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DIRECTOR'S REPORT

Khaitan Electricals Ltd.

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Market Cap. (₹) 1.55 Cr. P/BV 0.00 Book Value (₹) -341.58
52 Week High/Low (₹) 18/1 FV/ML 10/1 P/E(X) 0.00
Bookclosure 29/09/2018 EPS (₹) 0.00 Div Yield (%) 0.00
Year End :2016-03 

The Directors present the 40th Annual Report together with the Audited Financial Statements of the Company for the year ended 31st March, 2016.

FINANCIAL RESULTS

2015-2016 (Rs. in lacs)

2014-2015

(Rs. in lacs)

Sale of Goods

29,296.87

43,559.22

Gross Profit/(Loss) for the year

(8,982.44)

(4,530.03)

Less : Depreciation

219.43

295.89

Profit/(Loss) before Tax & Exceptional item

(9,201.87)

(4,825.92)

Less : Exceptional Item

(259.32)

-

Profit/(Loss) after Exceptional item

(9,461.19)

(4,825.92)

Add: Provision for Income-tax

For Current Year- Current tax

-

-

Deferred tax

-

(3.40)

MAT Credit Entitlement

-

-

For earlier years- Income Tax

-

(62.41)

Profit/(Loss) after Tax

(9,461.19)

(4,891.73)

Add: Balance in Profit and Loss Account

(7,073.43)

(2,181.70)

Amount available for Appropriation

(16,534.62)

(7,073.43)

Appropriation

a) Transfer to General Reserve

-

-

b) Proposed Dividend

-

-

c) Tax on Dividend

-

-

Balance carried to Balance Sheet

(16,534.62)

(7,073.43)

Earnings per share (in Rs.)

(82.27)

(42.54)

Cash earnings per share (in Rs.)

(80.36)

(39.96)

CORPORATE OVERVIEW

Khaitan Electricals Limited is one of the India's Leading Fan manufacturers with interests in Home Appliances, Lightings and pump business having its corporate head quarters in Kolkata.

Your Company prepares its financial statements in compliance with the requirements of the Companies Act, 2013 and the Generally Accepted Accounting Principles (GAAP) in India.

FINANCIAL REVIEW

The year 2015-16 was a tough year and the Company witnessed a sharp drop in Turnover and Margins. Due to de-growth in business volumes, overheads and finance cost could not be absorbed which affected the bottom line. The Net Sales for the year was Rs.282.61 Crores against Rs.430.00 Crores in the previous year. The Company incurred a Loss before Tax of Rs. 94.61 Crores as against a Loss of Rs. Rs.48.26 Crores during the Previous Year. The loss of Rs.94.61 Crores includes provision on Closing Stock (old and defective) along with provisions against Bad & Doubtful Debts and Advances of Rs.43.50 Crores.

OTHER INCOME

Other income consists of interest received, export incentives, rent receipt, cash discount, claims received etc.

FINANCIAL EXPENSES Financial expenses for the year were to Rs.41.37 Crores as against Rs.41.73 Crores in the Previous Year.

DEPRECIATION

Depreciation was at Rs.2.19 Crores compared to Rs.2.96 Crores in the previous year.

EARNING PER SHARE

Earnings per Share (EPS) stood at (Rs. 82.87) compared to EPS of (Rs.42.54) in the previous year. The cash earned per share stood at (Rs. 80.36) as against (Rs.39.96) in the previous year.

