BOARD'S REPORT TO THE MEMBERS, Your Directors are pleased to present the report on the Company's business operations together with the audited statement of accounts for the financial year ended 31st March, 201 5, for your review OPERATIONS AND OVERALL PERFORMANCE. The Company's sales performance was maintained at the previous year's level, despite continued drop in demand for HF in domestic markets post-withdrawal of CDM benefits on R22, and stiff competition from China in the Aluminium Fluoride segment. To turn around the operations, the Company has taken various steps to improve operational performance: (a) Continuous focus on cost reduction (b) Increasing vendor base and developing alternate sources for its main raw material, Fluorspar and Sulphur, to reduce input costs. (c) Improving customer and product mix (d) Continuously engaging with suppliers of other raw materials and packing materials for reduction in rates. (e) Exploring market for HF in Asia Pacific and Europe. (f) Effective utlilisation of working capital limits. Profit before depreciation, interest and taxation (EBIDTA) was Rs. 7.83 crores during the year, compared to Rs. 11.12 crores in the previous year. However, factors such as a significant depreciation of the Indian Rupee against the US Dollar, currency volatility, and higher interest outgo on working capital limits due to poor credit rating, impacte.' cash profits. DIVIDEND: As the Company has incurred loss in the current year, your Directors have not recommended any dividend for the year 2014 - 2015. REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS: The steps taken by the Company to turn around the operations as enumerated above under the heading Operations and Overall Performance, have started yielding results. After incurring continuous losses during the first three quarters of the financial year, the Company has registered improved performance during the f.ourth quarter and registered Profit After Tax (PAT) of Rs. 0.83 crore. The Company is also taking steps to revive the IBAP plant and increase its viability by working on value-added products out of by-product generated during production of IBAP. Your company is also working on some other value-added products and will continue to focus on moving up the value chain in speciality products where it can have competitive advantage and grow sales volumes and margins. Your Board of Directors is optimistic about the turnaround of the Company in the coming years. ALUMINIUM FLUORIDE: Your Company has strategically reduced the production of Aluminium Fluoride due to its lower contribution. However, your Company will continue to service its long-term strategic customers. HF ACID: The entire value chain of Fluorspar - Hydrofluoric Acid suffers due to a wide gap in supply and demand. China, which continues to enjoy the benefits of backward and forward integration in the value chain, is competing more aggressively. Capacity shifting is possible in proximity to Fluorspar sources. The withdrawal of the 10% export duty by China has added further pressure on the price of the product, both in the domestic and export markets. However, we are continuously working on improving the operational parameters in order to increase margins. EXPORTS: Export turnover was higher by 9% at Rs. 18.63 crores, as compared to Rs. 17.13 crores in the previous year, despite lower off take by overseas customers on account of market demand and stiff competition from China. Your Company endeavors continuously to increase export revenues by expanding the customer base in new markets MATERIAL CHANGES AND COMMITMENT IF ANY: ISSUE OF PREFERENCE SHARES:: During the year, the Company has issued and allotted 5,00,000 - 11% Redeemable Cumulative Non Convertible Preference Shares ('the Preference Shares") of face value of Rs. 1 00/-each for cash at par on private placement basis to M/s. Aditya Birla Chemicals (India) Limited ("ABCIL") for general corporate purposes, and also to meet the ongoing business requirements of the Company. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earnings and outgo as required under Section 1 34 (3)(m) of The Companies Act, 201 3 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished as Annexure-A to the Annual Report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 Your Company has not provided any loan (s), guarantee(s) to any person or body corporate and has not made any investment(s) during the year under Section 186 of the Companies Act, 2013. