and Associate Companies

The Company has no material subsidiary in accordance with the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015.

In accordance with section 129(3) of the Companies Act, 2013, we have prepared consolidated financial statements of the Company and all its subsidiaries, which form part of the Annual Report. The statement provides the details of performance, financial positions of each of the subsidiaries.

Further these Financial Statements have been prepared in accordance with the Indian Accounting Standards (hereinafter referred to as the ‘Ind AS’) as notified by Ministry of Corporate Affairs pursuant to section 133 of the Companies Act, 2013 read with Rule 3 of the Companies (Indian Accounting Standards) Rules, 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016. These financial statements for the year ended March 31, 2018 are prepared under Ind AS for the first time. For all periods up to and including the year ended March 31, 2017, the financial statements were prepared in accordance with the accounting standards notified under the section 133 of the Companies Act 2013, read together with paragraph 7 of the Companies (Accounts) Rules, 2014 (hereinafter referred to as ‘Previous GAAP’) used for its statutory reporting requirement in India immediately before adopting Ind AS. The financial statements for the year ended March 31, 2017 and the opening Balance Sheet as at April 01, 2016 have been restated in accordance with Ind AS for comparative information.

The Financial Statements have been prepared on the historical cost convention on going concern basis and on accruals basis unless otherwise stated.

The accounting policies are applied consistently to all the periods presented in the financial statements, including the preparation of the opening Ind AS Balance Sheet as at April 01, 2016 being the ‘date of transition to Ind AS’.

The financial statements of Kohinoor Foods Limited ("Holding Company of KFL") together with its subsidiaries (hereinafter collectively referred to as "Group") are consolidated to form Consolidated Financial Statements (CFS). Consolidated Financial Statements consolidate the financial statements of KFL and its Wholly Owned Subsidiaries.

The parent company has not received audited financial statement from its Joint venture Company, Rich Rice Raisers LLC and Associate companies Al Dahra Kohinoor LLC and Al Dahra Kohinoor Industries LLC. The Management considers that the parent company is not in position to exercise control over these entities. Hence the results of Joint Venture Company and associate companies have not been considered in the Consolidated Financial Statements.

Rich Rice Raisers LLC, in which, KFL hold 25% shareholding, has closed its operation. KFL holds 20% share in each of its associates companies. Al-Dahra Kohinoor LLC has exercised the call option, which KFL has accepted. Upon completion of the formalities the shareholding of the parent company in both of these associates will reduce to NIL.

During the year the Board of Directors of the Company had reviewed the affairs of the subsidiaries and a statement containing the salient features of the financial statement of our subsidiaries in the prescribed format AOC-1 is enclosed as Annexure to the Financial Statement and hence not repeated here for the sake of brevity.

In accordance with Section 136 of the Companies Act, 2013, the audited financial statement, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are available on our website www.kohinoorfoods.in/investor. These documents will also be available for inspection during business hours at our Registered Office.

Further the Policy for determining material subsidiaries as approved by the Board may be accessed on the Company’s website at the link: www.kohinoorfoods.in/investor

Internal Control System

The Company has in place adequate internal control systems that facilitates the accurate and timely compilation of financial statements and management reports, ensures regulatory and statutory compliance, and safeguards investor interest by ensuring the highest level of governance. The control system ensures that all assets are safeguarded and protected and that the transactions are authorised, recorded and reported correctly. A CEO and CFO Certificate provided by Jt. Managing Director and CFO, included in the Corporate Governance Report confirms the existence of effective internal control systems and procedures in the Company Internal audit function evaluates the adequacy of, and compliance with policies, plans, regulatory and statutory requirements. The Internal Auditors directly report to the Board’s Audit Committee, thus ensuring the independence of the process. It also evaluates and suggests improvement in effectiveness of risk management, controls and governance process. The Audit committee and Board provides necessary oversight and directions to the Internal audit function and periodically reviews the findings and ensures corrective measures are taken. In the opinion of the management and the internal auditors, there exists adequate safeguard against fraud and negligence within the Company.

