Sri Chamundeswari Sugars Ltd Directors Report

Dear Members,

The Directors have pleasure in presenting the 46th Annual Report together with the Audited Financial Statements of the Company for the Financial Year ended 31st March, 2019.

FINANCIAL RESULTS:

(Rs in lakhs)

Particulars	2018-19	2017-18
Profit/Loss Before Interest and Depreciation	3,158.02	2,385.10
Less: Interest	2,755.42	2,284.15
Depreciation and Amortisation	834.70	819.44
	(3,590.12)	(3,103.59)
Add: Exceptional items	-	-
Profit / (Loss) Before Tax	(432.10)	(718.49)
Less: Income Tax Expenses	-	-
Deferred Tax Liability/ (Asset)	(131.80)	(248.74)
Profit / (Loss) after Tax	(300.30)	(628.54)

COMPANY PERFORMANCE:

During the year, Company crushed 5.88 Lakh Mts as against 3.89 Lakh Mts of cane crushed in the previous year. The company produced 5.80 Lakh Qtls of sugar as against 3.95 Lakh Qtls of sugar during the previous year. The recovery of sugar from sugarcane was at 9.88% at KM Doddi unit as against 8.83% during the previous year.

The company generated 7.10 Crore units of power as against 5.01 Crore units during the previous year. Out of the said generation, company exported 4.42 Crore units as against 2.88 Crore units during the previous year.

The company produced 110.12 Lakh Liters of Alcohol as against 93.18 Lakh Liters of Alcohol during the previous year.

During the year under review, total revenue from operation stood at Rs. 236.60 crores as against Rs. 209.12 crores in the previous year. Even though the monsoon was delayed in the year 2018, it was more than the previous year resulting in better sugarcane production for the years 2018-19 and 2019-20.

The Srinivasapura Unit (Unit II) was not operational during the FY 2018-19 due to expansion work from 1250 TCD to 3500 TCD and establishment of 21 MW Co-generation Plant. All the major machineries have been received at site and erection is under progress. The unit is expected to commence the operations in the third quarter of the Financial Year 2019-20.

OUTLOOK FOR 2019-20:

Indian Sugar: India is the second largest producer of sugar in the world. In India, Sugar is cultivated in around 5 million hectors. Sugarcane is the only source of sugar production in India unlike many other countries produce sugar from sugar beet also. Sugar industry is the key driver for the rural development and upliftment. The following are the sugar production and consumption details for the past 3 years in India.

DOMESTIC SUGAR BALANCE:

(Figures in lakh tonnes)

Sl. No.	Particulars	2016-17	2017-18	2018-19(P)
1	Opening Stock as on 1st October.	77.52	38.80	107.20
2	Production during the Season	202.85	324.79	330.00
3	Imports**	4.46	2.15*	-
4	Total Availability	284.83	365.74	437.20
5	Off-Take
	i) Internal (Domestic)	245.61	253.90	260.00
	Consumption
	ii) Exports**	0.46	4.64	35.00
	Total off-take	246.07	258.54	295.00
6	Closing Stock as on 30th September	38.76	107.20	142.20
7	Stock as % of Off-take	15.8%	42.20%	54.70%

** Imports and exports are under O.G.L. and reported by sugar mills to GoI through Proforma II. Imports under AAS are not included in the domestic sugar balance sheet (as is being followed by Government of India)

* Mills produced about 2.15 lac tons of white sugar out of raw sugar imports allowed by Government. (Source: ISMA)

It is estimated that domestic sugar production during sugar season 2018-19 would be a record of 33 million tonnes. (SS 2017-18: 32.3 million tonnes), surpassing Brazil as the largest producer for the first time in 16 years.

The Central Government with a view to help sugar producers to clear sugarcane payments to farmers has increased the MSP from Rs.29 (w.e.f. 07/06/2018) to Rs.31 (w.e.f. 14/02/2019) per Kg. This has helped to stabilize the sugar prices to the level of Rs.32 to Rs.33 per Kg.

