Sujana Universal Industries Ltd Directors Report.

To

The Members of Sujana Universal Industries Limited, (A Company under Corporate Insolvency Resolution Process by NCLT order No. CP(IB)No. 186/09/HDB/2019).

Your Directors and the Resolutional Professional (Herein after referred to as "The Directors" for the sake of brevity) have pleasure in presenting their Report and the Audited Financial Statements of your Company for the year ended 31st March, 2019.

Companys Performance

Your Directors hereby report that the Company has achieved a turnover of Rs. 236.32 lakhs upto 31.03.2019 as against the turnover of Rs. 5534.72 lakhs during the previous financial year ended 31.03.2018.

Rs. in Lakhs
Particulars 2018-2019 2017-2018
Revenue: Revenue from Operations 236.32 5534.72
Other Income 40.28 217.43
Total Income 276.60 5752.15
Expenses: Cost of Materials Consumed - 37.76
Purchase of Stock-in-Trade - 4404.01
Changes in inventories of Finished Goods, Work-in-Progress and - -
Stock-in-Trade 887.45 454.04
Employee Benefit Expenses 111.10 251.89
Finance Costs 2730.16 55.60
Depreciation and Amortization Expenses 1006.10 1817.31
Other Expenses 68453.30 8296.74
Total Expenses 73188.11 15317.35
Profit Before Tax (72911.51) (9656.20)
Current Tax - -
Differed Tax 96.52 949.20
Profit for the year (73008.03) (10514.40)
Balance of Profit (99393.05) (23712.90)

Operations & Overall Performance:

During the year under review, your Company reported total income of Rs. 276.60- Lakhs as against Rs. 5752.15 lakhs of previous year. Your company incurred loss before tax of Rs. 73008.03 lakhs as against loss of Rs. 10514.40 lakhs in the previous year. After making a provision of Rs. 2730.16 Lakhs towards interest and Rs. 1006.10 Lakhs towards depreciation, the current financial year closed with a net loss of Rs. 73008.03 Lakhs as against net loss of Rs. 10514.40 Lakhs last year.

Dividend:

In view of the losses, your Company does not recommend any dividend for the year under review.

Material Changes and Commitments:

There is no material change and commitment has occurred, affecting the financial position of the Company, between the end of the financial year of the Company i.e. 31st March, 2019 and the date of this report.

Deposits

Your Company has not accepted Deposits from Public or Members under Chapter V of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014 for the year under review.

Related Party Transactions

All contracts/arrangements/transactions entered by the Company during the financial year with related parties were in ordinary course of business and on arms length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties which could be considered material under Regulation 23 of Listing Regulation. Accordingly, the disclosure of Related Party Transactions as required nder Section 134(3)(h) of the Companies Act, 2013 in Form AOC - 2 is not applicable. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board is also posted in the Investors section of the Companys website www.sujana.com. Your Directors draw attention of the members to Note No. 2.28 to the financial statements which sets out related party disclosures.

Prior omnibus approval is obtained on an annual basis for the transactions with related parties which are of a foreseeable and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted and a statement giving details of all transactions with related parties are placed before the Audit Committee and Board of Directors for their review on a periodic basis. None of the Directors, other than to the extent of their shareholding, receipt of remuneration / commission, has any pecuniary relationships or transactions vis--vis the Company.

Corporate Social Responsibility

Corporate Social Responsibility Policy framed in consonance with Section 135 of the Companies Act, 2013 read with the rules framed there under duly indicating the activities to be undertaken by the Company as specified in the Schedule VII of the Companies Act, 2013. The Corporate Social Responsibility Policy is posted in the Investors section of the Companys website. The Company is not falling under any of the applicability criterias of CSR as mentioned under the provisions of Section 135 of the Companies Act, 2013 as amended by the Companies Amendment Act, 2019. Reporting as required under the aforesaid Section, for the FY 2018-19 as Annexure - I and forms part of this report.

Directors Responsibility Statement:

Directors Responsibility Statement as required under the provisions of Section 134(3)(c) of the Companies Act, 2013, is given in the Annexure - II attached hereto and forms part of this Report.

Auditors:

(a) Statutory Auditors

M/s. J. Singh & Associates, Chartered Accountants (FRN No. 110266W), are the Statutory Auditors of the Company and they hold the office till the conclusion of the 33rd Annual General Meeting of the Company in the year 2022.

Notes to the accounts as referred in the Auditors Report are self-explanatory.

