Sukhjit Starch & Chemicals Ltd Directors Report.

Dear Share Holders :

Your Directors are pleased to present before you the 76th Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2020 :-

1. FINANCIAL RESULTS 2019-20 2018-19
(? in Crores) (? in Crores)
Sales & Other income 805.24 743.15
Earning before Interest, tax and Depreciation 64.55 95.00
- Less Interest 18.16 16.28
- Depreciation 13.35 12.74
Profit before tax 33.04 65.98
- Provision for taxes 8.93 21.40
-- Deferred Tax/(Deferred Tax written back) (9.40) 2.90
Profit After Tax 33.51 41.68
Surplus brought forward from previous year 25.62 21.39
Dividend for the F.Y. 17-18 -- 5.78
(including Dividend Distribution Tax)
Interim Dividend for F.Y. 18-19 -- 6.67
(including Dividend Distribution Tax)
Transfer to General Reserves 25.00 25.00
Surplus carried forward 34.13 25.62

2. PERFORMANCE

Sales and other income of the Company for the year ended 31.03.2020 have increased by about 8% to ?805.24 Cr from ? 743.15 Cr in the previous year. However, profits of the Company have been adversely affected mainly due to high cost of basic raw material i.e. Maize. Late rains in the months of October and November last year had seriously impaired the quality of Kharif Crop in most of the Maize growing areas of Madhya Pradesh, Maharashtra and Karnataka. The prices and availability remained very volatile thereafter increasing the cost of basic raw material considerably. The outbreak of COVID-19 in the last quarter of F.Y. 2019-20 further aggravated the position as COVID-19 has not only shattered the demand for some of the finished goods, but also affected their prices negatively. The Earnings Before Interest, Tax and depreciation have come down to ? 64.53 Cr. (? 95.0 Cr.) which after interest of ? 18.16 Cr. (? 16.28 Cr.) and depreciation of ? 13.35 Cr. (? 12.74 Cr.) resulted in a net profit before tax of ? 33.04 Cr. (? 65.97 Cr.). The net profit after tax has come down from ? 41.67 Cr. to ? 33.50 Cr. this year.

3. COVID -19

The national lockdown in March, 2020 and imposition of Curfew in some states due to outbreak of COVID-19 Pandemic has changed the overall economic activity resulting in serious disruption of business operations. The Company has taken necessary steps from time to time to contain the impact of pandemic following the

statutory guidelines/advisories issued by the Central / State Governments. Owing to the uncertainty in the economic activity, post lifting the lockdown, the Company has carried out due assessment of the possible impact on its business results and its overall liquidity position. The Management has exercised due care in valuation of its inventories, receivables or other assets keeping in mind the risk involved in their recoverable in the foreseeable future. Since the situation is evolving continuously, the impact in future may be different from the estimates made on the date of approval of these results. The Management will continue monitoring the material changes due to the said Pandemic and take necessary measures accordingly to address the situation.

4. FUTURE PROSPECTUS

With the prediction of normal monsoons during the running year, it is expected that high production of agriculture produce will improve the availability of basic raw material at an optimum cost. This will also ensure continuous supply of raw material at all plant locations of the Company. However, the economic disruption amid Covid-19 may impact the business operations during the running year. The Company is trying to optimize the capacity utilization at the existing units and commencement of Production by its new unit (coming up in the state of Punjab and is expected to be operational in Q2 F.Y. 21).

5. DIVIDEND

The Board recommended a Dividend of ? 2/- (Rupees Two only) per equity share of the face value of ?10/- each i.e. 20% (Twenty Percent) on paid up equity share capital of the Company for the financial year ended 31st March, 2020, which comes to 40% on the Pre Bonus Capital, which was increased by issue of Bonus shares allotted in the ratio of 1:1 last year. The Company had paid interim dividend of ? 7.5/- (Seven Rupees Fifty Paisa only) per equity share of the face value of ? 10/- each i.e. 75% on the pre bonus capital, in the month of March, 2019.

