surana corporation ltd Directors report

The company has achieved a Net Revenue of Rs. 234.66 Crores as against the Net Revenue of Rs. 1196.33 Crores in the previous financial year. The Net Revenue of the year was mainly dependent on the trading activities as the Manufacturing activity was almost Nil due to the non operation of factory premises. Further, going forward with the levy of Excise on Gold Jewellery by the Finance Bill 2016, there has been a negative sentiment prevailing in the market.

Revenues from wind power generation during the year amounted to Rs.3.10 Crores as against Rs.3.68 Crores for the previous year. The fall in wind energy division has been on account of failure of almost half the capacity of the project because of locational factors. Along with this there have been evacuation problems for abnormal period during the peak season.

The company has incurred a loss after tax of Rs.319.27 Crores as against loss after taxes amounting to Rs.299.62 Crores in the previous year. The major factors contributing to this loss has been the ballooning interest cost and non ability of the company to scale up its operations for want of working capital funds release from banks.

The Gem and Jewellery sector had been affected due to restrictions imposed by RBI on the Bullion trade during the year 2013. Due to the RBI guidelines, it had a profound impact on working capital financing of the domestic jewelers as RBI restricted the import of gold on consignment

basis only for the export purpose and asked banks to restrict issuance of LC against 100% cash margin. These moves reduced the gold supply during the last and current financial year.

Due to the non availability of the Gold in the market per se and the business model the company was operating the average credit period for the domestic customers got extended to around 90- 120 days. Similarly in respect to the restriction on import and export of Gold, the export business of the company also suffered.

Due to the above external factors as discussed, the Company has faced difficulties in managing its cash flows and working capital requirements. In order to correct its working capital position and liquidity challenges arising out of the mismatch of the loan maturities and potential projected earnings, the Company had approached the lenders for restructuring of its entire debt for suitable realignment under Corporate Debt Restructuring (CDR) mechanism. The CDR Cell approved the proposal of debt restructuring with super majority of the lenders at the CDR Empowered Group (EG) meeting held on 24.10.2014 and issued the Letter of Approval (LOA) on 22.11.2014 based on which the lenders agreeing to the package has signed the Master Restructuring Agreement (MRA) on 20.01.2015. The lenders have restructured the debts of the Company to the extent of Rs. 1547.15 Crores under the CDR mechanism.

As part of the CDR, the identified sticky debtors have mortgaged their assets as collateral under the CDR package. A detailed understanding of this is provided under the Debtors position.

The salient features of the package were as under:

1 Repayment of Restructured Term Loans (‘RTL) after moratorium of 2 years from cut-off date in 32 structured quarterly installments commencing from 30^th June, 2017 to March, 2024. The moratorium period of 2 years has expired on June 30, 2017.

2. Conversion of various irregular/outstanding/devolved financial facilities into Working Capital Term Loan (‘WCTL) and "Fund based working Capital".

3. Unpaid Interest due on certain existing facilities on cutoff date, interest accrued during the moratorium period on WCTL and interest on fund based working capital facilities for certain period were to be converted into Funded Interest Term Loans (‘FITLs) .

4. Contribution of Rs 35.20 Crore in the CL by promoters in lieu of bank sacrifice in the form of equity/and/or unsecured loans on terms and conditions stipulated by/accepted to CDR EG.

5. An additional Working capital facilities (fund based) limits of Rs. 139.94 Crore shall be reconstituted.

Even after company has complied all the conditions as stipulated in the CDR and every Consortium banker assuring the company of release of additional credits into the working capital account, it has been holding back substantial amount. Such unilateral holding up of funds affects the day to day operations of the company and also destroys the companys goodwill in the market. This leads to a situation of losing the market and consequently incurring losses.