During the year under review, the Auditors of the Company have not reported any fraud as specified under Section 143 (12) of the Companies Act, 2013 to the Audit Committee.

Statutory Auditors Qualification / Comment /Explanations on the Companys Standalone/Consolidated Financial Statements

a) The Company has defaulted in repayment of dues to Banks/Financial Institutions and all loans outstanding were classified as NPAs by the banks. Provision for interest (excluding penal interest) amounting to Rs. 55.67 Cr. and Rs.213.40 Cr for the quarter ended 31st March 2019 and Year ended on such date respectively on its Working Capital Loan and Term Loan has not been made in the books by the Company, as those Loan Accounts were classified as NPA by the Lending Banks and Financial Institutions. The loss of the Company has been understated by Rs.55.67 Cr for the quarter ended 31st March 2019 and Rs. 213.40 Cr for the year ended on such date in view of non-provision of Interest amount.

As on 31.3.2019, the outstanding secured loans stand at Rs. 1123.20 cr., and the Company is pursuing with the lenders a viable restructuring package. As almost all the Banks/Financial Institutions, the lenders have classified our loan accounts as NPAs and in view of the Companys efforts with the lenders for settlement of dues in the form of OTS/Resolution of debts by takeover by strategic investors, the Company has not provided in the books of account unpaid interest amounting to Rs.213.40 cr., for the current financial year 2018-19.

b. In absence of technical and costing evaluation of current and non current assets, impact of impairments, if any, on their economic value, we cant comment on the realizable value of same.

The amounts in current assets and non current assets advance paid for services etc., and in the opinion of the management, they are good and recoverable in cash or in kind. Hence, provision has not been made.

c. The Trade receivables could not be verified as the confirmation of balances have not been received. The Company has made a provision for bad and doubtful debts for trade receivables amounting to Rs.409.18 Cr during the Year ended 31st March 2019. The realizability of remaining trade receivables amounting to Rs.579.63 Cr is in doubt and the company has not made any provision for Bad and Doubtful Debts in respect of this trade receivables.

The Company has sent letters to the debtors requesting for confirmation of balance as on 31.03.2019. The Company is following up with the Debtors for the confirmations. The company has made provision for bad and doubtful debts to the extent of Rs.409.18 crore and is confident of realizing the balance amount of Rs.579.63 crore. Hence provision has not been made for the amount.

d. Loans and advances of Rs. 44.16 Cr has been given to various sub-contractors, suppliers and other parties are old advances. Having regard to the age of this advances, in our opinion, this are doubtful of recovery. The company is yet to assess the change in risk of default and resultant expected credit allowance on such Loan and advances. Had the aforesaid Loans and advances has been provided for impairment, loss of the company for the quarter ended 31st March 2019 and year ended on such date would have been higher by Rs. 44.16 Cr .

The amount of Rs.44.16 Cr., has been paid as advance for supply of goods/ services and in the opinion of the management, they are good and recoverable in cash or in kind. Hence, provision has not been made.

e. The Companys Net worth has been eroded on account of losses incurred by the company during the year ended 31st March 2019 and previous financial year and the net worth of the company is negative. The Current Liabilities of the company exceeded the current assets of the company as at 31st March 2019 by Rs.754.64 Cr. It would cast doubt on the Companys ability to continue as a going concern basis.

The company has been making efforts for settlement of the dues of banks/ Financial Institutions in the form of OTS/ Resolution of debts through takeover by strategic investors. The company expects its net worth to become positive in the process and hence can continue as a going concern.

Note No. f in Independent consolidated audit report

f. Except Sun Trading Net worth of the companies in the Group has been eroded on account of losses incurred during current financial year ended 31st March 2019 and previous financial year doubt on the Companys ability to continue as a going concern basis

Due to adverse conditions in the international market for steel and allied products and other problems, the subsidiaries incurred losses and their Net Worth has been eroded. It may be observed from the net worth of all the subsidiaries excepting Sun Trading Ltd has been eroded fully. Since the company management was of the opinion that the impairment of valuation of the subsidiaries excepting Sun Trading Ltd was permanent, a provision for impairment to the extent of Rs.174.97 crore (book value of investment in subsidiaries excepting Sun Trading Ltd) was made in books.