6. CAPEX & CREDIT RATING

The Credit Analysis & Research Limited (CARE) has maintained the rating CARE A+ for the long term borrowings of the Company and CARE A1 for the short term borrowing of the Company. The Current Assets stood at ? 254.25 crores as compared to ? 211.27 crores on 31.03.2019 including Inventories at ? 152.10 crores on 31.03.2020 against ? 53.24 crores in previous year. The level of inventories was higher on 31.03.2020 due to lower sales in the month of March, 2020 owing to the outbreak of COVID-19 and total lockdown from 22.03.2020. The Non Current Assets have increased to ? 455.31 Crores (Net) on 31.03.2020 against ? 321.55 crores on 31.03.2019 due to planned cap-ex for the new maize processing facility of maize grind capacity of 600 TPD, commissioned in the state of Punjab.

The Management believes that the Company has enough liquid resources at hand to meet any additional working capital requirements.

7. MANAGEMENT DISCUSSION AND ANALYSIS

As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Managements discussion and analysis report is annexed herewith marked as Annexure A and forms a part of this report.

8. CORPORATE GOVERNANCE

Your company is fully committed to the philosophy of transparency and believes in conducting its business with due compliance of all the applicable laws, rules and regulations. In compliance with the requirements of

SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended to date, the report on the Corporate Governance is annexed to this report marked as Annexure B.

9. SHARE CAPITAL

There is no change Equity Share Capital during the F.Y. 2019-20.

10. TRANSFER TO RESERVES

The Company has transferred ? 25 crores (PY ? 25 crores) to the general reserve.

11. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134 (3c) of the Companies Act, 2013, the Directors state that:

(a) in the preparation of the Annual Accounts for the financial year ended 31st March, 2020, the applicable Indian Accounting Standards have been followed and there are no material departures;

(b) appropriate accounting policies have been selected and applied 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 of the company for the year so ended;

(c) proper and sufficient care has been taken 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 Annual Accounts for the year ended 31.03.2020, have been prepared on a going concern basis;

(e) the internal financial controls have been laid down to be followed by the company and that such internal financial controls are adequate and are operating effectively; and

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

12. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

The Vijoy Steel & General Mills Company Ltd., Phagwara: The Company held 96.17% of shares in the capital of the Vijoy Steel & the General Mills Co. Ltd. The Company continues providing good engineering support to the manufacturing operations of the Company and has shown turn around during the year under reference. The Company has achieved higher turnover during the year i.e. ? 1.95 crores against ? 0.71 crores P.Y. by supplying some of the equipment to the new expansion project of the Company.

Scott Industries Ltd., Phagwara: The Company held 99.97% of shares in the capital of the Scott Industries Ltd. The Company has shut down its operations. Most of its assets have been already disposed off and efforts are on to realize the dues from its old customers.

Sukhjit Mega Food Park & Infra Ltd., Phagwara: The Company held 100% of shares in the capital of its subsidiary Sukhjit Mega Food Park & Infra Ltd. The Company has already spent over ? 120 crores on the Project. The project is almost ready for commissioning and is expected to commence its operations in Q2 F.Y. 2021.

There has been no material change in the nature of business of the Subsidiaries. As required under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, as amended to date, The Consolidated Financial Statements of the Company and its subsidiaries are attached, which have been prepared in accordance with the relevant Indian Accounting Standard(s) as prescribed under the Companies Act, 2013.

In pursuance to the general circular issued by the Ministry of Corporate Affairs, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary companies are not being annexed with the Balance Sheet of the Company. A statement containing the requisite financial details of the companys subsidiaries for the financial year ended 31st March, 2020 is annexed to the consolidated results in the Annual Report. The annual accounts of these subsidiaries and the related detailed information will be made available to any shareholder of the Company who may be interested in seeking such information and are also available for inspection by any shareholder of the Company at the registered office of the Company. The Company shall place the annual accounts of subsidiaries on its website and shall provide the requisite information to any shareholder on demand.