Further, Govt. of India has announced Soft Loan for payment of sugarcane arrears during the year 2018-19 with interest subvention for one year.

The Governments move to increase buffer stock to 4 million tonnes from 3 million tonnes for the current season is to control the floating stock sugar in market and thereby maintaining the sugar prices.

The Union government, through its policies favouring ethanol, hopes to solve the cyclic problem of over production in the sugar industry. Interest subvention, fixing the sale price of ethanol and allowing production of ethanol directly from cane juice are some of the policy-level interventions that the government has put in place to push the sugar mills to go for ethanol production and meet the governments target of 10 per cent blending of ethanol in fuel. By 2030, the government plans to increase the blending to 20 per cent along with 5 per cent of biodiesel.

Considering the overall position, our factory situated at K M Doddi will crush 8 Lakh Mts. in the coming crushing season 201920. Consequent to the same, Cogen and Distillery Divisions will perform maximum due to enhanced crushing expected. Further the commercial operation of Hemavathi unit will help the Company to achieve higher turnover and better performance.

DIVIDEND

Due to inadequacy of profits, your Board is unable to recommend any dividend for the year ended 31st March 2019.

TRANSFER TO RESERVE

Due to inadequacy of profits, no amount was transferred to any Reserves.

INFORMATION ABOUT SUBSIDIARY/ JV/ ASSOCIATE COMPANY

As on 31.03.2019 the Company did not have any Subsidiary / Associate/JV company. However as on date the company SCSL Agro Industries Private Limited is an associate company of the Company.

NUMBER OF BOARD AND COMMITTEE MEETINGS

During the year under review, 6 meetings of the Board were held on 25th May 2018 (11.00AM), 25th May 2018 (3.00PM), 23rd August 2018, 26th September 2018, 14th December 2018 and 18th March 2019. The Audit Committee met 5 times during the year under review i.e. on 25th May 2018, 23rd August 2018, 26th September 2018, 14th December 2018 and 18th March 2019. Nomination and Remuneration Committee met 2 times during the year under review i.e. 25th May 2018 and 14th December 2018.

ATTENDANCE OF DIRECTORS IN MEETINGS

Following is the number of meetings attended by each of the directors during FY 2018-19:

Name of Director	Whether attended AGM held on (26.09.2018)	Board Meeting (out of 6)	Audit Committee Meeting (Out of 5)	NR Committee Meeting (Out of 2)
Shri. M Srinivaasan	Yes	6	NA	NA
Dr. M Manickam	No	3	NA	NA
Shri. M Balasubramaniam	Yes	3	3	NA
Shri. A Arjunaraj	Yes	5	4	2
Dr. A Selvakumar	Yes	6	5	2
Dr. M R Desai	Yes	2	NA	-
Smt. Susheela Balakrishnan	No	2	NA	NA
Shri. S Senthil Saravanan	Yes	5 (out of 5)	5	NA
Shri. V K Swami- nathan (Up to 24th May 2018)	NA	1 (out of 1)	NA	NA

SEPARATE MEETING OF INDEPENDENT DIRECTORS

Separate meeting of the independent directors was held on 18th March 2019 in terms of Schedule IV of the Companies Act 2013 and all the independent directors participated in the meeting.

COMPLIANCE WITH SECRETARIAL STANDARDS

The Company has complied with the applicable Secretarial Standards issued by the Institute of Company Secretaries of India.

EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT-9 is annexed to the Board Report.

