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Stovec Industries Ltd.

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Jul 28, 04:01
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Directors Report

Market Cap.(`) 531.53 Cr. P/BV 5.91 Book Value (`) 430.62
Bookclosure 11/05/2017 FV/ML 10/1 P/E(X) 21.31
EPS (`) 119.47 Div Yield (%) 1.22
You can view full text of the latest Director's Report for the company.
Year End :2016-12 

TO THE MEMBERS

The Directors are pleased to present the 43rd Annual Report and the Audited Financial Statement of the Company for the year ended December 31, 2016.

1. FINANCIAL RESULTS

Particulars

Current Year 31.12.2016 (Rs, in Millions)

Previous Year 31.12.2015 (Rs, in Millions)

Revenue from Operations (net) Other Income

1885.13

39.48

1,567.02

35.55

(a) Total Income:

(b) Total Expenditure:

1924.61

1533.58

1,602.57

1,240.34

Gross Profit before Depreciation and Amortization expenses

391.03

362.23

Less: Depreciation & Amortization expenses Operational Profit/Profit Before Tax

51.25

339.78

51.57

310.66

Less: Current Tax Deferred tax

Excess provision of income tax of earlier years (Net)

120.48

(4.87)

0.23

115.84

104.65

2.06

(1.44)

105.27

Profit After Tax

223.94

205.39

Add: Profit brought forward from previous year

425.54

313.99

Profit available for appropriation

649.48

519.38

Dividend on equity shares

64.73

60.55

Tax on Dividend

13.18

12.33

Amount transferred to General Reserves

21.00

Short (Excess) Provision on earlier year's Dividend Distribution Tax

(0.04)

Profit carried forward to Balance Sheet

571.57

425.54

2. PERFORMANCE OVERVIEW Standalone

In financial year 2016, your Company moved forward strongly, sustained the performance and attained double digit growth in revenue. Your Company has demonstrated good performance during the year and recorded standalone revenue from operations of Rs. 1885.13 Million (Previous year Rs. 1567.02 Million), a growth of about 20 % in comparison to prior year. The increase in revenue was contributed by growth in sales of almost all product lines and more particularly Rotary Screen Printing Machine and Nickel Perforated Screens and was driven by increased market presence. The Company has achieved standalone Profit before tax of Rs. 339.78 Million (Previous year Rs. 310.66 Million), a growth of about 9 % in comparison to prior year.

Consolidated

The consolidated revenue from operations stood at Rs. 1946.43 Million (Previous year Rs. 1621.98 Million), an increase of about 20% in comparison to prior year. The Company's consolidated Profit before tax for the financial year 2016 stood at Rs. 377.85 Million (Previous year Rs. 331.79 Million).

3. RESERVES AND SURPLUS

The Company has not transferred any amount to General Reserves for the financial year 2016.

4. DIVIDEND

Considering the Company's financial performance, the Board of Directors have recommended payment of Final Dividend of Rs. 31/- per equity share having face value of Rs. 10/- each (i.e. 310%) for the financial year ended on December 31, 2016. This Final Dividend is subject to the approval of Members in the 43rd Annual General Meeting.

5. SUBSIDIARY COMPANY

Atul Sugar Screens Private Limited ("ASSPL") is a Wholly Owned Subsidiary of the Company. Your Company has obtained a certificate from the Statutory Auditors of the Company certifying that the Company is in compliance with the Foreign Exchange Management (Transfer or issue of security by a person resident outside India) Regulations, 2000 with respect to the downstream investments made in Atul Sugar Screens Private Limited.

A Summary of Performance of ASSPL is provided below:

The revenue from operations of ASSPL during the financial year 2016 stood at Rs. 162.02 Million [Previous year Rs. 154.88 Million]. ASSPL recorded Profit before tax of Rs. 37.41 Million (Previous year Rs. 22.96 Million).