CASH FLOW ANALYSIS

Source of cash

2015-16

2013-14

Cash from operations

(5044.73)

(895.92)

Increase in Borrowings

(229.31)

3860.13

Inter Corporate Deposits

262.23

(403.57)

Proceeds from Preference Shares

500.00

--

Total

(4511.81)

2560.64

Use of Cash

2015-16

2013-14

Net capital expenditure

139.96

170.74

Interest Paid (Net)

3154.90

3180.37

Tax paid

(37.52)

81.36

Increase/(Decrease) in Cash & Cash Equivalents

(830.06)

(390.45)

Increase/(Decrease) in Working Capital

(7198.41)

(481.38)

Extra Ordinary Items

259.32

--

Total

(4511.81)

2560.64


SHARE CAPITAL AND NET WORTH

The paid up Equity Share Capital as on March 31, 2016 was Rs.11.50 Crores. During the year under review the company has issued 5,00,000 Non-Convertible Redeemable Preference shares of Rs. 100 each. The net worth of the Company has reduced to Rs. (45.02) Crores as compared to Rs.44.59 Crores in the previous year.

SICK COMPANY AS PER SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (SICA)

As per the audited accounts of the Company, the company has eroded 100% of its net worth i.e. it has become sick industrial company within the meaning of Section 3(o) of Sick Industrial Companies (Special Provisions) Act, 1985. Therefore the Company will have to file reference with Board for Industrial and Financial Reconstruction (BIFR) as required by Section 15 of the said Act.

HUMAN RESOURCES

The Company employed good human resources practices. The Company is enjoying good and congenial industrial relations at all of its plants. As on 31st March, 2016, the total permanent employees were 468.

SAFETY ENVIRONMENT AND POLLUTION CONTROL

The Company continuously works on high safety standards and a clean environment free from pollution. The manufacturing process does not generate effluents.

ISO 9001:2008

The Plants of your Company located at Hyderabad and Faridabad are presently ISO 9001:2008 certified.

CURRENT OUTLOOK

The present market scenario does not appear to be very encouraging. Though the Company is making all out efforts to regain its growth trend with major thrust on consolidation of product mix, reduction in cost and containing of overheads and interest, the Company is quite concerned about the outlook for the Current Year.

EXPECTED IMPACT OF GOODS AND SERVICE TAX (GST) ON THE COMPANY

GST reform is believed to transform India into a single market. It is expected that implementation of the GST law will have a positive impact on the Company due to following reasons:

a. The Company will be able to close down depots in at least 7 states across India, thereby saving cost of rent, Carrying and Forwarding Agents and other Overheads, as goods can be supplied freely from the depots at nearby states.

b. There will be economy of freight as goods will be able to reach the destination using the shortest route.

c. Further this will help the company to face challenges from the unorganized sector as due to GST the increase in cost of goods to the final customer attributable to tax impact is expected to reduce by 50%, thereby bringing the customers from the unorganized sector back to the organized sector.

RISKS AND CONCERNS

The Indian economy achieved GDP growth of 7.6% in FY'15-16 compared to 7.2 % in FY'14-15. It is expected that the Indian economy will continue to grow at 7% to 8%. Manufacturing sectors continued to languish.

Wild currency fluctuations affect metal prices and may cause pressure on margins. No threat is witnessed from imports.

Though the Company is realigning its products to mitigate the impact of rising cost, the steep rise in input cost is a major cause of concern.

With no sign of improvement in overall economic scenario and stability in input cost, the company looks forward to year 2016-17 with caution.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company remains committed to maintain its internal control system and procedures to provide reasonable assurances for efficient conduct of business and security of its assets. The Company has an elaborate budgetary control system and actual performance is consistently monitored by the Management. The Company has a well defined organizational structure, authority levels and internal guidelines and rules.

Your company has adequate internal control systems in place, commensurate with the size, scale and complexity of the operations. The Company has already carried out an audit on internal financial control by third party. The Statutory Auditors have also commented on the internal financial control on financial Reporting in their report.

DEPOSITS

The Company had not accepted / renewed any Deposit during the year under review and there was no outstanding Deposit.

TRANSFER OF AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

Pursuant to the provisions of section 125 of the Companies Act, 2013, dividends which remained unpaid or unclaimed for a period of 7 years have been transferred by the company to the Investor Education and Protection Fund.

