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Thiru Arooran Sugars Ltd. Directors Report
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You can view full text of the latest Director's Report for the company.
Market Cap. (Rs.) 7.70 Cr. P/BV 0.07 Book Value (Rs.) 100.19
52 Week High/Low (Rs.) 9/3 FV/ML 10/1 P/E(X) 0.00
Bookclosure 15/12/2015 EPS (Rs.) 0.00 Div Yield (%) 0.00
Year End :2016-03 

Dear Shareholders,

The Directors present their 60th Annual Report on the working of the Company for the year ended March 31, 2016.

(Rs. in millions)

2015-16

2014-15

Profit / (Loss) before Interest & Depreciation

(240.01)

(98.28)

Less : Interest and Finance Charges

385.01

526.51

Depreciation

77.69

78.44

Profit / (Loss) before Tax

(702.71)

(703.23)

Less : Provision for Taxation

- Deferred Tax

(501.39)

(231.00)

Profit / (Loss) after Tax

(201.32)

(472.23)

Balance brought forward from previous year

(281.70)

190.53

Surplus / (Loss) carried to Balance Sheet

(483.02)

(281.70)

Dividend :

In view of the loss for the year, no dividend is being recommended.

Share Capital :

The paid up Equity Share Capital of the Company as on March 31, 2016 was Rs. 113.17 million. During the year under review, there was no change in Share Capital.

Company Performance :

The operations for the period under report reflect the performance of the Sugar and Distillery Divisions. The overall performance of the Company was severely impacted by abysmal realizations on sale of sugar, lower recovery and lower production of alcohol. The aforesaid factors have together contributed to the Company reporting Loss after Tax of Rs. 201.32 million as against Loss after Tax of Rs. 472.23 million for the previous year.

Sugar:

The performance of the Sugar Division continued to be impaired by severe drought conditions which impacted the availability of cane. The aggregate quantity of sugarcane crushed by both the factories during the year was marginally higher at 5.46 lakh MTs as against 5.24 lakh MTs crushed during the previous year, while the combined sugar recovery was marginally lower at 8.64% as against 8.90% recorded in the previous year.

The Government of India had fixed the Fair and Remunerative Price (FRP) of sugarcane for 2014-15 season at Rs. 2,200/- per MT linked to average recovery of 9.5%, which translated to an FRP of Rs. 2,200/- per MT for both the Tirumandankudi and the A.Chittur units.

However, with the compelling need to encourage farmers to plant more sugarcane for the 2014-15 season, the Company announced payment of a cane price of Rs. 2,300/- per MT for both the units, as against the State Advised Price (SAP) of Rs. 2,550/- per MT linked to average recovery of 9.5%. This apart, the Company has borne the entire cost of cane transport, the additional burden of which worked out to Rs. 124/- per MT.

As against production of 46,617 MTs of sugar during the previous year, production for the year under review aggregated to 47,011 MTs.

Distillery:

During the year under review, alcohol production was lower at 4,171 KL as compared to 11,975 KL during the previous year, due to unexpected production bottlenecks. The average realization on sale of alcohol during the year was also lower at Rs. 42/- per litre as against Rs. 46/- per litre in the previous year.

Prospects for the 2015-16 season:

Sugar:

The Government of India has fixed the Fair and Remunerative Price (FRP) of sugarcane for 2015-16 season at Rs. 2,300/- per MT linked to average recovery of 9.5%, which translates to an FRP of Rs. 2,300/- per MT for both the Tirumandankudi and the A Chittur units. Thereafter, the Government of Tamil Nadu announced the State Advised Price (SAP) for the 2015-16 season at Rs. 2,750/- per MT linked to average recovery of 9.5%. Since the SAP announced for 2015-16 season was way beyond the paying capacity of the industry, especially in the absence of any matching sugar realizations, the private sector sugar mills have made several representations to the State Government, seeking grant of suitable financial reliefs to enable payment of State Advised Price, but the State Government is yet to respond. Besides, several other representations, seeking among others, waiver of the VAT levy on sugar, rationalization of State levies on alcohol produced within the State so as to provide level playing field vis-a-vis imports from neighboring States, and allotment of molasses to enable distilleries to produce and supply the more remunerative ethanol to oil companies, are yet to receive favorable consideration. As such, all the available revenue streams of sugar mills have been severely constricted. The Writ Petition filed in the Hon'ble High Court of Madras on behalf of all the private sugar mills in the State, seeking quashing of the Government Order fixing SAP, is pending disposal, and all the private mills have been paying only the applicable FRP for the 2015-16 season.

