NCL Industries Ltd Directors Report.

Your Directors have pleasure in presenting their Report for the financial year ended March 31, 2019.

Financial Results

The Audited Financial Statements for the year ended March 31, 2019, and the report of the Auditors thereon are being circulated with this report. The salient features of the financial results are as follows:

(Rs. in lakhs)
2018-19 2017-18
Total Revenue 1,47,140.89 1,33,998.75
Profit Before Tax 6,098.68 7,436.91
Provision for Tax (including deferred tax) 1,420.58 2,526.15
Profit for the year after tax 4,678.10 4,910.76
Transfer to General Reserve 3,500.00 4,000.00

Your Directors are pleased to report that the year under review marked the highest turnover achieved since its inception of your Company. The total revenue of Rs.1,471.40 Crores represented a growth of over 9.81 % compared to the previous year. Improvement in cement production and sales during the year under review contributed to the healthy performance.

The Boards Division recorded a Turnover of Rs.134.66 Crores during the year under review.

The generation of hydel power during the year increased to 22.36 million units, compared to 18.54 million units in the previous year. However, optimal generation of power could not be achieved by the Energy Division in the absence of release of adequate water during the year under review. The Ready Mix Concrete division improved its performance during the year under review.

While the physical performance in terms of production and sales improved, there was a marginal fall in the Profit After Tax ( Rs.46.78 Crores) compared to 49.11 Crores in the previous year. This was mainly due to pressures on the average net realization of cement and the demand supply dynamics.

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

Change in Capital Structure

During the year under review, the Company availed Term loan of Rs.135.00 Crores from Yes Bank at lower rate of interest and the entire proceeds were utilized for redemption of high cost of outstanding Non Convertible Debentures (NCDs). With this tranche, the entire amount of Rs.320 Crores NCDs raised in the earlier years stand redeemed.

Readymade Doors:

As intimated in the last Annual Report, the plant for manufacture of Readymade Doors to produce 1000 doors per day has been installed at Malkapur near Hyderabad. The exercise of marketing and brand building has started in earnest. Your Board hopes to report further progress in the performance of this plant in its next report.

Dividend

Considering the stable performance, your Directors are pleased to maintain the dividend level, and recommend a dividend @ 25 % i.e. Rs.2.50 per share (Face value of Rs.10/- each) for the financial year 2018-19.

Registered Office

During the year under review, the Registered & Corporate Office of the Company relocated to its own premises situated in Secunderabad w.e.f 21st December, 2018.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134 (3) (c) of the Companies Act, 2013, and on the basis of the information furnished to them by the concerned accounting professionals, your Directors confirm that:

I. All applicable accounting standards have been followed in the preparation of annual accounts and that there are no material departures.

II. The Directors 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, 2019 and of the profit of the Company for the year ended on that date.

III. The Directors 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.

IV. The Directors prepared the Annual Accounts on a going concern basis.

V. Proper internal financial controls were in place and that the financial controls were adequate and were operating effectively.

VI. Appropriate systems were devised to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

DIRECTORS AND KEY MANAGERIAL PERSONS (KMP)

Independent Directors

During the year under review, your Company had five independent directors as stipulated by Section 149(6) of the Companies Act, 2013, namely Mr. R.Anand, Mr.V.S.Raju, Mr. Kamlesh Gandhi, Dr. R.Kalidas and Lt.General (Retd) T.A.Dcunha. There were three executive directors namely Mr. K Ravi, Managing Director, Mr.K.Gautam, Executive Director and Mr.N.G.V.S.G.Prasad, ED & CFO.

There has been no change in the composition of Board during the year under review.

Mr.R.Anand Chairman, having crossed the statutory age limit of 75 years, demitted office as Director and Chairman w.e.f 1st April, 2019 by virtue of Regulation 17(1A) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015,

A Special Resolution has been passed by the Shareholder through postal ballot on 25th March, 2019 approving continuation of Mr.V.S.Raju as an Independent Director beyond April 1, 2019 though he has already attained the age of 75 years.

