SBEC Sugar Ltd Directors Report.

To,

The Shareholders,

SBEC Sugar Limited Dear Members,

Your Directors have pleasure in presenting the 25"hAnnual Report of the Company together with the Audited Accounts for the year ended 31st March 2019.

FINANCIAL RESULTS

The summarised financial results of SBEC Sugar Ltd. as well as Consolidated with its subsidiaries i.e. SBEC Bioenergy Limited and SBEC Stockholding and Investment Limited for the financial year ended 31st March, 2019.

(Rs. in Lacs)

STANDALONE

CONSOLIDATED

Financial Parameters Period ended 31.03.2019 Period ended 31.03.2018 Period ended 31.03.2019 Period ended 31.03.2018
Profit before interest, Depreciation, exceptional items and tax (2,428.04) (5,852.96) (1,810.06) (4903.96)
Interest 506.43 806.43 1,228.29 1,618.68
Depreciation 1,811.89 1,789.16 2,043.49 1,999.72
Exceptional Items - Income
Profit before tax (4,746.36) (8,448.55) (5,081.84) (8,522.34)
Provision for taxation 1.30 4.56 10.23
Profit after tax (4,747.66) (8,448.55) (5,086.4) (8,532.57)
Other Comprehensive Income (0.69) 8.72 (0.57) 11.09
Total Comprehensive Income (4,748.35) (8,439.84) (5,086.97) (8,521.48)

DIVIDEND & RESERVES

As the Company has incurred loss during the year under review, your Directors have not recommended any dividend for the financial year ended March 31, 2019.

SHARE CAPITAL

The paid up Equity capital as on March 31, 2019 was Rs.4765.38 Lacs. During the year under review, the Company has not issued shares with differential voting rights nor granted stock options nor sweat equity.

OPERATIONS

The crushing for the season 2018-19 started on 10th November, 2018 and cane crushed during season 2018-19 was 129.78 Lac Qtls as compared to 146.27 Lac Qtls in the last season.

Particulars Unit

Sugar Season

2016-17 2017-18 2018-19
Cane Crush Lac Qtl 106.52 146.27 129.78
Recovery % 9.37 9.73 11.10
Sugar Production Lac Qtl 10 14.24 14.43

Company crushed 129.78 lakh Qtls sugarcane and increases recovery by 1.37% over the previous Sugar Season. With gradual acceptance of sugarcane variety Co-0238 by the farmers of the area, the cane production throughout the State gradually increased, resulted in excess sugar production leading to a steep decline in current sugar prices as compared to last year.

Your Companys sugar factories is in U.P. where state governments announce the Sate Administrative Price (SAP), which is much higher than the Fixed Remunerative Price (FRP). This creates a distortion in the industry because SAP is neither linked to sugar recovery nor it takes in to account domestic and global prices and other relevant parameters. As a result, when sugar prices are low, mill owners are unable to pay to farmers resulting in delayed payment, huge cane arrears and trust deficit between farmers and millers.

As per ISMA, during the Sugar Season Sugar 2018-19, till 30" June, 2019, about 328.09 lakh tons of sugar have been produced, taking total sugar production in Sugar Season 2018-19 about to 329-329.50 lac tons. The opening stocks as on 1st October 2019 is expected to be all time high of around 145 lac tons. As compared to a normative requirement of around 50 lac tons on 1st October of any year as opening stocks, the industry is unnecessarily carrying about 95 lac tons of sugar inventory, unless the surplus stock is cleared from the country, the scenario may not undergo any significant change. It is expected that the pressure on the sugar price would continue to remain given the over-supply scenario.

Despite several challenges, your company continuous thrust on strong farmer relationship, cost control, efficiency improvement and continued to focus on cane development activities, comprising clean cane, varietal change and modern agriculture practices that is expected to improve productivity in the coming years.

MATERIAL CHANGES AND COMMITMENTS

No material changes or commitments have occurred between the end of the financial period to which the financial statements relate and the date of this report, affecting the financial position of the Company.

SUBSIDIARY COMPANIES

As on March 31st 2019, the Company has one Wholly Owned Subsidiary i.e. SBEC Stockholding & Investments Limited and one Subsidiary i.e. SBEC Bioenergy Limited. There are no associates companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries.

In accordance with Section 129(3) of the Companies Act, 2013, the Company has prepared a consolidated financial statement of the Company and all its subsidiary companies, which is forming part of the Annual Report. A statement containing salient features of the financial statements of the subsidiary companies are annexed in Form AOC-1 and marked as "Annexure-A" to the Annual Financial Statements.

