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Surana Corporation Ltd Management Discussions

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Sep 17, 2018|11:10:01 AM

Surana Corporation Ltd Share Price Management Discussions

To

The Members,

The Directors of the Company present to you the 25th Annual Report of the Company, together with the Audited Balance Sheet as at 31st March, 2016 and the Statement of Profit and Loss for the year ending on 31st March, 2016.

1. FINANCIAL RESULTS

The Financial Results of the Company for the year under review is summarized below for your perusal and consideration.

(Rs. in Crores)
PARTICULARS 2015-16 2014-15
REVENUE FROM OPERATIONS 1196.32 1115.91
PROFIT/(LOSS) BEFORE TAX AND (298.75) (277.43)
DEPRECIATION
PROFIT/(LOSS) BEFORE TAX (PBT) (320.20) (291.13)
PROVISION FOR CURRENT TAX - -
TAX EXPENSE (20.57) (04.06)
PROFIT/(LOSS) AFTER TAX (299.63) (287.06)

1.1 FINANCIAL PERFORMANCE

The company has achieved a Net Revenue of Rs.1196.32 crores which is marginally higher than the Previous years’ performance of Rs.1115.91 crores. In fact this marginal improvement in performance was achieved against the backdrop of non release of working capital funds by the banks even after the approval of restructuring package by CDR-EG. The performance of the year was mainly dependent on the trading activities as the Manufacturing activity was almost Nil due to the shifting of factory from the old premises to the new 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.3.68 crores as against Rs.4.15 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.299.65 crores as against loss after taxes amounting to Rs.287.07 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.

1.2 CORPORATE DEBT RESTRUCTURING (CDR)

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 30th 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 Crores 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 company’s 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 fresh 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.

2. SHARE CAPITAL

The paid up Equity Share Capital as on 31st March, 2016 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.

3. DIVIDEND

Your Directors have not recommended any dividend for the financial year2015-16 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.

4. MANAGEMENT DISCUSSION AND ANALYSIS

4.1 INDUSTRY STRUCTURE AND DEVELOPMENTS:

In the global gems and jewellery industry, India stands unique. India also has a long tradition in the manufacturing of jewellery and coloured gemstones. The factories that compare well with the best in the world in terms of technology, skills and environment, were initially set up mainly by diamantaires. Today, modern jewellery manufacturers have also opened units outside the zone in centres like Mumbai’s MIDC and other parts of India like Surat SEZ in Surat, Noida SEZ in Delhi, Sitapura SEZ in Jaipur, Manikanchan SEZ in Kolkata etc to cater to India’s growing share of the international market. The jewellery segment is now mature and fully developed with highly talented designers and skilled artisans creating the widest possible range of jewellery. From mass produced diamond jewellery designed for Europe or USA, to exquisitely crafted designer jewellery in plain gold or studded with diamonds and coloured gemstones, India offers it all. The quantum of gold supply dropped seven per cent in the December 2015 quarter owing to a four per cent fall in global mine output. This is the largest quarterly reduction since 2008 and an all-time high for fourth quarter demand. Producers and mines that hedge (selling future production when they see prices falling) have started de-hedging (buying back their forward sales as they expect prices to recover). India’s jewellery consumption increased 14 per cent year-on-year (y-o-y) to 204 tonnes in the fourth quarter of 2015. Meanwhile, retail investment rose 18 per cent (y-o-y) to 52 tonnes, the highest since the fourth quarter of 2013.