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES: In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is available on Company's website at www.tanfac.com The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. The Company has obtained necessary prior omnibus approval from the Board pertaining to Related Party Transactions, in the ordinary course of business and on an arm's length basis. All such transactions which are of repetitive nature and / or entered in the Ordinary Course of Business and are at arm's Length are placed before the Audit Committee on a quarterly basis for its review and approval. Details of related party transactions are made available under Annexure-B. AUDITORS & AUDITORS' REPORT: M/s. Khimji Kunverji & Co., Chartered Accountants, Mumbai (Firm Registration No.105146W) were appointed as Statutory Auditors of the Company by the Members at their Annual General Meeting held on T3th August, 2014. The Report given by the Auditors on the Financial Statements of the Company forms part of the Annual Report. There were no qualifications, reservations or adverse remarks made by the Auditors in their report. The Company has received a letter from the above auditors to the effect that their re-appbintment, if made, would be within the prescribed limits under Section 141 (3)(g) of The Companies Act, 2013 and that they are not disqualified for reappointment. COST AUDITOR The Board has appointed Shri N. Krishnakumar, Cost Accountant, Cuddalore (Membership No.27885) for conducting the audit of cost records of the Company pertaining to Inorganic and Organic products manufactured by the Company covered under Central Excise Tariff Heading Chapter Nos.28 and 29 respectively SECRETARIAL AUDIT REPORT The Board has appointed Ms. Kalyani Srinivasan (Practicing Company Secretary, Chennai (CP. No.3109 & FCS No.5854), to conduct Secretarial Audit for the financial year 20142015, which, inter alia, includes audit of compliance with the Companies Act, 2013, and the Rules made under the Act, Listing Agreement and Regulations and Guidelines prescribed by the Securities and Exchange Board of India. The Secretarial Audit Report furnished under Annexure-C, does not contain any qualification, reservation or adverse remark. RISK MANAGEMENT POLICY The Company has already laid down the procedure regarding risk assessment and minimization. Pursuant to Clause 49(VI) of the revised listing agreement, which was made effective from 1st October, 2014, the Company has constituted a Risk Management Committee to define its roles and responsibilities and laid down the procedure to assess the risk and minimization procedures. The risk management includes identifying types of risks and its assessment, risk handling and monitoring and reporting. The Board shall also be responsible for framing, implementing and monitoring the risk management plan for the company. The details of identified risk and mitigation plan would be reviewed by the Committee every quarter and forwarded to the Board with their recommendation, if any, and the same will be reviewed and discussed by the Board in their meeting. DISCLOSURE AUDIT COMMITTEE AND VIGIL MECHANISM Pursuant to the provisions of Section 177 of the Companies Act, 2013, read with Rules 6 and 7 of the Companies (Meetings of the Board and its Powers) Rules, 2014, the Company has constituted the Audit Committee, comprising of six Members, including four Independent Directors, viz., Shri M.R. Sivaraman, IAS (Retd.), Shri Lalit Naik, Shri V.T. Moorthy, Shri R. Karthikeyan, Shri Kannan K Unni and Dr. Shankar Narasimhan. All the recommendations made by the Audit Committee were accepted by the Board. Pursuant to Section. 1 77(9) of The Companies Act, 2013 read with Rule. 1 of The Companies (Meetings of Board and its Powers) Rules, 2014 and also as per clause 49(H)(F) of the listing agreement with the stock exchanges, the Company has established a vigil mechanism in line with its Group Policy for Directors and Employees to report their genuine concerns or grievances. The audit committee would be monitoring the established vigil mechanism which provide for adequate safeguards against victimization of employees and directors who avail of the vigil mechanism and also provide for direct access to the Chairman of the Audit Committee. CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING In accordance with the Regulations of The SEBI (Prohibition of Insider Trading) Regulation, 201 5, vide its Notification dated 15th January, 2015, effective from 1 5th May, 201 5, the Company has established systems and procedures for Code of Practices and Procedures for Fair Disclosure of unpublished price sensitive information and a Code of Conduct to regulate, monitor and report trading by insiders, which includes, Directors, Employees and their relatives and other connected persons to restrict insider trading, on the basis of any unpublished price sensitive information, available to them by virtue of their position in the Company. The objective of this Code is to prevent misuse of any unpublished price sensitive information and prohibit any insider trading activity, in order to protect the interest of the shareholders at large. The details of dealing in Company's shares by the insiders, if any, would be placed before the Board on a quarterly basis. The Code of Practices and Procedures for Fair Disclosure of unpublished price sensitive information is available on the Company's website www.tanfac.com INTIMATION TO BIFR The Net Worth of the Company for the financial year 2014-2015 has eroded by more than 50% of its peak Net Worth during the immediately preceding four financial years. As required under the provisions of Section 23(1)(a)(i) of The Sick Industrial Companies (Special Provisions) Act, 1985, your Company, shall with in a period of 60 days from the date of adoption of accounts of the Company for the financial 2014-2015 by the members at their Annual General Meeting to be held on 29.9.2015 report to BIFR under the specified guideline. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year, the Board of Directors has appointed Smt. R. Rajalakshmi, as an Additional Director with effect from 24th March, 2015, as required under clause 49 of the equity listing agreement, after recommendation by the Nomination and Remuneration Committee. The Committee has evaluated her skills, experience and knowledge to hold office as an Additional Director up to the date of the forthcoming Annual General Meeting. Being eligible, Smt. R. Rajalakshmi, offered herself to be appointed as the Independent Director of your Company and not be liable to retire by rotation. Smt. R. Rajalakshmi will hold office of Director for a term up to five consecutive years if approved by the Members at the ensuing Annual General Meeting as per applicable provisions of the Companies Act, 2013 and Clause 49 of the Equity Listing Agreement. The following Independent Directors, viz., Shri V.T. Moorthy, Shri M.R. Sivaraman, IAS(Retd.), Shri T.S. Raghavan and Dr.Shankar Narasimhan are seeking their re-appointments for a term of five consecutive years upto March 31, 2020. The Independent Directors of your Company have given their certificates of independence, stating that they meet the criteria of independence as mentioned under Section 149 (6) of the Companies Act, 201 3. The details of the training and familiarization programmes and the Annual Board Evaluation process for Directors have been provided in the Corporate Governance Report. The policy on Director's appointment, including criteria .for determining qualifications, positive attributes and independence of Director forms part of the Corporate Governance Report of this Annual Report. BOARD EVALUATION The evaluation of Board of Directors and the Board, as required under Section 149(8) of The Companies Act, 2013, read with Schedule IV under Chapter VIII and clause 49 of the listing agreement, were done through selected parameters related to their roles, responsibilities and obligations of the Board and functioning of the committee. The evaluation criteria for Directors was based on their participation, contribution/ guidance and suggestions for improvement, wherever required, made to the Company. The Board approved the evaluation results as presented by the Nomination Committee. SEPARATE INDEPENDENT DIRECTORS' MEETINGS The Independent Directors met during the year in the absence of Non-independent Director and discussed inter alia the performance of Non-independent Directors and the Board as a whole and the quality, quantity and timeliness of the flow of information between the Company management and the Board for effective and reasonable performance of their duties. NUMBER OF MEETINGS OF THE BOARD During the financial year 2014-2015, the Board met six times and the details of which are given in the Report on Corporate Governance that forms part of the Annual Report. The time gap between two meetings as required under the listing agreement was well within the period. BOARD COMMITTEES Presently, the Board has four Committees, viz., Audit Committee, Nomination and Remuneration Committee, Stakeholders' Relationship Committee and Risk Management Committee, comprising of the required combination of Non Independent and Independent Directors. Committeewise details are furnished in the Report on Corporate Governance section of the Annual Report. ANNUAL RETURN The details forming part of the extracts of Annual Return under Form MGT-9, pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration) Rules, 2014 is furnished as an Annexure-D. RESEARCH AND DEVELOPMENT Your Company successfully commercialized production of a new product which finds application in the Water and Waste Water Industry. Your company is working on the development of two more new products, one finding application in the sanitation and food preservative industry, which will be commercialized in financial year 2015-2016, and another product, a Sulphuric Acid derivative which finds applications in the textiles, water treatment and food industries SAFETY, HEALTH AND ENVIRONMENT PROTECTION (SHE) Your Company is committed to sound Safety Health and Environmental Management Systems ¦ and processes and has implemented various best practices during the year, which helped to maintain its good safety record. Your Company is Integrated Management System (IMS) certified. This comprises ISO 9001-2008 for Quality Management System (QMS), ISO 14001-2004 for Environment Management, System (EMS) & OHSAS 18001:2007 for Occupational Health, and Safety Assessment Series for Safety Management System by DNV GL AS, India. We ensure that economic considerations do not