The present term of the Mr. Kamlesh Gandhi, Independent Director is till 28th September, 2019 and he has been proposed to be reappointed for another term of 5 years. The Board has recommended his reappointment for a period of five years at the ensuing Annual General Meeting of the Company.

The terms and conditions of appointment of independent directors are as per Schedule IV of the Act. They have submitted declarations that each of them meets the criteria of independence as provided and in Section 149(6) of the Act and there has been no change in their status as independent director during the year.

Pursuant to Section 2(51) and Section 203 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, there is no change in the key managerial personnel of the Company during the year under review. Mr. T. Arun Kumar is the Company Secretary and Compliance officer.

The Company has received declarations from all the Independent Directors of the Company under Section 149(7) of the Companies Act, 2013 confirming that they continue to meet the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and Regulation 25 of the SEBI (LODR) Regulations, 2015.

At a meeting of the Board held on 30th May, 2019, Mr.Kamlesh Gandhi has been elected as the Chairman of the Board of Directors of the Company.

Board Evaluation

The annual performance evaluation of individual directors was carried out by the Board in compliance of the provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.The criteria in which the performance of the individual directors was carried out has been disclosed in the Corporate Governance Report. The Performance evaluation of independent directors was done by the entire Board of Directors excluding the director being evaluated.

Directors

Mr. K Madhu, Promoter Director has expressed his desire to step down from the Board as a part of his plans for gradual retirement from his corporate responsibilities. The Board has requested him to hold office till the ensuing Annual General Meeting so that the shareholders can meet him and bid farewell to him before demitting office.

Mr.Vinodrai V Goradia retires by rotation at the ensuing Annual General Meeting, and is eligible for reappointment. The Shareholders passed a Special resolution through postal ballot on 25th March, 2019 approving his continuation as Director beyond April 1, 2019 though he has already attained the age of 75 years.

At a meeting of the Board held on 14th February, 2019, Mr. Bhupatiraju Subba Raju has been appointed as a Director and Executive Director with effect from the date of assumption of office. Mr. Bhupatiraju Subba Raju assumed office on the 4th July 2019. Appropriate resolutions are being placed before the ensuing Annual General Meeting seeking approval of his appointment.

The Board wishes to place on record its appreciation of the valuable contribution made by Mr. R Anand and Mr. K Madhu during their tenures as Chairman and Director respectively.

Particulars of Directors whose appointment / reappointment sought are given in Annexure A-1 to this Report as part of the Report on Corporate Governance under SEBI (LODR) Regulations, 2015.

BOARD MEETINGS

During the year under review, five Board meetings were held on 30th May, 2018, 10th August, 2018, 25th September, 2018, 12th November, 2018 and 14th February,2019. The maximum time gap between any two consecutive meetings was within the period prescribed under the Companies Act, 2013.

Committees of the Board

The Board has constituted various committees as required under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015. The details of such Committees are given in Annexure - A as a part of the report on Corporate Governance.

Plans for Orderly Succession for appointments to Board etc,

Your Board of Directors is fully satisfied that plans are in place for orderly succession for appointments to the Board and to senior management positions.

CORPORATE GOVERNANCE

A separate report of compliance with the provisions relating to Corporate Governance as required SEBI (LODR) Regulations, 2015 is enclosed as Annexure A and forms part of this Report.

Risk Management

The company has a system of constantly identifying and monitoring the risks that the company may be exposed to. A Risk Management Committee headed by Independent Director as Chairman and one Independent Director and two other Non Executive Directors are the members. As and when required, the Committee and its members review various risks and steps taken to manage the risks. The Board is of the opinion that there are no elements of risks that may threaten the existence of the Company.

Particulars of Loans, Guarantees, or Investments under section 186 of the Companies Act, 2013

The company has not granted any loans, given any guarantees or made any investments during the year which would be covered under section 186 of the Companies Act, 2013.

