Rainbow Papers Ltd Directors Report.

Dear Shareholders,

Your Directors’ have pleasure in presenting the 32nd Annual Report of the Company together with the Audited Accounts for the financial year ended 31st March, 2018.

1. FIRST YEAR OF IMPLEMENTATION OF INDIAN ACCOUNTING STANDARDS (Ind AS)

This is the first year of implementation of Indian Accounting Standards (Ind AS). The standalone financial statements for the year ended 31st March, 2018 have been prepared in accordance with the Accounting Standards (Ind AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014. The financial statements for the year ended on 31st March, 2017 have been restated in accordance with Ind AS for comparative information.

2. FINANCIAL HIGHLIGHTS :

The standalone and consolidated financial results of the company for the year ended 31st March, 2018 are as under:

(Rs. in Lacs)

FINANCIAL RESULTS 2017-18 2016-17
Revenue from Operations 28.39 5273
Depreciation 11,111.72 13648
Profit before Exceptional & Extraordinary Items & Tax (19,872.33) (16946)
Prior Period items / Exceptional items
Taxation: Less/ (Add) Current Tax
MAT credit reversal of earlier years /mat credit entitlement
Deferred Tax
Short/Excess Provision of Earlier Years
Net Profit After Tax For The Year (19,872.33) (16946)
EPS (Face Value of Rs. 2 per share)
Basic (18.71) (15.95)
Diluted (18.71) (15.95)

3. DIVIDEND

Considering the continued losses in the Financial Year 2017-18, Board of Directors do not recommend any dividend for the year.

4. OPERATIONS

During the period under review, the Companys operations continued to be affected due to non availability of adequate working capital which has adversely affected the plant.

Furthermore, the Company could not undertake necessary and regular capital expenditure as per industry norms for proper maintenance and upkeep of plant and equipment in the previous year due to paucity of funds.

5. OUTLOOK

Your Company was in talks with Joint Lenders’ Forum (JLF) for approval of One Time Settlement (OTS) as proposed by the prospective investor M/s. Kushal Limited along with the Scheme of Compromise and Arrangement with the Unsecured Creditors of the Company and Scheme of Amalgamation of M/s. Rainbow Papers Limited with M/s. Kushal Limited. Pursuant to approval of the said scheme and OTS by the JLF, your Board on 14th September, 2017 approved the OTS and the scheme.

The said OTS was put to hold due to admission of petition filed under Insolvency and Bankruptcy Code, 2016 by one of the operational creditor M/s. Neeraj Paper Agencies Limited. Accordingly Hon’ble National Company Law Tribunal (NCLT) had appointed Mr. George Samuel as the Interim Resolution Professional (IRP) vide its order dated 22nd September, 2018. Due to appointment of IRP powers of the Board of Directors were suspended till the completion of Corporate Insolvency Resolution Process (CIRP).

Mr. R. D. Choudhary was appointed as the Resolution Professional by the Committee of Creditors formed under the provisions of the Insolvency and Bankruptcy Code, 2016. Expression of Interest was called for the submission of Resolution Plan for reviving the operations of the Company. After going through the proposals received, Committee decided to again call for the expression of interest. M/s. Kushal Limited was the sole bidder to submit the Resolution Plan and after going through the legality of the plan submitted, it was approved by the Committee of Creditors with requisite majority.

The said plan is placed before the NCLT for their kind consideration and approval.

6. PUBLIC DEPOSITS

The Company has not accepted or renewed any deposits from the public during the financial year 2017-18.

7. HUMAN RESOURCES

During the year under review, workmen strenght has gone down substaintially due to operations being adversely affected.

8. CORPORATE SOCIAL RESPONSIBILITY (CSR)

In line with the provisions of the Companies Act, 2013 and rules made thereunder, Corporate Social Responsibility (CSR) Committee has been formed and the Composition of the CSR Committee is as under:

Name of Director Category of Directorship Designation
Shri Ajay Goenka Managing Director Chairperson
Shri Rahul Maheshwari Executive Director Member
Shri Kantibhai Patel Independent Director Member

On account of non applicability of CSR for the reporting period, CSR policy as recommended by the CSR Committee and approved by the Board of Directors is given in the Annual Report on CSR Activities as an Annexure A to this Report, but other details as required as per the Companies Act, 2013 is not given due to non applicability.

9. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Ms. Aanal Trivedi, Director of the Company, retires by rotation and being eligible, have offered themselves for re-appointment.

Shri Ajay Goenka, Managing Director of the Company whose term ends on 20th August, 2018 and in the board meeting held on 14th August, 2018 has extended term of his appointment for further period of 5 years subject to approval of Members in the General Meeting of the Company.

The Board recommends their re-appointment as Directors as detailed in the notice convening the Annual General Meeting.

10. COMPOSITION AND NUMBER OF MEETINGS OF THE BOARD

The Board of Directors of the Company comprises of well qualified and experienced persons having expertise in their respective areas. It has appropriate combination of Executive and Non-Executive Directors consisting of one Chairman & Managing Director, one Executive Director, three Independent Director and one Woman Director as required pursuant to Section 149 of the Companies Act, 2013.

The Board meets at regular intervals with gap between two meetings not exceeding 120 days. During the year under review, the Board met 9 times on 20th April, 2017, 30th May, 2017, 20th July, 2017, 24th July, 2017, 12th August, 2017, 29th August, 2017, 14th September, 2017, 28th November, 2017 and 14th February, 2018.

11. AUDIT AND RISK MANAGEMENT COMMITTEE

In compliance with the requirement of Section 177 of the Companies Act, 2013, the Board of Directors has constituted Audit Committee. The members of the Audit Committee possess financial/accounting expertise and exposure. The Audit Committee assists the Board in its responsibility for overseeing the quality and integrity of the accounting, auditing and reporting practices of the Company and its compliance with the legal and regulatory requirements.

The Audit & Risk Management Committee comprises of the Independent Directors of the Company under the Chairmanship of Mr. Abhilash Delwadia. The other independent directors of the Committee are Mr. Indrasinh B. Zmdala and Mr.Kantibhai Patel.

Statutory Auditors and Internal Auditors are the permanent invitees at the committee meetings. Company Secretary acts as the Secretary of the Committee.

For the Finanacial year 2017-18, the Audit Committee met 5 times on the following dates: 30th May, 2017, 12th August, 2017, 14th September, 2017, 28th November,2017 and 14th February, 2018.

The recommendations given by the Audit Committee are considered and reviewed by the members of the Board of the Company. However, there is no such case where the Board dissented or did not accept the recommendation of the Audit Committee.

The Company has established the vigil mechanism through Whistle Blower Policy for all the stakeholders of the Company which also provides for direct access to the chairperson of the Audit Committee in appropriate or exceptional cases as per the Policy.

The Whistle Blower Policy will be applicable to all the stakeholder of the Company, which is an extension of the Code of Business Conduct through which the Company seeks to provide a mechanism for the Stakeholders to disclose their concerns and grievances on Unethical Behavior and Improper/Illegal Practices and Wrongful Conduct taking place in the Company for appropriate action. The Company shall oversee the vigil mechanism only through the Audit Committee. If any of the members of the Audit Committee have a conflict of interest in a given case, they should excuse themselves and the others in the Committee would deal with the matter on hand.

12. POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR

DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF A DIRECTOR AND OTHER MATTERS PROVIDED UNDER SUB-SECTION (3) OF SECTION 178

Pursuance to Section 178 of the Companies Act, 2013, as applicable to the Company, The Composition of the Nomination & Remuneration Committee is as under:

1. Shri Kantibhai Patel Independent Director,

2. Shri Indrasinh B. Zala Independent Director,

3. Smt. Aanal N. Trivedi Professional Director

The Committee met once on 12th August, 2017.

The Nomination & Remuneration Committee considers the requirement of the skill sets on the Board, integrity of the persons having standing in their respective field/profession and who can effectively contribute to the Companys business and policy decisions, recommend the appointment to the Board for approval.