AUDIT COMMITTEE

All recommendations made by the Audit Committee during the year were accepted by the Board. Audit Committee consists of the following members:

1. Shri. A Arjunaraj (Chairman)

2. Shri. M Balasubramaniam

3. Dr. A Selvakumar

4. Shri. S Senthil Saravanan

NOMINATION AND REMUNERATION COMMITTEE

Nomination & Remuneration Committee consists of the following members:

1. Dr. A Selvakumar (Chairman)

2. Shri. A Arjunaraj

3. Dr. M R Desai

TRANSFER OF UNCLAIMED DIVIDEND / DEPOSIT TO INVESTOR EDUCTION AND PROTECTION FUND

During the Financial Year 2018-19, no amount of unclaimed dividend or deposit was transferred to Investor Education and Protection Fund. However as on 2nd April 2019 unclaimed deposit with interest amounting to Rs 59,606 was transferred to the IEPF.

SHARES IN UNCLAIMED SUSPENSE ACCOUNT

Particulars	No of Shareholders	No of Shares
Aggregate number of shareholders and the outstanding shares lying in the Unclaimed Suspense Account at the beginning of the year	2,124	2,22,197
Number of shareholders who approached the issuer for transfer of shares from the Unclaimed Suspense Account during the year	Nil
Number of shareholders to whom shares were transferred from the Unclaimed Suspense Account during the year	Nil
Aggregate number of shareholders and the outstanding shares lying in the Unclaimed Suspense Account at the end of the year	2,124	2,22,197

DETAILS RELATING TO UNCLAIMED DEPOSITS (Excluding interest)

Particulars	Amount (INR)
Amount of existing deposits (unclaimed) as at 1st April 2018	6,99,000
Amount of deposits renewed during the year	-
Amount of deposits accepted during the year	-
Amount of deposits repaid during the year	50,000
Balance of deposits (unclaimed) outstanding at the end of the year	6,49,000
Whether there has been any default in repayment of deposits or payment of interest thereon during the year	No
The details of deposits which are not in compliance with the requirements of Chapter V of the Act	Nil

MATERIAL CHANGES AND COMMITMENTS

No Material changes occurred subsequent to the close of the financial year of the Company to which the balance sheet relates and before the date of this report. There was no change in the nature of business of the Company during the Financial Year ended 31st March 2019.

DIRECTORS RESPONSIBILITY STATEMENT

In pursuance of Section 134(5) of the Companies Act 2013, the Directors hereby confirm that:

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

b) the directors had 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 at the end of the financial year and of the profit and loss of the company for that period;

c) the directors had taken proper and sufficient care 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 directors have prepared the annual accounts 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, and;

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.

AUDITORS AND AUDITORS REPORT THEREON

At the 44th AGM, the members of the Company, appointed M/s. P K Nagarajan & Co, Chartered Accountants, Coimbatore (Firm Registration No. 016676S) as Statutory Auditor of the Company for a term of 5 consecutive years from the conclusion of the 44th Annual General Meeting held on 15th September 2017. The requirement to place the matter relating to ratification of appointment of Auditors by members at every Annual General Meeting is done away with vide notification dated 7th May 2018 issued by the Ministry of Corporate Affairs, New Delhi. However, the Company has obtained eligibility certificate from the Auditors for continuing as Statutory Auditors of the Company.

The Auditors Report to the shareholders for the year under review does not contain any qualification, reservation or adverse remark or disclaimer. The Auditors have not reported any fraud under section 143 (12) of the Companies Act, 2013.

INTERNAL AUDITOR

The Board has appointed M/s Brahmayya & Co., Chartered Accountants, Bangalore to conduct internal audit of the Company.

SECRETARIAL AUDIT REPORT

The Secretarial Audit Report as provided by Shri. G Vasudevan, M/s. G V Associates, Practicing Company Secretaries, Bangalore for the Financial Year ended 31st March 2019 is annexed herewith.

DEPOSITS

The Company has not accepted any deposits during the year.

LOANS, GUARANTEES AND INVESTMENTS

Disclosure on particulars of loans, investments and guarantees (contingent liabilities) are provided in Notes forming part of Balance Sheet as at 31st March 2019. The Company has not provided any security attracting the provisions of section 186 during the Financial Year 2018-19.

