Megastar Foods Ltd Directors Report.

The Directors are pleased to present the 8th Annual Report on the business and operations of the Company together with the Audited Accounts for the financial year ended March 31, 2019.

GENERAL OUTLOOK OF THE COMPANY

Our Company is having state of the art modern machinery at its wheat processing plant in Punjab, India, with an installed capacity of 84000 MT for the Financial Year 2018-19. It has been our constant endeavour at all the levels to ensure processing of wheat with quality, undertaking testing and exploring new possibilities by our team of highly skilled people. It has been our hallmark in our organization to strictly follow the Good Manufacturing Practices (GMP), Good Laboratory Practices (GLP) to ensure the high standards of food safety, quality & hygiene. At present we are catering primarily to MNCs in India and also exporting some of our products to United Nations Organization, Europe, United States & Middle East.

Our companys main aim is to maintain and deepen relationships with our customers to which we can serve successfully by providing them a point of difference, adding value and ultimately, providing profitable growth for both parties. Our customers are supported by a highly skilled, enthusiastic, can-do culture team throughout the whole business. Our endeavour is to maintain an efficiently sound business in order to provide a secured future to our fellow employees while stressing on the continual improvement of our highly ranked products for a constantly enhanced customer satisfaction.

For the financial year ended on March 31, 2019 the company has earned a net profit of Rs. 242.56 Lakh as compared to the net profit of Rs. 130.49 Lakh, for the previous year ended on March 31, 2018.

FINANCIAL PERFORMANCE

The financial position of the company for the financial year ended on March 31, 2019 is summarised below:

PARTICULARS 2018-19 2017-18
Revenue from Operations 14233.16 10294.06
Other Income 4.15 4.36
Total Revenue 14237.31 10298.42
Profit Before Tax, Depreciation and Finance Cost and extraordinary items 751.63 498.97
Finance Cost (311.15) (266.34)
Depreciation and Amortization expenses (98.25) (86.59)
Prior period expenses (2.31) 0.00
Profit before Tax 339.92 146.04
Tax (97.35) (15.55)
Profit After Tax 242.56 130.49
Earning Per Share:
Basic 2.55 2.16
Diluted 2.55 2.16

OPERATIONS

The companys operations are managed by a highly qualified and dedicated team of professionals. Under the abled guidance of the professional team,

The revenue from Sales for the Company increased fromRs. 10294.06 lakh in the previous year to Rs. 14233.16 lakh during the financial year ended on March 31, 2019.

DIVIDEND

Your Directors have decided to plough back the earnings in the growth of business and for this reason, have decided to not to recommend any Dividend for the year under review.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

Management Discussion & Analysis Report for the year under review which also covers the performance of the company is presented in a separate section and forms a part of this Annual Report.

CORPORATE GOVERNANCE

The compliance with the corporate governance provisions as specified in SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 are not applicable to your Company, as the Company is listed on BSE SME exchange. However, the company has voluntarily adopted majority of the provisions of the said regulations as a part of its endeavour towards good corporate governance practice. A report on Corporate Governance has been submitted by the company as a part of this report.

INDUSTRIAL RELATIONS

Industrial relations and work atmosphere remained cordial throughout the year with sustained communication and engagement with workforce through various forums.

CREDIT RATING

The Company enjoys a credit rating provided by CRISIL BB+/Stable for long term and CRISIL A4+ for short term which is assured to be substantially improved on the basis of current results. The Company has not defaulted in payment of its obligations to any financial institutions during FY 2018-19.

However, after the closure of Financial Year, the Company is awarded improved credit rating provided by Brickwork BWR BBB- for long term and BWR A3 for short term.

SAFETY, HEALTH AND ENVIRONMENT

The Company continues to demonstrate strong commitment to safety, health and environment which have been adopted as core organizational values. The Company assures safety and facilities in accordance with statutory and regulatory requirements. Employees are continuously made aware of hazards / risks associated with their job and their knowledge and skills are updated through requisite training to meet any emergency. Medical and occupational check-ups of employees and eco-friendly activities are promoted. The Company does not produce any kind of hazardous waste.

FINANCE

Increase in sales and elongated working capital cycle during the year are the major causes for an increased finance cost during the year. The finance cost for the year ended on March 31, 2019 was Rs. 311.15 lakhs. The Company managed to procure enough lines of credit to ensure a smooth flow of operations. The free reserve of the Company as on 31st March, 2019 increased from Rs. 143.05 lakhs to 880.21 lakhs.

BOARD OF DIRECTORS AND KEY MANAGERIAL PERSONNEL

As at the end of the financial year 2018-19, the company had 6 Directors and 2 Key Managerial Personnel.