Even after many request submitted by the Company, the bankers are not in a position to take a positive look for releasing additional working capital facility as the banks has put the company under wait and watch. Because of these hurdles and restrictions, the company is unable to do the operations freely in the market and the realization from the debtors also getting delayed. However, at the JLM cum Consortium meeting held on April 20, 2016, the consortium bankers have taken the decision for exiting from CDR and informed the company that the same shall be

communicated in CDR EG meeting to be held on April 27, 2016. The resh proposal in the form of company entering into the real sector business (subject to the approval of shareholders) for promoting the properties pledged by the sticky debtors to the company and promoters properties for settling the dues of the consortium bankers where submitted to the bankers for their approval, however the company has not received any communication from the bankers on the same.

During the Financial 2016-17, the company was continuously negotiating with the lead Bank SBI and other member banks to come forward for a compromise settlement by way of One Time Settlement. By considering the company sincere efforts to settle of the dues by way of One Time Settlement, the lead Bank SBI and other member banks had provided their In- principle approval for settling the dues of the consortium at a One-Time Settlement of Rs. 252 Crores at the Joint Lenders Meeting held on December 14, 2016 and the company is awaiting for the individual sanction of the each banks to proceed further.

The paid up Equity Share Capital as on 31^st March, 2017 was Rs. 24.36 Crores. During the year under report, the Company has not issued any shares with differential voting rights nor granted stock options nor sweat equity.

Your Directors have not recommended any dividend for the financial year 2016-17 in view of the losses incurred and the need to conserve resources of the Company. The Company is also required to seek prior approval of the lenders for declaration of dividend, in terms of the Corporate Debt Restructuring package.

The Gems and Jewellery sector plays a significant role in the Indian economy, contributing around 6-7 per cent of the countrys GDP. One of the fastest growing sectors, it is extremely export oriented and labour intensive.

Based on its potential for growth and value addition, the Government of India has declared the Gems and Jewellery sector as a focus area for export promotion. The Government has recently undertaken various measures to promote investments and to upgrade technology and skills to promote ‘Brand India in the international market.

India is deemed to be the hub of the global jewellery market because of its low costs and availability of high-skilled labour. India is the worlds largest cutting and polishing centre for diamonds, with the cutting and polishing industry being well supported by government policies. Moreover, India exports 75 per cent of the worlds polished diamonds, as per statistics from the Gems and Jewellery Export promotion Council (GJEPC). Indias Gems and Jewellery sector has been contributing in a big way to the countrys foreign exchange earnings (FEEs). The Government of India has viewed the sector as a thrust area for export promotion. The Indian government presently allows 100 per cent Foreign Direct Investment (FDI) in the sector through the automatic route.

The gems and jewellery market in India is home to more than 500,000 players, with the majority being small players. India is one of the largest exporters of gems and jewellery and the industry

is considered to play a vital role in the Indian economy as it contributes a major chunk to the total foreign reserves of the country. UAE, US, Russia, Singapore, Hong Kong, Latin America and China are the biggest importers of Indian jewellery. The demand for gold in India rose by 15 per cent year-on-year to reach 123.5 tonnes during January-March 2017, according to the World Gold Council (WGC). The Goods and Services Tax (GST) and monsoon will steer Indias gold demand going forward.

The Gems and Jewellery sector is witnessing changes in consumer preferences due to adoption of western lifestyle. Consumers are demanding new designs and varieties in jewellery, and branded jewellers are able to f^ilfl their changing demands better than the local unorganized players. Moreover, increase in per capita income has led to an increase in sales of jewellery, as jewellery is a status symbol in India.

The cumulative Foreign Direct Investment (FDI) inflows in diamond and gold ornaments in the period April 2000 - March 2017 were US$ 895.96 million, according to Department of Industrial Policy and Promotion (DIPP).

• In the Union Budget 2017-18, the Government of India, offered tax cuts for the middle class and other sections of society (5 per cent for the Rs 250,000-500,000 tax slab; which was 10 per cent initially). All these measures will drive consumption, which will be favourable to the gems and jewellery industry.

• The Government of Indias proposal to cut corporate tax rates to 25 per cent for micro, small and medium enterprises (MSMEs) having annual turnover up to Rs 50 crore (US$ 7.5 million) will benefit a large number of gems and jewellery exporters from MSME category.

