MANAGEMENT DISCUSSION AND ANALYSIS Dear Shareholders, The Directors have pleasure in brsenting the 53rd Annual Report of your Company and the Audited Accounts for the financial year ended 31st March, 2014. Economy Overview In the recent past, the Indian economy has faced varied challenges such as inflationary brssures, domestic structural constraints, slowdown in growth and an unsupportive external environment. The slowdown manifested in the decline in the growth of GDP from 8.9 % in 2010-11 to 6.7% in 2011-12 and 4.5% in 2012-13. With the expected growth rate of 4.9% in 201314, the declining trend in growth appears to have reversed. The growth slowdown in India is broadly in line with trends in similar emerging economies. The sharp downturn in growth is a combination of domestic factors with the global economic environment of uncertainties and slow growth in many advanced economies. The revival in agriculture on the back of a steady monsoon and robust growth in financial and business services led to a modest uptick in growth in 2013-14. Financial Highlights Inspite of the economic slowdown all around, your company continued to perform well with sales growing by 7.1% to Rs. 130.45 crores in the 2013-14. Profit before tax increased by 14.6% to Rs. 24.86 crores as compared to Rs. 21.69 crores in 2012-13. Earnings per share increased to Rs.40.33 as compared to Rs 38.18 in 2012-13. During the year, the industry witnessed an upward trend in the raw material prices. However, due to effective management and supervision, the company was able to effect savings in energy costs and partly offset the adverse effect of increase in input costs. As a consequence of increased cost of production, gelatin prices also firmed up. Issue of Bonus Shares The Board of Directors of the Company in its meeting held on August 6th, 2014, has recommended issue of bonus shares to the holders of equity shares of the Company in the ratio of 1:2 (i.e. one bonus equity share of 10/- each for every two fully paid up equity shares of 10/- each held), subject to the approval of the shareholders in the ensuing Annual General Meeting. Dividends Your Directors recommend a dividend of Rs.5/- per Equity Share for the financial year ended March 31, 2014 (brvious year Rs.5/- per Equity Share). The total outflow on account of the proposed dividend including dividend distribution tax will be Rs.235.92 lacs, (brvious year Rs.235.92 lacs). Transfer to Reserves It is proposed to transfer an amount of Rs. 162.64 lacs (being 10% of the net profits for the year) to the General Reserve. An amount of Rs. 1227.85 lacs out of the profits for the year under review is proposed to be retained in the Profit and Loss account. Industry Structure and Developments The market for gelatin is primarily driven by its growing use in end-user industries such as food and beverages, pharmaceutical, and cosmetics. Growing health concerns and ageing population, especially in western countries, are also acting as the major factors driving this market. However, cultural barriers across the world on the use of gelatin derived from animals is a factor which inhibits the overall market growth. Moreover, growing regulatory issues primarily in the food industry are also challenges for the players operating in this market. The rapid growth of the pharmaceutical industry in India and across the world has resulted in stable demand for gelatin in domestic market. The demand for exports was also stable during the period. The Indian gelatin industry differs from the rest of the world, in the process followed for manufacture of gelatin; while most of the gelatin manufactured globally use either hide or crushed bones for the manufacture of gelatin, the Indian manufacturers essentially use crushed bones. This is due to the virtual non-availability of porcine hide for manufacturing gelatin in India. Most of the bovine hide in India is taken up by the leather industry. Ergo, the Indian gelatin industry makes use of crushed bones resulting from the bovine industry. Opportunities and Threats The Office International des Epizooties, Paris [OIE], continued the status of India as "Negligible Risk" as far as BSE categorisation is concerned which is a good opportunity for the industry. The level of awareness about environmental hazards has increased among the general public and the state authorities are upgrading pollution control norms regularly. The industry is now required to address the issue of environment with more commitment. Your company has taken necessary steps to meet these challenges effectively. The availability of good quality raw material is a constant concern. The import of poor quality of gelatin into India is a health concern and also affects proper price realisation on the gelatin produced by the domestic manufacturers including your company. The industry has collectively approached the government to initiate action against the import of poor quality gelatin. Alternatives for the by-product DCP are emerging and could be of some concern in future. Outlook Barring any unforeseen circumstances, your company should continue to perform well. The company continues its focus on improved productivity and quality of its products. Risks and Concerns Rising raw material costs, fuel and electricity prices could impact margins. Tightening of pollution control norms by the statutory authorities can affect output and result in higher cost of production. The steady economic development in China and India is expected to drive the market for Asia-Pacific. The imports from China at prices well below the domestic price can have a major effect on the margins in the near future. Segment-wise or product-wise performance The company is engaged in the business of manufacture and sale of gelatin and ossein and the by-product di-calcium phosphate which broadly form part of one product group and hence a single business segment. However, based on geographical factors, reportable segment have been identified as exports sales and domestic sales. The segment revenue information is given separately in Notes on Accounts under the disclosure as required under Accounting Standard 17 -Segment Reporting and forms part of the Directors' Report. Internal Control System The company has an adequate internal control system covering supervision, checks and balances, policies, procedures and internal audit which ensures that company assets are safeguarded and protected and that transactions are authorised, recorded and reported correctly. The system is reviewed and updated on an ongoing basis. The Group Internal Audit team continues to support the internal audit function. The company's internal control system comprises audit and compliance of observations made by the Internal Auditors. The Internal Auditors independently evaluate the adequacy of internal controls and