(b) Cost Auditors:

M/s. B V R Associates & Co, Cost Accountants, have been appointed as the Cost Auditor of the Company for financial year 2019-20 pursuant to provisions of Section 148 and other applicable provisions of the Companies Act 2013. As required by Section 148 of the Companies Act, 2013, necessary resolution has been included in the notice convening the Annual General Meeting seeking ratification by the members to the remuneration proposed to be paid to the cost auditors for the financial year ending 31st March, 2020.

The Company is in process of filing the Cost Audit Report, for the financial year 2018-19 with the Central Government.

(c) Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules framed there under, the Resolution Professional has appointed Anand Kumar C Kasat, Practicing Company Secretaries, Mem. No. 42078, CP. No. 17420 to undertake the secretarial audit of the Company. The secretarial audit report issued by Anand Kumar C Kasat, Practicing Company Secretary for the financial year ending 31st March, 2019 is given in the Annexure-III-A attached hereto and forms part of this Report. There are no qualifications, reservations or adverse remarks made by the secretarial auditor and the observation made is self explanatory and requires no further explanation from the Board.

(d) Secretarial Compliance Report

Pursuant to Regulation 24A of SEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 the Company has obtained annual Secretarial Compliance Report for the financial year ended 31st March, 2019. The report has been annexed herewith as "Annexure - III-B".

(e) The Company could not appoint Company Secretary under Section 203 of Companies Act, 2013 reading Rule 8A of Companies (Appointment and Remuneration of Key Managerial Personnel) Rules, 2014 in spite of its efforts and the Company is taking further steps to comply with the provisions for appointment of Company Secretary.

Since the appointment of Company Secretary could not be made, the Company could not file Form INC 22A and consequently, the Company has been classified as Non Compliant Company by the Ministry of Corporate Affairs.

Share Capital

The paid up equity share capital as on 31st March, 2019 was Rs. 168841072. During the year 2018-19, there was no change in the share capital of the Company.

The Company has not issued any share with differential voting rights nor has granted any stock options or sweat equity as on 31st March, 2019. None of the Directors of the Company hold instruments convertible into equity shares of the Company.

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-IV and forms part of this Report.

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

Particulars with respect to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo as required under Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 are given in the Annexure -V attached hereto and forms part of this Report.

Meetings:

During the year under review 5 (Five) board meetings were held on May 30th, 2018, August 14th, 2018, August 29th, 2018, November 14th, 2018 and February 14th, 2019. The maximum time gap between any two consecutive meetings was within the period prescribed under the Companies Act, 2013 and and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Directors:

Pursuant to the provisions of Section 152 of the Companies Act, 2013 and in accordance with the Articles of Association of the Company, Shri. S.Hanumantha Rao(DIN: 00118801), Director of the Company will retire by rotation at the ensuing Annual General Meeting and, being eligible, offers himself for re-appointment.

The Resolutions proposing their re-appointment/appointments as Directors will be placed before the Shareholders for their approval at the ensuing Annual General Meeting of the Company.

Dr.V.Malakonda Reddy (DIN: 00839850) Independent Director of the Company has resigned due to personal reasons from the directorship of the Company w.e.f May 30th, 2018. The Board places on record its deep appreciation for the valuable services rendered by him during his association as a Director and Independent Director of the Company.

Ms. G.Uma Devi (DIN: 07958472) Independent Director of the Company has resigned due to her full time employment in a private organization w.e.f: May 29th, 2019. Ms. G.Uma Devi has communicated and confirmed that there are no material reasons other than those provided above. The Board places on record its deep appreciation for the valuable services rendered by her during her association as a Director and Independent Director of the Company.

Shri Venkatakrishnan (08067933), Nominee Director of the Company has resigned due to withdrawal of nomination by the IDBI Bank Limited with effect from September 18th, 2018. The Board places on record its deep appreciation for the valuable services rendered by him during his association as a Director and Independent Director of the Company.

The Company has received declarations from all the Independent Directors of the Company confirming that they continue to meet with the criteria of independence as prescribed under sub-section (6) of Section 149 of the Companies Act, 2013 and under Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

None of the Directors of your Company is disqualified under Section 164 (2) of the Companies Act, 2013. As required by law, this position is also reflected in the Auditors Report.

The following persons are Key Managerial Personnel of the Company:

Shri G Srinivasa Raju : Managing Director

Shri S Hanumantha rao : Whole time Director

Shri S Rengaraj : Chief Financial Officer

For Directors seeking appointment/re-appointment in the forthcoming Annual General Meeting of the Company; the particulars as required to be disclosed in accordance with Regulation 36(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, are attached and forms part of this Report.

