Kothari Industrial Corporation Ltd Directors Report.

Your Directors hereby present their 48th Annual Report on the business and operations together with the Audited Accounts of the Company for the year ended March 31, 2018.

Summary of Financial Results :

(Rupees in Lakhs)

2017-18 2016-17
Total Revenue 1,845.75 3,440.25
Total Expenses 1,933.62 3,281.81
(Loss) before Depreciation,Interest, Exceptional Item and Tax (87.87) 158.44
Depreciation 48.20 411.23
Interest 6.54 317.15
(Loss) beforeExceptional Item and Tax (142.61) (569.94)
Exceptional Items(net) (110.85)
(Loss) before Tax (253.46) (569.94)
Tax Expenses - -
(Loss) for the year (253.46) (569.94)
Other Comprehensive Income 0.83
Loss carried to Balance Sheet (252.63) (569.94)
Earnings per share (1.32) (2.98)

In the preparation of the accountsthe company has mandatorily adopted "Ind AS" with effect from 1st April 2017 and the comparative figures for the previous year have been modified accordingly. The significant accounting policies have also been redrafted to make them "IndAS" compliant.

DIVIDEND

In view of the continued losses, your Directors are unable to recommend any dividend for the year ended 31st March, 2018.

OPERATIONS:

The significant reduction in the turnover during the year under review had been largely due to stoppage of production of mixtures during the year due to Government policy. It is expected that based on representation, the State Government would likely to revise its policy thereby facilitating resumption of production of NPK Mixtures, in line with other neighbouring states.

The company is well poised to augment sales of Water Soluble Fertilizers, various Agro Products, Micro Bio Products etc., through its vast network of dealers.

ACTION PLAN :

With a view to expanding the operations of the company, the Vice Chairman and Managing Director has undertaken the following initiatives:

(a) A senior retired executive of a leading fertilizer company has joined the organization during the year and he has been assigned to revamp the dealers network more particularly in the states of Andhra Pradesh & Karnataka. Further, his expertise would be utilized for manufacture of various new inputs for agro farming. His joining the organization would ensure significant expansion of the company’s operations.

(b) With an objective of creating Pan-India image of the company, the Managing Director has established a business association with the Government of Qatar and its ruler, following which there is a distinct possibility of company being able to impor t significant quantities of Urea particularly for industrial use for which credit facilities are being lined up. This development augurs well for the growth strategy of the company. The Managing Director has also visited other countries including the United Kingdom and the United States to explore possibilities of overseas collaboration; the benefit of which will be reflected in the years going forward.

The above strategic planning, thanks to the strenuous efforts of the Managing Director, would open vistas of opportunity for the company and benefit of all stakeholders.

SHARE CAPITAL:

The paid up equity share capital as on 31st March 2018 remains unchanged at Rs.955.54 lakhs.

The company has not issued any shares during the year under review.

TRANSFER TO RESERVES

Your Company proposes not to transfer any sum to the general reserve of the Company

MANAGEMENT DISCUSSION AND ANALYSIS & CORPORATE GOVERNANCE:

In terms of provisions of Regulation 34 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations, 2015, (hereinafter referred to as Listing Regulations) the Management Discussion and Analysis Report is appended as Annexure-I to this report.

PARTICULARS OF EMPLOYEES:

Details 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:

(i) No remuneration was received by any directors in the company during the financial year 2017-18. So, the ratio of remuneration of each director to the median remuneration of the employees of the company for the financial year 2017-18 is not applicable.

(ii) There is no percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year.

No remuneration received by the director, so the question of percentage increase in remuneration of each director doesn’t arise.

The Chief Financial Officer has been appointed on 01.08.2017, so there is no increase of remuneration of CFO in the financial year.

There is no Chief Executive Officer in the financial year, so the question of percentage increase in remuneration of CEO doesn’t arise.

Company secretary of the Company has been appointed on 19.03.2018, so there is no increase in remuneration of CS in the financial year.

(iii) The percentage increases in the median remuneration of employees in the financial year: 7.18%

(iv) There were 50,permanent employees on the rolls of the Company as on 31.03.2018.

