McDowell Holdings Ltd Directors Report.

TO THE MEMBERS,

The Directors have pleasure in presenting the Annual Report of the Company along with Audited Accounts for the year ended March 31, 2019.

Financial Performance for the year ended March 31, 2019:

For the Financial Year Ended

Particulars
31.03.2019 31.03.2018
( Rs ) (Rs )
Income 1,57,17,551 1,03,69,082
Less : Expenditure 8,23,26,647 2,64,80,221
Loss before tax and exceptional item (6,66,09,096) (1,60,84,139)
Exceptional item : Profit on sale of Investment 9,71,75,455 -
Profit/(Loss) before Tax 3,05,66,359 (1,60,84,139)
Tax Expense (Earlier year) 5,00,000 (9,668)
Profit/(Loss) after Tax 3,00,66,359 (1,60,74,471)

Dividend

Considering the available fund position and the required future commitments, no dividend has been recommended for the financial year ended March 31, 2019.

Operations of the Company

The total income of the Company during the financial year under review was Rs 1,57,17,551 as against Rs 1,03,69,082 in the previous financial year. The increase was primarily due to increased dividend income.

The total expenditure during the year was Rs 8,23,26,647 as against Rs 2,64,80,221 in the previous financial year. The increase in expenditure was primarily due to increase in employee costs and legal / professional expenses.The net profit is Rs 3,00,66,359 as against a loss of Rs 1,60,74,471in the previous year. The profit for the year was earned from sale of investments.

Market Value of Companys investment

The Companys net worth, taking into account the market value of the Companys investments, would be more than adequate to meet its liabilities and to continue its operations in future.

Future Prospects

Your Company is in the category of NBFC-CIC (exempted) and it continues to hold strategic investments in different companies. The dividend distribution by the Investee Companies contributes to the Companys revenue.

In order to strengthen the prospects of the Company, your Directors/Management were evaluating options to enter into additional activities. The attachment/transfer of the Companys investments by the Regulators has affected the cash flow position of the Company which in turn has affected these primary discussions. Should the situation improve, the Company would again evaluate available options during the current year.

Directors and Key Managerial Personnel

Ms. Tushita Patel (DIN 07017591) a, Non-Executive Woman Director, is liable to retire by rotation at the ensuing Annual General Meeting and, being eligible, offers herself for re-appointment.The Nomination and Remuneration Committee has recommended the re-appointment of Ms. Tushita Patel as a Director liable to retire by rotation.

Mr. Ajay Kumar Vijay was appointed as a Whole Time Director and Key Managerial Personnel of the Company for a period of 3 years w.e.f. May 9, 2019 designated as Executive Director and Chief Executive Officer of the Company onthe recommendation of the Nomination and Remuneration Committee. His appointment is subject to the approval of the Members of the Company.

The other Key Managerial Personnel are the Company Secretary, Mr. Manoj Kumar and the Chief Financial Officer, Mr. Arindam Ash. The affairs of the Company are conducted under the overall supervision and guidance of the Board of Directors of the Company. None of the Directors of the Company are disqualified under Section 164 (2) of the Companies Act, 2013. Your Directors have made necessary disclosures as required under the provisions of the Companies Act, 2013.

Directors Responsibility Statement

The Board of Directors of the Company hereby state that:

(a) in the preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures; (b) accounting policies have been selected and applied consistently and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at the end of the financial year and of the profit of the Company for that period; (c)proper and sufficient care has been taken 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 prevention and detection of fraud and other irregularities; (d)the Annual Accounts have been prepared on a going concern basis; (e)Internal Financial Controls have been laid down to be followed by the Company and that such Internal Financial Controls are adequate and operating effectively and (f)proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Statutory Auditors

(a)Appointment of Statutory Auditors:

The Members of the Company had appointed M/s. BVC & Co., Chartered Accountants, (Firm Registration No. 008154S) as the Statutory Auditors of the Company for a period of five years commencing from the conclusion of the Thirteenth Annual General Meeting to the conclusion of the Eighteenth Annual General Meeting of the Company. The Auditors have confirmed that they continue to fulfil the criteria for appointment as Auditor of the Company as prescribed under the Act and the Rules framed thereunder.