concurrently audit the majority of the transactions in value terms. Independence of the audit and compliance is ensured by direct reporting of Internal Auditors to the Audit Committee. Fixed Deposits During the year under review, the company has not accepted any fixed deposits from the public, and as on March 31, 2014 the company had no unclaimed deposits or interest thereon due to any depositor. Subsidiary Company The company does not have any subsidiary company. Directors In accordance with the provisions of Section 152 of the Companies Act, 2013, and Article 115 of the Articles of Association ofthe company, Mr. R.K. Raje. retires by rotation at the ensuing Annual General Meeting ofthe company. Mr. R.K. Raje, being eligible, has offered himself for re-appointment. The Board of Directors recommends his re-appointment. Justice Gulab Gupta, Mr. M.C. Pant and Mr. Deepak Chaudhuri, are proposed to be appointed as Independent Directors of the company at the ensuing Annual General Meeting ofthe company in accordance with the provisions of Section 149 ofthe Companies Act, 2013. The company has received declarations from them confirming that they meet with the criteria of independence as brscribed under subsection (6) of Section 149 ofthe Companies Act, 2013. The Board of Directors recommends their appointment as Independent Directors for a period of two years. The company has received a notice in writing from a member along with a deposit of requisite amount as brscribed under Section 160 of the Companies Act, 2013 proposing the candidature of Ms. Drushti R. Desai as a Director ofthe company and she has given her consent to act as a Director ofthe company. The Board recommends her appointment as a Director liable to retire by rotation. All the appointments of the Directors of the company are in compliance with the provisions of Section 164(2) of the Companies Act, 2013 read with Rule 14(1) of Companies (Appointment and Qualification of Directors) Rules, 2014. Attention of Shareholders is invited to the relevant items ofthe Notice ofthe Annual General Meeting and the Notes thereto. Brief resume of the Directors proposed to be appointed/ reappointed, nature of their expertise in specific functional areas and names of companies in which they hold directorship and membership / chairmanship of committees of the Board, as stipulated under Clause 49 ofthe Listing Agreement with the Stock Exchanges, are given in the section on Corporate Governance in this Annual Report. Directors' Responsibility Statement Pursuant to the requirement under Section 217(2AA) ofthe Companies Act, 1956, with respect to Directors' Responsibility Statement, it is hereby confirmed: I. That in the brparation of accounts for the financial year ended 31st March 2014, the applicable accounting standards read with requirements set out under Schedule VI to the Companies Act, 1956, have been followed along with proper explanation relating to material departures, if any; II. That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that were reasonable and prudent so far as to give a true and fair view of the state of affairs of the company at the end of the financial year and the profit and loss ofthe company for the year under review; III. That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the company and brventing and detecting fraud and other irregularities; IV. That the Directors have brpared the accounts for the financial year ended 31st March, 2014 on a 'going concern' basis. Statutory Auditors and Audit Report M/sT.R. Chadha&Co., CharteredAccountants, Statutory Auditors ofthe company, hold office until the conclusion of ensuing Annual General Meeting and are eligible for re-appointment. The company has received a letter from them to the effect that their reappointment, if made, would be within the brscribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for such re-appointment within the meaning of Section 141 ofthe said Act. The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments. Cost Auditor M/s Tapan Badkul & Associates, Cost Accountants, have been appointed as the Cost Auditors of the Company to conduct audit of cost accounting records maintained by the Company for product(s) covered under MCA order No.52/26/CAB-2010 dated 24th January, 2012 (as amended) for the year ending on 31st March, 2014. Transfer of Unpaid and Unclaimed amounts to IEPF Pursuant to the provisions of Section 205A(5) of the Companies Act, 1956, the declared dividends and interest on debentures which remained unpaid or unclaimed for a period of 7 years have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government pursuant to Section 205C ofthe said Act. During the financial year 2013-14 the company has transferred the unclaimed dividends for the year 2005-06 on Equity Shares and on 9% Cumulative Redeemable Preference Shares amounting to Rs.40,388/- and Rs. 1,84,850/- respectively to the Investor Education and Protection Fund. 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 14th August, 2013 (date of last Annual General Meeting) on the Ministry of Corporate Affairs' website. Corporate Governance Your company is committed to maintain the highest standards of Corporate Governance and adhere to the requirements set out by the Securities and Exchange Board of India's Corporate Governance practices. Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges forms part of the Annual Report. The Whole-Time Director's declaration regarding compliance with the company's Code of Business Conduct and Ethics for Directors and Management Personnel forms part of Report on Corporate Governance. The requisite certificate from M/s T.R. Chadha & Co., Chartered Accountants, Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance, as stipulated under the aforesaid Clause 49, is annexed to this Report. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under Section 217(1)(e) ofthe Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 are provided in the Annexure to this Report. Employees None of the employees of the company is in receipt of remuneration exceeding the limit brscribed under Section 217(2A) ofthe Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975. Industrial Relations Industrial relations remained cordial throughout the year. Your Directors place on record their sincere apbrciation of the significant contributions made, and the continued support extended, by all employees at all levels to the company's operations during the year. Acknowledgement Your Directors take this opportunity to thank the Central and the State Governments, statutory authorities, bankers, vendors and business associates and the shareholders for their continued interest and valued support. For and on behalf ofthe Board R. K. Raje Director Ashok K. Kapur Wholetime Director Place : Jabalpur Date : 6th August, 2014 |