(v) Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration:

Average percentage increase in the salaries of employees other than the Managerial Personnel in the last financial year is 6.69% and there is no percentile increase in the managerial remuneration. The comparison between average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year with the percentile increase in the managerial remuneration is not applicable.

(vi) It is hereby affirmed that the remuneration paid is as per the remuneration policy of the Company.

There are no employees who were in receipt of remuneration in excess of the ceiling prescribed in the Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Further as on 31st March, 2018 the Company had 50 employees and the Disclosure with respect to details of the Top 10 employees as on 31st March, 2018 in pursuance to Rule 5(2)& Rule 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are attached herewith as

Annexure-II.

DIRECTORS AND KEY MANAGERIAL PERSONNEL:

A) Change in Board Constitution

(i) Mrs. Surekha Pradip Kothari, Non-executive Non-Independent Director of the Company resigned from the Board w.e.f August 28, 2017.

(ii) Mr. J Rafiq Ahmed , was appointed as an Additioal Director with effect from 21-04-2017 and he has been appointed as Managing Director of the company for a period of five years and the same has been confirmed by the shareholder at 47th AGM held on 30-12-2017.

(iii) Company has appointed Ms.Thoopjlamudu Arulpathy Rajalaxmi as an Additional Director under the category of Independent director of the Company with effect from 11th June, 2018 to hold office as such until the conclusion of ensuing Annual General Meeting of the Company.

B) Details with regards to meeting of Board of Directors and attendance during the year of the Company

(i) Composition of the Board of Directors as on the date of this Report is mentioned below;

Name of the Director Designation Category
Mr. Pradip D Kothari Director / Chairman Non-Executive Director
Mr. Rafiq Ahmed Vice Chairman & Executive Director
Managing Director
Mr.Gunasekaran Director Independent Director
Mr.Dilip Machadoo Machadoo Director Independent Director
Ms.Thoopjlamudu Arulpathy Rajalaxmi Additional Director Independent Director

(ii) Meeting of Board of Directors and Attendance during the Year:

During the FY 2017 2018, 10 meetings of the Board of Directors of the Company were held i.e. on 05.04.2017, 21.04.2017, 10.05.2017, 31.05.2017, 28.08.2017, 28.09.2017, 02.12.2017, 06.01.2018, 21.02.2018 and 12.03.2018. The gap between two meetings did not exceed 120 days. The attendance of the members at the Board of Directors meetings was as follows:

Name of Director No. of Board Meetings attended
Mr. Pradip D Kothari 10
Mr. Rafiq Ahmed 9
Mr.Gunasekaran 10
Ms. Surekha P Kothari 4
Mr. Dilip Machadoo Machadoo 10
Ms. Thoopjlamudu Arulpathy Rajalaxmi Nil

Notes.

Ms.ThoopjlamuduArulpathyRajalaxmi appointed as Additional Director under the category of Independent Director w.e.f 11th June, 2018.

Ms.SurekhaP Kothari has resigned w.e.f 28.08.2017 from the Board of Directors.

(C) Policy on Directors’ Appointment and Remuneration:

The current policy is to have an appropriate mix of executive, non executive and independent directors to maintain the independence of the Board, and separate its functions of governance and management. As on 31st March, 2018, the Board consist of five Members, one of whom is an Executive Director, one of whom is Non-Executive Director and the three others are Independent

Directors. The Board periodically evaluates the need for change in its composition and size. The Policy of the Company on Director’s Appointment and Remuneration, including criteria for determining qualifications, positive attributes, independence of director and other matters provided under Section 178(3) of the Companies Act, 2013, adopted by the Board, is appended as Annexure III to this report. We affirm that the Remuneration paid to the director is as per the terms laid out in the said policy.

(D) Declaration by Independent Directors:

The Company has received necessary declarations from each Independent Director(s) under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.

(E) KEY MANAGERIAL PERSONNEL:

Mr.J Rafiq Ahmed, Managing Director of the company was appointed for a period of five years at the last Annual General Meeting.

Mr. Anil Kumar Padhiali was appointed as Company Secretary cum Compliance officer and KMP of the Company from March 19, 2018.

Mr.V.Singravel was appointed as Chief Financial Officer and KMP of the Company from August 01, 2017.