DIRECTORS

All independent directors have given declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

The tenure of appointment of Mr. Sunil K. Khaitan as Chairman & Managing Director is due to end on 31.10.2016. The Board recommend his reappointment in the forthcoming Annual General Meeting.

Mr. Sajjan Dabriwal, Director of the Company, retire by rotation and being eligible offer himself for reappointment. The Directors recommend his appointment at the forthcoming Annual General Meeting.

The details of the Director being recommended for appointment are contained in the accompanied Notice of the forthcoming Annual General Meeting.

Mr. Sajjan Dabriwal was Deputy Managing

Director of the Company till 31st March, 2016. He is Non-Executive Director w.e.f 1st April, 2016.

Mr. Biswajit Choudhuri resigned from Directorship of the Company w.e.f 30th December, 2015.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS UNDER SECTION 186

Particulars of loans given, investments made, guarantees given and securities provided are provided in the Financial Statement.

CHANGE IN KEY MANAGERIAL PERSONNAL

Mr. Sajjan Dabriwal resigned from the position of Deputy Managing Director of the Company with effect from 1st April, 2016. Mr. Sunil Sureka resigned from the position of Chief Financial Officer (CFO) of the Company with effect from 04.11.2015. Mr. Swapan Das has been appointed as Chief Financial Officer (CFO) of the Company with effect from 12.02.2016.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

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.

CORPORATE GOVERNANCE

Pursuant to Regulation 27 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Corporate Governance Report, Chairman and Managing Director's declaration regarding compliance to code of conduct and Auditors' Certificate regarding compliance to conditions of Corporate Governance are made a part of the Annual Report.

AUDITORS REPORT

The Board has duly examined the statutory auditor's report to accounts and clarifications, wherever necessary, have been included in the Notes to Accounts section of the Annual Report.

AUDITORS

M/s. V. S. Rao & Co., Chartered Accountants and M/s. G. P. Agrawal & Co., Chartered Accountants, joint auditors of the Company retire at the conclusion of the ensuing Annual General Meeting. In terms of the Companies Act, 2013 ("the new Act") and the Rules framed there under, it is proposed to appoint them as Joint Auditors of the Company to hold office from the conclusion of the ensuing Annual General Meeting, until the conclusion of the 41st Annual General Meeting of the Company to be held in the Year 2017 (subject to ratification of their appointment by the Members at every Annual General Meeting held after the ensuing Annual General Meeting).

As required under the provisions of section 139(1) of the new Act, the Company has received a written consent from M/s. V. S. Rao & Co., Chartered Accountants and M/s. G. P. Agrawal & Co., Chartered Accountants, to their appointment and a Certificate, to the effect that their reappointment, if made, would be in accordance with the new Act and the Rules framed there under and that they satisfy the criteria provided in section 141 of the new Act.

The Board commends their re-appointment as statutory auditors. The Notes on Financial statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments.

NUMBER OF BOARD MEETINGS HELD

The Board of Directors met 4 times during the financial year 2015-16. The dates on which the meetings were held are as follows:

29th May, 2015, 13th August, 2015, 9th November, 2015 and 12th February, 2016.

PERFORMANCE EVALUATION

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, 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 and independence of judgment thereby safeguarding the interest of the Company. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The board also carried out annual performance evaluation of the working of its Audit, Nomination and Remuneration as well as stakeholder relationship committee. The Directors expressed their satisfaction with the evaluation process.

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act, 2013, Directors of your Company hereby state and confirm that:

a) in the preparation of the annual Financial Statements for the year ended 31st March, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) they have 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 the same period;

c) the directors have taken proper and sufficient care 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) they have prepared the annual accounts on a going concern basis;

e) they have laid down proper internal financial controls (IFC) in the company that are adequate and were operating effectively.

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

SECRETERIAL AUDIT REPORT

According to the provision of section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Secretarial Audit Report submitted by Company Secretary in Practice is enclosed as a part of this report.

REMUNERATION POLICY

The Board has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy has been uploaded on the website of the Company at www. khaitan.com.