Board Evaluation:

The Board of Directors evaluated the annual performance of the Board as a whole, its committees and the directors individually in accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 in the following manner:

• Structured evaluation forms, 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, for evaluation of the performance of the Board, its Committees and each director were circulated to all the members of the Board along with the Agenda Papers. The members of the Board were requested to evaluate by filling the evaluation forms and the duly filled in evaluation were required to be sent to the Company Secretary in a sealed envelope or personally submitted to the Chairman at the concerned meeting.

• The Board also provided an individual feedback to the concerned director on areas of improvement, if any.

A separate meeting of Independent Directors was held on 30th March, 2019 to evaluate the performance of the Chairman, the Non Independent Directors, the Board and flow of information from management.

Particulars of Employees:

The information required pursuant to the provision of Section 197 read with Rule, 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, are set out in Annexure-VI of this Report.

Management Discussion and Analysis Report:

Management Discussion and Analysis, forming part of this report as required under Regulation 34(2) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is attached hereto as Annexure- VII and forms part of this Report.

Corporate Governance:

Your Company is committed to principles of good Corporate Governance. The Board of Directors ensures that your Company is in compliance with all the applicable regulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 pertaining to Corporate Governance. A detailed report on Corporate Governance is attached as Annexure-VIII and forms part of this report. Certificate from the Practicing Company Secretary confirming the compliance with the conditions of Corporate Governance as stipulated under Regulation 34(3) read with Schedule V of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is attached to this report.

Subsidiaries :

Details of the subsidiaries are given below :

Your Company has the following Wholly Owned Subsidiaries:

PAC Ventures Pte Ltd, Singapore was set up in the year 2007 with a view to expand the Companys business of general wholesale trade(including general imports and exports) in the overseas markets and the Company has achieved revenue of Rs. Nil during the year

Sujana Holdings Ltd, Dubai was set up in the year 2006 for carrying on the business of investments and trading and its revenue during the year is nil Further, Sujana Holdings has expanded its operations in Sharjah UAE by forming a subsidiary namely Empire Gulf FZE, Sharjah, UAE.

Nuance Holdings Ltd, Hong Kong was set up in the year 2006 for carrying on the business of investments and trading and its revenue during the year was Rs. Nil. Nuance Holdings Ltd has expanded its operations by forming a subsidiary namely Selene Holdings Ltd, Mauritius.

Sun Trading Ltd, Cayman Islands was set up in the year 2008 for carrying on the business of general wholesale trade which includes general imports and exports and its consolidated revenue was Rs. Nil. Sun Trading Ltd has a subsidiary namely Sun global Trading Pte. Ltd, Singapore.

Hestia Holdings Ltd, Mauritius has became subsidiary of the Company w.e.f. 27th December 2010, with the object of carrying on the business of general trade which includes general imports and exports.

A separate statement containing the salient features of the Financial Statement for the financial year ended 31st March, 2019 of the aforesaid subsidiary companies are included in the Annual Report as Form AOC-1 as an ‘Annexure -IX. The Financial statements of the said Subsidiaries Companies are available for inspection by the Shareholders at the Registered office of your Company. Your Company undertakes that the Financial statements of the Subsidiaries Companies shall be made available to the Shareholders of the Company on demand.

Consolidated Financial Statements:

The consolidated financial statements of your Company for the financial year 2018-19, are prepared in compliance with applicable provisions of the Companies Act, 2013, Accounting Standards and Listing Regulations as prescribed by the Securities and Exchange Board of India (SEBI).

The consolidated financial statements have been prepared on the basis of audited financial statements of the Company and its subsidiaries.

Audit Committee:

Your Company has constituted an Audit Committee as per the requirements of Section 177 of the Companies Act, 2013. The details of the composition of the Audit Committee as required under the provisions of Section 177(8) of the Companies Act, 2013, is given in the Corporate Governance Report furnished as part of the Annual Report. During the year under review, the Board has accepted all the recommendations of the Audit Committee.

Internal Control Systems and their adequacy:

Your Company has an effective Internal Control System to prevent fraud and misuse of Companys resources and protect shareholders interest. Your Company has an independent Internal Audit Department to monitor and review and focus on the compliances of various business processes. The internal audit report alongwith audit findings and tracking of process improvements & compliances is presented for review to the Audit Committee of Board of Directors.