• The Government of Indias announcement on establishing gold spot exchange could help in Indias participation in determining gold price in the international markets.

• The demonetisation move is encouraging people to use plastic money, debit/ credit cards for buying jewellery. This is good for the industry in the long run and will create more transparency.

In the coming years, growth in Gems and Jewellery sector would be largely contributed by the development of large retailers/brands. Established brands are guiding the organised market and are opening opportunities to grow. Increasing penetration of organised players provides variety in terms of products and designs. Also, the relaxation of restrictions of gold import is likely to provide a fillip to the industry. The improvement in availability along with the reintroduction of low cost gold metal loans and likely stabilisation of gold prices at lower levels is expected to drive volume growth for jewellers over short to medium term. The demand for jewellery is expected to be signihcantly supported by the recent positive developments in the industry.

Mr Narendra Modi, Prime Minister of India, encouraged the diamond industry in Surat, Gujarat to come forward in making India number one in the gems and jewellery sector, by focusing on Design in India in addition to the Make in India campaign.

Exchange Rate Used: INR 1 = US$ 0.0155 as of April 17, 2017.

References: Media Reports, Press Releases, Department of Industrial Policy and Promotion (DIPP), Reserve Bank of India, Gem & Jewellery Export Promotion Council, Union Budget 2017-18

The global body expects Indian gold demand to be about 650-750 tonnes in 2017. Demand was just a little more than 600 tonnes in the last calendar year. Incidentally, the year 2016 saw gold demand in India falling to its lowest level since 2009 as government policies along with weak rural sentiment kept consumers away. While the gold trade body said that the outlook for 2017 was "cautious", it added that demand was likely to improve going forward. The global body further stated that while demonetisation did dent economic growth, it was helping large jewellery retailers and consumers in terms of transparency and quality.

"Demonetisation is also boosting large jewellery retailers, and they will continue to grab a larger share of the market. Over time, consumers will move away from cash towards digital payments, and organised players should benefit from this trend. This change in market dynamics will result in more transparency and a better deal for consumers, protecting them from shady practices such as under-carating," the WGC said.

The Company has shi?ed its manufacturing facility from Tondiarpet to Madhavaram during the month of December, 2014; this shift in factory operation has affected the manufacturing capacity of the Company since December, 2014. The Company with a view to mitigate the loss of business on account of shift in factory has resorted to outsourcing of Jewellery manufacturing to a small set of trusted karigars.

The Wind energy division of your Company earned an income of Rs.3.10 Crores during the financial year 2016-17 as compared to an income of Rs.3.68 Crores in the previous year. The fall in wind energy division has been mainly due to shutting down of grid for abnormal period during the peak season. During the financial year, due to non-payment of dues to the State Bank of India, where the 60 windmill assets owned by the company are pledged were taken on possession and subsequently sold by State Bank of India through private treaty to a third party. The sale proceeds are utilized by SBI for adjusting the outstanding dues of the company. Accordingly, the said investment has been impaired during the year.

Surana Corporation Limited had to face a stretch in its working capital needs as the companys debtors also stretched payments.

With restricted market conditions for jewellery sector, the working capital cycle of the company has been badly affected. Almost all the jewelers have been asking for extended credit period, whereby the companys liquidity is getting stretched. The credit period for more than Rs. 370 Crores of companys domestic debtors has got stretched to more than 180 days. As the banks also not released any additional drawing power, the company was unable to do/improve the operations in the market and which becomes difficult for the company to bring down the over drawings. Similarly, because of the existing scenario, there is enormous delay in realization from sticky debtors which includes foreign debtors also.

Debtors of Rs. 612.56 crores aged more than one year (referred as sticky) are covered under the Memorandum of understanding entered in June 2014 confirming the schedule of repayment. This

Schedule of repayment has been considered as part of company CDR proposal by the consortium of Banks. Further the Memorandum also indicates coverage of these debts belonging to the some of the debtors by properties. These properties of the debtors have been mortgaged in favour of the consortium lenders of the company as part of CDR. Also the company reserves the rights to sell the said properties in case of non receipt of scheduled payments .

