DIRECTORS' REPORT Dear Members, Your Directors have pleasure in presenting the 44th Annual Report on the business and operations of the Company along with the audited financial statements, for the year ended March 31, 2015 OPERATIONAL & FINANCIAL REVIEW Due to sharp fall in the prices of crude oil during the second half of the year, high interest rate, increase in raw material prices and other reasons which were beyond the control of the Company, the Gross Sales of your Company decreased to Rs.20,881.23 Lacs from Rs.23,653.91 Lacs in the previous year. Management evaluates all recently issued or revised accounting standards on an ongoing basis. The Company discloses its un-audited financial results on a quarterly basis and audited financial results on an annual basis. There have been no material changes and commitments that have occurred between the close of the financial year (March 31, 2015) and the date of the Report (August 12, 2015), which affects the financial position of the Company. DIVIDEND In view of losses, your Directors regret their inability to recommend dividend on Equity Shares of the Company for the year ended March 31, 2015. DIRECTORS AND KEY MANAGERIAL PERSONNEL Directors The Board comprises of 6 Directors including 3 Independent Directors. The Independent Directors provide their declarations both at the time of appointment and annually confirming that they meet the criteria of independence as prescribed under Companies Act, 2013 and Clause 49 of the appointment. The Board recommends his re-appointment. The tenure of Mr. Varun Seth as Whole Time Director of the Company was valid till June 30, 2015. Hence, the Board of Directors of the Company, at its meeting held on May 27, 2015 passed the Board resolution, subject to the approval of shareholders at the ensuing General Meeting, to re-appoint him for a further period of three years with effect from July 01, 2015 to June 30, 2018. Brief resume of Mr. Varun Seth, Whole Time Director proposed to be re-elected, is included in the Notice of 44th Annual General Meeting. Company Secretary and Compliance Officer During the year, Mrs. Deepika Sati, Company Secretary and Compliance Officer of the Company resigned from the Company and she was relived from services with effect from May 11, 2015. Consequent to aforesaid resignation, with effect from July 1, 2015 the Board of Directors appointed Ms. Shilpa Verma as Company Secretary, and Compliance Officer of the Company. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an evaluation of its own performance as well as the evaluation of the working of its Audit Committee and Nomination & Remuneration Committee. A structured questionnaire was prepared after taking into consideration the inputs received from Directors, covering various aspects of the Board functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board and the Directors expressed their satisfaction with the evaluation process. REMUNERATION POLICY The Board has, on recommendation of the Nomination & Remuneration Committee, framed a policy for appointment and remuneration of Directors, Key Managerial Personnel (KMP) and other Employees. As part of the policy, the Company strives to ensure that: a) the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; b) relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and c) remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. DIRECTORS' RESPONSIBILITY STATEMENT To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013 : a) in the preparation of the annual financial statements for the year ended March 31, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures. b) for the financial year ended March 31, 2015, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit and Loss of the Company for the year ended March 31, 2015. c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. d) the annual financial statements have been prepared on a going concern basis. e) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively. f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively AUDITORS Statutory Audit M/s. Sehgal Mehta & Co. (Firm Registration No. 003330N), Chartered Accountants, were appointed as the Statutory Auditors of the Company at the 43rd Annual General Meeting for a period of three years from the conclusion of that meeting till the conclusion of 46th Annual General Meeting, subject to the ratification by the members at every Annual General Meeting. The Company has received confirmation from the Statutory Auditors regarding their consent and eligibility under Sections 139 and 141 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 for appointment as the Auditors of the Company. The Board recommends the ratification of the appointment of M/s. Sehgal Mehta & Co. (Firm Registration No. 003330N), Chartered Accountants as the Statutory Auditors of the Company for the financial year 2015-16. The Notes on financial statement referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Board of Directors has appointed Ms. Shalu Singhal, (C.P. No. 12329) Practising Company Secretary, to conduct the Secretarial Audit of the Company for financial year ended March 31, 2015. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark and is attached in Form MR-3 as Annexure I. SUBSIDIARY COMPANIES The Company does not have any subsidiary. DISCLOSURES a) Particulars of Loans, Guarantees and investments: The Company has not given any Loans or Guarantees as covered under the provisions of section 186 of the Companies Act, 2013. However, the details of Investments made by the Company are contained in Note No. 13 to the Financial Statements. b) Transactions with Related Parties: All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of the business. There were no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. Your attention is drawn to the related party disclosure set out in Note no. 40, 41, 42 & 43 of the financial statement. c) Deposits: Since, April 1, 2014 the Company has not issued any Deposit Scheme for invitation or acceptance of Deposits within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014. As on April 1, 2015 all Deposits have been repaid by the Company to the Deposit Holders and any amount of Deposits, which remain unclaimed for a period of 7 years along with interest accrued thereon, have been deposited by the Company into the Investor Education and Protection Fund (IEPF). The declaration of same is also filed with the Registrar of Companies, NCT of Delhi and Haryana, in pursuance of the Companies (Acceptance of Deposits) Rules, 2014. d) Extract of Annual Return: An extract of Annual Return in Form MGT-9 as required under Section 92(3) of the Act read with Companies (Management & Administration) Rules, 2014 is annexed as Annexure-II to this report. e) Sexual Harassment Policy : The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year, the Company has not received any complaint of harassment. f) Regulatory Orders: No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and Company's operations in future. CORPORATE GOVERNANCE AND POLICIES Your Company is fully compliant with the Corporate Governance guidelines, as laid out in Clause 49 of the Listing Agreement and believes that good Corporate Governance is the basis of stakeholders' satisfaction and is thus, committed to attain the highest level of transparency, accountability and compliance of law in all facets of operations. A detailed report on Corporate Governance forms part of this Annual Report. The Statutory Auditors of the Company have examined the requirements of Corporate Governance with reference to Clause 49 of the Listing Agreement and have certified the compliance, as required under Clause 49 of the Listing Agreement. The Certificate in this regard is attached as Annexure-III to this Report. The Board has in accordance with the requirements of Companies Act, 2013 and Clause 49 of the Listing Agreement has adopted new policies and amended existing policies such as policy on Related Party Transaction, Code of Conduct for Directors and Senior Management and Whistle Blower/ Vigil Mechanism Policy. Whistle Blower/ Vigil Mechanism Policy Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Board of Directors had approved the revised Policy on Whistle Blower/ Vigil Mechanism. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/Employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Risk Management Policy The Company has constituted a business risk management committee pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement. The details of the committee is set out in the Corporate Governance Report forming part of this Report The Company is well aware of these risks and challenges and has put in place mechanisms to ensure they are managed and mitigated with adequate timely actions. At present, the Company has not identified any element of risk which may threaten the existence of the Company. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS ANDOUTGO The particulars prescribed under Section 134 of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are furnished in Annexure-IV to this Report. PARTICULARS OF EMPLOYEES During the financial year ended March 31, 2015, none of the employee was in receipt of remuneration exceeding the limit specified under Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the reports 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 ensuing Annual General Meeting. If any member is interested in inspecting the same, such member may write to the Secretarial Department of the Company in advance. MANAGEMENT DISCUSSION & ANALYSIS REPORTS Cautionary Statement Certain statements in this section may be forward looking and be based on expectations/projections about the future. Company's actual results, performance could thus differ materially from those projected in any such forward looking statements. The Company assumes no responsibility to publicly amend, modify or revise any of such forward looking statements on the basis of subsequent developments, information or events. Industry Structure and Development With launch of the 'Make in India' initiative, Mr. Narendra Modi, the Prime Minister of India, aims to give global recognition to the Indian economy and also place India on the world map as a manufacturing hub. India has also set for itself an ambitious target of increasing the contribution of manufacturing output to 25 per cent of gross domestic product (GDP) by 2025, from 16 per cent currently. Currently, the Indian Plastics Industry is spread over across the country, employing about 4 million people and over 2,000 exporters. It operates more than 30,000 processing units, of which 85 per cent to 90 per cent are small and medium enterprises (SMEs). Your Company is one of the leading manufacturers of PET bottles and containers since 1984 under the brand name "PEARLPET" with dominance in both household and retail segment. We believe in providing our customers the trendy, unique storage products which is adaptable to their needs. We are proud to have bought a new thought process to the Indian kitchen by making the first safe, transparent, unbreakable, odorless plastic jars & bottles. Our products are made of virgin plastics which are universally approved by USFDA and other regulating bodies for Food, Beverage and Water storage. All PEARLPET products are fully recyclable and also marked with a recycling code to indicate the type of material used. The production facilities, strategically placed at four locations namely Baddi, Pant Nagar, Mahad and Jigani are in close proximity to our diversified customer base. Economic Scenario and Outlook Plastic Industry is one of the most versatile and widely used product in the world. Many everyday products like food containers, synthetic fibres and almost all water plastic bottles are made from PET. The usage of plastics cut across all sections of society. Due to its moulding capacity, versatility, non corrosive and moisture resistant properties, economic viability, easy process ability and also its attractiveness and durability in all