While so, the persisting severe drought conditions across the State have not only taken a heavy toll on cane yields and cane availability for the 2014-15 season, but also severely impacted planting of cane for supply during the 2015-16 season.

Sugar production in the country during 2015-16 season is estimated at 25.2 million MTs as against domestic off take of 25.5 million MTs. Considering the opening stock of 9.1 million MTs and the export of 1.7 million MTs, the closing stock is estimated at 7.1 million MTs. This drawdown of 2.0 million MTs in closing stock, coupled with the anticipated 2.0 million MT decline in production in 2016-17, has enabled sugar prices, which had remained at grossly unviable levels over the whole of Financial Year 2014-15 and Financial Year 2015-16, to show the first signs of recovery from March 2016 onwards.

In order to mitigate the financial crisis faced by the industry at large, and especially to facilitate settlement of mounting cane price arrears, the Central Government has extended the following reliefs during the year under review:

i) Soft Loan for cane payment with interest subvention of 10%;

ii) Exemption of Excise Duty on Ethanol and Molasses used for production of Ethanol, effective October 01, 2015; and

iii) Extension of an incentive of Rs. 45/- per MT of cane to the cane growers of those mills which fulfill the Minimum Indicative Export Quota fixed for each sugar mill to facilitate disposal of the surplus sugar stocks in the country;

The aforesaid reliefs, however, have provided only short term and partial succor, and there is yet no permanent solution, by way of linkage of cane price to sugar realizations, in sight.

During the year under review, the Company has exported 17,500 MTs of sugar at an aggregate realization of Rs. 385.06 million. As part of its strategy to reduce the heavy incidence of Finance Charges, the Company has leveraged its long term export track record and availed USD 35.35 million (Rs. 234.21 crores) as long term export advance, to be adjusted against the value of sugar to be exported over a period of time. The aforesaid advance is secured by Export Performance Bank Guarantees issued by the consortium of Banks, which have converted most of the existing Fund based limits into Non Fund based limits, pursuant to the Company having utilized the aforesaid trade advance for prepayment of the entire Term Loans and most of the Fund based Cash Credit Facilities which carried higher rate of interest. This arrangement will enable more timely payment of cane price and result in substantial interest savings in the years ahead.

Distillery:

The steep reduction in cane crushing in the State during the 2015-16 season has had a significant impact on molasses and alcohol prices. Since the Company has built up adequate stocks of molasses and is also holding considerable stocks of alcohol, the performance of the Distillery is expected to be better compared to the financial year under review.

Subsidiary and Associate Companies:

The Subsidiary Company viz. Terra Energy Ltd recorded a turnover of Rs. 182.67 million and reported a Profit of Rs. 7.57 million for the year as against a turnover of Rs. 150.95 million and Profit of Rs. 5.25 million for the previous year. The Associate Company viz. Shree Ambika Sugars Ltd recorded a turnover of Rs. 3,631.55 million and reported Loss before Tax of Rs. 784.63 million for the year as against a turnover of Rs. 3101.28 million and Loss before Tax of Rs. 803.61 million for the previous year.

Consolidated Financial Statements:

The Consolidated Financial Statements of the Company prepared, in terms of Section 129 of the Companies Act, 2013 read with the Companies (Accounts), Rules, 2014 and as per SEBI (Listing of Obligations and Disclosure Requirements) Regulations, 2015, together with a separate statement containing the salient features of the financial performance of the subsidiary and associate Companies and the Report of the Auditors thereof form part of the Annual Report.