Related Party Transactions

Pursuant to Section 134 (3) (h) of the companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the details of the Related Party Transactions are contained in Annexure A-2 to this Report.

Management Discussion and Analysis Report

The Management Discussion & Analysis Report is annexed as Annexure B to this Report.

Litigations

During the year under review, no significant or material orders were passed by any regulatory/statutory authorities or courts / tribunals against the company impairing its going concern status and operations in future.

Penalties

Vide an Adjudication Order dated 29th October 2018, the company has been imposed a monetary penalty of Rs.5 lakhs by SEBI for alleged failure to comply with Regulation 78(6) of SEBI (ICDR) Regulations.

The non-compliance with the regulations cited above were technical in nature, and did not result in any undue benefit or advantage to the Promoters. The above facts are brought out in the Adjudication Order itself.

For more details, shareholders may refer to the full text of the order which can be accessed at https://www.sebi.gov.in.

Corporate Social Responsibility (CSR) Activities

The company has a CSR Committee as prescribed by the Statute with Dr.R.Kalidas, Independent Director as Chairman. The Committee also includes one Executive and one Non-Executive Director. The CSR Committee meeting was held on 29th May, 2018 and reviewed the CSR Policy and CSR activities.

Under the provisions of Section 135 of the Companies Act, 2013 an amount of Rs.140.49 Lakhs was required to be spent on CSR activities for the financial year 2018-19. Your Directors are glad to report that the CSR expenditure incurred during the year towards education and health care exceeded the mandatory requirement. The total CSR expenditure was Rs.196.80 Lakhs. The details of the CSR activities during the year under review are listed in Annexure C to this Report.

Subsidiaries

Your Company has no subsidiaries, Associates or Joint Ventures as on the date of the Report.

Investor Education & Protection Fund

The Company has transferred Rs.17.77 Lakhs relating to unpaid Dividend for the Financial Year 2010-11 to the Investor Education & Protection Fund. As required by Section 124 of the Companies Act, 2013 and the rules made there under, a total of 8,848 equity shares of Rs.10/- each were transferred to the Investor Education and Protection Authority.

Fixed Deposits

The details relating to Fixed Deposits are as follows:

As on 31st March 2019, Rs.5754.68 Lakhs of Public Deposits were outstanding.The Company has repaid all the matured deposits that have been claimed, and there have been no defaults in payment of interest or repayment of principal. The details of deposits received from the directors / relatives of directors during the year under review in terms of MCA Notification No.GSR 695 (E) dated 15th September, 2015 are as under:

S.No Name of the Director / Relative of Director Amount (Rs. in lakhs) Inter-se Relationship
1 Mr.R.Anand 20.00 Chairman (up to 31.3.2019)
2 Mr.Vinodrai.V.Goradia 20.00 Director
3 Mr.Kamlesh Gandhi 15.00 Director
4 Mrs.Roopa Bhupatiraju 59.50 Director
5 Mr.K.Ravi 45.00 Managing Director
6 Mrs.K.Sailaja 80.00 Wife of Mr.K.Ravi
7 Mrs.Charulatha V.Goradia 10.00 Wife of Mr.V.V.Goradia
8 Master B.Arjun 15.40 Son of Mrs. Roopa Bhupatiraju-Director
9 Baby Anika Bhupatiraju 5.00 Daughter of Mrs. Roopa Bhupatiraju-Director
10 Mrs.K.Sarojini 3.00 Mother of Mr.K.Ravi & Mr.K.Madhu (Director)
11 Mr.R.Kiran 30.00 Son of Mr.R.Kalidas-Director
12 Mr.R.Arun 30.00 Son of Mr.R.Kalidas-Director
13 Mrs. N.Sita Mahalakshmi 3.50 Mother of Mr.N.G.V.S.G.Prasad
14 Ms.N.Suchitra Katyayani 20.00 Daughter of Mr.N.G.V.S.G.Prasad
15 Ms.N.Chaitra Sarada 26.50 Daughter of Mr.N.G.V.S.G.Prasad

Particulars of Employees

The details of employees who have been in receipt of remuneration envisaged by Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial personnel) vide MCA Notification dated 30th June, 2016 are annexed as Annexure D to this Report.