S. No. NAME DESIGNATION DATE OF APPOINTMENT
1. Mr. Vikas Goel Chairman cum Managing Director (CMD) 28/11/2011
2. Mr. Vikas Gupta Whole Time Director (WTD) 28/11/2011
3. Mr. Mudit Goyal Whole Time Director (WTD) 31/03/2018
4. Mr. Amit Mittal Non-Executive Independent Director (NEID) 04/04/2018
5. Mr. Prabhat Kumar Non-Executive Independent Director (NEID) 04/04/2018
6. Ms. Savita Bansal Non-Executive Independent Director (NEID) 04/04/2018
7. Mr. Robin Kumar Company Secretary (KMP) 27/02/2019
8. Mr. Vijay Sharma Chief Financial Officer (KMP) 31/03/2018

The independent Directors are entitled to hold office for a term of 5 years and are not liable to retire by rotation.

Mr. Mudit Goyal (DIN: 08099543) Whole Time Director of the Company retires by rotation at the ensuing 8th Annual General Meeting of the company and being eligible, offers himself for reappointment. Though, such determination of office by retirement and then re-appointment would not constitute a break in his tenure of service as the Whole Time Director of the Company.

In the beginning of the financial year under review, Mr. Prabhat Kumar, Mr. Amit Mittal and Ms. Savita Bansal were appointed as Non-Executive Independent Directors of the Company on April 04, 2018. The independent Directors are entitled to hold office for a term of 5 years and are not liable to retire by rotation.

Mr. Vijay Sharma was appointed as the Chief Financial Officer w.e.f. 31.03.2018 and Mr. Robin Kumar was appointed as the Company Secretary w.e.f. 27.02.2019 in place of Ms. Neharika Sodhi who was appointed as the Company Secretary of the company on 27.11.2017. Both of them hold the positions of Key Managerial Personnel of the company as per Section 203 of the Companies Act, 2013.

None of the Directors of your Company is disqualified under the provisions of Section 164(2)(a) and (b) of the Companies Act, 2013. During the period under review, none of the Non- Executive Directors of the Company had any pecuniary relationship or transactions with the Company. Further, none of the Non-Executive Directors of the company have any shareholding in the company.

The details of the Directors being recommended for appointment / re-appointment are contained in the Notice convening the forthcoming Annual General Meeting of the Company

DECLARATION OF INDEPENDENCE

Your Company has received declarations from all the Independent Directors confirming that they meet the criteria of independence as prescribed under the provisions of Companies Act, 2013 read with rules made thereunder.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has no Subsidiary, Joint Venture or Associate Company in the Financial Year 2018-19.

However, after the closure of the financial year, the company acquired a Wholly Owned Subsidiary (WOS) in the name and style of M/s Megapacific Ventures Private Limited

EXTRACT OF ANNUAL RETURN

Pursuant to Section 92 (3) of the Act and Rule 12 (1) of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in Form MGT-9 is attached as ANNEXURE-1. https://www.megastarfoods.com/Other-stock-exchange-compliances

PARTICULARS OF CONTRACT OR ARRANGEMENT WITH RELATED PARTIES

All related party transactions entered into during FY 2018-19 were on an arms length basis and in the ordinary course of business. During FY 2018-19, the Company has not entered into any material related party transaction and Particulars of contracts or arrangements with related parties referred to in section 188 (1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as ANNEXURE-2 to the Boards Report.

The Company has formulated a policy on dealing with related party transactions which is posted on the website of the Company at the web link https://www.megastarfoods.com/assets/pdf/Policy-on-related-party-transactions.pdf

NUMBER OF BOARD MEETINGS AND COMMITTEE MEETINGS

During the year under review, 11 (Eleven) Board meetings, 5 (Five) Audit Committee meetings, 5 (Five) Stakeholders Relationship Committee meetings, 2 (Two) Nomination & Remuneration Committee meetings and 1 (One) Corporate Social responsibility Committee meeting were convened and held. Details and attendance of such Board & Committees meetings are mentioned in Corporate Governance Report.

Pursuant to clause VII (1) of Schedule IV of the Companies Act, 2013, the Independent Directors had a separate meeting on 27.02.2019.

PROGRAMME FOR FAMILIARISATION OF INDEPENDENT DIRECTORS

The details of programme for familiarization of independent directors of the Company, 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 put up on the website of the Companys website www.megastarfoods.com

PARTICULARS OF LOANS/ ADVANCES/ INVESTMENTS MADE DURING THE FINANCIAL YEAR

Particulars of loans, guarantees, investments and securities provided during the financial year under review, covered under the provisions of Section 186 of the Companies Act, 2013, have been provided in the Financial Statements which forms part of the Annual Report and there is no any amount of loans, guarantees and investments made during the financial year 2018-19.