India’s aggregate jewellery (703 tonnes) and investment demand (187 tonnes) in 2015 gained six per cent to 890 tonnes. This nominal rise in demand, despite the annual average price declining six per cent, can be attributed to the poor monsoon. Gross annual imports for the whole year were 904.5 tonnes, 10 per cent higher than that of 2014. Considering 196 tonnes of imports for exports, net import for domestic consumption was 20 per cent higher at 708.5 tonnes. India retained its top position in global gold consumption for the second consecutive year, fuelled by record high jewellery consumption at 703 tonnes.(Source: http://www.gjepc.org, www.businessstandard.com)

4.2 OPPORTUNITIES

The bullion sector, especially the Gold jewellery sector, is back in focus with the recent announcements made by the government and the Reserve Bank of India (RBI).Globally, physical gold demand rose two per cent y-o-y in the fourth quarter of 2015, as a strong pick-up in net official sector purchases (mostly by central banks) and a moderate increase in retail investment were partially offset by reduction in demand from the jewellery and industrial sectors. Jewellery fabrication posted a two per cent y-o-y drop, on the back of disappointing demand in China, although this was partially neutralised by continued growth in India.

5. OPERATIONS

5.1 MANUFACTURING

The Company has shifted its manufacturing facility from Tondiarpet to Madhavaram during December, 2014; this shift in factory operation has affected the manufacturing capacity of the Company for the year. 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.

5.2 WIND ENERGY DIVISION

The Wind energy division of your Company earned an income of Rs.3.68 Crores during the financial year 2015-16 as compared to an income of Rs.4.87 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.

5.2 DEBTORS POSITION

Surana Corporation Limited had to face a stretch in its working capital needs as the company’s 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 company’s liquidity is getting stretched. The credit period for more than Rs. 370 crores of company’s 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 this financial year 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 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 .

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 company’s performance. Hence the company with the view to overcome this hurdle and in order to maintain the existing the market and trade, we have entered into a kind of agreement with "Sayso Exim Private Limited " and " Thribovan Enterprises Private Limited" at an increase credit period term. This arrangement effectively helps the company in maintaining its business share without sacrificing .

6. FUTURE OUTLOOK

As stated earlier, the Company has availed the CDR mechanism to restructure its existing debts with the lenders. The Company has signed a Master Restructuring Agreement (MRA) with its lenders. The repayment is spread over a ten year period ending in the year 2023-24. The mechanism also stipulates stringent monitoring by the lenders including monthly cash flows. The lenders have constituted a Monitoring Committee (MC) lead by the Monitoring Institution (MI) viz. SBI Ltd.

Simultaneously the company is also planning to develop 100 acres of land belonging to promoters at Sholinghur and 10 acres of land belonging to promoters at Madhavaram. All these properties belong to promoters which had already mortgaged with the banks. The Promoters with the view to reduce the debt burden of the company have decided to develop these lands and utilise the sale proceeds for repaying the debts of the company in a faster manner within the anticipated period of 48 to 60 months. By doing this the company expects to substantially reduce the burden by around Rs. 350 crores to Rs.400 crores. With substantial reduction in debt and venturing into the retail business, the company is in a confident of reviving itself with this proposal and the accounts have been accordingly prepared on going concern basis.

7. RISK PERCEPTION AND CONCERN

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.

Statutory Departmental Enquiries:

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 theCBIofficerwas 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 it’s 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 it to be non duty paid item. The company has produced all the necessary documents confirming the Genuinity 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.

8. INTERNAL CONTROL SYSTEM

Your Directors are pleased to inform you that your Company has an adequate and sufficientinternal controls as well as Internal Audit Systems manned by company officials and nature of the Company’s day to day operations. The Internal policies and controls do ensure efficient use of Company’s productive assets. 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 company’s operations.

9. HUMAN RESOURCES

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 30 employees. The Company is in the process of revamping the employer employee engagement program.

10. CORPORATE GOVERNANCE

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.

11. CORPORATE SOCIAL RESPONSIBILITY AND GOVERNANCE COMMITTEE

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 2013-14, 2014-15 and 2015-16 the Company had achieved a Net Loss of Rs.360.33 Crores, Rs.287.06 Crores and Rs.299.65 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.315.68 Crores, hence the submission of a report on CSR activities does not apply.

12. RISK MANAGEMENT COMMITTEE AND POLICY:

TheBoardofDirectorshasconstitutedaRiskManagementCommitteeandframedaRiskManagement 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.

13. SEXUAL HARASSMENT POLICY:

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.