As required under Section 136 of the Companies Act, 2013, the Annual Report of the Company containing its standalone and consolidated financial statements and the Annual Accounts of the Subsidiary and Associate Companies and the related detailed information have been placed on the website of the Company: www.tasugars.in.

The audited financial statements of the Subsidiary and Associate Companies will be available for inspection by any shareholder at the Registered Office of the Company during the business hours upto the date of the Annual General Meeting. A copy of the audited financial statements of the Subsidiary and Associate Companies will be made available to the shareholders of the Company on request.

Directors and Key Managerial personnel:

Pursuant to Section 152 of the Companies Act, 2013, Mrs Malathi Ram Tyagarajan, Director retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for reappointment. As required under Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, details of her qualification, experience etc., are furnished in the Notice convening the forthcoming Annual General Meeting

The Company has received declarations from the Independent Directors confirming that they meet the criteria of independence as stipulated under Section 149(6) of the Companies Act, 2013. The Independent Directors were kept fully informed of the Company's operations in all its segments. Pursuant to Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, a separate meeting of the Independent Directors was held, during the year under review, on March 31,2016.

As required u/s 134 of the Companies Act, 2013, the Board of Directors has evaluated its own performance and the performance of the various Committees of the Board and also the Directors individually.

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a Policy for selection and appointment of Directors and Key Managerial Personnel and the criteria for determining qualifications, positive attributes and independence of Directors. Policy on selection of Directors and Remuneration Policy is stated in the Corporate Governance Report.

Eight meetings of the Board of Directors were held during the year and the details thereof are given in the Report on Corporate Governance.

Directors' Responsibility statement:

Pursuant to Section 134(5) the Directors confirm:

i) that in the preparation of the Annual Accounts for the Year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) that the Directors 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 as on March 31, 2016 and of the Loss of the Company for the year ended on that date;

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, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) that the Directors have prepared the annual accounts on a going concern basis;

v) that the Directors have laid down internal financial controls to be followed by the Company and that the said internal financial controls are adequate and are operating effectively; and

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

Corporate Governance and Management Discussion and Analysis Reports:

The Corporate Governance and Management Discussion and Analysis Reports form an integral part of this Report and are set out as Annexure I and II to this Report. The Certificate from the Auditors of the Company, certifying compliance of conditions of Corporate Governance stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is also annexed to the Report on Corporate Governance.

Fixed Deposits:

The Company has discontinued acceptance of deposits from the public since April 01, 2014. As on the date of this Report, the Company has unclaimed deposits aggregating to Rs. 0.75 million.

Auditors

Statutory Auditors:

The Company, at its 58 Annual General Meeting (AGM) held on September 29,2014, appointed M/s. S.N.S. Associates, Chartered Accountants, Chennai, having Firm Registration No.006297S allotted by The Institute of Chartered Accountants of India, as Statutory Auditors of the Company to hold office for three consecutive years from the conclusion of the aforesaid AGM, subject to ratification at every AGM. The Auditors' Report for the year ended March 31, 2016 does not contain any qualification or adverse remark and the same is attached with the Annual Report. The Company has obtained certificate, under Section 141 of the Companies Act, 2013, from M/s.

S.N.S. Associates, confirming their eligibility for being the Statutory Auditors of the Company for the Financial Year 2016-17.

Cost Auditors:

As per the Companies (Cost Records and Audit) Rules, 2014, the Company's cost accounting records are subject to Cost Audit. The Board of Directors, on the recommendation of the Audit Committee, has appointed M/s. Vaasan Co., Cost Accountants, as the Cost Auditor to audit the cost accounting records maintained by the Company for the Financial Year 2016-17, on a remuneration of Rs. 60,000/-, exclusive of Service Tax and reimbursement of travel and out-of-pocket expenses that they may incur in connection with the audit. The Company has received certificate from M/s. Vaasan Co., confirming their eligibility, as required under Section 141 of the Companies Act, 2013. As required under the Companies Act, 2013, a resolution seeking ratification of the Shareholders, for payment of remuneration as above as approved by the Board of Directors, is included in the Notice convening the Annual General Meeting.