compromise safety and environment protection measures and the Board has mandated accordingly. We are constantly working to reduce the use of corrosive material, conserve energy and water, reduce chemical consumption, and recycle water and process wastes. Your Company regularly updates its safety and risk management processes, conducts safety audits, and carries out HAZOP study for existing and new projects. Your Directors also periodically visit the factory to review the safety arrangements. Their suggestions are implemented systematically. Your Company motivates employees, workers and contract workmen, through training on aspects related to safety, and by rewarding the best performers in the area of safety and environment. As recommended by the Members of the Audit Committee, the Company takes continuous measures towards structural and foundation rehabilitation work and takes corrective action wherever necessary for further strengthening safety features of the plants, for safe operations. Your Company periodically conducts on-site mock drills and actively coordinates with the local government and other nearby companies for off-site emergency mock drills and mutual aid. MANAGEMENT POLICY We, at Tanfac Industries Limited, are coinmitted to continual improvement of the processes affecting quality, cost, and delivery, and also the environment, in order to prevent pollution and to comply with the requirements of customers, interested parties and the public MANAGEMENT OBJECTIVE Your Company's Management Policy entails: • Meeting customer needs and expectations. • Compliance with all applicable environmental regulations and other related requirements. • Continuous improvement of Quality Management System (QMS) and Environmental Management System (EMS) through monitoring of performance indicators, identifying and updating environmental aspects, implementing management programmes, and pollution prevention. • Establishing and reviewing management objectives at functional level, to meet contemporary requirements for improvement of the management system. • Elimination of waste and conservation raw materials, energy and water. • Involvement of staff in order to bring about a better work environment and culture. • To provide value for money to our customers through continuous upgradation of technology and enhancing productivity through benchmarking. • Maintaining a safe and healthy work environment. • Minimize customer complaints and improve customer perception / feed back. • Communicate the policy to all persons working for or on behalf of the organization. • To take all safety measures as mandated by law and by the Board. • The Environment Management Cell ensures effective implementation of the policy. Your management allocates all necessary resources on a priority basis. CORPORATE GOVERNANCE Your Company is strongly committed towards its philosophy of Corporate Governance. The Company has already constituted a Committee of Directors to assist the Board in good Corporate Governance. Your Company affairs are managed in a fair manner. The Corporate Governance Report, along with the Auditors certificate regarding compliance of the conditions of the Corporate Governance as stipulated in Clause 49 of the Listing Agreement of the Stock Exchange, is attached herewith. A Certificate of the CEO and CFO of the Company, in terms of sub-clause (IX) of Clause 49 of Listing Agreement, inter alia, confirming the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee, is also annexed. Your Directors are pleased to report that the Company is fully complied with the SEBI guidelines and corporate governance as on financial year ended 31st March, 2015 and continue to comply with the same. INSURANCE The Company's properties of fixed asset, including building, plant and machinery, and insurable assets and currents assets including stock of raw materials, finished goods, stores and spares etc., are adequately insured. MANAGEMENT'S DISCUSSION AND ANALYSIS REPORT As required under clause 49(VIII)(D) of the listing agreement with the stock exchanges, the Management's Discussion and Analysis Report for the year under review has been made as forming part of the Annual Report. PERSONNEL Pursuant to Section 197(12) of The Companies Act, 201 3, read with Rule 5(2) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of disclosure of remuneration are not applicable to the Company as no employees are covered under the specified ceiling of drawing remuneration of Rs. 5 Lakhs per month. Except sitting fees for attending the Board, Audit Committee and Stakeholders Relationship Committee meetings, no other remuneration is being paid to the Directors. Shri Lalit Naik, Manager and Director has not drawn any remuneration, including sitting fees, for attending the Board/Committee meetings. Details pertaining to remuneration as required under Section 197(12) of The Companies Act, 2013 read with Rule 5(1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is furnished forms part of the annual report. INDUSTRIAL RELATIONS Employee relations