14. DEPOSITORY SYSTEM / E-VOTING MECHANISM:

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 Company’s 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 in 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.

15. TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of Section 205A(5) and 205C of the Companies Act, 1956, relevant amounts which remained unpaid or unclaimed for a period of seven years have been transferred by the Company, from to 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 22nd September, 2015 (date of last Annual General Meeting) on the Company’s website (www.surancorp.com), as also on the Ministry of Corporate Affairs’ website.

16. AUDITORS

STATUTORY AUDITORS

M/s. VDSR & Co, Chartered Accountants, Chennai having firm registration number 001626S has been 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 under the Companies Act, 2013.

17. AUDITORS REPORT AND MANAGEMENT’S RESPONSE TO AUDITORS EMPHASIS

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

AUDITORS EMPHASIS

Note no 37, the Company has incurred a net loss of Rs. 2,99,63,02,499/- during the year ended March 31, 2016 (Rs. 1,93,26,00,902/- representing finance cost and Rs. 1,06,37,01,597/- representing operational loss) and as of that date, the Company’s accumulated losses aggregate to Rs. 5,43,73,25,654/- resulting in erosion of its net worth. These conditions indicate the existence of uncertainty that may cast significant doubt about the Company’s ability to concern. However, the financial statements have been prepared under the assumption of going concern, considering the management’s assessment to recover the balance dues from various debtors and management’s plan to venture into new business areas. These submissions and assertions by the management envisage that the Company has the ability to garner the required cash flows, which have not been independently assessed by us.

MANAGEMENT’S RESPONSE

The financial statements have been prepared under the as sumption of going concern, considering the management’s assessment to recover the balance dues from debtors and management’s plan to venture into new business areas.

AUDITORS EMPHASIS

i) Note no 15 and 17, regarding short term trade receivables of Rs. 454,91,68,629/- and Long term trade receivables of Rs. 460,26,36,597/- in respect of which the Company has initiated action for recovery from the customers and has considered as good and recoverable for the reasons stated therein. However, we are unable to comment, on the adjustments that may be required, if any, to the carrying values of these receivables as at March 31, 2016 and, in respect of the loss as reported in the Statement of Profit and Loss. ii) Note no 32 (ii), regarding recompense for reliefs and sacrifices extended by the bankers, in respect of which the company is of the opinion that such payment is contingent on various factors including improved performance and cash flows the outcome of which is materially uncertain and therefore recompense amount payable cannot be determined currently. iii) Note no 10, regarding Interest payable on borrowings from the consortium banks. During the year, lenders have categorized some of the loan accounts as Non Performing Assets and have not charged interest thereof for the subsequent period. Management has provided for interest based on the information available as per the terms of the prevailing loan agreements without having any balance confirmation from the banks with respect to accrual of Interest Payable.

Accordingly the actual interest payment to the banks may varyfrom the amount already accounted.

MANAGEMENT’S RESPONSE i) The Company is confident of getting the recovery as per the Memorandum of Understanding entered into with the said Debtors; consequently the company doesn’t see any major adjustments to the carrying values under the current scenario. ii) As such payment is contingent on various factors including improved performance and cash flowsthe outcome of which is materially uncertain and therefore recompense amount payable cannot be determined currently. iii) As the operation of the Company have not improved for want of release of Working Capital by the consortium of bankers as agreed by them under CDR package, accordingly there have been delays in payment of interest to consortium bankers.

SECRETARIAL AUDIT

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".

MANAGEMENT RESPONSE TO SECRETARIAL AUDITOR’S OBSERVATION

1. The Company received a sum of Rs. 35,27,73,330 from its promoter’s 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.Rs.35.28 Crores brought in by promoters as their contribution for the sacrifice amount towards CDR implementation was treated as share application money at the year ended 31st March, 2015, the same was reclassified as unsecured loan due to the fact that the shares could not be allotted within the period of sixty days as stipulated under the provisions of the Companies Act, 2013.

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 filled in the vacancy of women director with the delay on 28th August, 2015.