RELATED PARTY TRANSACTIONS

All related party transactions that were entered during the financial year were at arms length basis and were in the ordinary course of business. All Related Party Transactions were placed before the Audit Committee and the Board for approval. Prior omnibus approval of the Audit Committee has been obtained for the transactions which were of foreseen and repetitive nature. There were no materially significant related party transactions during the year under review which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders. Accordingly no transactions are being reported in Form AOC-2 in terms of section 134 of the Act read with Rule 8 of the Companies (Accounts) Rules 2014. However the details of the transactions with related parties are provided in the Companys financial statements in accordance with the Accounting Standards.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO:

(A) Conservation of energy: (i) Steps taken / impact on conservation of energy / Heat and Electrical Energy	Tuning of Air to fuel ratio to minimize the energy consumption by fan motors (details attached as Annexure-1)
(ii) Steps taken by the company for utilizing alternate sources of energy including waste generated	We are utilizing biogas generated from distillery unit which replaces the conventional fuel.
(iii) Capital investment on energy conservation equipment	a) Rs. 3.36 crores for Biogas plant revamping work
	b) Rs. 31.51 crores to replace 6 old mills by 4 new energy efficient mills
(B) Technology absorption: 1. Efforts, in brief, made towards technology absorption.	a) CSTR Technology for biogas plant adopted
	b) Energy Efficient Drive Mills
2. Benefits derived as a result of the above efforts	a) Replacement of non-conventional fuel
	b) At the maximum rated capability, there will be saving of power consumption per tonne of cane in future.
3. In case of imported technology (imported during the last 3 years reckoned from the beginning of the financial year), following information may be furnished:
(a) Details of technology imported.	Nil
(b) Year of import.
(c) Whether the technology been fully absorbed
(d) If not fully absorbed, areas where absorption has not taken place, and the reasons therefore.
4 Expenditure incurred on Research and Development	Nil

Annexure - 1

Energy Conservation Project

A Title of Energy Conservation Project	Tuning of Air to Fuel ratio to optimize the energy consumption by reducing the speed of fan motors
B Description of Original Systems and its Operation	Air to fuel ratio was in the range of 80-85% due to which fan motors were running at high speed resulting in high power consumption
C Description of Modified System and its Operation	Air to fuel ratio tuned and optimum value arrived and air to fuel ratio adjusted to the range of 25-30% due to which fan motors speed was reduced, resulting in the reduction of power consumption of Fan Motors (ID Fan, FD Fan & SA Fan Motors)
D Energy Saving Calculation
Energy Consumption by Aux equipments/ day before tuning of air to fuel ratio in Kwhr	42,107
Energy Consumption by Aux equipments/ day after tuning of air to fuel ratio in Kwhr	37,778
Energy saving due to conservation project in Kwhr	4,329
E Cost Benefits
Energy saving/ day in Kwhr	4,329
Cost saving/ day in Rs.	18,961.02
Cost saving/ month in Rs.	5,68,830.60
Investment cost	Nil
No of days Cogen operated after implementation	90
Cost saving for season	17,06,491.80

(C) Foreign exchange earnings and Outgo

Earnings	Nil
Outgo	3,725 EURO (INR 3,07,370)

RISK MANAGEMENT

Periodic assessments to identify the risk areas are carried out and management is briefed on the risks in advance to enable the company to control risk through a properly defined plan. The risks are classified as financial risks, operational risks and market risks. The risks are taken into account while preparing the annual business plan for the year. The Board is also periodically informed of the business risks and the actions taken to manage them. The Company has formulated a policy for Risk Management.

NOMINATION AND REMUNERATION POLICY

The remuneration policy is directed towards rewarding performance based on the review of achievements. It is aimed at attracting and retaining talents. The remuneration structure shall be determined after taking into consideration age, qualification, experience in the respective field, past performance of the concerned individual, regulatory frame work, competition in the industry, financial position of the company.