RESERVES

Entire amount of Net Profit of Rs. 242.56 Lakhs for the financial year has been transferred to Profit and Loss Surplus account, which appears under the head "Reserves and Surplus." No amount has been transferred to any other reserves.

MATERIAL CHANGES AND COMMITMENTS IF ANY, AFFECTING FINANCIAL POSITION OF THE COMPANY FROM THE END OF FINANCIAL YEAR AND TILL THE DATE OF THIS REPORT no material changes and commitments which could affect the Companys financial position have occurred since the close of the financial year on March 31, 2019 till the date of this Boards Report. Further it is hereby confirmed that there has been no change in the nature of business of the Company during the financial year 2018-19.

SUSTAINABILITY INITIATIVE

Your Company is conscious of its responsibility towards preservation of natural resources and continuously takes initiatives to reduce consumption of electricity and water.

RISK MANAGEMENT

The primary objective of risk management is to protect the Company against risks to the value of the business, its capital and its continuity. In order to achieve the objective and for better governance, the Company has adopted a formal Risk Management Policy and also posted on the Company website: www.megastarfoods.com. The Policy sets out key risk areas - financial risks (including risk to assets), legislative and regulatory risks, environmental risks (including natural disasters), operational risks (markets, production, technology, etc.), risks relating to employment and manpower, and individual large transactional risks.

The Chairman-cum-Managing Director of the company identifies and proposes action in respect of all risks through his Management team as and when any are perceived or foreseen or inherent in operations; analyses these, and then recommend it to Audit Committee for its review and further mitigation measures.

CHANGE IN THE NATURE OF BUSINESS

There has been no change in the nature of business of the Company during the year.

SHARE CAPITAL

The authorised share capital of the company at the end of the Financial Year 2018-19 was Rs. 15,00,00,000/- comprising of 1,50,00,000 equity shares of Rs. 10/- each.

During the financial year ended March 31, 2019, Company issued 26,80,000 (Twenty Six Lakh Eighty Thousand) Equity shares through Initial Public Offer (IPO) at Rs. 30 (INR Thirty Only) each including premium of Rs. 20 (INR Twenty Only) each, with this issue the Equity share paid up Capital of the Company increased from Rs. 7,22,37,000 (INR Seven Crore Twenty Two Lakh Thirty Seven Thousand Only) to Rs. 9,90,37,000 (INR Nine Crore Ninety Lakh Thirty Seven Thousand Only). Further, during the financial year, the shares of the company were listed on the SME Exchange of BSE Limited with effect from 24.05.2018.

DEPOSITS

The Company has neither accepted nor renewed any fixed deposits from the public or the Members, within the meaning of Section 73 of the Companies Act, 2013, read with Chapter V of the Companies Act, 2013 and the Companies Acceptance of Deposits) Rules, 2014, during the financial year 2018-19, and as such, no amount of principal or interest on deposits from public or the Members, was outstanding as of the Balance Sheet date.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNAL

There are no significant and/or material orders passed by the Regulator(s) or Court(s) or Tribunal(s) impacting the going concern status of the Company and its business operations in near future.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO

The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in ANNEXURE-3 and is attached to this report.

HUMAN RESOURCES AND EMPLOYEE RELATIONS

There is an on-going emphasis on building a progressive Human Resources culture within the Organisation. Structured initiatives to nurture talent and create a working environment that fosters motivation, team-work and result orientation continue to be addressed. Productivity level continued to be subject to continuous monitoring.

Employee strength as on March 31, 2019 was 177 as compared to 86 in the previous year.

DISCLOSURE OF INTERNAL FINANCIAL CONTROLS

The Internal Financial Controls with reference to financial statements as designed and implemented by the Company are adequate and commensurate with the size, scale and complexity of its operation. The internal controls are tested for adequacy, efficiency and effectiveness through audits by the in- house internal audit department and the observations, corrective and preventative actions are reviewed by the management and Audit committee of the Board of Directors.

During financial year under review, no material or serious observation has been received from the Internal Auditors of the Company for inadequacy or ineffectiveness of such controls.

VIGIL MECHANISM POLICY

The Company has in place a Vigil Mechanism/Whistle Blower Policy, in terms of provisions of Section 178(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its powers) Rules, 2014 which was approved by the Board of Directors on 4th April, 2018. The Companys personnel have direct access to the chairman of the Audit Committee to report concerns about unethical behaviour (actual or suspected), frauds and other grievances. No personnel of the Company have been denied access to the Audit Committee. Adequate safeguards are being provided against victimization of whistle blowers availing of such mechanism.