In accordance with the provisions of Section 136(1) of the Companies Act, 2013, the Annual Report of the Company containing standalone and consolidated financial statements has been placed on the website of the Company, www.sbecsugar.com. Further, the audited accounts of the Subsidiary Companies and the related detailed information have also been placed on the website of the Company www.sbecsugar.com. A copy of annual accounts of subsidiaries will be made available to shareholders seeking such information at any point of time.

On the basis of Audited Financials Accounts of the Company for the FY.18-19 the Company has two Material Subsidiaries Company i.e. SBEC Bioenergy Limited and SBEC Stockholding & Investment Limited. The Minutes of the Board Meetings of the subsidiary companies are placed at the Board Meetings of the Company. Details of significant transactions and arrangements entered into by the subsidiary companies are noted by the Board. The Audit Committee of the Company reviews the financial Statement of the subsidiary companies including investments made.

There has been no change in relationship of any subsidiary company during the financial year.

CONSOLIDATED FINANCIAL STATEMENT

The consolidated financial statements of the Company for the financial period 2018-19, are prepared in compliance with applicable provisions of the Companies Act, 2013, Indian Accounting Standard (Ind AS) and SEBI (LODR) Regulations, 2015.

DIRECTORS

During the year the Board of Directors changed the designation of Shri. Abhishek Modi from Whole Time Director to Non-executive Director of the Company w.e.f.13.02.2019 subject to the approval of shareholder after that Shri. Abhishek Modi showed his willingness to again act as Whole time Director of the Company without drawing any remuneration. Then, the Board of Directors approved appointment of Shri. Abhishek Modi whole Time Director Designated as Executive Director of the Company w.e.f.25thMay, 2019, for a period of five (5) years subject to the approval of shareholders in the forthcoming Annual General Meeting.

Shri. R.K. Sharma re-appointed as a Manager of the Company w.e.f 14th June, 2019 for a period of one(1) year subject to the approval of shareholders in forthcoming Annual General Meeting.

Shri. Rohit Garg was appointed as an Independent Director to fill the casual vacancy, caused by the death of Shri. Manmohan and who holds office as an Independent Director Upto September 25, 2019. In accordance to the provision of section 149, 150 and 152 of the Companies Act, 2013 Shri. Rohit Garg re-appointed as Independent Non-Executive director of the Company not liable to retire by rotation and to hold office for a second term of 5(five) consecutive year w.e.f 24th September, 2019 subject to the approval of shareholder in forthcoming annual general meeting.

In accordance with the provisions of Section 152 of the Companies Act, 2013 and Articles of Association of the Company, Shri. Jayesh Modi (DIN 02849637), Non-Executive Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible for re-appointment.

Particulars of Directors seeking appointment/re-appointment have been given in the explanatory statement annexed to this notice for the Annual General Meeting.

All the Directors have made necessary disclosures as required under various provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

KEY MANAGERIAL PERSONNEL (KMP)

During the financial period ended 31.03.2019, following persons are Whole Time Key Managerial personnel (KMP) of the Company in terms of provisions of Section 203 of the Companies Act, 2013:

SI. No. Name Designation
1. Shri. Raj Kumar Sharma Manager
2. Shri. Anil Kumar Goel Chief Financial Officer
3. Shri. Shobit Nehra Company Secretary

*Shri Abhishek Modi was appointed as Whole Time Director of the Company w.e.f. 25th May, 2019.

BOARD MEETINGS

The Board met Seven times during the financial year 2018-19, the details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and the SEBI (LODR), Regulations, 2015.

FORMAL ANNUAL EVALUATION

Pursuant to the requirements of Section 134(3)(p) of the Companies Act, 2013 read with Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements), 2015, the Board has carried out a performance evaluation of itself, its Committees, the Chairman and each of the other Directors.

A structured questionnaire was prepared after taking into consideration the inputs received from the Directors covering various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligation and governance.

A separate exercise was carried out to evaluate the performance of individual directors including the Chairman of the Board. The performance evaluation of Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors at their meeting held separately.

At the conclusion of the evaluation exercise, the Members of the Board assessed that the Board as a whole together with each of its Committees was working effectively in performance of its key functions.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions contained in Section 134 (5) of the Companies Act, 2013, your Directors to the best of their knowledge and belief and according to information and explanations obtained from the management, confirm that:

a) in the preparation of the annual accounts for the financial year ended March 31, 2019, the applicable accounting standards have been followed and there are no material departures from the same;

b) the Board of Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2019 and of the profit and loss of the Company for the year ended on that date;

c) the Board of 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;

d) The Directors have prepared the Annual Accounts on a going concern basis.

e) The Directors have laid down proper internal financial controls to be followed by the Company and such controls are adequate and operating effectively; and

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

DECLARATION FROM INDEPENDENT DIRECTORS

All Independent Directors of the Company have given declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and SEBI (LODR), Regulations, 2015.

