DIRECTORS' REPORT TO THE MEMBERS OF KARMA ENERGY LIMITED The Directors are pleased to present this Eight Annual Report and the Audited Statement of Accounts for the year ended March 31, 2015. 2. DIVIDEND AND RESERVES Your Directors have not recommended any dividend (previous year Re.0.50 per share) for financial year 2014-15 on account of loss for the year. Pursuant to loss for the year the company has also not transferred any amount to Reserves. 3. PERFORMANCE During the year the Total Income of the Company was Rs.1665.21 Lakh as compared to Rs.3136.36 Lakh in the previous year. The Profit before depreciation achieved was Rs.67.30 Lakh (Previous year Rs.1023.15 Lakh). The Profit / (Loss) after Tax registered was (Rs.313.03 Lakh) (Previous year Rs.152.77 Lakh). The company has not transferred any amount to Reserves during the year. There has been no change in the business of the company during the year as compared to the previous year. Generation from all its wind power plants in different states have been marginally lower than the previous year except in Theni District and Tirunelveli District in Tamil Nadu wherein the State Utility have not been shutting off the grid to the extent they were resorting to in the previous year on account of state wide imbalance in the grid which has been compounded by Southern grid yet to be integrated in the National grid. The steep drop in value of realization of power generation has been on account of non granting of open access for sale to third parties by the State Utility in Maharashtra as per their Revised Procedure for Wind Open Access announced effective from 01.04.2014 which was squarely struck down by Hon'ble Maharashtra Electricity Regulatory commission (MERC) vide their order of 20.08.2014 and despite such order the State utility did not issue the open access approval necessitating the Association of Wind Power Generators filing a Contempt Petition which has been finally heard on 23.03.2015 and judgement reserved. Since the order of MERC has not yet been issued so far, the company as a conservative measure has recorded the income from its 18 MW wind farm project at the lower tariff rate applicable for sale to the state utility as the entire gross generation of 308.20 lakh units has been fed into the grid of the state utility. Since the issues involved in the litigation is squarely covered by a direct decision of Hon'ble Appellate Tribunal for Electricity, it is expected that MERC order would be in favour and on receipt of the said order only income can be accounted at a tariff agreed to for sale of power under open access to third parties. In Andhra Pradesh where the company has a 7.5 MW, wherein on a tariff revision petition filed by State Distribution Licensee APCPDCL the Hon'ble State Electricity Regulatory Commission APERC had issued an interim order fixing that tariff at Rs.1.69 per unit against the normal tariff of Rs.3.37 per unit. Thereafter APERC had issued their final order on 06.09.2014 retaining the tariff at Rs.3.37 per unit. Consequently the difference in tariff has been accrued and accounted under exceptional items at Rs.380.20 lakh. However the bifurcation of state of United Andhra Pradesh into AP and Telangana with effect from 02.06.2014 has also created issues on the matter of release of payment of arrears from January 2011 to May 2014 consequent to the tariff rate being sustained by Hon'ble APERC. Though the company has accounted for arrears of income from generation proceeds as exceptional items in F.Y. 2014-15, the payment thereto is still pending. The company in respect of its 18 MW wind farm in Maharashtra, since sale is to third parties, is availing the renewable Energy Certificates issued as per Central and State Electricity Regulatory Commissions and the said certificates can be sold in the Electricity Exchange at a base price of Rs.1500/- per REC and maximum being Rs.3300/- per REC. However, the off take of REC in the market by the obligated entities predominantly the Distribution Licensees have been negligible during 2014-15 resulting in accumulation of REC which are only accounted on sale. The unsold REC as at 31.03.2015 is about 24398 which at the minimum price of Rs.1500/- per REC would fetch about Rs.365.97 lakh. Even though the Central Government has been enthusiastic in pronouncing measures and aiming to achieve quantum jump in installation and generation of power from renewable energy projects, unfortunately at State level as well as the utilities and at times the State Electricity Regulatory Commissions have not been keeping pace with the same. On the contrary in some states where the company has its wind farm the pronouncements whether in the form of Regulations or Orders have been adverse to the sustenance of renewable energy projects especially those which have been in operation for many years. In Maharashtra apart from the imbroglio created by the utility for F.Y. 2014-15, MERC had added to the woes by replacing old open Access Regulations with new Open Access Regulations squarely curtailing the non discriminatory open access for sale of power to third parties and thus stifling the existence and growth of renewable energy projects especially wind power. The Association of wind power generators have filed a writ petition in the Hon'ble High Court of Bombay against the new regulations of MERC and it is expected as in the case of any litigation in India, the matter before High Court could be a long drawn out affair. 