Due to non-availability for the suitable candidate for the post of women director, the Company was able to appoint Smt. Soundharya Panchapakesan as women director with effect from 28th August, 2015 only. Subsequent to the resignation of Smt. Soundharya Panchapakesan with effect from 02nd September, 2016, the company as appointed Smt. Agnes Roselind Joseph as women director immediately, in order to comply with the provision of appointing the women director.

4. For the 1st Quarter, there was a vacancy in the Board in place of the Independent director which was filled in only on 30 th May 2015. Further, the composition of the audit committee during 1st Quarter had fallen below the minimum threshold limit of independent directors and total number of members. The Company with effect from 30th May, 2015 has aligned the composition of Audit Committee and the company is maintaining the proper composition of Audit Committee till date.

5. The Company is not regular in filing forms with the Registrar of Companies.

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

6. 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 has appointed the whole-time company secretary and General Manager – Finance and accounts to take care the activities of Chief Financial officer. The Company is taking all necessary steps to comply with the provisions of Section 203 of Companies Act, 2013.

7. The Company has not been regular with making disclosures or updating its website as per the Listing Agreement entered with the Stock Exchange in which it is listed and as per the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015. The Company is taking all necessary steps to comply with the said provisions.

18. INTERNAL AUDITOR:

The Board has appointed M/s. S V L & Associates, Chennai as the Internal Auditors of theCompany pursuant to Section 138 of Companies Act, 2013 and Rule No. 13 of The Companies (Accounts of Companies) Rules, 2014 for the financial year 2016-17.

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.

19. DECLARATION BY INDEPENDENT DIRECTORS:

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.

20. DIRECTORS:

The following changes have occurred in the Board of Directors during the financial year 2015-16:

During the year, Shri. Vijayraj Surana, Managing Director had forwarded his resignation to the Board, expressing his unwillingness to continue as Managing Director. The Board of Directors, expressed their inability to accept his resignation as any substantial change in the management has to be approved with the concurrence of lenders. Accordingly, he is still considered to be continuing on Board.

20.1 RESIGNATION OF DIRECTORS:

Smt. Soundharya Panchapakesam has resigned from the position of Director with effect from 02nd 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.

20.2 APPOINTMENT OF DIRECTOR:

Shri. Swaminathan Ganesh was appointed as an Independent Director of the Company with effect from 30th May, 2015 and Smt. Soundharya Panchapakesam was appointed as an Independent Director with effect from 28th August, 2015.

Shri. K.E.Devarajan was appointed as a Non-Executive Director of the Company with effect from 03rd July, 2015. Smt. Agnes Roselind was appointed as an Independent Director of the Company with effect from 26th May, 2016.

21. RE-APPOINTMENTS

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 25th 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.

22. BOARD EVALUATION

Pursuant to the provisions of Regulation 27(2) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations, 2015, the Board shall monitor and review the Board evaluation framework. The Companies Act, 2013 states that a formal 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.

23. TRAINING OF INDEPENDENT DIRECTORS

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 Company’s strategy, operations, product and service offerings, markets, organization structure, finance, human resources, technology, quality, facilities and risk management.

24. REMUNERATION POLICY

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.

25. DIRECTORS’ RESPONSIBILITY STATEMENT:

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 lossof 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.

26. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION

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"

27. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF COMPANIES ACT, 2013:

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.

28. PARTICULARS OF EMPLOYEES:

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.

29. DEPOSITS

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

30. MEETINGS

During the year 7 (Seven) 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.

31. COMMITTEES

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.

32. AUDIT COMMITTEE

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 SEBI (LODR) Regulations, 2015, the following is the current composition of Audit Committee:

Name of the Director Category Status
Shri. Swaminathan Ganesh Non-Executive Independent Director Chairman
Shri. Agnes Roselind Joseph Non-Executive Independent Director Member
Shri. Devarajan.K.E Non-Executive Director Member

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

33. VIGIL MECHANISM/WHISTLE BLOWER POLICY

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.