Our Offices as well as the manufacturing facilities endorse the highest health, safety, security and environmental standards.

Internal Financial Controls

The Company has in place well defined and adequate Internal Financial Controls which are tested from time to time for necessary improvement, if any required.

Listing at Stock Exchange

The Equity Shares of the Company are listed with BSE Limited and National Stock Exchange of India Ltd. The annual listing fee for the Financial Year 2018-2019 has been paid by the Company to BSE and invoice of listing fees of NSE is yet to be revised by NSE.

Registered Office

The Registered Office of the Company is situated at Pinnacle Business Tower, 10th Floor, Surajkund, Shooting Range Road, Faridabad, Haryana 121001, w.e.f. 16th August, 2017 and in this regard a fresh certificate for change of registered office has been issued by the Registrar of Companies, NCT of Delhi & Haryana at New Delhi.

Corporate Governance

Your Company has taken adequate steps to ensure compliance with the provisions of Corporate Governance as stipulated by the Stock Exchanges. Pursuant to SEBI (LODR), Regulation, 2015, a report on the Corporate Governance, Certificate regarding Compliance, Secretarial Audit Report and Jt. Managing Director (CEO) and CFO certification along with the Auditors Certificate has been made part of the Annual Report.

Auditors

M/s Rajender Kumar Singal & Associates LLP, Chartered

Accountants, New Delhi, Statutory Auditors of the Company was initially appointed as auditors of the Company for the first term valid till 31st March, 2018.

This is to further note that M/s Rajender Kumar Singal & Associates LLP, Chartered Accountants, New Delhi, Statutory Auditors of the Company, holds office from the conclusion of ensuing Annual General Meeting to the conclusion of Fifth Annual General Meeting to be held till the year 2023. The Board of Directors has received their consent and they have confirmed their eligibility to the effect that their re-appointment, if made, would be within the prescribed limits and they are not disqualified for re-appointment.

The Board pursuant to the provisions of Section 139, 142 and other applicable provisions of the Companies Act, 2013 and on the recommendation of the Audit Committee has considered the appointment of M/s Rajender Kumar Singal & Associates LLP, Chartered Accountants, New Delhi (Firm Registration No. 016379N), as Statutory Auditors of the Company to hold office from the conclusion of ensuing Annual General Meeting till the conclusion of Fifth Annual General Meeting to be held in the year 2023. The Board of Directors accordingly recommends their reappointment as Statutory Auditors.

Auditors Report

The Company has received the Auditors Report duly signed by M/s Rajender Kumar Singal & Associates LLP, Chartered Accountants, New Delhi, and took note on the same. Further as mentioned in the Auditors Report, attention is drawn (Emphasis of Matters) to notes to the Financial Statements, the same has not been reproduced for the sake of brevity, however the Board Discussed the same in details and the remarks given by the Directors is mentioned herein below:

As stated in Note 4 to the standalone financial statements, the company has adjusted the value of inventories by Rs 24445.09 Lacs as at the date of transition i.e. April 1, 2016, by reducing the amount of borrowing cost included in the value of inventories, due to applicability of Ind AS.

As stated in Note 6 (C) to the standalone financial statements, regarding company’s investment in its wholly owned subsidiary, Kohinoor Foods USA Inc., amounting to Rs 3978.45 Lacs. This subsidiary company has been incurring continuous losses and its net worth is fully eroded. However, based on factors regarding future business plan, growth prospects of subsidiary as described in the said note, Management believes that the realizable value is higher than the carrying value of the investment due to which

Investments are recognised at carrying value.

As stated in Note 41 to the standalone financial statements and further as per advice received from legal experts and on the basis of merit of the case, there is a high probability that the income tax order will be set aside and the demand will be quashed. Accordingly, management is of the view that no provision in respect of the above demand is required to be made in the books of accounts.

As stated in Note 44 of standalone financial statement, as per information and explanation given to us, the company has not paid interest to banks and its outstanding balance in loan accounts has exceeded its drawing power since February, 2018.