4. SUBSIDIARY / ASSOCIATE / JOINT VENTURE COMPANIES Your company has 8 subsidiary companies namely Almi HydroElectric Projects Ltd, Baledh Energy Projects Ltd, Batot Hydro Power Ltd, Brahmanvel Energy Ltd, Greenweiz Projects Ltd, Joiner Hydro Power Projects Ltd, Khandesh Energy Projects Ltd and Vajharpada Energy Ltd. All subsidiary companies are SPV's executing power projects which are in different stages of development except Greenweiz Projects Limited is in the business of carrying out operation & maintenance of wind farms. Batot's 3.5 MW Project was re-commissioned in mid June 2013 after extensive repairs over a period of one year pursuant to unprecedented floods in 2012 has been recording good generation and payments thereto are also being received promptly but heavy repair cost on account of flood and high finance costs have been affecting its performance. In accordance with Section 136 of the Companies Act, 2013 read with Rule 10 of The Companies (Accounts) Rules, 2014, a company may forward statement of accounts containing the salient features in the prescribed form and simultaneously ensure that copies of the financial statements including consolidated financial statements along with Auditors Report, Directors Report and other documents that is required to be attached are annexed with the financial statements and made available for inspection at the registered office of the company, during working hours for a minimum period of 21 days prior to the meeting of the shareholders. Accordingly Accounts in the Form as per prescribed Form AOC-3 of the subject rules are being forwarded to all the members of the company with complete set of financial statements available at the registered office of the company for inspection as above. Also salient features in the financial statement of subsidiaries, associate companies, joint ventures compiled in Form AOC-1 of the subject Rules are attached to the financial statements. No subsidiary company has ceased to be a subsidiary during the year. Weizmann Corporate Services Ltd. became an Associate company during the year. Weizmann Energy Limited and Parmatma Power Projects Private Limited ceased to be the joint venture entities of the company during the year. 5. DIRECTORS AND KEY MANAGEMENT PERSONNEL In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of the Company the Directors Shri D G Siraj and Shri N V Siraj retires by rotation and, being eligible have offered themselves for re-appointment. The Managing Director of the company Mr. G N Kamath was reappointed for a period of one year with effect from 1st December 2014 subject to approval of shareholders by special resolution at the ensuing Annual General Meeting. The confirmation of re- appointment of Mr. G N Kamath as Managing Director for a period of one year and above would be included in Notice to the ensuing AGM. The company had appointed Ms. Smita V Davda as Additional Director at the Board Meeting of the company held on 13.02.2015. Ms. Smita V Davda being spouse of Mr. Vinesh V Davda, as per section 149(6) of the Companies Act, 2013 both of them would be considered as Non Independent. Since the tenure of Additional Director as per section 161 of Companies Act, 2013 is up to the ensuing Annual General Meeting, the appointment of Ms. Smita V Davda as Director is being proposed in the ensuing AGM Notice and accordingly a Resolution has been included in the Notice to the AGM. The Company had pursuant to Section 149(10) read with Section 152 of the Companies Act, 2013 appointed four independent directors viz. Shri V P Kamath, Shri K M Vussonji, Shri Upkar Singh Kohli and Shri Vinesh N Davda for a term of five consecutive years at the Annual General Meeting held on 11.09.2014. Subsequently pursuant to appointment of Smt. Smita V Davda, spouse of Shri Vinesh N Davda, Shri Vinesh N Davda ceased to be an independent director. During the year no directors have resigned from the Board. The Board of Directors had four meetings during financial year 2014-15. Mr. T V Subramanian was appointed as Chief Financial Officer by the Board of Directors during the year. 6. STATEMENT INDICATING THE MANNER IN WHICH FORMAL EVALUATION HAS BEEN MADE BY THE BOARD OF ITS OWN PERFORMANCE AND THAT OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS The Nomination and Remuneration Committee of the Board continuously evaluate the performance of the Board and provide feedback to the Chairman of the Board. The independent directors had a separate meeting without the presence of any non independent directors and management and considered and evaluated the Board's performance, performance of the Chairman and other non independent directors and shared their views with the Chairman. The Board had also separately evaluated the performance of the Board, the Committees and independent directors without participation of the relevant director. 7. FAMILIARISATION PROGRAMME ARRANGED FOR INDEPENDENT DIRECTORS The company as required under Schedule IV of the Companies Act, 2013 and Clause 49 Guidelines on Corporate Governance issued by SEBI has made arrangement to provide suitable training to independent directors, to familiarize them with the company, their roles, rights, responsibilities in the company considering the nature of the industry in which the company operates, business model of the company, etc. During F.Y. 2014-15 no new independent directors have been appointed by the company. 8. EXTRACT OF ANNUAL RETURN AS PER SECTION 92(3) OF COMPANIES ACT, 2013 An extract of Annual Return as at 31.03.2015 pursuant to section 92(3) of the Companies Act, 2013 and forming part of this Report is attached as Annexure I to this Report. 9. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(3) of the Companies Act, 2013, your Directors confirm: i) that in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) that 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 loss of the Company for that period ; iii) that 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 for preventing and detecting fraud and other irregularities; and iv) that the Directors had prepared the annual accounts on a going concern basis. v) that 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; vi) 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 ; 10. STATEMENT OF DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SECTION 149(6) OF THE COMPANIES ACT, 2013 The Board confirms the receipt of statement of declaration from independent directors as called for u/s.149(6) of the Companies Act, 2013. 11. COMPANY'S POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF A DIRECTOR, KEY MANAGERIAL PERSONNEL AND OTHER EMPLOYEES The company has constituted a Nomination and Remuneration Committee with the responsibilities of formulating the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to the remuneration for the directors, Key Managerial Personnel and other employees ; Formulating criteria for evaluation of independent directors and the Board ; Devising policy on Board diversity ; Identifying persons who are qualified to become directors and who may be appointed in senior management in accordance with the criteria laid down and recommend to the Board their appointment and removal. Appointment and Remuneration to Managing Director is subject to approval by members in General Meeting and shall be in accordance with Schedule V of Companies Act, 2013 and ceiling as per Section 197 of the Act. Appointment of Independent Directors to satisfy conditions u/s.149(6) of the Companies Act, 2013. The Independent Directors shall be governed by Code of Conduct detailed in Schedule IV of the Companies Act, 2013. The personnel selected as Board Member or Key Management Personnel or other senior personnel of the company is based on their requisite qualifications, skills, experience and knowledge in the relevant fields. Remuneration policy of the Company includes fixation of remuneration and annual increments based on performance, knowledge, position, target achievement, company's business plans, market environment and the remuneration is segregated into monthly fixed payments, annual payments, contribution to social and retirement benefits, reimbursement of expenses incurred for discharge of official duties, annual bonus, welfare schemes like insurance on health for self and family, accident benefits, tying up with agencies for managing retirement benefits like gratuity, pension schemes, etc. The remuneration policy as above is also available on the website of the company - www.karmaenergy.co 12. PARTICULARS OF THE EMPLOYEES AND INFORMATION CALLED FOR UNDER SECTION 197 OF THE COMPANIES ACT, 2013 AND THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits and other Disclosures pertaining to remuneration as set out in the said rules are complied with. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request. 13. DISCLOSURE OF PARTICULARS Pursuant to Section 134(3) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 the Report on the matters of Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo are as follows : As the Company is in the field of Wind Farm development and not manufacturing, the relevant provisions relating to conservation of energy, technology absorption are not applicable. However as the Company is in the field of wind farm development and promoting green energy, it is directly contributing to reducing dependency on fossil fuel and thus conserving the fossil fuel. The earnings and outgo in foreign exchange was NIL during the year. 14. FIXED DEPOSITS Your Company has not accepted any Fixed Deposits within the meaning of Section 73 of the Companies Act, 2013. 15. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS U/S.186 OF THE COMPANIES ACT, 2013 As the Company is in the business of Wind Power Generation an infrastructure activity as per Schedule VI of the Companies Act, 2013, provisions of Section 186 is not applicable. 16. PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES REFERRED TO IN SECTION 188(1) OF THE COMPANIES ACT, 2013 The transactions with the Related Parties are at arm's length basis and these transactions are not material in nature as per Section 188 of the Companies Act, 2013 read with Rule 15 of the Companies (Meeting of Board and its Powers) Rules, 2014. 17. POLICY ON RELATED PARTY TRANSACTIONS The Company has framed a policy on related party transactions and the same has been hosted on its website www.karmaenergy.co The policy includes the specific category of policies requiring prior approval of the Audit Committee, the Board of Directors, Special Resolution by members at General Meeting, determining the materiality of the related party contract both under Companies Act and Clause 49 of the Listing Agreement, and also the procedures to be followed in complying with the statutory provisions in respect of related party transaction, if any. 18. STATEMENT INDICATING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY FOR THECOMPANY The Company has framed its Risk Management Policy detailing the identification of elements of risks, monitoring and mitigation of the risks. The company has also constituted a Risk Management Committee for the above purpose. The company has laid down detailed process in planning, decision making, organizing and controlling. The Risk Management Policy has been hosted on the company's website www.karmaenergy.co 19. CORPORATE SOCIAL RESPONSIBILITY OF THE COMPANY The statutory requirement of complying with Corporate Social Responsibility of the Companies Act, 2013 is not applicable to the company during F.Y. 2014-15. 