The Committee has approved a policy with respect to the appointment and remuneration of the Directors and Senior Management personnel. The objectives of this policy are:

(a) to create a transparent system of determining the appropriate level of remuneration throughout all levels of the Company;

(b) encourage people to perform to their highest level;

(c) allow the Company to compete in each relevant employment market;

(d) provide consistency in remuneration throughout the Company;

(e) align the performance of the business with the performance of key individuals and teams within the Company;

(f) long term value creation; and

(g) attract and retain the best professionals.

The policy details of the types of remuneration to be offered by the Company and factors to be considered by the Board, Nomination & Remuneration Committee and management in determining the appropriate remuneration strategy.

13. BOARD EVALUATION

The Powers of Board has been suspended until the completion of Corporate Insolvency Resolution Process and thus no evaluation of Board Members has been carried out and no separate meeting of the Independent Directors has been held.

14. INSURANCE

The Company’s properties including Building, Plant and Machinery, Stocks, Stores, etc., have been adequately insured.

15. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the Companies Act, 2013, the unclaimed dividend aggregating to Rs. 1,90,672/- lying with the Company for a period of seven years pertaining to the year ended on 31st March, 2010, was transferred during the year 2017-18, to the Investor Education and Protection Fund established by the Central Government.

16. INFORMATION TECHNOLOGY

Most of the functional areas of your company are working on IT (Information Technology) platform. To name a few of them: Planning, Raw Material, Purchase, Finance, Sale, Weight Bridge, Production HR etc.

We are working with live ERP systems, modules and functions. Our entire plant is under observation on CCTV cameras and PA System (Public Announcements) for safety and security purpose.

17. CORPORATE GOVERNANCE

Corporate Governance is an ethically driven business process that is committed to values aimed at enhancing an organization’s brand and reputation. This is ensured by taking ethical business decisions and conducting business with a firm commitment to values, while meeting stakeholders expectation. At Rainbow Papers Limited, it is imperative that our company affairs ae managed in a fair and transpaperent manner. This is vital to gain and retain the trust of our stakeholders.

As stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Management Discussion and Analysis Report and Report on Corporate Governance form part of this Annual Report. Certificate of the Auditors regarding compliance with the conditions of Corporate Governance as stipulated in Chapter IV of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also annexed to the Directors’ Report.

18. DEMATERIALIZATION

The Equity shares of the Company are in compulsory demat segment and are available for trading in the depository system of both National Securities Depository Ltd (NSDL) and the Central Depository Services (India) Ltd. (CDSL). 105268895 nos. of equity shares forming 99.11% of the equity share capital of the Company stands dematerialized on 31st March, 2018.

19. LISTING OF SHARES

The equity shares of the Company are presently listed on the BSE Ltd, (BSE) and the National Stock Exchange of India Limited (NSE). The BSE & NSE have nationwide terminals and therefore, shareholders/investors are not facing any difficulty in trading in the shares of the Company from any part of the Country.

Your Company has not paid annual listing fees for financial year 2016-17 and 2017-18 to BSE and NSE on account of pending approval of resolution plan before the NCLT. Your Company has not paid custodial fees to National Securities Depository Ltd. and Central Depository Services (India) Ltd.

20. STATUTORY AUDITORS AND THEIR REPORT

M/s. Mehta Lodha & Co., Chartered Accountants, the Statutory Auditors of the Company who were appointed at the 29th Annual General Meeting to hold office till 33rd Annual General Meeting are subject to ratification. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the rules framed there under for ratification as Auditors of the Company. As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. furnished a certificate regarding their eligibility for re-appointment as Statutory Auditors of the Company, pursuant to Section 139 (1) of the Companies Act, 2013 read with rules. The Board of Directors recommends their re-appointment.

The Auditors Report contains following qualification

"We draw attention to Note No. 46 of the accompanying financial statements in respect of non-provision of interest on NPA accounts of banks of Rs. 136.86Crore(Previous Year Rs. 143.31 Crore), for the year under consideration and the total amount of such unprovided interest till date is Rs. 280.17Crore(Previous Year Rs.143.31Crore) The exact amounts of the said non provisions of interest are not determined and accounted for by the company and to that extend Bankers loan liabilities are understated and loss is understated"

21. INTERNAL AUDITORS

Pursuant to the provisions of Section 138 read with Rule 13 of the Companies (Accounts) Rules, 2014, your Company has appointed M/s RNCA & Associates., Chartered Accountants, as the Internal Auditors of the Company for conducting internal audit for the financial year 2018-19.