COMPOSITION OF BOARD’S COMMITTEES:

Your company has three Committees: Viz., the Audit Committee, the Nomination and Remuneration Committee, and the Stakeholder’s Relationship Committee. All Committees are appropriately constituted. Details of the All Committee are listed in the Corporate Governance Report.

BOARD EVALUATION:

The Board of Directors has carried out an Annual Evaluation of its "own performance", "Board committees" and "Individual Directors" pursuant to the section 134(3) of the Companies Act, 2013.

The Nomination and Remuneration Committee ("NRC") reviewed the annual performance of the individual Directors.

In a separate meeting of Independent Directors, performance of non Independent Directors, performance of the Board as a whole was evaluated.

VIGIL MECHANISM:

The Company has established a mechanism for Director’s and employee’s to report their concerns relating to fraud, malpractice or any other activity or event which is against the interest of the Company. The Whistle Blower Policy is in place. Employees can report to the Management concerned unethical behaviour, act or suspected fraud or violation of the Company’s Code of Conduct Policy. No Employee has been denied access to the Audit Committee. The Vigil Mechanism policy of the company is available on our website www.kotharis.in.

CORPORATE SOCIAL RESPONSIBILITY:

As per the provision of Section 135 of the Companies Act, 2013, all companies having a net worth of Rs.500 crore or more, or a turnover of Rs.1,000 crore or more or a net profit of Rs.5 crore or more during any financial year are required to constitute a CSR committee and hence our Company do not meet the criteria as mentioned above, the Company has not constituted any Corporate Social Responsibility Committee; and has not developed and implemented any Corporate Social Responsibility initiatives and the provisions of Section 135 of the Companies Act, 2013 is not applicable to the Company.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT 2013:

The Company has in place an Anti Sexual Harassment Policy in line with the requirement of the Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act 2013. All the employees (permanent, Contractual, temporary, Trainees) are covered under this policy. During the year under review, no complaints were received falling under the category of Sexual Harassment of Women.

SECRETARIAL AUDIT:

Pursuant to provisions of section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company engaged the services of Mr.R.Srinivasan, Company Secretary in Practice, Chennai to conduct the Secretarial Audit of the Company for the 12 months period ended on 31st March, 2018. The Secretarial Audit Report (in Form MR-3) is attached as Annexure-IV to this Report.

Comments of the Board on the qualification/reservation/adverse remarks/disclosure made:

Observations by Secretarial Auditor Our Reply
1) The Company had convened the Annual General Meeting for FY 2015-16 on 28th September 2017 and has made an application for compounding of offence with NCLT, Chennai and is pending before them. The company has filed application for compounding of offence with NCLT, and ROC, Chennai and the same is pending before them. The Company is confident of getting a favourable order from NCLT.
2) The Annual General Meeting for FY 2016-17 was held on 30th December 2017 after a delay of three months for which permission was not granted by ROC and a similar application is being made. The company is in the process of filing the compounding application. The Company made an application to get extension of three months for convening the AGM but unexpectedly the ROC not allowed extension of time.
However the Company convened the AGM immediately. Company also is in the process of filling the compounding application with NCLT.
3) As per the terms of the listing agreement, the company is required to maintain the shareholders data at a single point with the Registrar & Transfer Agents. The same is in the process of handing over the physical shareholders data to the Registrar & Transfer Agents.
4) The Company had not transferred an amount of Rs.6.98 Lakhs to the Investor Education and Protection Fund set up by the Ministry of Corporate Affairs relating to previous years. The matter is sub-juiced before the High Court.
5) Mrs.Surekha P Kothari who was a Director on the Board of the company resigned on 28th August 2017 and the causual vacancy thus caused by her resignation is to be filledup. The Board of Directors had appointed a women director namely Ms.Thoopjlamudu Arulpathy Rajalaxmi at their meeting held on 11th June, 2018.

AUDITORS:

At the 46th Annual General Meeting of the company held on 28th September 2017 M/s.Arockiasamy& Raj, Chartered Accountants, Chennai, were appointed as Statutory Auditors upto the conclusion of ensuing Annual General Meeting. The audit report on the Board minutes doesnot contain any qualificatory remark.