Further Amount of interest paid to the banks over previous years needs to be recalculated based on actual entitlement of interest by the Banks and are to be verified and these figures may get reduced. Disputes with the banks over the rate of interest charged and calculated are pending, as such these cannot be treated as an admission of any fact qua the Banks.

As stated in Note No. 5 of standalone financial statement, the management has upwardly revalued the carrying amount of fixed assets by Rs 15885.18 Lakhs as at the date of transition i.e. April 1, 2016, which consequently resulted in increase of revaluation reserve.

Further your attention to clause (ii) of Annexure-A to the auditor’s report, that the auditors did not have occasion to overview the physical stock taking done by the management during the financial year 2017-18 and have relied on the information and explanations provided to them by the management.

Cost Auditors

The Cost Auditor M/s Cheena and Associates appointed as Cost Accountants of the Company for the year 2017-18 and has completed the audit of the cost record of the Company. The Cost Audit Report does not contain any qualification, reservation or adverse remark.

The Board pursuant to the provisions of Section 148 and all other applicable provisions of the Companies Act, 2013 and Companies (Audit and Auditors) Rules, 2014 (including any statutory modification(s) or re-enactment thereof, for the time being in force), on the recommendation of the Audit Committee has approved the appointment of M/s Cheena & Associates, Cost Accountant Firm to conduct the audit of the cost records of the Company for the financial year ending on March 31, 2019 and remuneration to be paid subject to rectification by shareholders.

Secretarial Audit

The Board of Directors pursuant to the Provision of Section 204 of the Companies Act, 2013, has appointed M/s Vinod Aggarwal and Associates, Company Secretary Firm, (having FCS No. 8007 and CP No. 8816) to conduct Secretarial Audit of the Company for the Financial Year 2018-2019.

Secretarial Audit Report

The Secretarial Auditor M/s Vinod Aggarwal and Associates, Company Secretaries, appointed for the year 2017-18 and has completed the secretarial audit of the Company. The Secretarial Audit Report as received from the Practicing Company Secretary is annexed to the Annual Report as Form No.-MR-3. As per the Secretarial Audit Report the Company has complied with all the applicable acts, laws, rules and regulations and does not contain any qualification, reservation or adverse remark.

Internal Auditor

The terms of M/s SPMG & Co., Chartered Accountants, New Delhi, who was reappointed as Internal Auditor of the Company for the Financial Year 2017-18 expired on 31st March, 2018.

Your Directors have approved their reappointment in the Board Meeting dated 30th May, 2018, for the financial year 2018-19.

Deposits

During the year under review, the Company has not accepted any deposit under Chapter V of the Companies Act, 2013.

Share Capital of the Company

During the year under review, the Company did not issue equity shares. The paid up Share Capital of the Company is amounting to Rs. 35,24,15,300/- comprising of 3,52,41,530 equity shares of Rs. 10/- each.

Board Meetings

The Board is headed by an executive Chairman. As on 31st March 2018, the Board of Directors consisted of Nine Directors, including Chairman, Joint Managing Directors, Woman Director, Independent Director and others.

Six (6) Board Meetings were held during the year 2017-18, i.e. on 13th April, 2017, 30th May, 2017, 10th August, 2017, 14th November, 2017, 14th February, 2018 and 31st March, 2018, and the gap between two meetings did not exceed 120 days.

Audit Committee Meetings

During the year under review, the Audit Committee met Five (5) times i.e. on 30th May, 2017, 10th August, 2017, 14th November, 2017, 14th February, 2018 and 31st March, 2018 and the maximum time gap between any two consecutive meetings did not exceed 120 Days. The minutes of the meetings of the Audit Committee are noted by the Board.

Nomination and Remuneration Committee

During the year under review, the Nomination and Remuneration Committee met Two (2) times i.e. on 10th August, 2017 and 31st, March, 2018. The committee in the meeting held on 10th August, 2017 has discussed/considered and approve the re-appointment and remuneration of Mr. Jugal Kishore Arora as Chairman, Mr. Satnam Arora and Mr. Gurnam Arora as Joint Managing Directors of the Company, and in the meeting of 31st March, 2018 the committee has considered appointment/designate Mr. Kamal Deep Chawla as Chief Financial Officer (CFO) of the Company.