INTERNAL FINANCIAL CONTROLS

Your company has in place an adequate internal control system in order to ensure that all transactions are authorized, recorded and reported correctly and that all assets are protected against the perils of unauthorized use or disposition. Towards enhancing the efficiency of internal controls, services of consultants are hired wherever necessary, and their suggestions are reviewed and implemented. Your Company has in place an Internal Audit system, whereby an independent professionals firm of Internal Auditors conducts regular audit across the Company and their scope and findings are reviewed by the Management and Audit Committee on a regular basis.

The Audit Committee of the board also meets periodically to review the internal controls, internal audit findings, action taken reports and to advise the management on corrective policies, if any.

AUDITORS AND AUDITORS REPORT

Statutory Auditors

M/s. K. K. Jain & Co. Chartered Accountants (FRN.02465N) were appointed as Statutory Auditors of the Company for a term of 5 Years to hold office from the conclusion of 23rd Annual General Meeting (AGM) held on August 29, 2017 till the conclusion of the 28th Annual General Meeting of the Company, subject to annual ratification of their appointment by the members at the every AGM of the Company, on such remuneration as may be decided by the Audit Committee of the Board.

After that due to amendment to Section 139 of the Companies Act, 2013, which became effective from May 7, 2018, the annual ratification of statutory auditors is no longer required.

Accordingly, the Notice of ensuing Annual General Meeting does not include the proposal for seeking shareholders approval for ratification of appointment of Statutory Auditors of the company.

STATUTORY AUDITORS REPORT

The Auditors Report contains qualifications and the Company has given its comments on Auditor Qualified Opinion for the Financial Year 2018-19. The details are mentioned here under:

Response to Qualified Opinion (i)

Under the power vested with the Cane Commissioner (U.P) for waiver of interest under U.P. Sugar Cane (Regulation of Supply and purchase) Act, 1953 in respect of loss making/ sick companies, the Company had made an application to Cane Commissioner (U.P.) for waiver of interest on Cane Dues. Pending receipt of the Cane Commissioner decision, no interest has been provided on the cane dues. The Company has decided to account for the same on actual payment basis.

Response to Qualified Opinion (ii)

The management is of the opinion that no provision for doubtful debts is required as subsidiary company is the major secured creditor of Modi Industries Limited which owns substantial properties which are quite sufficient to take care of its entire liabilities. In view of that the management is confident for recovery of whole amount.

COST AUDITORS

As per the requirement of the Central Government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Companys cost records are subject to Cost Audit.

The Board of Directors, on the recommendation of the Audit Committee, have appointed M/s. M.K. Singhal & Co., Cost Accountants, as the Cost Auditors to audit the cost accounting records maintained by the Company for the financial year 2019-20 on a remuneration of Rs.60,000/- plus taxes as applicable and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, a resolution seeking members approval of the remuneration payable to the Cost Auditor forms part of the notice convening the Annual General Meeting.

SECRETARIAL AUDITOR

The Board appointed M/s R. Singhal & Associates, Practicing Company Secretaries, as the Secretarial Auditor to undertake the Secretarial Audit of the Company for Financial Year 2018-19. The Report of the Secretarial Audit is given in "Annexure-B" to this Report.

The observation in secretarial audit report are self-explanatory and therefore not call for any further explanation.

FIXED DEPOSITS

During the financial year, Company has not accepted any deposit from public within the meaning of section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposit) Rules, 2014.

RISK MANAGEMENT POLICY

As per Section 134(3) (n) of the Companies Act, 2013, the Company has adopted a Risk Management Policy which is reviewed on a periodic basis in order to recognize and reduce exposure to risks wherever possible. The Companys risk management policies are based on the philosophy of achieving substantial growth while mitigating and managing risks involved. Major risks identified are discussed at the meetings of the Audit Committee and the Board of Directors of the Company.

AUDIT COMMITTEE

The Audit Committee comprises of four Independent Directors, viz., Shri. R.K. Agarwal as Chairman, Shri. J.C. Chawla, Shri. Vijay Kumar Modi and Shri. Shyam Babu Vyas as Members. The details of terms of reference of the Audit Committee, number and dates of meeting held, attendance, among others are given separately in the attached Corporate Governance Report.

NOMINATION AND REMUNERATION COMMITTEE

Pursuant to the provisions of Section 178 of the Companies Act, 2013 read with Rules made there under, the Board has constituted a Nomination & Remuneration Committee and the details of terms of reference, number & dates of meeting held, attendance and other details are given separately in the attached Corporate Governance Report. The Board on the recommendation of Nomination & Remuneration Committee framed a policy i.e. Nomination and Remuneration Policy for selection and appointment of Directors, senior managerial personnel and their remuneration.