The appointment and remuneration of Executive Directors viz. Managing Director is governed by the recommendation of Nomination and Remuneration Committee, resolutions passed by the Board of Directors and shareholders of the company. The remuneration consists of salary, perquisites, allowances and commission which are subject to the limitations specified under the Companies Act, 2013 and Schedule V to the said Act.

The Non-Executive Directors are paid sitting fees of Rs.10,000/- for each meeting of the Board or Committee thereof.

The remuneration paid to the Managing Director and other Key Managerial Personnel are disclosed at Note No. 31 of Notes forming part of Financial Statements. The company does not have any Employees Stock Option Scheme.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the Financial Year 2018-19, the following changes have occurred in the constitution of Directors / KMP of the company:

Sl. No	Name	Designation	Date of appointment / cessation	Appointment/ Cessation
1	Shri. V K Swaminathan	Director	24/05/2018	Cessation
2	Shri. S Senthil Saravanan	Additional Director	25/05/2018	Appointment
3	Smt. Priya Uttam Arwat	Company Secretary	08/06/2018	Cessation
4	Shri. Murali B S	Company Secretary	22/10/2018	Appointment

Dr. M Manickam retires from the Board by rotation and being eligible, offers himself for re-appointment. The Board of Directors recommends the said re-appointment. Brief resume of him seeking re-appointment has been annexed to the Notice convening the ensuing AGM.

Shri. S Senthil Saravanan was appointed as an Additional Director by the Board on 25th May 2018 who was appointed as an Independent Director by the members at the previous Annual General Meeting held on 26th September 2018.

None of the Directors of the Company are disqualified as per the applicable provisions of the Act.

CORPORATE SOCIAL RESPONSIBILITY

As there have been no average profits available during the last three years, provisions of section 135 pertaining to Corporate Social Responsibility (CSR) are not applicable to the Company. For the purposes of Section 135(1) of the Companies Act, 2013 read with Rule 5 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Schedule VII of the Companies Act 2013, the company has duly constituted CSR Committee. The Committee would decide the activities to be undertaken by the Company and the expenditures to be incurred on the same and recommend the same to the Board and thereafter the Board approves the CSR policy.

ANNUAL EVALUATION

Pursuant to the provisions of the Companies Act, 2013, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of the Audit Committee and Nomination & Remuneration Committee.

A structured questionnaire was prepared after taking into consideration 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, obligations and governance.

A separate exercise was carried out to evaluate on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company etc. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Non Independent Directors was carried out by the Independent Directors.

RE-APPOINTMENT OF INDEPENDENT DIRECTORS

Dr. M R Desai, Shri. A Arjunaraj and Dr. A Selvakumar were appointed as Independent Non-Executive Directors of the Company by the members at the 41st Annual General Meeting of the Company held on 25th September 2014 for a period of five consecutive years commencing from 25th September 2014 to 24th September 2019.

As per section 149(10) of the Companies Act 2013, an Independent Director shall hold office for a term of upto five consecutive years on the Board of a Company, but shall be eligible for re-appointment on passing a special resolution by the Company for another term of upto five consecutive years on the Board of a Company.

The Board recommends the re-appointment of the aforesaid Independent Directors for second term of five consecutive years from the date of ensuing AGM. This has been included in the notice convening the ensuing AGM.

DECLARATIONS BY INDEPENDENT DIRECTORS

All the Independent Directors have given the declaration pursuant to Section 149(7) of the Companies Act, 2013 affirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act 2013.

COST AUDIT

Shri M Krishnamurthy (Membership Number F 7568), Cost Accountant, was appointed as the Cost Auditor of the Company and their Audit Report on the Cost Accounts of the Company for the period ended March 31, 2019, will be submitted to the Central Government in due course.