Remuneration Policy

On the recommendation of the Nomination and Remuneration Committee, the Board has formulated Remuneration Policy for appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration.

The Remuneration Policy of the Company forms part of this Report and may be accessed on the Company’s website on the link www.kohinoorfoods.in/investor

Whistle Blower Policy/Vigil mechanism

The Company has established a vigil mechanism for Directors and Employees to report their concerns about unethical behavior, actual or suspected, fraud or violation of the Company’s code of conduct or ethics policy or any other grievances, the details of which are given in the Corporate Governance Report. The Whistle Blower Policy may be accessed on the Company’s website on the link www.kohinoorfoods.in/investor.

Risk Management

The Company has constituted a Risk Management Committee comprising executives headed by the Managing Director.

The Company has a Risk Management Policy to identify, evaluate business risks and opportunities. The Company has adopted several strategies for Risk Management to mitigate risks and uncertainties. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company’s competitive advantage.

The Company has adopted a Risk Management Policy which establishes various levels of accountability and overview within the Company. In addition, all the key risks get continuously deliberated and discussed at the Group Executive Committee level as well as the Business Unit level. The said Policy is placed on the Company’s website www.kohinoorfoods.in/investor.

Particulars of Loan Given, Investment made, Guarantees given and Securities Provided

Particulars of loans given, investments made, guarantees and securities provided under section 186 of the Companies Act, 2013 are provided in the notes of standalone Financials statement and well within the limit approved by the Shareholders of the company.

Capacity enhancement of Food Factory

During the year the company has increased the Production capacity of its food factory acquired in the year 2015-16, by 75,000 ready meals per day from 15,000 ready meals per day in the last year. Our focus would be on product innovation to develop healthy food products from locally available raw material. We will continue to Invest & Innovate and expand our product offering to add value to our Food business operations.

The increase in capacity of new food facility would not only reduce the dependence on our existing out-sourced facilities but also help us to focus on business by acquiring new customers.

Present Status of litigations

As informed in the Annual Report for the financial year 2016-17, that in terms of the confidential Mutual Settlement Agreement dated 13th April, 2017, the Company M/s Kohinoor Foods Limited (KFL) has settled all disputes with Kohinoor Speciality Foods India Pvt. Ltd. (KSF) and McCormick Switzerland GMBH, which resulted all proceedings in London Arbitration (LCIA) and in the Indian Court (NCLT) and have consequently withdrawn the case filed in the respective Courts/Tribunal and the concerned apex court has issued the required order in this regard.

This is to further inform you that in terms of the Settlement Agreement, KFL transferred its 15% shareholding of KSF to McCormick, Singapore after receiving 75% of the total consideration after obtaining approval of RBI. Further as agreed in the agreement the company will receive the second tranche being 25% of the agreed consideration on September 28, 2018, amounting to Rs. 2,50,00,000/- (Rupees Two Crores Fifty Lakhs Only).

The Board of Trustee of the port of Mumbai has filed a money suit for recovery of Rs. 9.64 Cr. towards alleged outstanding demurrage charges against which the Company has filed its counter claim of Rs. 10.88 Cr. towards the financial losses, interest on the investment, refund of the license fees, refund of the demurrage charges, compensation and damages etc. The matter is still pending.

An appeal is lying pending before the Dy. Excise & Taxation Commissioner-Appeal, Punjab against the Order received from Excise and Taxation Deptt., Punjab in respect of Year 2009-10 and 2010-11 demanding a sum of Rs. 4,50,41,414/- towards the cess imposed by the State Govt. on exports. The Company has challenged the validity of imposition of cess on export in its appeal as the same is not permissible under article 286 of the Constitution of India. Further demand has been raised for Rs. 5,41,073/- after completing the Sales Tax assessment for AY 2011-12 against which appeal has been filed.