20. ESTABLISHMENT OF VIGIL MECHANISM The company has in place a vigil mechanism pursuant to which a Whistle Blower Policy is also in vogue. The whistle blower policy covering all employees and directors of the company is hosted on the company's website www.karmaenergy.co 21. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY WHICH HAVE OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR OF THE COMPANY TO WHICH THE FINANCIAL STATEMENTS RELATE AND THE DATE OF REPORT There are no material changes and commitments affecting the financial position of the company except in respect of its 18 MW wind farm in Maharashtra wherein the company has been hitherto availing open access from state utility for sale of wind power to Blue Chip Companies, the State Electricity Regulatory Commission has introduced a new Distribution Open Access Regulations, 2014 repealing their earlier Distribution Open Access Regulations, 2005 and consequently has restricted availability of non discriminatory open access to wind power generators to sell power to any of their consumers and the Association of Wind Power Generators has filed a writ petition before March 2015 itself in the Hon'ble High Court of Bombay and the same is pending disposal. Therefore till the Hon'ble High Court disposes off the writ petition, revenue from the 18 MW wind farm from April 2015 onwards would be an uncertainty despite the fact that on account of infirm nature of wind power, the wind power is generated in the normal way and fed into the grid of the state utility. 22. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATION IN FUTURE No significant or material orders have been passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future except a new Distribution Open Access Regulations, 2014 issued by State Electricity Regulatory Commission has substantially curtailed the availability of open access for sale of power to third parties in the state of Maharashtra and the same is presently before the Hon'ble High Court of Bombay in the form of writ petition by an association of wind power generators. Till an order is issued by the Hon'ble High Court of Bombay there could be an uncertainty in accounting of revenue from its 18 MW wind farm in the state of Maharashtra. Alternatively company can sell its power to the state utility at a much lower preferential tariff approved by the State Electricity Regulatory Commission. 23. DETAILS IN RESEPCT OF ADEQUACY OF INTERNAL CONTROLS WITH RESPECT TO THE FINANCIAL STATEMENTS The company has an internal control system commensurate with the size, scale and nature of its operation. The internal controls ensure that all its assets are properly safeguarded and protected against loss from unauthorized use or disposal, all transactions are authorized, recorded and reported correctly. The company has also an internal audit system for periodical audit of the internal control systems of the company. 24. ISSUE OF NEW EQUITY SHARES DURING THE YEAR The company has not issued any new equity shares during the year. 25. AUDITORS In the 7th Annual General Meeting (AGM) of the Company held on September, 11, 2014 Messrs. U. B. Sura & Co. Chartered Accountants and Messrs. Shyam C. Agrawal & Co., Chartered Accountants, had been appointed as the Joint Statutory Auditors of the Company for a period of 3 years to hold office from conclusion of the 7th (AGM) until the conclusion of the 10th (AGM) of the company. In terms of provisions of the Companies Act, 2013, It is necessary to get the appointment ratified by the shareholders in every Annual General Meeting until the expiry of the period of original appointment. In view of the above, the Board of the Director recommends your ratification of the appointment Messrs. U. B. Sura & Co. Chartered Accountants and Messrs. Shyam C. Agrawal & Co., Chartered Accountants, as the joint Statutory Auditors as mention at Item No. 4 of the Notice 2013, the company had appointed Shri Martinho Ferraro - Practicing Company Secretary (COP 5676) as Secretarial Auditor for financial year 2014-15 and whose report of 25th May 2015 is attached as Annexure-IV. There are no adverse observations made by the Auditor. 27. AUDITORS' REPORT The observations of the Auditors in their report, read with notes annexed to the accounts, are self-explanatory. 28. CORPORATE GOVERNANCE Your Company has complied with Corporate Governance requirement as per the Clause 49 of the Listing Agreement. A report on Corporate Governance forms part of this report as Annexure-II. A certificate from the Statutory Auditors of the Company confirming compliance of the Corporate Governance is appended to the Report on Corporate Governance. 29. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Management Discussion and Analysis Report as required under the Listing Agreement with the Stock Exchanges is attached to this Report as Annexure-III. 30. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) Act, 2013. "The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. During the year no complaints have been received. 31. ACKNOWLEDGEMENT Your Directors express their grateful appreciation for the assistance and co-operation received from Government Authorities, Bankers, Lending Institutions, Suppliers and Customers during the year under review. Your Directors place on record their appreciation for the committed services of the executives and staff of the Company. For and on behalf of the Board D G Siraj Chairman Date : 30th May, 2015 |