The Board of Directors of the Company have adopted various policies like Related Party Transactions Policy, Whistle Blower Policy, Corporate Social Responsibility Policy, Risk Management Policy, Dissemination of Material Events Policy, Documents Preservation Policy, Monitoring and Reporting of Trading by Insiders, Code of Internal Procedures and Conduct for Regulating, Code of Practices and Procedures for Fair Disclosures and such other procedures for ensuring the orderly and efficient conduct of its business for safeguarding of its assets, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information

Vigil Mechanism:

The Board of Directors, on recommendation of the Audit Committee, established a vigil mechanism by framing a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The Vigil Mechanism framework ensures that strict confidentiality is maintained whilst dealing with concerns and also that no discrimination shall be meted out to any person for a genuinely raised concern. The designated officer/ Audit Committee Chairman can be directly contacted to report any suspected or confirmed incident of fraud/misconduct.

Remuneration Policy:

The Board of Directors, on recommendation of the Nomination and Remuneration Committee framed a Nomination and Remuneration policy for selection, appointment and remuneration of Directors, KMP and Senior Management and matters covered u/s 178(3) of the Companies Act 2013. The details of the same are provided in the Corporate Governance Report.

The Policy is also posted in the Investors section of the Companys website www.sujana.com.

Particulars of Loans, Guarantees or Investments:

Particulars of Loans, Guarantees and Investments as required under the provisions of Section 186 of the Companies Act, 2013 are provided in the notes to the Financial Statements.

Risk Management :

The Risk Management programme at The Company is focused on ensuring that risks are known and addressed. The Board of Directors, on recommendation of the Audit Committee, established a robust Risk Management framework by framing a Risk Management Policy to deal with all risks including possible instances of fraud and mismanagement, if any. The Risk Management Policy details the Companys objectives and principles of Risk Management along with an overview of the Risk Management process, procedures and related roles and responsibilities.

The Board is of the opinion that there are no elements of risks that may threaten the existence of the Company. The board periodically tracks the progress of implementation of the Risk Management policy

Industrial Relations:

Your directors are happy to report that the Industrial Relations have been extremely cordial at all levels throughout the year.

Sexual Harassment Policy:

The Company as required under the provisions of "The Sexual Harassment of Women at Workplace (Prohibition, Prevention and Redressal) Act, 2013" has framed a Policy on Prohibition, Prevention and Redressal of Sexual Harassment of Women at Workplace and matters connected therewith or incidental thereto.

In the year under review, the Company has not received any complaint under the said Policy.

Environment and Social Obligation:

The Companys plants comply with all norms set up for clean and better environment by the competent authorities. The Company undertakes regular checks / inspections including certification for the maintenance of the environment. The Company values environmental protection and safety as the major considerations in its functioning. The Company has adequate effluent Treatment

Plants to prevent pollution. The Company is continuously endeavoring to improve the health and quality of life in the communities surrounding its industrial complexes.

Human Resource Management:

The Company believes that Human Resource is its most valuable resource, which has to be nurtured well and equipped to meet the challenges posed by the dynamics of Business Developments. The Company has a policy of continuous training of its employees both in-house. The staff is highly motivated due to good work culture, training, remuneration packages and the values, which the company maintains. Your Directors would like to place on record their deep appreciation of all employees for rendering quality services and to every constituent of the Company be its customers, shareholders, regulatory agencies or creditors. Industrial relations have remained harmonious throughout the year.

Insurance:

All the properties and insurable assets of the Company, including Building, Plant and Machinery, stocks etc., wherever necessary and to the extent required, have been adequately the covered.

Quality:

Your Company accorded high priority to quality, safety, training, development, health and environment. The Company endeavours to ensure continuous compliance and improvements in this regard

Appreciations:

The Management take this opportunity to express their deep sense of gratitude to the Central, State Government and Local Authorities, Financial Institutions, Banks, Customers, Dealers, Vendors and all the stakeholders for their continued cooperation and support to your Company.

The Management wishes to express its appreciation to all the employees of the Company for their outstanding contribution to the successful operations of the Company.

Management specially thank to the shareholders for their continued confidence and faith in the Company.

For SUJANA UNIVERSAL INDUSTRIES LIMITED
Ramakrishnan Sadasivan
Resolution Professional
(IP Registration No.IBBI/IPA-001/IP-P00108/2017-18/10215)
PLACE: Hyderabad (A Company under Corporate Insolvency Resolution Process by
DATE: November 14th, 2019 NCLT order No. CP(IB)No. 186/09/HDB/2019)