34. PARTICULARS OF CONTRACTS OR ARRAGEMENTS WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT, 2013:

All related party transactions that were entered into during the financial year were on an arm’s length basis and were in the ordinary course of business. There are no materially significant 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 Board’s Report.

35. EXTRACT OF ANNUAL RETURN

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

36. ENHANCING SHAREHOLDER VALUE

Your Company believes that its Members are among its most important stakeholders. Accordingly your company’s 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.

37. GREEN INITIATIVES

During the fiscal 2015-16, we started a sustainability initiative with the aim of going 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 2015-16 and Notice of the 25th 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 and the Notice of 25th Annual General Meeting are sent in the permitted mode. Members requiring physical copies can send a request to the Company.

38. ACKNOWLEDGEMENT

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 Company’s 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.

Date: 02nd September, 2016 By Order of the Board of Directors
Place: Chennai
Sd/- Sd/-
Agnes Roselind Joseph Devarajan.K.E
Director Director
(DIN: 07601460) (DIN: 07228715)

ANNEXURE "A" SECRETARIAL AUDIT REPORT

For The Financial Year Ended On 31st March, 2016

(Pursuant to section 204(1) of the Companies Act, 2013 and Rule No. 9 of the Companies (Appointment and Remuneration Personnel) Rules, 2014) To, The Members,

SURANA CORPORATION LIMITED

We have conducted the secretarial audit of the compliance of applicable statutory provisions and the adherence to good corporate practices by Surana Corporation Limited (hereinafter called the company). Secretarial Audit was conducted in a manner that provided us a reasonable basis for evaluating the corporate conducts/statutory compliances and expressing my opinion thereon.

Based on our verification of the Company books, papers, minute books, forms and returns filed and other records maintained by the company and also the information provided by the Company, its officers, agents and authorized representatives during the conduct of secretarial audit, we hereby report that in our opinion, the company has, during the audit period covering the financial year ended on 31st March 2016, complied with the statutory provisions listed hereunder and also that the Company has proper Board-processes and compliance mechanism in place to the extent, in the manner and subject to the reporting made hereinafter:

We have examined the books, papers, minute books, forms and returns filedand other records maintained by the Company for the financial year ended on 31st March, 2016 according to the provisions of:

(i) The Companies Act, 2013 (the Act) and the rules made there under;

(ii) The Securities Contract (Regulation) Act, 1956 (SCRA) and the Rules made there under;

(iii) The Depositories Act, 1996 and the Regulations and Bye-laws framed there under to the extent of Regulation 55A;

(iv) Foreign Exchange Management Act, 1999 and the Rules and Regulations made there under to the extent of Imports and Exports of goods and services, and Current Account Transactions;

(v) The following Regulations and Guidelines prescribed under the Securities and Exchange Board of India Act, 1992 (‘SEBI Act’):

(a) The Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

(b) The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015;

(c) The Securities and Exchange Board of India (Issue of Capital and Disclosure Requirements) Regulations, 2009;

(d) The Securities and Exchange Board of India (Share Based employee Benefits), 2014 (Not applicable for the Audit Period).

(e) The Securities and Exchange Board of India (Registrars to an Issue and Share Transfer Agents) Regulations, 1993 regarding the Companies Act, 2013 and dealing with client to the extent of securities issued;

(f) The Securities Exchange Board of India (Issue and Listing of Debt Securities) Regulation, 2008 (Not applicable for the Audit Period).

(g) The Securities Exchange Board of India (Delisting of Equity Shares) Regulation, 2009 (Not applicable for the Audit Period).

(h) The Securities Exchange Board of India (Buyback of Securities) Regulation, 1998 (Not applicable for the Audit Period).