During the financial year 2015-16, the Company has provided for an amount of Rs.30,22,49,611/-, which was to be recovered as per the MOU but not recovered. During the year 2015-16 the company has recovered a total of Rs.57,72,22,892/- from the sticky debtors. A portion of such recovery had happened in the form of takeover of coal and Steel stocks relating to the party. Even though the anticipated recovery from the sticky debtors was Rs.59,75,00,375/- as per schedule of repayment of MOU, the company has recognised additional provision for said domestic debtors from whom not recovered as per MOU individually.

During the Financial Year 2016-17, there is no recovery from the sticky debtors and the company had issued notice under Section 434 of the Companies Act, 1956. However, the company is taking all necessary steps to approach NCLT under The Insolvency and Bankruptcy Code.

Even though the company is confident of collecting all its debtors, as an abundant precaution, the company is getting the debts securitized by collaterals wherever possible. The company is also in the process of negotiating with the debtors to seek early repayment by giving some discounts. These measures will help the company to reduce the liquidity crunch marginally and at the same time would give comfort the banks about the recoverability of the same.

The Company being continuously hounded by one or the other statutory authorities, the markets have been jittery in dealing with the company directly. Even though the market has been faith on the promoters of the company but still our hesitant to have too much of direct exposure, this hesitancy in the market has been restricting the companys performance. Hence the company with the view to overcome this hurdle and in order to maintain the existing the market and trade, have entered into a kind of agreement with "Sasyso Exim Private Limited " and " Thribovan Enterprises Private Limited" at an increase credit period term during the financial year 2016- 17. This arrangement effectively helps the company in maintaining its business share without sacrificing profitability.

As stated earlier, the Company had obtained In-principle approval from the consortium banks for settling their outstanding dues at a One Time Settlement of Rs.252 Crores. However, individual sanction for the individual consortium members is awaited. Once the said approval from the individual consortium is received, the company debt burden will drastically reduce and company shall concentrate more towards the core area of developing the business into new heights.

The Directors are constantly assessing the business risks pertaining to the performance of the Company. The following are the important risks perceptions:

• Volatility in gold and silver prices.

• Uncertain regulatory atmosphere.

• Current account deficit and more restrictions by the Government on import of gold.

• Increased customs duty.

• Customers Default

• Inadequacy of Finance Arrangement

• Statutory Policies

• Restriction of importing of Gold

• Events Due to Unforeseen Circumstances

• Uncertainties of global economy, impacting overall growth.

Your Directors are fully conscious of the various business risks and have taken adequate care to tackle any situation.

During the financial year 2012-13 based on the complaints by MMTC Ltd, CBI had seized of around 400 Kgs of Gold during the search conducted on 20.06.2012. The main complaints against the company by MMTC were an outstanding amount of around Rs. 29 crores due to them on Gold supply transactions entered into 2007-08 to 2010-11. In this regard, the company had submitted to the investigating authorities that the alleged dues as claimed by the MMTC can never arise due to the fact that bullion is always supplied on payment of advance in full or at a margin of 110 % of the value. Consequently the investigating authority (CBI) had filed a charge sheet in August, 2013 concluding that there was a total due of around Rs. 13.86 crore recoverable from MMTC from the company. These calculation with the investigating agency are also bound to fall flat in the court of law as MMTC subsequent to filing of the charge sheet has also filed a civil suit with the high court of madras in which they have declared that the calculation by the CBI officer was wrong and the final working on the net amount payable and claimed in the civil suit is only 2.25 crores. Further on 25th February, 2015 the honourable CBI Court has closed the FIR relating to 400 kgs of Gold Seizer. The Court in its order has pronounced that there is no prosecutable evidence against the company or its Management.