13. PARTICULARS OF REMUNERATION TO DIRECTORS AND DISCLOSURES

In terms of the provisions of section 197 (12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and remuneration of Managerial Personnel) Rules, 2014, the names and other particulars of Directors/ KMP are set out in the Annexure C to the Directors Report.

However, in view of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of the employees who are in receipt of remuneration over ^ 1.02 crores p.a. if employed throughout the year or ? 8.5 lacs p.m. if employed for a part of the year during 2019-20 are given below :

(A) Persons employed through out the year and were in receipt of remuneration aggregating not less than ? 1.02 crores for the year :

Sr. No. Name Age Designation Gross Remuneration (? Lacs)
1 Shri K.K. Sardana 72 Managing Director w.e.f. 1st May, 2019 106.56
Qualification Experience Date of Joining Last Employment/ Designation Held
B.A. 49 18.01.1972 The Sukhjit Starch & Chemicals Ltd., Phagwara G.M. (Commercial)

(B) Persons employed for a part of the year and were in receipt of remuneration at a rate not less than ? 8,50,000/- per month

Sr. No. Name Age Designation Gross Remuneration (? Lacs)
1 Shri I.K. Sardana 74 Managing Director upto 29th April, 2019 11.96
Qualification Experience Date of Joining Last Employment/ Designation Held
B.A. 54 02.08.1967 The Sukhjit Starch & Chemicals Ltd., Phagwara Sales Manager

Note :

1. The Remuneration shown above includes salaries, allowances, commission, contribution to provident fund and perquisites valued in accordance with the income tax rules.

2. Pursuant to the provisions of the section 197 (14) of the Companies Act, 2013, there is no holding Company and Sh. I. K. Sardana & Sh. K.K. Sardana have not received any remuneration in form of salary, commission, allowances and sitting fees from any of its subsidiaries.

14. DIRECTORS

(a) The Board have co-opted Sh. Vikas uppal (DIN: 00796828) as an Additional Non- Executive Independent Director on 21.01.2020. He will hold the office till the Annual General Meeting and Board has recommended his appointment as an Non-Executive Independent Director of the Company. He is having long experience of over three decades in the manufacturing, administration, management fields. Presently he is the Managing Director of Opal Engines Pvt. Ltd.

(b) Smt. Shalini Umesh Chablani (DIN:00885883) has been co-opted as a Non- Executive Additional Director of the Company on 21.01.2020. The Board has recommended her appointment as Non- Executive Woman Director of the Company in the ensuing Annual General Meeting. She is Commerce Graduate and is presently a Director of Tea-Ma Consortium Ltd. and Britania Sales and Services Pvt. Ltd. She has rich experience in the field of marketing, trade & commerce besides having a rich industrial back ground. She brings with her diverse experience and skills.

(c) A notice has been received from shareholders u/s 160 of the Companies Act, 2013 proposing the appointment of Sh. Tarsem Singh Lally (DIN:00381009) to the office of the Non- Executive Independent Director of the Company. Accordingly, a resolution for his appointment has been proposed to be passed by the shareholders in the ensuing Annual General Meeting. Sh. Tarsem Singh Lally is engineering graduate and an experienced entrepreneur with sound business background. He has lifelong commercial/ technical experience of over 45 years in various fields to his credit. He is director on the Board of various companies and brings with him decades long business experience and will strengthen the composition of the Board.

(d) Sh. Vinod Pal Kapahi, a Non Executive - Independent Director of the Company has retired from Directorship on completing of his term as the Non Executive - Independent Director of the Company. The Board placed on record his valuable & rich contribution and guidance in the Board meetings for over fourteen years.

(e) The Company has received declarations from all the Independent Directors of the company confirming that they meet the criteria of independence and comply with all the requirements in pursuance to subsection (6) of Section 149 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, so as to qualify themselves to be appointed as independent directors under the provisions of the Act and rules thereunder.