(i) The Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015 (w.e.f. 01st December 2015)

(vi) Other laws applicable specifically to the company being a manufacturer, Importer Exporter of Bullion (which has been currently suspended) and Wind energy:

(i) Factories Act, 1948

(ii) Legal Metrology Act, 2009

(iii) Negotiable Instruments Act, 1881

(iv) Environment (Protection) Act, 1986

(v) Water (Prevention and Control of Pollution) Act, 1981

(vi) Air (Prevention and Control of Pollution) Act, 1974

(vii) Hazardous Waste (Management and handling) Rules, 1989

(viii)State Fire Safety Act

(ix) Electricity Act, 2003

(x) Trademarks Act, 1999

We have also examined compliance with the applicable clauses of the following: i. Secretarial Standards with respect to Meetings of Board of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of Company Secretaries of India applicable with effect from 1 July, 2015. ii. The Listing Agreements entered into by the Company with the Stock Exchanges, where the equity shares of the Company are listed and the Uniform Listing Agreement entered with the stock exchanges pursuant to the provisions of the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015 (applicable with effect from 01 December, 2015).

During the period under review the Company has complied with the provisions of the Act, Rules, Regulations, Guidelines, Standards, etc. mentioned above subject to the following observations:

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 14,68,87,050wasreclassifiedas unsecured loan as per the instruction of subscriber to the shares, which is not in compliance of the Companies (Acceptance of Deposit) Rules, 2014.

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

3. The Company has filledin the vacancy of women director with the delay on 28th August, 2015.

4. For the 1st Quarter, there was a vacancy in the Board in place of the Independent director which was filled in only on 30th May 2015. Further, the composition of the audit committee during 1st Quarter had fallen below the minimum threshold limit of independent directors and total number of members.

5. The Company is not regular in filing forms with the Registrar of Companies.

6. 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.

7. The Company has not been regular with making disclosures or updating its website as per the Listing Agreement entered with the Stock Exchange in which it is listed and as per the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulation, 2015.

We further report that there are systems and processes in the company relevant to the operations to monitor and ensure compliance with Applicable Laws, Rules, Regulations and Guidelines, which needs updation to be commensurate with its size and operations.

We further report that, the compliance by the Company of applicable finance laws like Direct and Indirect tax laws has not been reviewed in this audit since the same have been subject to review by Statutory Financial Audit and other designated professionals.

We further report that:

The Board of Directors of the Company is duly constituted with proper balance of Executive Directors,

Non-Executive Directors and Independent Directors except for the 1st Quarter of the Financial Year 2015-16. The changes in the composition of the Board of Directors that took place during the period under review were carried out in compliance with the provisions of the Act, except for mandatory disclosures to be made to the Registrar of Companies.

Adequate notice is given to all directors to schedule the Board/ committee Meetings, agenda and detailed notes on agenda, at least seven days in advance except for the meeting held during 1st, 2nd, and 3rd Quarter of the Financial Year, and a system exists for seeking and obtaining further information and clarifications on the agenda items before the meeting and for meaningful participation at the meeting.

As recorded in the minutes of the meeting and signed by the Chairman, the decisions of the Board of Directors or committee of the Board, as the case may be were unanimous and no dissenting views have been recorded. We further report that during the audit period: i. The Company has shifted its Registered Office and Factory within the Local Limits during the financial year 2015-16. ii. Networth of the Company has been eroded; hence the company has opted to be governed by Corporate Debt Restructuring (CDR) Scheme. iii. The Company has received share application money from its promoter as per the terms of the CDR Scheme during the Financial Year 2014-15. However, no allotment was made during the period under review and the Board decided to refund/ re-classify the share application money.

ANNEXURE "A"

(To the Secretarial Audit Report of M/s. SURANA CORPORATION LIMITED for the financial year ended 31.03.2016)

To,

The Members,

SURANA CORPORATION LIMITED

Our Secretarial Audit Report for the financial year ended 31.3.2016 is to be read along with this Annexure A.

1. Maintenance of Secretarial record is the responsibility of the management of the Company. Our responsibility is to express an opinion on these secretarial records based on our audit.

2. We have followed the audit practices and the processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the secretarial records. The verification was done on test basic to ensure that correct facts are reflected in secretarial records. We believe that the processes and practices we followed provide a reasonable basic for our opinion.