weather conditions, it has become a material of universal choice, for the lower and middle class of population, it is an essential material. A time has come when plastics industry has the capacity to influence the progress of all other sectors. Plastic industry is regarded as 'sunrise' industry due to its increasing versatility and worldwide demand. Indian Plastics Processing Industry is an important segment of Indian industry which is making significant contribution to the economic development and growth of various key sectors in the country. However its usage in the country is 9.7 kgs per capita which is far below as compared to 109 kgs in USA and 45 kgs in China. The lower demand growth can be attributed to the fact that the Plastics sector in India has been hit by economic slowdown, deferment of capital expenditure by the government on infrastructure, currency volatility and liquidity crunch caused by higher interest rates Opportunities and Challenges Thus, the Plastic goods industry in India has bright prospects and there is a great scope of growth due to universal acceptability of these goods and their production & use will grow unhindered. Plastic industry in India symbolizes a promising industry and at the same time helps in creating new employment opportunities for the people of India, creating millions of unskilled and semi-skilled jobs and change the export profile from raw materials to value added plastics products. The plastics processing industry is a source of great potential for global businesses. There is tremendous scope for innovative technological up gradations and thus rapid growth of the sector. There are tremendous investment opportunities in plastic industry. But the unprecedented growth in the use of plastics as a packing material has created a serious problem of solid waste disposal. Plastic is a non-biodegradable substance and creates problems of environmental pollution. The industry however witnesses factors that pose a threat and restrain growth in the industry. The factors that need consideration are: 1) Recycling: The recycling of the used plastic material solves the problem of waste disposal, lessens the burden on raw materials, lightens the pressure on the biosphere and provides jobs to millions. It may be mentioned here that this process needs technological development and up gradation. It is estimated that about 60% of the plastics consumed in the Country are recycled. This rate needs to go up to 80%. 2) Inflation: the inflation rate in India was recorded at 5.01 percent in May of 2015. It is averaged at 8.51 percent from 2012 until 2015, reaching an all-time high of 11.16 percent in November of 2013 and a record low of 4.38 percent in November of 2014. Inflation rate impacts the price of plastic compounds and their usage in the industry. 3) Dumping of Products: China is seen as a threat by other developing nations for a reason that certain goods are being sold at a price far below the price prevailing in the market on account of cheap labour and significant capacities. The various other factors viz. high interest rate, volatile currency market, tough competition from big industrial group etc. may also pose serious concern on the profitability of the Company as a whole. Segment Wise Performance The Company has a single reportable segment i.e. Manufacture of PET bottles and jars etc. Therefore, segment-wise reporting is not applicable. Risk Management As every other business, your Company also has significant exposure to different types and levels of risk. However, the Company has a well-structured risk assessment and minimization mechanism, which is periodically reviewed by the Board of Directors. With thorough market understanding, strong marketing network, diverse and flexible manufacturing and technical expertise, your Company has been able to manage and withstand risks and concerns faced by the industry. However, if any, regulatory changes affect the usage of PET, your Company will be seriously impacted. During the year under review, there was a fire at one of the Company's unit located at Mahad due to short circuit. The Company has filed insurance claim for loss of stocks, building, furniture & fixture and machinery. Internal Control Systems and their Adequacy The Company has engaged the services of an independent Chartered Accountant to carry out the internal audit and ensure that recording and reporting are adequate and proper, the internal controls exist in the system and that sufficient measures are taken to update the internal control system. The system also ensures that all transactions are appropriately authorized, recorded and reported. Exercises for safeguarding assets and protection against unauthorized use are undertaken from time to time. The Board has adopted the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, safeguarding of its assets, the prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial disclosures. Human Resource and Industrial Relations Industrial relation is a multidisciplinary field that studies the employment relationship. Your Company recognizes the importance of human value and ensures that proper encouragement both moral and financial is extended to employees to motivate them. Your Company has provided rent free accommodation to all its staff and workers adjacent to the factory premises of the Company. As on March 31, 2015, 532 numbers of employees were on Company's Roll. During the year under review, your Company enjoyed cordial relationship with workers and employees at all level. Acknowledgement The Directors wish to express their appreciation for the continued co-operation of the Central and State Governments, bankers, financial institutions, customers, dealers and suppliers and all the shareholders. The Directors also wish to thank all the employees for their contribution, support and continued co-operation throughout the year. On Behalf of the Board of Directors Pearl Polymers Limited Chand Seth Chairman & Managing Director Date: August 12, 2015 Place: New Delhi |