Now Board has recommended to the shareholders for reappointment of M/s. Arockiasamy& Raj, Chartered Accountants, Chennai, as Statutory Auditors of the Company, to hold office from the conclusion of this Annual General Meeting of the Company until the conclusion of the 53rd Annual General Meeting of the Company to be held in the year 2023.

PARTICULARS ON CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

(i) Energy Conservation: The superphosphate factory is under long lease and the lessee has taken appropriate steps to ensure energy in a comprehensive manner

(ii) Foreign Exchange Earnings and Outgo: The Company has not earned or spent any foreign exchange during the year under review.

(iii) Research and Development & Technology Absorption: The Company is not directly engaged in manufacture.

DIRECTORS’ RESPONSIBILITY STATEMENT:

The Directors confirm that:-

a) In the preparation of the Accounts for the Financial Year ended 31st March 2018 the applicable accounting standards and schedule III of the Companies Act, 2013 (including any statutory modification(s) or re-enactment(s) for the time being in force), have been followed along with the proper explanation relating to material departure;

b) They have selected such accounting policies and applied them consistently and made judgements 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 Loss for that period.

c) To the best of their knowledge and information, they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; and

d) They 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 such internal financial controls though adequate are being strengthened on an ongoing basis quite effective to operate effectively; and

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

SUBSIDIARIES, ASSOCIATES, AND JOINT VENTURES:

Your Company does not have any Subsidiary/Associate Company nor does it have Joint Venture with any entity. Consolidated Financial statements are not applicable to your Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS:

During the year under review, details of Loans, Guarantee and Investments covered under the Provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

RISK MANAGEMENT

The Company has implemented a risk management policy including identification therein of elements of risk, if any, which in the opinion of the Board is adequate.

EXTRACT OF ANNUAL RETURN:

As required under Section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of Annual Return in MGT-9 is annexed with this Report as Annexure – V. RELATED PARTY TRANSACTIONS:

During the year under review, the contracts or arrangements with related parties referred to in section 188 of Companies Act, 2013 have been on arm’s length and in ordinary course of business and they were not material in nature. Accordingly, the particulars of the transactions as prescribed in Form AOC - 2 is annexed as Annexure-VI

CORPORATE GOVERNANCE:

Corporate governance is an ethically driven business process that is committed to values aimed at enhancing an organizations brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders1 expectations. At Kothari

Industrial Corporation Limited, it is imperative that our company affairs are managed in a fair and transparent manner. This is vital to gain and retain the trust of our stakeholders. The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The Company has also implemented several best corporate governance practices as prevalent globally.

The provision of Corporate Governance is not applicable on the Company in terms of Regulation 15(2) of SEBI (LODR) Regulations, 2015. At the Company, we constantly strive to evolve and follow up on the Corporate Governance guidelines. However, as a matter of good practice,and best practices a separate section on Corporate Governance is annexed as Annexure- VII to this Report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURT:

There are no significant and material orders passed by the Regulators or Court that would impact the going concern status of the company.

INTERNAL FINANCIAL CONTROLS:

The Company has a well-placed, proper and adequate internal control system, which ensures that all assets are safeguarded and protected and that the transactions are authorized, recorded and reported correctly. The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate. This has been endorsed by statutory auditors in their separate report which is annexed.

INTERNAL AUDIT:

M/s.N.Ganesan Associates, Chartered Accountants as the Internal Auditor of the Company have carried out effective internal audit of the operations and accounts of the company during the year.

MATERIAL CHANGES AND COMMITMENTS, IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

No material changes and commitments affecting the financial position of the company occurred.

LISTING:

Certain formalities are to be completed for getting the shares re-listed;the Company is actively completing such formalities.

DEPOSITS:

The Company has not accepted any public deposit during the year.

ACKNOWLEDGEMENT:

Your Directors place on record their appreciation of the valuable support and help of M/s.Gemini Fertilizers both in management and financial matters, Government authorities, Banks and Employees. The cooperation and the forbearance of the members are gratefully acknowledged.

(By Order of the Board of Directors)
For KOTHARI INDUSTRIAL CORPORATION LIMITED
Place: Chennai PRADIP D KOTHARI
Date : 11.06.2018 CHAIRMAN