Pursuant to the provisions of Section 129 (3) of the Companies Act, 2013 ("the Act"), a statement containing the salient features of financial statements of ASSPL in the prescribed Form AOC-1 is provided in Annexure-I forming part of this report. The Audited Financial Statements of ASSPL are available on the Company's website at www.stovec.com and the same are also available for inspection at the registered office of the Company as per the details mentioned in the Notice of 43rd Annual General Meeting. Your Company will also make available these documents upon written request by any Member of the Company interested in obtaining the same.

The Annual Audited Consolidated Financial Statements together with the Report of Auditor's thereon forms part of this Annual Report.

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

Information as required to be given under Section 134(3)(m) of the Act read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is provided in Annexure II forming part of this Report.

7. FIXED DEPOSITS

For the year ending December 31, 2016, the Company has not accepted any deposits falling within the purview of Section 73 of the Act and rules made there under.

8. COMMUNICATION FROM AHMEDABAD STOCK EXCHANGE LIMITED

The Company has received communication from Ahmedabad Stock Exchange Limited ("ASE") informing about its exit Policy. It has requested Company not to do compliance with ASE and to continue compliance with stock exchange where the securities of the Company are further listed (i.e. BSE Ltd for your Company). Accordingly the Company is now not required to do compliance with ASE.

9. CORPORATE GOVERNANCE

A separate report on Corporate Governance Compliance and a Management Discussion and Analysis Report as stipulated in Regulation 34 (3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations") forms part of the Director's Report as Annexure-III and IV respectively along with the required Certificate from the Practicing Company Secretary regarding compliance of the conditions of Corporate Governance.

10. AUDIT COMMITTEE

The Company has in place an Audit Committee in terms of requirements of the Act read with rules framed there under and Listing Regulations. The details relating to the Audit Committee are given in the Corporate Governance Report forming part of this report. The recommendations of Audit Committee were duly accepted by the Board of Directors.

11. DIRECTORS AND KEY MANAGERIAL PERSONNEL

At the 43rd Annual General Meeting, Mr. Eiko Ris (DIN: 07428696) retires by rotation and being eligible, offers himself for re-appointment.

The Members at the 41st Annual General Meeting, appointed Mr. Khurshed. M. Thanawalla (DIN: 00201749) and Mr. Marco Wadia (DIN: 00244357) as an Independent Director of the Company for a consecutive term of five years as per requirement of the Act. The above named Independent Directors have furnished declarations to the Company, confirming that they meet the criteria prescribed for Independent Directors under Section 149 (6) of the Act and Regulation 16(1)(b) of the Listing Regulations.

12. BOARD MEETING

During the financial year ended December 31, 2016, six meetings of the Board of Directors were held. The details of the attendance of Directors at the Board Meeting are mentioned in the Corporate Governance Report annexed hereto.

13. PERFORMANCE EVALUATION

The details of Annual Performance Evaluation of Individual Directors including Chairperson, Board of Directors and Committees of Board of Directors are mentioned in the Corporate Governance Report.

14. CORPORATE SOCIAL RESPONSIBILITY

In accordance with Section 135 of the Act and Rules framed there under, the Company has constituted a Corporate Social Responsibility ("CSR") Committee of Directors. The details of composition of CSR Committee are given in the Corporate Governance Report. The details of CSR policy and CSR spending by the Company have been provided as Annexure-V to this report, as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014.

15. REMUNERATION POLICY

The details of the Remuneration Policy is mentioned in the Corporate Governance Report. A Statement of Disclosure of Remuneration pursuant to Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, (as amended) is provided as Annexure VI forming part of this Report.

16. REMUNERATION TO INDEPENDENT DIRECTORS

Based on the recommendation from Nomination and Remuneration Committee and subject to the approval of Members in the forthcoming General Meeting, the Board of Directors have approved profit linked Commission (in addition to the payment of sitting fees and reimbursement of expenses incurred for attending the meetings of the Board and its Committee(s) thereof) to Independent Directors of not exceeding 1% (one percent) per annum, of the net profits of the Company (computed as per Section 198 of the Act) for each financial year, for a period of three financial years commencing from January 1, 2017.

17. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The scope of Internal Audit is well defined in the organization. The Internal Audit report regularly placed before the Audit Committee of the Board. The Management monitors and evaluates the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies. Based on the report of Internal Auditors, process owners undertake corrective action in their respective areas and thereby strengthening the controls continuously. Significant audit observations, if any, and corrective actions suggested and taken are presented to the Audit Committee of the Board.

18. EXTRACTS OF ANNUAL RETURN

The extracts of Annual Return in Form MGT-9 as required under Section 92(3) of the Act read with Rule 12 of the Companies (Management and Administration) Rules, 2014 (as amended), forms part of this Report as Annexure VII.

19. PARTICULARS OF CONTRACTS OR ARRANGEMENT WITH RELATED PARTIES

During the year under review, all the Related Party Transactions were entered into by the Company in the ordinary course of business and on arm's length basis. Hence reporting in Form AOC-2 is not applicable to the Company.

20. PARTICULARS OF LOANS, GUARANTEE OR INVESTMENTS

A statement providing particulars of Loans, Guarantees or Investments under Section 186 of the Act is provided as Annexure VIII forming part of this Report.

21. VIGIL MECHANISM

As per the provisions of Section 177(9) of the Act, the Company is required to establish a Vigil Mechanism for Directors and Employees to report genuine concerns. The Company has a Whistle Blower Policy (also known as Vigil Mechanism) in place and the details of the Whistle Blower Policy are provided in the Report on Corporate Governance forming part of this Report.

The Company has disclosed information about the establishment of the Whistleblower Policy on its website at www.stovec.com at http://www.spaprints.com/uploads/documents/Stovec/Stovec-policies/Whistle Blower Policv.pdf.

22. RISK MANAGEMENT

The Company has formulated Risk Management Policy in order to monitor the risks and to address/mitigate those risks associated with the Company. The Board of Directors do not foresee any elements of risk, which in its opinion, may threaten the existence of the Company.

23. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the provisions of Section 134 (3)(c) and 134 (5) of the Act, your directors confirm, to the best of their knowledge and belief:

a) that in the preparation of the annual financial statements for the year ended December 31, 2016, the applicable accounting standards have been followed and that no material departures have been made from the same;

b) that such accounting policies have been selected and applied consistently and judgment and estimates have been made that are reasonable and prudent, so as to give a true and fair view of the state of affairs of the Company as at December 31, 2016 and of the profit of the Company for the year ended on that date;

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) that the annual financial statements for the year ended December 31, 2016, have been prepared on a going concern basis;

e) that proper internal financial controls are in place in the Company and that such internal financial controls are adequate and are operating effectively; and

f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

24. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

The Company has in place a Policy on Prevention of Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules framed there under and Internal Complaints Committee has also been set up to redress complaints regarding sexual harassment. During the year, no complaint with allegations of sexual harassment was received by the Company.

25. REPORTING OF FRAUDS

There have been no instances of fraud reported by the Statutory Auditors under Section 143(12) of the Act and Rules framed hereunder, either to the Company or to the Central Government.

26. STATUTORY AUDITORS

Pursuant to the provisions of Section 139 of the Act and rules framed hereunder, M/s Price Waterhouse, Chartered Accountants, (Firm Registration No. 301112E) were re-appointed as Statutory Auditors of the Company for a consecutive term of five years to hold office from the conclusion of Forty first (41st) Annual General Meeting until the conclusion of the Forty sixth (46th) Annual General Meeting of the Company to be held in the calendar year 2020, subject to ratification of their re-appointment by Members at every subsequent Annual General Meeting.

The Company has received a letter from M/s. Price Waterhouse, Chartered Accountants, showing their unwillingness for ratification of their re-appointment as a Statutory Auditors of the Company in the forthcoming Annual General Meeting. The Company has received letter from M/s Deloitte Haskins & Sells LLP, Chartered Accountants, to the effect that if their appointment is considered as Statutory Auditors of the Company at the ensuing Annual General Meeting, then the same would be according to the terms and conditions prescribed under Sections 139 and 141 of the Act and rules framed there under.