3. We have not verifiedthe correctness and appropriateness of financial records and Books of Accounts of the Company.

4. Where ever required, we have obtained the Management representation about the compliance and law, rules and regulation and happening of events etc.

5. The compliance of the provisions of Corporate and other applicable laws, rules, regulation, standards is the responsibility of the management. Our examination was limited to the verification of procedure on test basic.

6. The Secretarial Audit report is neither an assurance as to the future viability of the Company nor of the effectiveness with which the management has conducted the affairs of the Company.

Place: Chennai For Lakshmmi Subramanian & Associates
Date: 02nd September, 2016 Sd/-
P S SRINIVASAN
ACS NO:1090
CP NO : 3122

ANNEXURE "B" TO DIRECTORS REPORT

Information pursuant to Sec 217(1) (e) of the Companies Act, 1956 read with the companies (Disclosure of Particulars in the Report of Director) Rules, 1988 for the year ended at 31st March 2016.

A. CONSERVATION OF ENERGY:

1. ELECTRICITY 2015-16 2014-15
Purchased (Amount in Rs.)
a) Total Units Consumed 35,420 46,127
b) Total Amount (Rs) 3,27,016 3,76,544
c) Rate Per Unit (Rs) 9.23 8.16
2. FURNACE OIL
a) Total Consumption (lts) Nil Nil
b) Total Amount (Rs) Nil Nil
c) Rate Per Litre (Rs) Nil Nil
3. COAL
a) Total Consumption (Tonnes) Nil Nil
b) Total Amount (Rs) Nil Nil
c) Rate per Tonne (Rs) Nil Nil

NOTES:

1. Total amount of electricity charges paid includes demand charges, belated payment charges, peak hour charges and meter rent.

B. RESEARCH AND DEVELOPMENT NIL
C. TECHNOLOGY ABSORPTION NIL

D. FOREIGN EXCHANGE EARNINGS AND EXPENDITURE

PARTICULARS 2015-16 2014-15
(Amount in Rs.)
Earnings
Export Receivables NIL NIL
Export of Goods NIL Nil
Expenditure
Imports NIL NIL
Travel Expenditure NIL NIL

ANNEXURE "C" TO DIRECTORS REPORT

AOC - 2

Particulars of Contracts/arrangements made with related parties

[Pursuant to Clause (h) of Sub-section (3) of Section 134 of the Companies Act, 2013, and Rule 8(2) of the Companies (Accounts) Rules, 2014 AOC-2]

This Form pertains to the disclosure of particulars of contracts/arrangements entered into by the Company with related parties referred to in Sub –section (1) of Section 188 of the Companies Act, 2013 including certain arm’s length transactions under third proviso thereto.

Details of contracts or arrangement or transactions not at arm’s length basis:

There were no contracts or arrangement or transactions entered into during the year ended March 31, 2016, which were not at arm’s length basis.

Details of material contracts or arrangement or transactions at arm’s length basis:

The details of material contracts or arrangement or transactions at arm’s length basis for the year ended March 31, 2016 are as follows:

Name of the Related Party Nature of Relationship Duration of the Contract Salient terms Amount (Rs in Crore)
Nature of Contract : Provision for Bad and Doubtful Debts / Diminution value of Investments
Gurudev Wind Energy Private Limited Subsidiary NA NA 2.41
Surana Wind Energy Private Limited Subsidiary NA NA 2.91
Surana Projects Private Limited Subsidiary NA NA 0.005
Nature of Contract Remuneration to KMP
Shri. Vijayraj Surana Managing Director NA NA 0.18
Commission to Shri. Jagadish Gopal Director NA NA 0.01
Sale of old vehicle/fixed assets to Shri.Vijayraj Surana Director NA NA 0.14
Lease Rent to Shri. Dineshchand Surana Relative NA NA 0.18

 

Date: 02nd September, 2016 For and on behalf of the Board of Directors
Place: Chennai
Agnes Roselind Joseph Devarajan.K.E
Director Director
(DIN: 07601460) (DIN: 07228715)

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