REMUNERATION POLICY

The Company has adopted a Remuneration Policy for executive and non-executive directors and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration as approved by the Board of Directors on the recommendation of Nomination and Remuneration Committee. The remuneration so approved is subject to the approval by the shareholders and such other authorities as the case may be. The Non-Executive Directors do not draw any remuneration from the Company except sitting fee paid to them for each meeting of the Board/ Committee thereof attended by them. The aforesaid policy can be accessed on the Companys website www.sbecsugar.com

CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES.

Pursuant to the provisions of the Section 135 of the Companies Act, 2013 (the Act), the CSR provisions are not applicable as per immediately preceding year financials of the Company. The CSR Committee constituted by the Board of Directors have been dissolved w.e.f. 9th August, 2018.

CONSERVATION OF ENERGY. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is enclosed in "Annexure-C" and forms part of this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information required under Section 197(12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Boards Report for the year ended March 31, 2019 are given in "Annexure —D" to this Report.

PARTICULARS OF LOANS. GUARANTEES OR INVESTMENTS

The details of Loans, Guarantees and Investment covered under the provision of Section 186 of the Companies Act, 2013 are given in the notes to financial statements.

RELATED PARTY TRANSACTIONS

The transactions entered with related parties during the year under review were on Arms Length basis and in the ordinary course of business and complied the provisions of Section 188 of the Companies Act, 2013. All related party transactions were approved by the Audit Committee and the Board. The relevant information regarding related party transactions has been set out in Note No. 30 of the Financial Statements for the financial year ended 31.3.2019. However, there was a transaction between the Company and SBEC Bioenergy Limited which was on arms length basis but the same was a material transaction. All the relevant details of the said transaction have been given in AOC-2 which is enclosed as "Annexure E" and forms part of this director report.

The Board has framed a Policy on related party transactions and placed the same on the Companys website at www.sbecsugar.com.

VIGIL MECHANISM & WHISTLE BLOWER POLICY

The Company has formulated and implemented the Whistle Blower Policy/ vigil mechanism. This has provided a mechanism for directors and employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee; any instance of unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct. The aforesaid policy has also been uploaded on the Companys website at www.sbecsuqar.com.

EXTRACT OF THE ANNUAL RETURN

The details of the extract of the Annual Return in Form MGT-9 as per the provisions of Section 92 of Companies Act, 2013 read with Rule 12 of Companies (Management and Administration) Rules, 2014 is annexed herewith and marked as "Annexure-F" to this Report and also available on the website of the Company at www.sbecsuaar.com.

COMPLIANCE OF SECRETARIAL STANDARD

The Company has complied with the Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government as required under Section 118(10) of the Companies Act, 2013.

LISTING OF SECURITIES

The equity shares of your Company are listed on the Bombay Stock Exchange Limited and the Calcutta Stock Exchange Association Limited. The Companys application for delisting of shares with The Calcutta Stock Exchange Association Limited is still pending.

BOARD DIVERSITY

The Company recognizes and embraces the importance of a diverse board in its success. We believe that a truly diverse board will leverage differences in thought, perspective, knowledge, skill, regional and industry experience, cultural and geographical background, age, ethnicity, race and gender, which will help us retain our competitive advantage. The Board has adopted the Board Diversity Policy which sets out the approach to diversity of the Board of Directors. The Board Diversity Policy is available on our website (www.sbecsuqar.com). More detail on diversity is available in the corporate governance report that forms part of this Annual Report.

CORPORATE GOVERNANCE

In Compliance with Regulation 17 to 27 of SEBI (Listing Obligation and Disclosure Requirements), Regulations, 2015, a detailed Corporate Governance Report has been given elsewhere in this report, along with Management Discussion and Analysis Report, which form an integral part of the Annual Report.

A certificate from R. Singhal & Associates, a firm of Company Secretaries in practice confirming compliance by the Company with the conditions of Corporate Governance as stipulated under part E of schedule V of SEBI (Listing Obligation and Disclosure Requirements), Regulations, 2015 is attached to this report. The Whole Time Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters as required under SEBI (LODR), Regulations, 2015.

PERSONNEL RELATIONS

Your directors hereby place on record their appreciation for the services rendered by the executives, staff and workers of the Company for their hard work, dedication and commitment. During the year under review, relations between the employees and the management continued to remain cordial.

APPRECIATION

Your directors thank the various Central and State Government Authorities and Agencies for the continued help and cooperation extended by them. The Directors gratefully acknowledge all stakeholders of the Company viz., farmers, customers, members, dealers, vendors and banks for their excellent support during the year. The Directors also place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued cooperation to the Company.

For & behalf of the Board
SBEC Sugar Limited
Sd/- Sd/-
Abhishek Modi R.K. Aqarwal
Place: New Delhi (Whole Time Director) (Director)
Date: 14th August, 2019 (DIN: 00002798) (DIN: 00298252)