 

(b)Auditors Qualifications and Board responses:

Certain issues relating to Companys income stream and its effect on the going concern aspects, Companys investments in a Promoter Company which is under winding up proceedings in Karnataka High Court and Companys investments in a Promotee Company which is in liquidation as per the Order of National Company Law Tribunal, Mumbai are the subject matter of Qualifications in the Audit Report.These Qualifications have been explained in Note no. 23 and 18 of the financial statements.

Corporate Governance & Management Discussion and Analysis Reports

Pursuant to the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, (SEBI LODR) a report on Corporate Governance and Management Discussion and Analysis Report are attached to this Report.

The Auditors Certificate confirming compliance of conditions of Corporate Governance is appended to this report. (CEO/CFO Certificate) as required under Regulation 17 of the SEBI LODR has been signed by the CFO of the Company.

DISCLOSURES :

Board and its Committees

The details of the composition of the Board and its Committees and the meetings of the Board and Committees held during the financial year are given in the Report on Corporate Governance. All the recommendations made by the Audit Committee and Nomination and Remuneration Committee from time to time were accepted by the Board.

Declarations by Independent Directors

All the Independent Directors have given a declaration in terms of sub-section (6) of Section 149 of the Companies Act, 2013. During the year your Company have not appointed any Independent Director.

Performance Evaluation of the Board and Committees

The details of annual evaluation made by the Board of its own performance and that of its committees, individual directors individually and performance criteria for Independent Directors laid down by the Nomination and Remuneration Committee are enclosed as Annexure – A tothis Report. The policy for performance evaluation of the Independent Directors and Board of Directors is available on the Companys website www.mcdowellholdings.co.in.

Details of remuneration to Directors

During the year under review, none of the Directors were paid any remuneration other than sitting fees for attending the committee and board meetings, as such the disclosures required under Section 197(12) of the Companies Act, 2013 is not applicable to the Company. Sitting fees are paid to Independent Directors for attending Board/Committee meetings. They are also entitled to reimbursement of actual travel expenses, boarding and lodging, conveyance and incidental expenses incurred in attending such meetings.

Particulars of Employees and Related Disclosures

Disclosures required to be made under Section 197(12) of the Companies Act, 2013 read with Rules 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 do not apply to Company for the year under review. The Company had not offered any shares to its employees or Key Managerial Personnel under any scheme of Employees Stock Option and has also not issued any sweat equity at any time.

Deposits

During the year under review, your Company did not accept any deposits within the meaning of provisions of Chapter-V, (Acceptance of Deposits by Companies) of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.

Corporate Social Responsibility (CSR)

The Company has constituted a Corporate Social Responsibility Committee as required under Section 135 of the Companies Act, 2013. Since the average net profit of the Company for the preceding three financial years was negative, there was no necessity for the Company to carry out any CSR spending for the period under review.

Secretarial Audit

(a) Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed M/s. I B Harikrishna & Co.

(C. P. No. 5302/Membership No. F 5829) Company Secretary in Practice to undertake the Secretarial Audit of the Company. The Report furnished by Auditor in the format prescribed is enclosed as Annexure - B to this report.

 

(b) Qualifications and Board responses

The Board responses to the qualifications of the Secretarial Audit are as under

Mr. Ajay Kumar Vijay was appointed as a Whole Time Director and Key Managerial Personnel of the Company for a period of 3 years w.e.f. May 9, 2019 designated as Executive Director and Chief Executive Officer of the Company.

In the absence of a Chief Executive Officer/Managing Director, the Compliance Certificate has been obtained from the Chief Financial Officer of the Company.

Internal Control System

The Company has a robust system of internal control, the effectiveness of which is tested by the process of internal audit under the supervision of Audit Committee.

Your Company, through internal audit under the supervision of the Audit Committee reviews the risk management process, risk mitigation plans and risk reporting.

The adequacy and effectiveness of Internal Financial Controls have been endorsed by the Internal Auditor and the Statutory Auditors. The report of the Independent Statutory Auditors in the annexure to their Audit Report does not contain any adverse observations.

Vigil Mechanism

The Company has implemented a vigil mechanism to provide a framework for the Companys employees and Directors to promote responsible and secure whistle blowing. It protects the employees who raise concern about serious irregularities within the Company. A brief summary of the vigil mechanism implemented by the Company is set out in Annexure - C to this report.

Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year under review. The Whistle Blower Policy is available in the Company website, www. mcdowell holdings.co.in.