In October, 2015 based on the field information, the DRI officers had come for search to the company showroom. During the search the officers seized 2.339 Kgs of Gold valued Rs. 62.50 lacs alleging it to be non duty paid item. The company has produced all the necessary documents confirming the genuinely of the gold to the department. On completion of the investigation , the department has issued a show cause notice in April, 2015 whereby asking for the reason as to why penalty equivalent to the duty amount payable on the said 2.339 Kgs gold be not levied on the company. The liability under the show cause notice is amounting to maximum of Rs. 62.50 Lacs.

Other than that DRI has also issued a show cause notice in the year 2013 relating to the differential duty to be paid on import of Jewellery from Thailand by disputing the value addition certified by the country of origin. This show cause notice of DRI is a PAN India phenomenal and has been issued to all the jewellers across the country who has imported the gold jewellery from Thailand. The company has a prudent measure has already provided for Rs 15.81 crore Relating to the said related duties. At the same time the company is of the opinion that this liability may not be crystallized in view of the recent Delhi High court judgment whereby circular/ notification of the CBEC under which these show cause notices were issued has been quashed.

Your Directors are pleased to inform you that your Company has an adequate and sufficient internal controls as well as Internal Audit Systems manned by company officials commensurate

with the size and nature of the Companys day to day operations. The Intemal policies and Controls do ensure efficient use of Companys productive assets. These internal guidelines also help protection of the assets of the Company. They also ensure that the activities of the Company are in accordance with the stated policies, guidelines and other statutes and regulations in force. Independent audit functions and compliances of the various stipulations of the Statutory Authorities are strictly adhered to by the Company and this aspect is monitored by the Audit Committee. The Internal Control Mechanism also provides for well documented policies and approved procedures for guiding the companys operations.

The Management envisions trained and motivated employees as the backbone of the Company. Special attention is given to recruit trained and experienced personnel not only in the production department but also in marketing, finance and accounts. The Management strives to retain and improve employee morale. The Company has total staff strength of about 20 employees. The Company is in the process of revamping the employer employee engagement program.

The Directors pay special attention to ensure that the guidelines given for the corporate governance are strictly adhered to. All possible steps are taken to adhere to the requirements set out by SEBI Guidelines on Corporate Governance.

A separate report on the Corporate Governance also forms part of the Annual Report. Requisite certificates from the Auditors of your Company regarding compliance of the conditions of the corporate governance as stipulated under Regulation 27(2) of the SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 with the Stock Exchanges is also attached to the corporate governance report.

The Board of Directors has constituted a Corporate Social Responsibility and Governance Committee (CSR&G Committee) in compliance with the provisions under the Companies Act, 2013. The committee comprises of Shri. Swaminathan Ganesh as the Chairman and Smt. Agnes Roselind Joseph and Shri. Devarajan.K.E as members.

The said Committee has been entrusted with the responsibility of formulating and recommending to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, monitoring the implementation of the framework of the CSR Policy and recommending the amount to be spent on CSR activities.

During the financial year 2014-15, 2015-16 and 2016-17 the Company had achieved a Net Loss of Rs.287.06 Crores, Rs.299.65 Crores and 319.27 Crores respectively. Due to subsequent liquidity crunch faced by the Company, the Company is not in a position to spend money pertaining to CSR activities. The Company during the last three financial year had an average net loss of Rs.302 Crores, hence the submission of a report on CSR activities does not apply.

The Board of Directors has constituted a Risk Management Committee and framed a Risk Management Policy in compliance with the provisions under the Companies Act, 2013 and Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The committee comprises of Shri. Swaminathan Ganesh as the Chairman and Smt. Agnes Roselind Joseph and Shri.Devarajan.K.E as members.

The Company had adopted the sexual harassment policy as recommended by the Audit Committee of the Board of Directors; however the Company is in the process of constituting a committee for the same.

The Company has entered into a Tripartite Agreement with both the Depositories viz. National Securities Depository Limited (NSDL) and Central Depository Services (I) Ltd (CSDL) along with Registrars M/s Cameo Corporate Service Ltd, Chennai for providing electronic connectivity for dematerialization on the Companys shares facilitating the investors to hold the shares in electronic form and trade in those shares. The shares of your Company are being traded now on the Bombay and National Stock Exchanges under compulsory demat form. Further, in accordance with provisions stipulated under Companies Act, 2013, the facility of e-voting is also made available to all shareholders of the Company. The instructions regarding e-voting are available in a separate section of the Annual report. All shareholders are also requested to update their email ids with the Company or our RTA M/s. Cameo Corporate Services Ltd.