(f) Based on evaluation criteria laid down under the Nomination and Remuneration Policy of the Company, framed in accordance with the provisions of section 178 of the Companies Act, 2013, the Nomination & Remuneration Committee rates the performance of the board and its committees which, inter-alia, includes evaluation of leadership abilities, contribution to corporate objectives & plans, regular monitoring, effective decision making ability, attendance and contribution at Board and Committee meetings etc. The company has in place a suitable policy for the appointment & remuneration of the Directors/ KMPs.

The Company has devised the Boards Performance Evaluation criteria for evaluation of Boards/ Committees/ Directors performance. The performance of the Committees was evaluated by the Board

on the basis of the criteria such as the composition of committees and effectiveness of committee meetings etc.

Separate Meeting of Independent Director of the Company was held on 13th November, 2019 and it reviewed the performance of Non- Independent Directors, the Board as a whole and also the Chairperson of the Company. The same was placed on record and discussed in the board meeting following the meeting of the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

The Board of Directors held five meetings during the year under reference and details thereof appear in report on Corporate Governance of the Annual report.

15. INTERNAL FINANCIAL CONTROLS

Internal financial control systems of your company ensure the reliability of financial reporting, timely feedback on the achievement of operational or strategic goals and compliance with all the applicable laws & regulations. The Internal & External Auditors of the Company also measure the effectiveness of internal controls through periodical checks and ensure that company has an effective internal control system duly commensurate with its size and nature of business. The management reviews the systems periodically to systematically improve business processes in regard to their effectiveness and efficiency.

16. VIGIL MECHANISM

Pursuant to Section 177 of the Companies Act, 2013 & rules made there under and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has established a vigil mechanism, which also incorporates a Whistle Blower Policy, for Directors and employees of the Company to report genuine concerns of unethical behavior or violation of code of conduct by way of direct access to the Chairman of the Audit Committee. There are adequate safeguards against victimization of employees/ directors who express their concerns. Whistle Blower Policy of the Company stands placed on the Companys website at the link: http://sukhjitgroup.com/whistle_blower_policy.html.

17. RISK MANAGEMENT POLICY

The company recognizes that the risk management and internal control are the key elements of good corporate governance and has formulated the risk management policy which describes the manner in which the company identifies, assesses, monitors and manages risks. The details of the policy are available at companys website.

18. AUDIT COMMITTEE

The powers, role and terms of reference of the Audit Committee covers the areas as contemplated under Section 177 of the Companies Act, 2013 (the Act) and Regulation 18 of Listing Regulations, as applicable, besides other matters as referred by the Board of Directors from time to time. The primary objective of the audit committee is to monitor and provide an effective supervision of the Managements financial reporting process, to ensure accurate and timely disclosures with highest levels of transparency, integrity and quality of financial reporting. The committee oversees the work carried out in financial reporting process by the Management, the internal auditors and the independent auditors. All possible measures are taken by the committee to ensure the objectivity and independence of the independent auditors.

The Committee mandatorily reviews information such as internal audit reports related to internal control weakness, management discussion & analysis and operational results, statement of significant related party transactions and such other matters as prescribed.

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During the year under reference, the Audit Committee of the Company consisted of Sh. V.P. Kapahi as Chairman and S. Ranbir Singh Seehra, Smt. Ruby Agarwal and Sh. M.G. Sharma as its members. The recommendations made by the Audit Committee were accepted by the Board.

19. GENERAL DISCLOSURE

(i) All the deposits have been accepted/ renewed / repaid as per the provisions of the Companies Act. The company had no unclaimed / unpaid deposits on 31/03/2020. Unsecured Loans as on 31/03/2020 include ? 5.77 crores (P.Y. ? 3.30 crores) received from directors, which have not been given out of funds acquired by them by borrowing or accepting loans or deposits from others, as per the declarations received from the concerned directors.

(ii) No shares have been issued during the year under reference with differential rights as to dividend, voting or otherwise.

(iii) There is no significant and material order passed by any regulator, court, tribunal which may impact the going concern status of the Company and Companys operations in future.

(iv) There is no change in the nature of companys business during the year under review.

(v) There was no instance of fraud during the year under reference which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act and Rules made thereunder.