Auditors

The current tenure of the statutory auditors, M/s Venugopal & Chenoy, Chartered Accountants, expires at the ensuing AGM. Pursuant to Section 139 of the Companies Act, 2013 the Board of Directors upon recommendation of the Audit Committee has recommended their reappointment for a second consecutive term as permitted by the Statute. The proposed auditors have given consent for their re-appointment and have also issued a certificate confirming that their appointment, if made, will be within the limits prescribed under the provisions of Section 139 of the Companies Act 2013.

The Notes on the financial statements referred to in the Independent Auditors Report are self explanatory. The Auditors report does not contain any qualification, reservation or adverse remark.

Cost Audit

M/s S.R. and ASSOCIATES, Cost Accountants have been reappointed to conduct the cost audit pertaining to Cement as well as RMC of the company for the year 2018-19. They have been reappointed by the Board of Directors as Cost Auditor of the Company for the Financial Year 2019-20. The remuneration of the cost auditor is required to be ratified by the members in terms of the relevant Rules. Accordingly, the matter is being placed before the Members for ratification at the ensuing Annual General Meeting.

The Cost Audit Report for the financial year ended March, 31st, 2018 was duly filed with Ministry of Corporate Affairs on 07 /09 / 2018.

Secretarial Audit

M/s. A J Sharma & Associates, Company Secretaries, have been appointed to conduct the Secretarial Audit of the Company. The Secretarial Audit Report pursuant to the provisions of Section 204 of the Companies Act, 2013 is attached as Annexure E to this Report. The observations of the Report do not call for any explanation as envisaged by Section 204(3) of the said Act.

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

The Company has constituted a Committee on Prevention of Sexual Harassment at workplace for women in the line with the requirements of the The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013 and the Rules made there under.

During the year under review, there were no cases received pursuant to the aforesaid Act.

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo

Particulars required under Section 134 (3) (M) of the Companies act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 are furnished under Annexure F which forms part of this Report. Your Company continues to be conscious of the need for conservation of energy, and wherever feasible, effective steps for energy conservation are taken.

There were no significant investments or developments in this regard during the year under review. The technology procured for the various operating Divisions has been fully absorbed. There was no significant expenditure in Research & Development warranting a special mention in this Report.

Extract of Annual Return

Pursuant to the provisions of Section 92 of the Companies Act, 2013 and Rules framed there under, the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure G and forms part of this Report.

Acknowledgements

Your Directors wish to place on record their appreciation of the support and co-operation extended by Axis Bank, Yes Bank, HDFC Bank and Central and State Government Departments, Dealers, Stockists, Consumers and Depositors.

Your Directors also wish to place on record their appreciation of the enthusiastic support received from the shareholders.

Your Directors have pleasure in acknowledging the excellent co-operation received from the team of dedicated executives and employees who have contributed handsomely to the operations of the company.

For and on behalf of the Board
Kamlesh Gandhi
Chairman
Place: Hyderabad DIN:00004969
Date: 9th August, 2019

Annexure A-1

Particulars of Directors whose appointment/reappointment is being sought

Name of the Director Mr. Vinodrai V.Goradia Mr.Kamlesh Gandhi Mr. Bhupatiraju Subba Raju
Date of Birth 29/08/1937 16/06/1950 10/05/1976
Qualifications Graduate in Management Studies (BITS Pilani),Masters in Information Systems and MBA from Mississipi State University, USA
Directorship in other companies Nil Bhagyanagar (I) Ltd, Sundaram Clayton Ltd Kirloskar Electric Company Ltd and NCL Alltek & Seccolor ltd Nil
Membership of Audit/ Stakeholders Relationship Committees of other public Ltd companies Nil 2 Nil
No. of shares held in NCL Industries ltd 5,48,602 Nil 1,00,000
Inter-se relationship with other Directors of the company NA NA Son in Law of Mr.K.Ravi, Managing Director and Spouse of Mrs.Roopa Bhupatiraju, Director and related to Mr.Ashven Datla and Mr.K.Madhu, Directors
Awards/ Medals etc: Nil Nil Nil