Share Capital

The Authorised Share Capital of the Company stands at Rs 15,00,00,000 comprising of 1,50,00,000 equity share of Rs 10 each and the issued, subscribed and paid up capital of the Company as on March 31, 2019 remain unchanged at Rs 13,99,22,580 comprising of 1,39,92,258 equity shares of Rs 10 each.

Depository System

The trading in the equity shares of your Company is under compulsory dematerialisation mode. As the depository system offers numerous advantages, Members are requested to take advantage of the same and avail the facility of dematerialisation of the Companys shares. Moreover, transfer of shares of the Company by physical means has been barred from April 01, 2019 pursuant to SEBIs Notification dated December 3, 2018.

Listing Requirements

Your Companys Equity Shares are listed on the BSE Limited (formerly Bombay Stock Exchange Limited) and National Stock Exchange of India Limited. The listing fees have been paid to both the Stock Exchanges for the year 2019-2020.

Extract of Annual Return

An extract of Annual Return in Form MGT-9 as on March 31, 2019 is available on the website of the Company www. mcdowellholdings.co.in and is available through the link http://mcdowellholdings.co.in/investors/others.

Nomination and Remuneration Policy

The Board on the recommendation of the Nomination and Remuneration Committee has laid down a policy for the appointment and remuneration of the Directors, Key Managerial Personnel and Senior Executives of the Company. The same is set out in Annexure - D to this report.

Particulars of Loans, Guarantees or investments

Details of loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are given in Note 8 & 11 of the Notes to the Financial Statements.

Subsidiary, Associates and Joint Ventures

The Company does not have any Subsidiary, Associates or Joint Ventures

Related Party Transactions

There were no related party transactions within the purview of Section 186 of the Companies Act, 2013. The Policy for Related Party Transactions, is available on the Companys website: www.mcdowellholdings. co.in.

Familiarisation Programme for Independent Directors

The details of programmes for familiarisation of the Independent Directors, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are available on the Companys website: www.mcdowellholdings.co.in.

Energy Conservation, Technology Absorption, Foreign Exchange Earnings and Outgo

The provisions under Section 134 of the Companies Act, 2013 and rules made there under relating to energy conservation, technology absorption do not apply to the Company, as the Company is not engaged in the manufacturing activities. There were no foreign exchange earnings or outgo during the year under review.

Significant and material changes/commitment/events/orders passed by the regulators subsequent to the date of financial statement for the year under review.

The Company has entered into a Settlement Agreement dated June 17, 2019 (herein after referred to as "SA") with Zuari Agro Chemicals Limited (hereinafter referred to as "ZACL"), Pursuant to SA, the Companys dues to ZACL as on June 30, 2019 has been finalised at Rs 18.52 crores (this includes interest of 7.91 crores and Principal of Rs 10.61 crores.)

ZACL (in which Zuari Fertilizers and Chemicals Ltd has merged) had initiated Corporate Insolvency Resolution Process (under Section 7 of the Insolvency and Bankruptcy Code, 2016), on the premise of non-payment of dues of Rs 17.87 crores from the Company to ZACL. Mangalore Chemicals and Fertilizers Limited (hereinafter referred to as "MCF"), which is a subsidiary of ZACL, owed 9.39 crores to the Company. The Company had sought for an adjustment of this amount from the total dues payable to ZACL. The SA was executed to bring an end to the Insolvency proceedings wherein the dues from MCF to the Company has been agreed to be adjusted by ZACL against their dues. The dues to ZACL as on June 17, 2019 has been finalised at Rs 18.97 crores. This has been partly paid ( 5.91 crores) has been paid by transfer of 11,85,151 MCF shares to ZACL. Pursuant to this adjustment, the amount outstanding to ZACL as on July 31, 2019 is

Rs 12.74 crores only. The interest is accruing @18% per annum.As per the SA, the balance due is payable within 18 months from the date of SA and non-payment within this period gives a right to ZACL to re-initiate the Insolvency proceedings upon the Company.

Pursuant to this SA, all the related proceedings in City Civil Court, Supreme Court, High Court of Karnataka and NCLT (IBC proceedings) have been withdrawn by both the parties.

Sexual harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013

There were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

Acknowledgement

Your Directors wish to acknowledge the co-operation and support extended by the employees and the shareholders of the Company.

By Order of the Board
M S Kapur
Place: Bengaluru Chairman
Date: August 02, 2019 [DIN 00703815]