The Board of Directors on recommendation of the Audit Committee appointed M/s. Deloitte Haskins & Sells LLP, Chartered Accountants (Firm Registration No. 117366W/W-100018) as the Statutory Auditors of the Company from the conclusion of 43rd Annual General Meeting until the conclusion of 48th Annual General Meeting (subject to ratification by Members at every subsequent Annual General Meeting).

A resolution seeking approval of appointment of M/s. Deloitte Haskins & Sells LLP, Chartered Accountants, as statutory auditors of the Company forms part of the Notice convening the 43rd Annual General Meeting and the same is recommended for consideration and approval of Members.

27. COST RECORDS AND COST AUDITORS

The Board of Directors on the recommendation of the Audit Committee, have appointed M/s Dalwadi and Associates, Cost Accountants (Firm Registration No. 000338) as its Cost Auditors to audit the cost records of the Company for the financial year 2017, at a remuneration as mentioned in the Notice convening the 43rd Annual General Meeting. A certificate has been received from the Cost Auditors to the effect that their appointment as Cost Auditors of the Company, if made, would be in accordance with the limits specified under Section 141 of the Act and Rules framed there under. A resolution seeking Member's approval for the remuneration payable to Cost Auditors forms part of the Notice convening 43rd Annual General Meeting of the Company and the same is recommended for the consideration and approval of Members. The Company will file the Cost Audit Report for the financial year 2016, within the time limit as prescribed under the Companies (Cost Records and Audit) Amendment Rules, 2014/2016.

28. SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 (as amended), the Company has appointed M/s Sandip Sheth & Associates, Practicing Company Secretaries (COP No. 4354), for conducting Secretarial Audit of the Company for the financial year ended on December 31, 2016. The Secretarial Audit Report is provided as Annexure-IX to this report.

29. AUDITORS REPORT

There are no qualifications, reservations or adverse remarks made by M/s Price Waterhouse, Chartered Accountants, Statutory Auditors, in their audit report and by M/s Sandip Sheth & Associates, Practicing Company Secretaries, Secretarial Auditors in their secretarial audit report and therefore need not require any comments under section 134(3)(f) of the Act.

30. MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING FINANCIAL POSITION OF THE COMPANY FROM THE END OF FINANCIAL YEAR AND TILL THE END OF THIS REPORT

There have been no 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 this Report.

31. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

As on date of this report, there are no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and operations of the Company in future.

32. PARTICULARS OF EMPLOYEES

Your Directors place on record their deep appreciation for the contribution made by the employees of the Company at all levels.

The information on employees particulars as required under Section 197 (12) of the Act read with Rule 5 (2) and 5 (3) of the Companies (Appointment and Remuneration of Managerial

Personnel) Rules, 2014 (as amended), is provided in the Annexure forming part of the Report. In terms of Section 136 of the Act, the Report and financial statements are being sent to the Members and others entitled thereto, excluding aforesaid Annexure. The said information is available for inspection by the Members at the Registered Office of the Company as per the details mentioned in the Notice of 43rd Annual General Meeting, on any working day (except Saturday, Sunday and Public Holidays) up to the date of the 43rd Annual General Meeting. Any Member interested in obtaining a copy of the same may write to the Company Secretary of the Company.

33. ACKNOWLEDGEMENT

The Board of Directors express its deep sense of appreciation for the contribution, co-operation and confidence reposed in the Company by SPGPrints B.V. - the Parent Company. The Board of Directors also extend its gratitude to its valued shareholders, employees, customers, bankers, suppliers and other stakeholders for their continued co-operation and support.

For and on behalf of Board of Directors

Sd/-

Place: Mumbai K.M.Thanawalla

Date: March 25, 2017 Chairman

DIN: 00201749

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