Pursuant to the provisions of Companies Act, 2013 and rules framed thereunder, relevant amounts which remained unpaid or unclaimed for a period of seven years have been transferred by the Company, from time to time on due dates, to the Investor Education and Protection Fund. The details of the same are covered under the Corporate Governance Report.

Pursuant to the provisions of Investor Education and Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has uploaded the details of unpaid and unclaimed amounts lying with the Company as on 28th September, 2016 (date of last Annual General Meeting) on the Companys website (www. suranacorp.com), as also on the Ministry of Corporate Affairs website.

M/s. VDSR & Co, Chartered Accountants, Chennai having firm registration number 001626S has been re-appointed as Statutory auditors of the Company from the conclusion of this Annual General Meeting till the conclusion of twenty ninth Annual General Meeting of the Company as set out in Item No.3 of the Notice of Annual General Meeting, subject to ratification of their appointment by shareholders in each Annual General Meeting.

M/s. VDSR & Co, Chartered Accountant, Chennai have conveyed their consent to be appointed as Statutory Auditors of the Company along with a confirmation that, their appointment, if made by the members, would be within the limits prescribed the Companies Act, 2013.

The Auditors have emphasized certain matters in their report as mentioned below and the management has given their respective response on the same.

The Company has not provided for interest and penal interest on certain borrowings for the year ended March 31, 2017 which is estimated at Rs. 4697 Lakhs.

The Management has not provided for interest on certain borrowings as the lenders have declared the accounts as Non-Performing assets and have not charged the interest in their loan books.

The company has considered trade receivables outstanding for more than 6 months of Rs. 249.36 Crores and long term trade receivables of Rs. 358.92 Crores, as good and recoverable. However, we were unable to confirm or verify, by alternative means, balances of such trade receivables.

Had provision been made with respect to the above interest and receivables in the books of the company, the loss would have been increased by Rs. 655.25 Crores and consequently networth have been reduced by Rs. 655.25 Crores.

The Company has treated the long receivables of Rs. 358.92 Crores, which is net of provisioning as good and recoverable due to fact that the said receivables are covered under the Memorandum of Understanding consisting of definitive repayment schedule and some of the assets belonging to the said parties are collateralized to the consortium on behalf of the company. Further trade receivables outstanding for more than six months of Rs. 249.36 Crores are considered good and fully recoverable.

The carrying values of the financial assets as at March 31, 2017 are not measured in accordance with the Ind-AS 39 and we are unable to comment on the adjustments that may be required to the carrying values of the financial assets.

The Company has implemented Ind-AS 39 and as all the necessary provisions on the financial assets and financial liabilities have been recognized, the company is of the view that financial assets and financial liabilities of the company are represented at fair market value. Further there are no financial assets held by the company. Similarly as all the financial liabilities of the company is payable on demand due to the fact that the loans have become Non-Performing Assets and the banks have initiated recovery suit, these financial liabilities are disclosed in the books as per the claims made by the lenders and accordingly the management is of the view that there might not be any adjustments required in carrying value of financial assets and liabilities.

We draw attention to Note no 4 to the statement which indicates that the company has incurred net loss of Rs. 200.68 Crores and Rs.319.26 Crores during the half year ended and year ended March 31, 2017 respectively and as on that date, the Companys current liabilities exceeded its current assets by Rs. 1,229.80 Crores and the companys accumulated losses aggregate to Rs. 838.63 Crores resulting in erosion of its networth. These conditions along with other matters as set forth in the aforesaid note indicates the existence of a material uncertainty that may cast

significant doubt about the companys ability to continue as a going concem. However, the financial statements have been prepared under the assumptions of going concern, considering the outcome of the consortium meeting dated December 14, 2016 and May 08, 2017, whereby the company has offered One Time Settlement of its liabilities with the consortium members, which has been considered by them for further approval. The ability of the company to continue as a going concern is significantly dependent on the further approval by consortium of lenders on the one time settlement offered by the company.