Whistle Blower Policy of the Company is posted on the website of the Company at the web link http://megastarfoods.com/whistle-blower

CERTIFICATIONS

Your company is having following certificates: BRC FOOD, INDIA ORGANIC NPOP/NAB/002, HALAL INDIA and SEDEX (enabling responsible supply chains) for its quality management systems and supplies employed at every level of the organization.

PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE

Your Company has zero tolerance policy in case of sexual harassment at workplace and is committed to provide a healthy environment to each and every employee of the Company. The Company has in place ‘Policy for Prevention and Redressal of Sexual Harassment in line with the requirements of Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 (hereinafter referred "as the said act") and Rules made there under. As per the provisions of Section 4 of the said Act, the Board of Directors has constituted the Internal Complaints Committee (‘ICC) at the Registered Office, Works to deal with the Complaints received by the Company pertaining to gender discrimination and sexual harassment at workplace.

Further, as per the provisions of Section 21 & 22 of the said Act, the Report on the details of the number of cases filed under Sexual Harassment and their disposal for the financial year under review, is as under:

Sr. No. No. of cases pending as on the beginning of the financial year under review No. of complaints filed during the financial year under review No. of cases pending as on the end of the financial year under review
NIL

SECRETARIAL STANDARDS

The Company has duly complied with the applicable Secretarial Standards on Meeting of Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India (ICSI).

DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, the Board of Directors hereby confirms 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. Such accounting policies have been selected and applied consistently and the Directors have 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 as at March 31st, 2019 and of the Profit and Loss of the Company for the year ended on that date; c. Proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. The annual accounts of the Company 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 were operating effectively; f. Proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

ALTERATION OF MEMORANDUM OF ASSOCIATION AND ARTICLES OF ASSOCIATION

During the financial year under review, the company has not carried out any amendment to the Memorandum of Association and Articles of Association of the company.

COMMITTEES OF BOARD OF DIRECTORS

The Board of directors have the following committees:

1. Audit Committee

2. Nomination and Remuneration Committee

3. Stakeholders Relationship Committee

4. Corporate Social Responsibility Committee

Apart from above, the Board has constituted 1 (non-statutory) committee namely Finance and Investment Committee. The Composition, terms of reference and number of meetings of the Committees during the period under review is covered in the enclosed Corporate Governance Report.

STATUTORY AUDITOR AND THEIR REPORT

M/s Avnish Sharma & Associates (Firm Reg. No.009398N), Chartered Accountants, Chandigarh, were appointed in the 4th the Annual general Meeting held on 30th September, 2014 for a term of 5 (Five) years to hold officer upto the 8th Annual General Meeting. Being eligible and qualified, M/s Avnish Sharma & Associates are proposed to be re-appointed for another term of (Four) years at the ensuing 8thAnnual General Meeting to hold office from the conclusion of the 8thAGM upto the conclusion of the12th Annual General Meeting of the company

The Auditors Report is having one adverse remark related to delay in payment of Provident Fund for the month of November and February which is deposited on 17th December, 2018 and 19th March, 2019 instead of 15th December, 2018 and 15th March, 2019 respectively which is not material in nature and reason of delay in payment being slowdown of the web server of concerned government website, as the Company has made all the efforts for making the payment on time, apart from the above said remark, there is no any other reservations, qualifications, adverse remarks or Modified opinion in the Audit Reports issued by them in respect of Financial Statements of the Company for the Financial Year 2018-19.

HUMAN RESOURCES DEVELOPMENT

It is a proud statement in itself that your Company continues to be an Employer of choice for a host of workforce. Value based HR programs unleashed by the Company from time to time have enabled the companys HR team to contribute substantially to the overall growth of the Company. In order to keep pace with the ever evolving demands of the existing business and the gamut of activities in Digital space, HR has been placing tremendous focus on capability building in newer areas with an objective to predict, diagnose, and take actions that will improve business performance. Further discussion on this subject is included in the Management Discussion and Analysis Report forming part of this report.

NOMINATION & REMUNERATION POLICY AND BOARD EVALUATION

Pursuant to the requirement of Section 134(3)(e) and Section 178(3) of the Companies Act, 2013, the Board has on the recommendation of the Nomination and Remuneration Committee, framed a policy on appointment of Directors including criteria for determining qualifications, positive attributes, independence of a Director and the policy on remuneration of Directors, KMP and other senior management. Remuneration policy in the Company is designed to create a high performance culture. It enables the Company to attract, retain and motivate employees to achieve results. Our Business Model promotes customer centricity and requires employee mobility to address project needs. The remuneration policy supports such mobility through pay models that are compliant to applicable rules and regulation.