22. COST AUDITORS

As there is no manufacturing activity during the reporting period, cost auditor is not being appointed.

23. SECRETARIAL AUDIT REPORT

Pursuant to Section 204 read with Section 134(3) of the Companies Act, 2013, Resolution Professional has appointed M/s. Yogesh Chhunchha & Co., Company Secretaries, Ahmedabad as Secretarial Auditor of the Company for FY 2017-18. The Secretarial Audit Report provided by M/s Yogesh Chhunchha & Co. is annexed with the Board’s report as Annexure B.

The Secretarial Audit Report contains following qualification

The Company has not complied with Section 124 (6) of the Act and Rules made thereunder in respect of Transfer of Shares in Investor Education and Provident Fund in respect of which dividends have not been paid / claimed for seven consecutive years or more.

During the Financial Year under review, the Company has not complied with Section 135 of Companies Act 2013 and Rules made thereunder in respect of amount to be spent on CSR activities.

The Company has not filed, till date of this report, Form MR-1 for Re-appointment of Mr. Rahul Maheshwari as Whole Time Director made at 31st AGM held on 28/09/2017 under section 196 of the Act and Rules made thereunder.

The Company had not filled up the Casual Vacancy of "Chief Financial Officer" in terms of Section 203 of the Companies Act, 2013."

24. MANAGEMENT’S VIEW ON QUALIFICATIONS

Directors would like to state that your Auditors have given Qualified Report for the Financial Year 2017-18 and in that connection your Directors are of the following views.

"Financial Institutions and Banks have declared advances as NPA, and thus these require no provision of interest in the books of accounts."

With regards to the qualifications mentioned in the Secretarial Audit Report your directors would like to state that

"One of the operational creditors of the Company had filed suit against the Company under Insolvency and Bankruptcy Code, 2016 and the same was admitted by the National Company Law Tribunal (NCLT) vide their order dated 12th September, 2017 and thus the powers of the Board were suspended and without power the said compliance of Section 124 in respect of Transfer of Shares in Investor Education and Provident Fund in respect of which dividends have not been paid / claimed for seven consecutive years or more was not complied to.

Your Company is going through financial crisis and thus the amounts required to be spent towards Corporate Social Responsibility (CSR) has not been spent.

The powers of the Directors were suspended and thus the said form was not filed.

With respects to filing of casual vacancy for the post of Chief Financial Officer in terms of Section 203 of the Companies Act, your Directors were not able to find any suitable candidate for the post and thus the position of KMP remains vacant. Your Directors will strive harder to find a suitable candidate and will comply with the law"

25. DIRECTORS’ RESPONSIBILITY STATEMENT

In terms of Section 134 (3) of the Companies Act, 2013, in relation to the financial statements for FY 2017-18, the Board of Directors states that:

a) In preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

b) The Directors have 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 on 31st March, 2018 and of the loss for the year ended 31st March, 2018;

c) The Directors have taken proper and sufficient care for 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) the financial statements have been prepared on a going concern basis.

e) the Directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively. f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively ‘

26. STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION

(6) OF SECTION 149

Shri Kantibhai Patel, Shri Indrasinh B. Zala and Shri Abhilash Delwadia Independent Directors of the Company have given their declarations to the Board that they meet the criteria of Independence as provided under the applicable provisions of the Companies Act, 2013 and Listing Regulations.

27. DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12) OF THE

COMPANIES ACT 2013 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There had been no frauds reported by the auditors pursuant to section 143(12) of the Companies Act, 2013.

28. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

During the year under review, there are no related party transactions that have taken place between the related parties.

29. CODE OF CONDUCT

The Company has adopted a Code of Business Conduct based on the business principles of the Company. The Board has laid down the code of conduct for all Board members and Senior management of the Company. The code of conduct has been posted on the website of the company. All Board members and Senior management personnel affirms the compliance with the code on an annual basis in the prescribed format.

30. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION,

PROHIBITION AND REDRESSAL) ACT, 2013

The Company has put in place an Anti-Sexual Harassment mechanism in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committees have been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received any complaint of sexual harassment during the year 2017-18.

31. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS

AND OUTGO

Operations of the Company were adversely affected due to liquidity crunch and we could not make plant operational throughout the year thus the details relating to conservation of energy, technology absorption, as prescribed under section 134 of the Companies Act, 2013 read with Companies (Account) Rules, 2014 would not be applicable. Due to non operation of the plant throughout the year, there is no foreign exchange earnings or outgo.

32. RISK MANAGEMENT POLICY

The Board of Directors has developed and implemented risk management policy for the Company ensuring that systems of risk management are in place. It has identified and assessed internal and external risks, with potential impact and likelihood, that may impact the Company in achieving its strategic objectives or may threaten its existence. The policy lays down procedures for risk identification, assessment, monitoring, review and reporting.

33. PARTICULARS OF EMPLOYEES

The information required underpursuant to Section 197 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided below:

1. The ratio of the remuneration of each director to the median employee’s remuneration:

Sr. No. Name of the Director Ratio (Remuneration of Director to Median Remuneration)
1. Ajay R Goenka NA
2. Rahul J Maheshwari NA

2. The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year:

Sr. No Name Designation % increase (incl. sitting fees)
1. Ajay Goenka Managing Director 0.00
2. Rahul Maheshwari Executive Director 0.00
3. Kanitibhai Patel Independent Director 0.00
4. Indrasinh Zala Independent Director 0.00
5. Abhilash Delwadia Independent Director 0.00
6. Aanal Trivedi Director 0.00
6 Shashikant Thakar Company Secretary 0.00

3. The percentage increase in the median remuneration of employees in the financial year: 0% (% increase in the remuneration of median employee as on 31.03.2018)

4. Comparison of the remuneration of the Key Managerial Personnel against the performance of the company:

During the year under review, no remuneration has been increased for any KMP.

5. Variations in the market capitalization of the company, price earnings ratio as at the closing date of the current financial year and previous financial year:

Market Capitalization BSE NSE
31.3.2018 24,85,48,482 24,96,10,655
31.3.2017 50,66,56,521 50,45,32,175
P/E Ratio BSE NSE
31.3.2018 (0.13) (0.13)
31.3.2017 (0.30) (0.30)

percentage increase over decrease in the market quotations of the shares of the company in comparison to the rate at which the company came out with the last public offer in case of listed companies.

6. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year:

average percentage increase is NIL in FY 17-18

7. Comparison of the each remuneration of the Key Managerial Personnel against the performance of the company

There is no increase in the remuneration paid to the Company Secretary.

8. The key parameters for any variable component of remuneration availed by the directors: NOT APPLICABLE.

9. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year:

Sr. Name of the Employee Designation Ratio
No.
Not Applicable

10. Affirmation that the remuneration is as per the remuneration policy of the company:

We hereby affirm that the remuneration paid to the Key Managerial Personnel is as per the remuneration policy of the Company.

11. Name of every employee of the company, who- i. if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than sixty lakh rupees --NIL ii. if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than five lakh rupees per month-- NIL iii. if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company – NIL

34. INDUSTRIAL RELATIONS

Industrial Relations remained cordial throughout the year under review. Several industrial relation initiatives implemented by the Company have significantly helped in improving the work culture, enhancing productivity and enriching the quality of life of the workforce.

35. THE EXTRACT OF THE ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT 9 as required under Section 134 (a) of the Companies Act, 2013, is attached as Annexure C to this Report.

36. APPRECIATION AND ACKNOWLEDGEMENTS

The Board of Directors places on record its appreciation for the continued support and confidence received from its Bankers and employees of the Company.

The Directors are also thankful to all other stakeholders for their valuable sustained support to the Company.

For behalf of the Suspended Board of Directors
Place : Ahmedabad R. D. Choudhary Ajay Goenka
Date : 14.08.2018 Resolution Professional Managing Director
Regd. No. IBBI/IPA-001/IP- DIN : 00139512
P00157/2017-18/10326