An appeal before the Customs, Excise & Service Tax Appellate Tribunal, New Delhi is lying pending against the order of Commissioner of Central Excise (Appeals), Delhi -III in respect of additional excise duty of Rs. 42,90,580/- demanded by the Excise department in connection of dispute over classification of goods -food product produced at Bahalgarh Factory- as per the Central Tariff Act. As the matter is still pending before the Tribunal, no provision in the books of accounts have been made*

During the financial year 2016-17, the Company has received a order from Honble Central Excise and Service Tax Appellate Tribunal, New Delh (CETSTAT) against the order passed by Commissioner of Service Tax (Adjudication), New Delhi demanding a service tax of Rs. 2,59,25,214/-. The Honble CETSTAT vide its order dated 16/02/2017 has granted major relief of Rs. 2,50,12,963/- against the aforesaid demand.

All other litigations are mentioned under the Contingent note of the Balance Sheet for the financial year 2017-18.

Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earning and Outgo

The particulars as prescribed in sub-section (3) of Section 134 of the Companies Act, 2013, read with Companies (Accounts) Rules, 2014 are enclosed as Annexure B to this Report.

Particulars of Employees and Related Disclosure

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said rules are given as under:

i) There are no Employee, employed throughout the year and in receipt of remuneration of Rs. 1,02,00,000/- or more per annum.

ii) There are no Employee, employed part of the year and in receipt of remuneration of Rs. 8,50,000/- or more per month during any part of the year.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out in the annexure-D to this report.

Having regard to the provisions of Section 136(1) read with its relevant proviso of the Companies Act, 2013, the Board’s Report is being sent to the members without some annexures. The said annexures are available for inspection at the Registered/Corporate Office of the Company during working hours and any member interested in obtaining such annexures may write to the Company Secretary and the same will be furnished free of cost.

Extract of Annual Return

In accordance with Section 134(3)(a) of the Companies Act, 2013, the extract of the annual return in Form No. MGT – 9 is enclosed as Annexure C to this Report.

Management’s Discussion and Analysis Report

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), a Management Discussion and Analysis Report and a Report on Corporate Governance is attached in a separate section forming part of the Annual Report.

A Certificate from the Statutory Auditors of the Company regarding the Compliance by the Company of the conditions stipulated in Regulations Part C of Schedule V of the Listing Regulations is also attached with this report.

A declaration by the Managing Director pursuant to Regulations Part C of Schedule V of the Listing Regulations stating that all the Board Members and Senior Management Personnel of the Company have affirmed compliance with the Code of Conduct, during the financial year ended 31st March, 2018, is also attached with this report.

Directors Responsibility Statement

Pursuant to section 134(5) of The Companies Act, 2013, the Directors confirm that:

a) in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, had been followed and there are no material departures from the same;

b) the Directors had 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 as at 31st March, 2018 and of the profit of the Company for the year ended on that date;

c) the Directors had 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;

d) the Directors had 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; and

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

Awards & Recognitions

Since its inception, the Company has been earning awards and recognition like consumer validated Super Brand Award (thrice in series), Reader’s Digest Most Trusted Brand award (4 times in a row), Power Brand Award, Guinness Book of World Record (for making World’s Largest Biryani), National award for Export Excellence, Brand Equity Award & many APEDA awards.

Corporate Social Responsibility

As per provisions under Section 135 of the Companies Act, 2013, all companies having net worth of Rs. 500 crores or more, or turnover of Rs.1,000 crores or more or a net profit of Rs. 5 crores or more during any financial year are required to constitute a Corporate Social Responsibility (CSR) Committee of Board of Directors comprising three or more directors, at least one of whom should be an Independent Director and such Company shall spend 2% of the average net profits of the Company made during the three immediately preceding financial years.

Accordingly a detailed CSR Policy was framed by the Company with the approvals of the CSR Committee and Board. The Policy, inter alia, covers the following:

• Philosophy

• Scope

• List of CSR activities

• Modalities of execution of projects/programmes

• Implementation through CSR Cell

• Monitoring assessment of projects/programmes

CSR Policy gives an overview of the projects or programmes which are proposed to be undertaken by the Company in the coming years.