The Cost Audit Report for the year ended March 31, 2015 was filed by the Cost Auditor on September 24, 2015, within the stipulated deadline of September 30, 2015.

Secretarial Auditors:

Pursuant to Section 204 of the Companies Act,2013, the Board of Directors have appointed M/s. R Sridharan and Associates, Practicing Company Secretaries, as the Secretarial Auditor, to carry out the Secretarial Audit for the Financial Year 2015-16. The Secretarial Audit Report of M/s. R Sridharan and Associates is annexed as Annexure III to the Report. The said Report does not contain any qualification, reservation or adverse remark.

Internal Financial Controls and their adequacy:

The Company has put adequate systems and procedures in place to ensure internal financial controls with reference to financial statements. The Company's internal auditors carry out regular checks on the adequacy of the internal financial controls.

DISCLOSURES:

Information on conservation of energy, technology absorption, foreign exchange earnings and outgo.

Information on conservation of energy, technology absorption, foreign exchange earnings and outgo are given in the Annexure IV to this Report, pursuant to Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014.

Corporate Social Responsibility

Section 135 of the Companies Act, 2013 has mandated companies having minimum net worth of Rs. 500 crores or turnover of Rs. 1,000 crores or a net profit of Rs. 5 crores during any financial year to constitute a Corporate Social Responsibility Committee of the Board. As the Company does not meet any of the aforesaid stipulations, it remains outside the purview of Section 135 of the Companies Act, 2013 and accordingly, is not required to make any disclosure in terms of the aforesaid Section.

Annual Return

Extract of Annual Return in the prescribed form is given as Annexure V to this Report, as required under Section 134(3)(e) of the Companies Act, 2013 read with the Companies (Accounts) Rules 2014.

Employees' remuneration

The Company does not have any employee drawing remuneration in excess of the limit specified under Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Details, as required under Section 197(12), are given in the Annexure VI to this Report.

Details of Related Party Transactions

All related party transactions entered into during the financial year were on arm's length basis and were in the ordinary course of business. All related party transactions are placed before the Audit Committee and the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseeable and repetitive in nature. Particulars of contracts or arrangements with Related Party referred to in Section 188 (1) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 is furnished in Form AOC-2 (Annexure - VII).

Audit Committee

The Audit Committee comprises Mr R Vijayaraghavan, as Chairman and Mr V Thirupathi and Mr R V Tyagarajan, as Members.

Details of Loans / Guarantees / Investments made

Pursuant to the approval accorded by the Shareholders of the Company, in terms of Section 186 of the Companies Act, 2014, vide Resolution dated March 28, 2016, the Company has, during the year under review, given Corporate Guarantee for Rs. 608.80 crores equivalent to US Rs. 97.99 million in favour of IDBI Trusteeship Services Ltd, Security Trustee of the Banks of the Associate Company, Shree Ambika Sugars Ltd, as collateral security for the Credit Facilities extended by Punjab National Bank, Canara Bank, IDBI Bank, Andhra Bank, Indian Bank, Corporation Bank, Lakshmi Vilas Bank and Union Bank of India.

Other disclosures:

There were no significant or material orders passed by the Regulators or Courts or Tribunals which impact the going concern status and the Company's operations in future.

There is no change in the nature of business of the Company during the year under review. As mentioned earlier, the Company has entered into long term export contracts undertaking to export sugar for an aggregate value of USD 35.35 million, pursuant to which, it has received an identical amount as export advance. There are no material changes and commitments in the business operations of the Company during the period from the close of the Financial Year 2015-16 to the date of this Report.

During the year under review, there were no complaints / cases filed pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibitions and Redressal) Act, 2013.

Acknowledgement :

Your Directors wish to place on record their sincere thanks and appreciation to the Shareholders, Sugarcane Growers, Employees, Bankers, and also the Central and State Governments for their continued cooperation and support.

On behalf of the Board

R V Tyagarajan

Chairman and Managing Director

August 12, 2016


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