The Company would like to submit that vide the consortium meeting dated December 14, 2016 and May 08, 2017 the companys offer for one time settlement of its liabilities with the consortium members has been considered and forwarded to necessary authorities for approval. Consequently, the company is well within its capacity to repay the consortium liabilities and accordingly the book of accounts has been prepared on on-going concern basis.

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Lakshmmi Subramanian & Associates, Practising Company Secretaries, Chennai to undertake the Secretarial Audit of the Company. The report of the Secretarial Audit Report is annexed herewith as "Annexure A".

1. The Company received a sum of Rs. 35,27,73,330 from its promoters consequent to restructuring of loans and advances by financial institutions and banks, as per the terms of the restructure under Corporate Debt Restructuring Scheme. Further, during the year under review, consequent to decision taken by the Board to not allot shares to the promoter the said sum was partially returned. The balance sum of Rs. 14,68,87,050 was reclassified as unsecured loan as per the instruction of subscriber to the shares, which is not in compliance of the Companies (Acceptance of Deposit) Rules, 2014.

As the CDR was declared as failure and exited by the consortium of banks, further processing of converting the promoter contribution into share capital could not happen and accordingly it was reclassified as unsecured loan.

2. The Company has not fully complied with the provisions of Secretarial Standards 1 and 2.

The Company is in the process of fully complying with the provisions of Secretarial Standards 1 and Secretarial Standards 2.

3. The Company has not filed any forms with the Registrar of Companies during the Financial Year.

The company is already into the system of filing forms with Registrar of Companies on regular basis.

4. The Company has not appointed Company Secretary (CS) and Chief Financial Officer (CFO) as required under section 203 of the Companies Act, 2013 during the Financial Year.

The Company is in the process of identifying the suitable candidate for the post of Company Secretary and ChiefFinancial Officer. The Company is taking all necessary steps to comply with the provisions of Section 203 of Companies Act, 2013.

5. The Company has not updated its website as per the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015.

The Company is already in the process of updating the website as per the said provisions.

The Board has appointed CA. R. Gopinath, Proprietor, Chartered Accountants, Chennai as the Internal Auditors of the Company pursuant to Section 138 of Companies Act, 2013 and Rule No. 13 of The Companies (Accounts of Companies) Rules, 2014 for the financial year 2017-18.

The Internal Auditors of the Company has a qualified team of Internal Audit professionals, who shall be reporting directly to the Audit Committee of the Company. The Internal Audit would ensure that strong internal control mechanism is put in place in the Company as per the recommendations and guidance of Audit Committee.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(b) of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

The following changes have occurred in the Board of Directors during the financial year 2016-17:

Smt. Soundharya Panchapakesam has resigned from the position of Director with effect from 02^nd September, 2016; The Board had placed on record the appreciation for the outstanding contributions made by Smt. Soundharya Panchapakesan during her tenure of office with the Company.

Smt. Agnes Roselind was appointed as an Independent Director of the Company with effect from May 26, 2016.

During the Financial Year, the company had informed the consortium about the resignation of Shri.Vijayraj Surana. However, the consortium is yet to provide its confirmation in this regard.

In accordance with the provisions of the Companies Act, 2013 and in terms of the Memorandum & Articles of Association of the Company, at the ensuing 26^th Annual General Meeting, Shri. K.E.Devarajan, Non- Executive Director of the Company is liable to retire by rotation and being eligible offer himself for re-appointment. The Board recommends his re-appointment.

Pursuant to the provisions of Regulation 27(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board shall monitor and review the Board evaluation

framework. The Companies Act, 2013 States that a rmal annual evaluation needs to be made by the Board of its own performance and that of its committees and individual directors. Schedule IV of the Companies Act, 2013 states that the performance evaluation of independent directors shall be done by the entire Board of Directors, excluding the director being evaluated. 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 its Audit, Nomination & Remuneration and Compliance Committees.

