Sukhjit Starch & Chemicals Ltd Directors Report.

Dear Share Holders :

Your Directors are pleased to present before you the 74th Annual Report and the Audited Statement of Accounts for the year ended 31st March, 2018 :-

1. FINANCIAL RESULTS 2017-18 2016-17
( in Crores) ( in Crores)
Sales & Other income 713.25 685.40
Earning before Interest, tax and Depreciation 68.43 52.72
-- Less Interest 17.54 12.80
-- Depreciation 14.72 11.79
Profit before tax 36.18 28.14
-- Provision for taxes (including Deferred Tax) 13.15 9.15
Profit After Tax 23.02 18.98
Surplus brought forward from previous year 17.55 8.56
Surplus available for appropriation 21.13 17.55
Dividend (including Corporate Tax) 5.77 4.44
Transfer to General Reserves 15.00 10.00
Surplus carried forward 21.13 17.55

Indian Accounting Standards 2015:

The financial statements of the Company as well as the Consolidated financial statements upto the year ended 31st March, 2017 had been prepared & presented according to Accounting Standards notified under The Companies (Accounting Standards) Rules, 2006 as amended. The annexed financial statements comply with the Indian Accounting Standards (Ind AS) notified under the section 133 of the Companies Act, 2013/ Companies (Indian Accounting Standards) Rules, 2015 and other relevant provisions of the Act as amended. These financial statements are the first statements of the Company under the Ind AS and provide the necessary details concerning the transition from previous GAAP to Ind AS.

2. PERFORMANCE

The Sales and other income of the Company have increased from 685 crores to 713 crores. However, sales of F.Y. 2016-17 included Excise Duty of 31.41 crores against 7.61 Croes in the sales of current year as the sales after 1st July have been taken net of GST. Thus for the purpose of comparison, sales (net of excise duty/ GST) & other income have increased to 705.64 crores from 654 crores previous year. The Earnings before interest, tax and Depreciation stood at 68.43 Crores ( 52.72 crores) showing an increase of about 30% during the year under reference which after interest of 17.54 crores ( 12.80 crores) and Depreciation of 14.72 crores ( 11.79 crores) resulted in the Net Profit before tax at 36.18 crores ( 28.14 crores) with an increase of over 28%.

3. FUTURE PROSPECTUS

With the prediction of normal monsoons during the running year, it is expected that the production of agriculture produce will improve the availability of basic raw material at an optimum cost with positive impact on the profitability of the Company. Good production of the agricultural produce will also ensure continuous supply of raw material at all plant locations of the Company. The Company is expected to show reasonable growth in its operations in the running year due to optimum utilization of its increased capacities at H.P and W.B Units.

4. NEW PROJECT

The Company is setting up a new unit as an Anchor unit in the Mega Food Park in the name and style of M/s Sukhjit Corn Products at Rehana Jattan, Teh. Phagwara, Punjab with maize grind capacity of 600 TPD. The unit will entail a Capex of around 150 crores and is expected to be commissioned and commence operations in the 3rd quarter of the F.Y. 2019-20.

5. 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.

6. 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, the Company has duly implemented the system of Corporate Governance. The report on Corporate Governance is annexed herewith marked as Annexure B to this report.

7. DIVIDEND

The Directors are pleased to recommend a dividend of 65% (i.e. 6.50/- per Equity share of 10/- each) during the financial year ended 31st March, 2018 against dividend @ 50% (i.e. 5/- per Equity share of 10/- each) paid in 2016-17.

8. TRANSFER TO RESERVES

The Company has transferred 15 crores (PY 10 crores) to the general reserve.

9. 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, 2018, the applicable Indian Accounting Standards have been followed and there are no material departures; (b) the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the company for the year so ended; (c) they 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) they have prepared the Annual Accounts for the financial Year ended 31st March, 2018 on a going concern basis;

(e) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and are operating effectively; and (f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

10. DEPOSITS

All the deposits have been accepted/ renewed / repaid as per the provisions of the Act. The company had no unclaimed / unpaid deposits on 31/03/2018.

11. SUBSIDIARY COMPANIES AND CONSOLIDATED FINANCIAL STATEMENTS

(a) The Vijoy Steel & General Mills Company Ltd., Phagwara: The Company has incurred operational loss for the year under reference due to lower productivity. It expects to improve upon its performance during the running year.

(b) Scott Industries Ltd., Phagwara: 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.