Annexure A-2

Details of Related Party Transactions

Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014), Parties and Nature of Relationship:

Name Nature of Relationship
NCL Alltek & Seccolor Ltd
NCL Homes Ltd
NCL Veka Ltd Director(s) holding more than 2% equity share capital in the other company or its holding company
Kakatiya Industries (P) Ltd
NCL Green Habitat (P) Ltd
Khandaleru Power Co Ltd
NCL Holdings (A & S) Ltd

1) Details of material contracts or arrangement or transactions at arms length basis: A. Nature of Contract: Appointment of Key Managerial Personnel

Mr K Ravi- Managing Director From 01/04/2016 To 31/03/2021 Total Remuneration of Rs.303.01 Lakhs for FY2018-19 (Including salary, other perks, benefits plus 2% Commission of Net profits U/s 198 of the Companies Act, 2013) Board Approval 29.01.2016 Shareholders Approval 20.09.2016
Mr K. Gautam Executive Director 01/08/2017 To 31/07/2022 Total Remuneration of Rs.71.68 lakhs for F.Y.2018-19 (Including salary and other perks and benefits). Board Approval 27/05/2017 and Shareholders Approval Dt.22/09/2017
Mr. NGVSG Prasad Executive Director & CFO From 30/05/2016 To 30/05/2021 Total Remuneration of Rs.42.87 Lakhs for F.Y.2018-19 (Including salary and other perks and benefits) Board Approval 30/05/2016 Shareholders Approval 20/09/2016

B. Nature of Contract: Sale of Finished Goods

NCL Alltek & Seccolor Ltd No fixed duration. Rs.1143.26 lakhs Omnibus Audit Committee approval dated 30.05.2018
NCL Homes Ltd As per the requirement. Rs.60.73 Lakhs
NCL Veka Ltd Director(s) holding more than 2% Rs.0.54 Lakhs
Kakatiya Industries (P) Ltd Equity share capital in the other company. Rs.3.05 Lakhs
NCL Green Habitat (P) Ltd Rs.19.38 Lakhs

C. Nature of Contract: Purchase of Goods/Services

NCL Alltek & Seccolor Ltd No fixed duration. As per the requirement. Rs.331.91 Lakhs for the year Terms as applicable to other parties Omnibus Audit Committee
Kakatiya Industries (P) Ltd Director(s) holding more than 2% equity share capital in the other company. Rs.136.36 Lakhs approval dated
NCL Veka Ltd Rs.14.78 Lakhs 30.05.2018

D. Nature of Contract: Rent Paid

Sri.K.Ravi 5 years w.e.f 15.12.2016 Lease Rent on 3.00 Acras of land situated at S.No.281&282 in Rampally (V) Keesara Mandal. Total amount paid in FY 2018-199.53 Lakhs. 11.11.2016

Annexure - D

Particulars of employees who have been in receipt of the remuneration envisaged by Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial personnel)

Name: Mr. K. Ravi
Age 64 years
Qualification Diploma holder in Electrical Engineering
Designation: Managing Director
Date of commencement of employment Since 11th January 2003
No. of year of experience over 42 years
Remuneration Rs 303.01 lakhs Per Annum *
Last employment held Managing Director of NCL Energy Ltd.
Nature of employment As per the terms approved by the shareholders
Percentage of equity shares

held in the company (as on 09/08/2019)

4.75 %

Notes:

Remuneration as shown above includes salary and other allowances in terms of his appointment.