MAINTENANCE OF COST RECORDS

The maintenance of cost records has been specified by the Central Government under section 148(1) of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014. Accordingly the Company has maintained the prescribed cost records.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

As per Section 177(9) and (10) of the Companies Act, 2013, the company has established Vigil Mechanism for directors and employees to report genuine concerns and made provisions for direct access to the chairperson of the Audit Committee. Company has formulated the present policy for establishing the Vigil Mechanism/ Whistle Blower Policy to safeguard the interest of its stakeholders, Directors and Employees to freely communicate and address to the Company, their genuine concerns in relation to any illegal or unethical practice being carried out in the Company.

SHARE CAPITAL AND DEBENTURES

There has not been any change in the Equity Share Capital of the Company during the Financial Year ended 31st March 2019. During the year, the Company has not made any Buy Back of Securities (other than Exit Offer), Issue of Sweat Equity, Bonus Shares and Employees Stock Option Plan.

Pursuant to the approval of members obtained at the Annual General Meeting held on 26th September 2018, the Company has issued and allotted Non-Convertible Debentures (NCDs) aggregating to Rs. 8,62,00,000 during the FY 2018-19. The Company proposes to issue NCDs during the FY 2019-20 and the same was included in the Notice of ensuing AGM for members approval.

EXIT OPTION

Pursuant to SEBI Circular No. SEBI/HO/MRD/DSA/CIR/P/2016/110 Dated 10th October 2016, the Company provided exit option to shareholders through the promoter group company Chamudeswari Enterprises Private Limited from 30th May 2018 extended upto 5th June 2019. Total 171 shareholders tendered their shares under Exit Offer holding in total 81,220 shares and the same was intimated to National Stock Exchange of India Limited.

ORDERS PASSED BY REGULATORS/COURTS/TRIBUNALS

The Company has not received any significant and material order from Regulators/Courts/Tribunals impacting the status of going concern and future operations of the Company. The Company received an Order from NCLT dated 6th December 2018 granting the extension for repayment of deposits till 31.03.2017. The Company already repaid all the deposits except unclaimed deposits of Rs. 7.49 lakhs (including interest) as on 31.03.2019.

DETAILS OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS The Company is having an adequate Internal Financial Controls ("IFC") within the meaning of the explanation to Section 134 (5) (e) of the Companies Act, 2013. For the year ended 31st March, 2019, the Board is of the opinion that the Company has sound IFC commensurate with the nature and size of its business operations,

wherein controls are in place and operating effectively and no material weaknesses exist. The Company has also a process in place to continuously monitor the existing controls and identify gaps, if any, and implement new and /or improved controls wherever the effect of such gaps would have a material effect on the Companys operation.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

During the year under review, the human relations continued to be very cordial. The Company wishes to acknowledge the contribution of the employees at all levels of the organisation.

The Company has placed an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints for sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has not received any complaints for disposal off during the year.

PARTICULARS OF EMPLOYEES

Since the Company is an unlisted Company, disclosure under the provisions of Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is not applicable to the Company.

DISCLOSURE REGARDING SDF DUES

The Government of India vide their Notification No. GSR 885(E) dated 17/09/2018 have amended the Sugar Development Fund Rules, 1983 and provided for a provision for restructuring of SDF dues of factories which have faced severe droughts. Two units of our Company are situated in Karnataka and Government of Karnataka has declared drought in Mandya District for the years 2013-14, 201516, 2016-17 and 2018-19. Accordingly, the Company has submitted a restructuring proposal to SDF, Government of India and the same is pending for their consideration and disposal.

ACKNOWLEDGEMENT

Your Directors wish to express their grateful appreciation to the continued co-operation received from the Banks, Government Authorities, Customers, Vendors, Shareholders and Farmers during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed service of the Executives, Staff and Workers of the Company.

For and on behalf of the Board of Directors

Date : 28.08.2019	M. Srinivaasan	Dr. A. Selvakumar
Place : Bangalore	Managing Director	Director
	(DIN - 00102387)	(DIN - 01099806)