Every new independent director of the Board attends an orientation program. To familiarize the new inductees with the strategy, operations and functions of our Company, the executive directors/senior managerial personnel make presentations to the inductees about the Companys strategy, operations, product and service offerings, markets, organization structure, finance, human resources, technology, quality, facilities and risk management.

The Board on recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors, make the following statement in terms of Section 134 (3) (c) of the Companies Act, 2013:

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

(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 had prepared the annual accounts on a going concern basis; and

(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.

(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.

A statement containing the particulars relating to conservation of energy, research and development and technology absorption as required under Section 134(3)(m) of the Companies Act, 2013

and Rule 8(3)(A), (3)(B) and 3(A)(C) of The Companies (Accounts) Rules, 2014 are given in "Annexure B"

Details of Loan, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to financial statements.

The information required pursuant to Section 197 of the Companies Act 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of the employees of the company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

Your Company has not accepted any deposits from the public during the year under review.

During the year 5 (Five) Board Meetings and 4 (Four) Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period as prescribed under the Companies Act, 2013.

Currently, the Board of Directors of the Company pursuant to the mandatory provisions of Companies Act, 2013 has the following committees namely:

a) Audit Committee

b) Nomination & Remuneration Committee

c) Stakeholders Relationship Committee

d) CSR Committee

e) Risk Management Committee

f) Share Transfer & Transmission Committee

A detailed note on the Board and its committees along with the composition of the committees and compliances is provided under the Corporate Governance Report section in this Annual Report.

Currently, the Company has an independent and qualified Audit Committee as per the provisions of Section 177(8) of the Companies Act, 2013 and Rule 7 of The Companies (Meetings of Board and its Powers) Rules, 2014 and The SEBI (LODR) Regulations, 2015, the following is the current composition of Audit Committee:

The Board has accepted all the recommendations provided by the Audit Committee.

The Company has a vigil mechanism/whistle blower Policy to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism Policy is explained in the Corporate Governance Report and also posted on the website of the Company.

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. The Company is in the process of developing a Related Party Transactions Manual, Standard Operating Procedures for purpose of identification and monitoring of such transactions. None of the Directors has any pecuniary relationships or transactions vis--vis the Company. Particulars of Contracts or arrangement with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as "Annexure C" to the Boards Report.

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as "Annexure D".

Your Company believes that its Members are among its most important stakeholders. Accordingly your companys operations are committed to the pursuit of achieving high levels of operating performance and cost competitiveness, consolidating and building for growth, enhancing the productive asset and resource base and nurturing overall corporate reputation. Your company is also committed to creating value for its other stakeholders by ensuring its corporate actions positively impact the socio-economic and environmental dimensions and contribute to sustainable growth and development.

During fiscal 2015-16, we started a sustainability init.iat.ive with the aim ofgoing green and minimizing our impact on the environment. This year, we are publishing only the statutory disclosures in the print version of the Annual Report. Additional information is available on our website www.suranacorp . com.

Electronic copies of the Annual Report 2016-17 and Notice of the 26^th Annual General Meeting are sent to all the members whose email addresses are registered with the Company/Depository Participant(s). For members who have not registered their email addresses, physical copies of the Annual Report 2016-17 and the Notice of 26^th Annual General Meeting are sent in the permitted mode. Members requiring physical copies can send a request to the Company.

The Board of Directors of the Company wishes to express their deep sense of appreciation and offer their sincere thanks to all the Shareholders of the Company for their unstinted support to the Company.

The Board also wishes to express their sincere thanks to all the esteemed Customers for their support to the Companys products.

The Board would also like to place on record their deep sense of gratitude to the various Central and State Government Departments, Organizations, Banks, Financial Institutions and Agencies for the continued help and co-operation extended by them.

In the end, the Board would like to place on record their deep sense of appreciation to all the executives, officers, employees, staff members, and workers at the factories.