The composition of the CSR Committee

A Committee of the directors, titled ‘Corporate Social Responsibility Committee’, was constituted by the Board with the following members:

1. Mr. Satish Chand Gupta

2. Mr. M K Trisal

3. Mr. Satnam Arora

4. Mr. Gurnam Arora

5. Mr. Sandeep Kohli (Resigned w.e.f.22nd June, 2018)

As the Average net Profit/(Loss) of the Company for last three financial years prior to 2017-18 comes to average net loss and therefore the Company is not statutorily required to spent amount as prescribed for CSR expenditure.

Kohinoor also envisions to improve lives in communities we live around, protect workplace rights, respect people, support missions that help people have a better life, provide good jobs, world class quality products and a healthy environment to all of us around.

At Workplace, Kohinoor Foods maintain high standards for fair and dignified treatment of all the people who work for our Company. For all of its employees, it is not just a place to work, but like another home and everybody in it like a big family, closely bonded with each other.

Kohinoor Foods also believes that a Company is as good as the people who work for it - their combined talents; skills, knowledge, experience and passion make a company what it is. Hence, Companys continuous goal is to inspire and motivate its people to hone their talents, increase their knowledge & skills and achieve extraordinary results at their workplace. In this endeavor we have offered subsidized meals to our employees at a very nominal cost.

Adherence to global human rights standards, No minor labour, Fair trade practices, complete Medical facilities for its people, Safe & sound working environment are the things that Kohinoor Foods take utmost care about.

The CSR Policy may be accessed on the Company’s website at the link: www.kohinoorfoods.in/investor

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

The Company has zero tolerance towards sexual harassment at the workplace. The Company has in place a Sexual Harassment Policy in compliance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment. The Sexual Harassment Committee has been set up to redress complaints received regarding sexual harassment.

The Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Declaration by Independent Directors

The Company has received necessary declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements), Regulation, 2015.

Board Evaluation

In accordance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, it is mandatory that the Board shall monitor and review the Board Evaluation Framework. The Companies Act, 2013 states that a formal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual Directors. Schedule IV of the Companies Act, 2013 and Regulation 17 (10) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 states that the performance evaluation of Independent Directors shall be done by the entire Board of Directors, excluding the director being evaluated.

The Board and the Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria and framework adopted by the Board. In addition, the performance of Board as a whole and committees were evaluated by the Board after seeking inputs from all the Directors on the basis of various criteria.

In a separate meeting of Independent Directors, performance of Non-Independent Directors, performance of Board as a whole and performance of the Chairman was evaluated, taking into account the views of the Executive Directors and Non-Executive Directors. The evaluation process has been explained in the Corporate Governance Report section of the Annual Report.

Training of Independent Directors

The Company Secretary of the Company conducted a detailed training programme to provide/update the changes in the SEBI (LODR), Regulation, 2015/Companies Act, 2013 and other relevant act to the Independent Directors.

Further, the Company issues a formal letter of appointment to Independent Directors outlining their roles, responsibilities, functions and duties as an Independent Director. The format of the letter of appointment is available on the Company’s website at the link: www.kohinoorfoods.in/investor

General

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employee of the Company under any scheme.

4. Issue of Employees Stock Option to employee of the Company under any scheme.

5. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

6. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company’s operations in future.

7. Business Responsibility Report as per Regulation 34 (2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, describing the initiatives taken by them from an environmental, social and governance perspective is not applicable to the Company, for the financial year 2017-2018 as per the SEBI Circular SEBI/LAD-NRO/GN/2015-16/27 dated 22nd December, 2015 and Frequently Asked Questions issued by SEBI on SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 dated 29th January, 2016.

Acknowledgment

Your Directors would like to express their appreciation for the assistance and co-operation received from the Banks, Government Authorities, Customers, Vendors, JV Partners and Members during the year under review. Your Directors acknowledge with gratitude, the commitment and dedication of the employees at all levels that has contributed to the growth and success of the Company.

For and on Behalf of the Board
Sd/-
Jugal Kishore Arora Place : Faridabad
Chairman Date : August 14 th, 2018