The Company pays remuneration by way of salary, benefits, perquisites and allowances and commission, if approved by the Board to its Managing Director and the Whole Time Directors. Annual increments are decided by the Nomination and Remuneration Committee within the salary scale approved by the members and are effective April 1, each year. The Nomination and Remuneration Committee decides on the commission payable to the Managing Director and the Whole Time Directors out of the profits for the financial year and within the ceilings prescribed under the Act based on the performance of the Company as well as that of the Managing Director and each Whole Time Director.

Managerial Remuneration: a. Remuneration of Chairman & Managing Director and Whole Time Directors

The details of remuneration paid to Chairman & Managing Director and Whole Time Directors of the Company for the financial year 2018-19 are as under:

PARTICULARS Mr. Vikas Goel Mr. Vikas Gupta Mr. Mudit Goyal
Salary (In Lakhs) 41.80 41.80 21.10
Contribution to PF & Other Funds
Total (In Lakhs) 41.80 41.80 21.10

b. Non-Executive Independent Directors (NEIDs):

During the year, the NEIDs were neither paid any remuneration nor granted any loans or advances. the Non-Executive Directors were eligible for sitting fees for each meeting of the Board attended by him/her, of such sum as may be approved by the Board of Directors within the overall limits prescribed under the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. A Non-Executive Director is also eligible for reimbursement the expenses incurred by him for attending the Board and / or Committee of Board meetings, there are no materially significant related party transactions, pecuniary transactions or relationships between the Company and its Directors except those disclosed in the financial statements for the year ended on March 31, 2019.

The details of sitting fees paid to the Non-Executive Directors during the financial year 2018-19 are given below:

S. No. Name of the Non- Executive Director Sitting Fees (in Rs.)
1. Mr. Prabhat Kumar 20,000
2. Mr. Amit Mittal 20,000
3. Ms. Savita Bansal 20,000
Total 60,000

c. Details of shares of the Company held by the Directors as on March 31, 2019 are given below:

S. No. Name of the Director No. of Equity Shares Held
1. Mr. Vikas Goel 2492660
2. Mr. Vikas Gupta 2139900
3. Mr. Mudit Goyal 181500
4. Mr. Prabhat Kumar Nil
5. Mr. Amit Mittal Nil
6. Ms. Savita Bansal Nil

DISCLOSURE PERTAINING TO MANAGERIAL REMUNERATION

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided as per ANNEXURE- 4.

SECRETARIAL AUDITOR AND AUDIT REPORT

The Board had appointed Mr. Kanwaljit Singh Thanewal, Practicing Company Secretary (M. No. 5901 & C.P No. 5870), as Secretarial Auditor to conduct the secretarial audit of the company for the financial year 2018-19, pursuant to the provisions of Section 204 of the Companies Act, 2013. The Report of the Secretarial Auditor forms part of the Boards Report as ANNEXURE ‘A. The said report of the Secretarial Auditor contains no qualifications or adverse remarks.

REPORTING OF FRAUDS

There has been no frauds reported by the Auditors, under sub section (12) of Section 143 of the Companies Act, 2013(including amendments), during the financial year under review, to the Board of Directors and hence, as such there is nothing to report by the Board under Section 134(3)(ca) of the Companies Act, 2013.

COST AUDIT

As per the provisions of Section 148 read with the Cost Audit Rules, the provisions regarding Cost Audit is not applicable to the Company.

AMOUNTS DUE TO MICRO, SMALL AND MEDIUM ENTERPRISES

During the Financial Year 2018-19 there being no amount outstanding for more than 45 days as per the provisions prescribed in The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006.

ACKNOWLEDGEMENT

Employee relations throughout the Company were harmonious. The Board wishes to place on record its appreciation to all employees in the Company, for their sustained efforts and immense contribution to the good levels of performance and growth that the Company has achieved during the financial year under review.

Your Directors also place on record their sincere thanks and appreciation for the continuing support and assistance received from the financial institutions, banks, Government as well as non –government authorities, customers, vendors, and members during the financial year under review.

Date: 09.08.2019 FOR AND ON BEHALF OF THE BOARD OF DIRECTORS
Place: Chandigarh MEGASTAR FOODS LIMITED
VIKAS GOEL VIKAS GUPTA
Chairman-cum-Managing Director Whole Time Director
(DIN: 05122585) (DIN: 05123386)