For and on behalf of the Board
Date: 9th August, 2019 Kamlesh Gandhi
Chairman
Registered Office:
7th Floor, NCL Pearl
Near Rail Nilayam,
S D Road, Secunderabad -500026.

ANNEXURE -F

Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo required under the Companies (Accounts) Rules, 2014

(Information pursuant to Section 134(3) (m) of the Companies Act, 2013 read with Rule 8(3) of Companies (Accounts) Rules, 2014)

A. Conservation of Energy:

The following are the steps taken on conservation of energy and its impact:

a) Improvement of raw mix design and continuous operation of pyro-process led to higher outputs which resulted in reduction of specific energy consumption.

b) Reduction in specific power consumption of cement mills (ball mills) by optimizing the operations.

c) Improvement of Raw Mill output by using high efficiency fan and optimizing the VRM operations reduced the specific power consumption.

d) Installation of high efficiency process fans to reduce the energy consumption.

e) Installation of Variable Frequency Drives (VFDs) for process fans to reduce the electrical energy consumption.

f) Replacement of normal lights with LED lights to conserve electrical energy.

B. Technology Absorption:

The Company is continuously endeavoring to upgrade its technology from time to time in all aspects through in-house R&D with a primary aim of improving the quality and reduction of cost of production. The Company has successfully achieved results in reducing the cost of production, improved technical efficiencies and productivity.

C. Foreign Exchange Earnings and Outgo:

Rs. In Lakhs
Sl. No. Particulars For the year 2018-19 For the year 2017-18
1 Earnings 32.98 41.35
2 Outgo 798.24 497.87

ANNEXURE - H 1

REMUNERATION DETAILS PURSUANT TO SECTION 197(2) OF THE COMPANIES ACT, 2013 READ WITH RULE 5 OF THE COMPANIES

(APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014.

(i) The ration of the remuneration of each director to the median remuneration of the employees of the company during the financial year 2018-19.

Sr. No. Name of the Director Ratio of remuneration of each Director to the median remuneration of the employees of the Company
1 Mr. Anand Ramanna 0.72
2 Mr. K. Madhu 0.72
3 Mr. Vinodrai V. Goradia 0.86
4 Mr. Ashven Datla 0.70
5 Mr. Kamlesh Gandhi 1.51
6 Mrs.Roopa Bhupatiraju 0.29
7 Mr.P.N.Raju 0.86
8 Dr.Kalidas Raghavapudi 1.10
9 Lt.Gen. (Retd ) T.A.DCunha 0.90
10 Mr.V.Sitarama Raju 1.51
11 Mr. K.Gautam 26.38
12 Mr.N.G.V.S.G.Prasad 15.78
13 Mr. K. Ravi 111.51

ANNEXURE - H 2

(ii) The percentage in increase in remuneration of directors/KMP if any during the Financial Year.

Sr. No. Name of the Director/KMP Designation % Increase / (Decrease) in the Remuneration
1 Mr. R. Anand Director (2.36)
2 Mr. K. Madhu Director (44.83)
3 Mr. Vinodrai V. Goradia Director (2.35)
4 Mr. Ashven Datla Director (50.57)
5 Mr. Kamlesh Gandhi Director (11.12)
6 Mrs.Roopa Bhupatiraju Director 95.40
7 Mr.P.N.Raju Director (16.55)
8 Dr.Kalidas Raghavapudi Director 54.07
9 Lt.Gen.(Retd) T.A.DCunha Director 22.68
10 Mr.V.Sitarama Raju Director (22.38)
11 Mr. K. Ravi Managing Director & KMP (3.15)
12 Mr. K.Gautam Executive Director & KMP 14.29
13 Mr. N.G.V.S.G.Prasad Executive Director & CFO & KMP 13.32
14 Mr. T. Arun Kumar Company Secretary & KMP 8.30

1. Median is computed on the basis of permanent employees on the rolls of the company. No of permanent employees on the rolls of the company as on 31/03/2019 is 833

2. The remuneration of Directors is as per the remuneration policy of the company.