(vi) The Board has constituted an Internal Committee for redressal of grievance / complaint (if any) under Sexual Harassment of Woman at workplace (Prevention, Prohibition and Redressal) Act, 2013. The committee has not received any complaint during the year under reference.

20. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The report on Corporate Social Responsibility activities carried out during the financial year 2019-20 is annexed herewith marked as Annexure D to this report.

21. CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The Company has not entered into any material transaction with its Promoters, Directors, Key Managerial Personnel or their Relatives which could have potential conflict with the interest of the Company. The salaries/ remuneration of the directors and KMPs have been fixed after due consideration by the Nomination and Remuneration Committee / Board / Shareholders as per applicable provisions of the Act. However, the transactions with subsidiary Companies are incurred after due appraisal, approval(s) at appropriate levels and omnibus approval by the audit committee / board, which are in the ordinary course of business and are at arm s length price, in terms of IND AS-24 and given as per Point No. 7 of the Notes to Accounts forming part of the Annual Report. Policy on related party transactions of the company appears on the Companys website at the link: http://sukhjitgroup.com/ Policy_dealing.html.

22. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED

Particulars of loans given and Investments made are provided in the standalone financial statements. The Company has given/provided some Guarantees / Securities to the Govt. / other Departments in the ordinary course of business. Corporate guarantee(s) for Rs. 40 crores to Yes Bank Ltd. and Rs. 20 crores to Citi Bank N.A. have been given against the Term Loans for setting up the Mega Food Park by its wholly owned subsidiary M/s Sukhjit Mega Food Park & Infra Ltd. and there is no third party Guarantee / security given / provided by the Company.

23. EXTRACT OF ANNUAL RETURN

Extract of the Annual Return of the Company is annexed herewith as Annexure E to this report. A copy of the same has also been placed on Companys website at the link : http://sukhjitgroup.com/extract of annual return.html.

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

The necessary detail is annexed herewith as Annexure F to this report.

25. AUDITORS AND AUDITORS REPORT Statutory Auditors :

M/s VSAP & Associates, Chartered Accountants, the retiring Auditors of the Company have confirmed their eligibility to be re-appointed as Statutory Auditors of the Company at the ensuing Annual General Meeting. The Board of Directors recommend the re-appointment of M/s VSAP & Associates, Chartered Accountants as auditors of the Company to hold office from the conclusion of this Annual General Meeting till the conclusion of the next Annual General Meeting. The Company has paid a sum of ? 5.90 lacs (incl. GST) to M/s VSAP & Associates, Chartered Accountants as audit fees during the Financial Year ended 31st March, 2020.

The Auditors report does not have any qualification, reservation, adverse remark or disclaimer by the statutory auditors.

Cost Auditors :

The Board of Directors recommends the re-appointment of M/s Khushwinder Kumar & Associates, Cost Accountants, as Cost Auditors of the Company for the financial year 2020-21, subject to the approval of the Central Government. The Cost Audit Report for the financial year ended 31st March 2020 is due to be filed with the Ministry of Corporate affairs on or before the September, 2020 and the cost audit report for the financial year ended 31/03/2019 was duly filled on 31/10/2019.

Secretarial Auditors :

The Board has appointed M/s Dinesh Gupta & Co., Practicing Company Secretaries, to conduct Secretarial Audit for the financial year 2019-20. The Secretarial Audit report for the financial year ended March 31, 2020 is annexed herewith marked as Annexure G to this report. The Board of Directors have re-appointed M/s Dinesh Gupta & Co., Practicing Company Secretaries, as Secretarial Auditors for the financial year 2020-21. The Secretarial Audit report does not contain any qualification, reservation or adverse remark.

26. ACKNOWLEDGEMENT

Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the bankers, govt. authorities, customers, members and other business associates. They place on record their deep sense of appreciation for the committed services of the executives, staff and workers of the Company for its success.

Yours truly,

For and on behalf of the Board,

Sd/- Sd/-
MANJOO SARDANA K.K. SARDANA
Chairperson Managing Director
Dated : 12th June, 2020