(c) Sukhjit Mega Food Park & Infra Ltd., Phagwara: The Unit is going on at site as per the schedule and the Company has already spent over 25 crores on the Project. A sum of 15 crores has been received as the 1st Installment of subsidy from Ministry of Food Processing Industries (MoPFI), Government of India and expect to get another 15 crores (2nd Installment) within this Year. The total Project costs is around 125 crores and the Project is expected to be commissioned in the 3rd quarter of the F.Y. 2019-20.

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, 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 attached 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, 2018 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 furnish a copy of details of annual accounts of subsidiaries to any shareholder on demand.

12. CONTINGENT LIABILITY

Disputed Liabilities, not provided as expense in the accounts, comprise of 32.34 Crores.The amount mainly includes 28.93 Crores as disputed Central Excise Duty (excluding penalty and interest) demand raised by the Central Excise Department since 01/04/1997 alleging the sale of Maize Starch as that of Modified Starch. Since the matter is subjudice, the Department has continuously been issuing the show cause notices against the differential duty. However, pertinent to mention that the product has been repeatedly got tested by the Department from its Central Revenue Laboratory where it has been clearly held to be Maize Starch. So the demand is totally baseless and without any substance. The company has been manufacturing Maize Starch by following the standard Wet Milling Process for the last many decades and the product is sold and accepted by the market as Maize Starch, so the company does not foresee any liability to crystallize on this account. Other items related to a demand of 1.18 crores raised on sale made through the consignment agents of the Company which is pending before the Assistant Commissioner and 2.22 Crores wrongly levied for R&C measures by A.P. Northern Power Distribution Company Ltd., Nizamabad against exemption enjoyed by the unit, the matter is pending before the Honble High Court of Andhra Pradesh and balance on account of other Misc. service tax demands due to difference of opinion.

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 60.00 Lacs p.a. if employed throughout the year or 5.00 Lacs p.m. if employed for a part of the year during 2017-18 are given below :

(A) Persons employed through out the year and were in receipt of remuneration aggregating not less than 60.00 Lacs for the year:

Sr. No. Name Age Designation Gross Remuneration ( Lacs)
1 Shri I.K. Sardana 72 Managing Director 124.38
2 Shri K.K. Sardana 70 Jt. Managing Director 113.34
Qualification Experience Date of Joining Last Employment/ Designation Held
B.A. 52 02.08.1967 The Sukhjit Starch & Chemicals Ltd., Phagwara Sales Manager
B.A. 47 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 5,00,000/- per month

NIL

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

14. DIRECTORS

(a) In accordance with the provisions of the Act, Smt. Ravi Chowdhry retires by rotation and being eligible, the Board recommends her reappointment.

(b) 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.

(c) 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 committee has in place a suitable policy for the appointment & remuneration of the Directors/ KMPs.

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. AUDIT COMMITTEE

The Board has constituted Audit Committee of the Company with Sh.V.P.Kapahi as Chairman and Shri S. K. Anand, Shri K.K. Sardana and Shri S.C. Jindal as its members. All the recommendations made by the Audit Committee were accepted by the Board.

18. INTERNAL COMPLAINTS COMMITTEE

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.

19. CORPORATE SOCIAL RESPONSIBILITY (CSR)

The report on Corporate Social Responsibility activities conducted during the financial year 2017-18 is annexed herewith marked as Annexure D to this report.

20. 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 and approval at Directors level / Audit Committee, which are in the ordinary course of business and are at arms length price, in terms of IND AS-24 and given as per Point No. 6 of the Notes to Accounts forming part of the Annual Report. Policy on related party transactions of the company stands placed on the Companys website at the link: http:// sukhjitgroup.com/Policy_dealing.html.

21. MEETINGS OF THE BOARD

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

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. A corporate guarantee for 40 crores to Yes Bank Ltd. for the Term Loan 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.

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

Cost Auditors :

The Board of Directors recommends, subject to the approval of the Central Government, the re-appointment of M/s Khushwinder Kumar & Associates, Cost Accountants, as Cost Auditors of the Company for the financial year 2018-19. The Cost Audit Report for the financial year ended 31st March 2018 is due to be filed with the Ministry of Corporate affairs on or before the September, 2018 and the cost audit report for the financial year ended 31/03/2017 was duly filled on 29/09/2017.

Secretarial Auditors :

The Board has appointed M/s Dinesh Gupta & Co., Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2017-18. The Secretarial Audit report for the financial year ended March 31, 2018 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 2018-19.

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/-
S.C. JINDAL
Chairman
Dated : 30th May, 2018