continued to be cordial throughout the year. The whole-hearted support of employees in the implementation of WCM, ISO-9002 systems, and ISO 14001 amply demonstrate the high level of team work, sense of belonging to the organization, and solidarity with the Management. PUBLIC DEPOSIT The Company has not accepted any deposits from the public during the year and there was no outstanding towards unclaimed deposit payable to depositors as on 31st March, 2015. SUSTAINABLE DEVELOPMENT - COMMUNITY DEVELOPMENT INITIATIVES - CORPORATE SOCIAL RESPONSIBILITY (CSR): CSR is a continuing commitment by business to behave ethically and contribute to economic development, while improving the quality of life of the workforce and their families, as well as of the local community and the society at large. Your company has continued its commitment to CSR activities despite continuous losses. Your Company's CSR initiatives are an integral part of overall business policy and aligned with its business goals. Projects are identified in a participatory manner, in consultation with the community, literally sitting with them and gauging their basic needs. We take recourse to the participatory rural appraisal mapping process. Subsequently, based on a consensus and in discussion with the village panchayats and other influential, the projects are prioritised. Arising from this, the focus areas that have emerged are education, health care, sustainable livelihood, infrastructure development, and espousing of social causes. All our community projects are carried out under the aegis of The Aditya Birla Centre for Community Initiatives and Rural Development. Your Company is carrying out its community welfare activities in and around Cuddalore for more than a decade. Your Company has been reaching out to under-served communities under the aegis of The Aditya Birla Centre for Community Initiatives and Rural Development. This has entailed transcending business interests and grappling with the "Quality of Life" challenges the poor face, and working to make a meaningful difference to them. Our Group vision is: "To actively contribute to the social and economic development of the communities in which we operate. In so doing, build a better, sustainable way of life for the weaker sections of society and raise the country's human development index." Your Company's focus areas include education, health care, sustainable livelihood, infrastructure development and espousing social causes. The specific initiatives include: > Girl child education under Kasturba Gandhi Balika Vidyalaya (KGBV) Scheme > Health - including Family Welfare and Total Health (Disease) Management > Child/Women Empowerment Projects > Need Assessment > Identification of funding sources and opportunities > Link up with Government agencies, NGO's and other potential partners > Implementation of community upliftment projects involving government authorities, village Panchayats and end beneficiaries in specific areas of social development, such as health, education, water management, etc..The projects also cater to the needs of children, women, adolescents, the physically challenged, and to the overall development of villages and communities. OTHER DISCLOSURES r There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations r Your Company has not issued any shares with differential voting. r- There was no revision in the financial statements. r Your Company has not issued any sweat equity shares. r During the year your Company has not received any complaints under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. HUMAN RESOURCES DEVELOPMENT: Your Company is widely acclaimed for its people development practices and has 'reinforced its position in this area. This, coupled with the ability to attract best talent, provides a competitive edge to the organization. Business priorities are aligned with the aspirations of employees, culminating in the development of an empowered and responsive human capital. Our work environment encourages innovation and creativity and promotes a culture that facilitates entrepreneurial activity within the organization, while adhering to Group values. Your Company has been investing in progressive employee relations practices to build capability at the grass root level. Employees are motivated through various skill development, engagement and volunteering programs, for their continuous performance improvement. ACKNOWLEDGEMENT: Your Directors wish to express their appreciation for the continued assistance and cooperation of the consortium banks, Government authorities, customers, vendors and members during the year under review. On behalf of the Directors and all shareholders, I would like to place on record my sincere appreciation of the committed services by the entire TANFAC family, comprising officers, staff and workers. Finally, I look forward to your continued understanding and support in taking your Company forward in these challenging times. For and on behalf of the Board (LALIT NAIK) DIRECTOR Date : 10.8.2015 Place : Chennai |