VIGIL MECHANISM

In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company at www.khaitan.com.

DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Company has been addressing various risks impacting the Company and the policy of the Company on risk management has been established. The Risk Management Policy has been uploaded on the website of the Company at www.khaitan.com.

RELATED PARTY TRANSACTIONS

All transactions entered with related parties during the year under review were on arm's length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. Thus disclosure in form AOC - 2 is not required. There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its omnibus approval.

The Board of Directors of the Company has, on the recommendation of the Risk and Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules there under and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. This Policy was considered and approved by the Board and has been uploaded on the website of the Company at www.khaitan. com.

CORPORATE SOCIAL RESPONSIBILITY

As there has been carry forward losses, provisions of section 135 of the Companies Act, 2013 pertaining to Corporate Social Responsibility are not applicable to the Company.

REMUNERATION RATIO OF THE DIRECTORS / KEY MANAGERIAL PERSONNEL (KMP) / EMPLOYEES:

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 and Directors is furnished hereunder:

S. No

Name

Designation

Remuneration

FY 2015-16

(Rs.)

Remuneration

FY 2014-15

(Rs.)

Increase in remuneration from previous year (Rs.)

Ratio/Times per Median of employee remuneration

1.

Mr. Sunil Krishna Khaitan

Chairman and Managing Director

43,58,400

46,15,250

(2,56,850)

16 times

2.

Mr. Sajjan Dabriwal

Deputy

Managing

Director

32,55,311

32,54,607

704

12 times

3.

Mr. Sunil Sureka

CFO (KMP)

7,17,177 (Resigned w.e.f 04.11.2015)

2,78,771 (Joined w.e.f. 02.02.2015)

Joined as CFO on 02.02.2015 and left on 04.11.2015 Comparison not possible

4.

Mr. Swapan Das

CFO (KMP)

13,59,791 (Joined w.e.f. 12.02.2016)

N.A.

Joined as CFO on 12.02.2016 Comparison not possible

5.

Mr. Amit Choraria

CS (KMP)

12,56,148

1,91,748(Joined

w.e.f.

02.02.2015)

Joined as CS on 02.02.2015. Comparison not possible

4 times

DISCLOSURES

Information, as required under Section 134 of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014, is set out as under:

A.

Conservation of Energy

: The Company's energy requirement is not large and the power consumption is in conformity with the industry norms. Hence, no special measures were taken.

B.

Technology Absorption

1. Specific areas in which R & D carried out by the Company

: Development of new models/products/

processes, improvement in the quality and productivity of the existing products.

2. Benefits derived as a result of the above R & D

: Improvement in quality and productivity of the products.

3. Future Plan of Action

: To design and develop new as well as low-cost

models of fans, high speed fans and power-efficient motors.

4. Expenditure on R & D

a) Capital

: Nil

b) Recurring

: Rs.15.45 Lacs

c) Total

: Rs. 15.45 Lacs

d) Total R & D Expenditure

as a percentage of Total Turnover

: 0.05 %

C.

Foreign Exchange Earning and Outgo

  1. Activities relating to Exports, initiatives taken to

increase exports, development of new export

markets for products and services and export plans.

: The Company export its products to various Middle East Countries, Nigeria, Ghana, Yemen, Uganda, Iraq, Nepal, Bangladesh, Sri Lanka, etc.

Efforts are on for increasing exports to the existing customers and for exporting to new countries.

2. Total Exchange used and earned

: Used - Rs. 0.41 Lacs Earned - Rs. 417.76 Lacs

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith.

PERSONNEL

Relations with the employees remained cordial and harmonious. Your Directors wish to place on record their sincere appreciation for the dedicated services rendered by the Company's employees at all levels.

The Directors thanks the Company's Customers, Distributors, Vendors, Investors, Bankers and Financial Institutions for their support to the Company.

On behalf of the Board

liMl k

Kolkata Sunil K. Khaitan

28th May, 2016 Chairman

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