DIRECTORS' REPORT The Board of Directors presents the 59th Annual Report on the business and operations of the Company and its Audited Statement of Accounts for the year ended March 31, 2015 together with the Auditors' Report and Comments on the Accounts by the Comptroller and Auditor General (CAG) of India. OPERATIONS AND BUSINESS PERFORMANCE The Company achieved a turnover of Rs. 14,397 crore during the year 2014-15. The turnover was marginally lower than the previous year due to non-allocation of wheat from Central Pool stocks by the Govt. for exports that resulted into a decline of Rs.1,684 crore in the turnover and changes in Govt. policies with regard to import of gold which led to a decline of Rs. 3,062 crore in the turnover vis-a-vis the previous year. The loss of turnover was, to a large extent, made good by undertaking exports to Iran and higher import of fertilizers in addition to other new initiatives like import of cashew, domestic sale of fertilizers and cardamom auctions. DIVIDEND The Board of Directors have not recommended any dividend for the year 2014-15 in view of a loss of Rs.492 crore suffered by the Corporation in the preceding year and need to conserve cash for its business operations due to rising borrowing costs. RESERVES An amount of Rs. 37.73 Crore was available in the Reserves and Surplus of the Company as on 1st April 2014. During the year, the Company revalued its assets based on valuation by a professional agency so as to present the current market value of assets in the Balance Sheet. This lead to an increase in the Reserves & Surplus by Rs. 914.25 crore. The Profit after Tax of Rs. 26.19 crore is being retained as surplus in the Balance Sheet. Accordingly, as on 31st March 2015, the Reserves and Surplus stood at Rs. 978.92 crore. FOREIGN EXCHANGE EARNINGS/OUTGO The total foreign exchange earnings of the Company by way of exports, trade margins, etc. during the year amounted to Rs. 274 crore while the foreign exchange outgo by way of imports and other expenses amounted to Rs. 11,178 crore. HUMAN RESOURCE Manpower STC had 738 employees on its rolls as on 31.03.2015, which included 498 managers and 240 staff. With a view to optimally deploy the available manpower and to offer better career progression opportunities to the managers in the Local Cadre, the Company merged the Local managerial cadre with the All India managerial cadre w.e.f. 02.02.2015. Recruitments During the year, the Company recruited four Probationary Officers with MBA qualification in International Business. In addition, lateral recruitments were made to fill four senior positions. Industrial Relations The Corporation continued to maintain harmonious industrial relations during the year. No man days were lost. A new Promotion Policy for staff was signed between the Management and the Federation of STC Employees' Unions with a validity period of 10 years. Recruitment of SC/ST/OBC The Company has been implementing the directives and guidelines issued by the Government of India from time to time with regard to recruitment of SC/ST/OBC and differently abled candidates. Human Resource Development During the year, the Company continued to lay emphasis on training & development of its employees at various levels. Four professional training programmes were especially formulated and approved in June 2014 for enhancing managerial effectiveness/skills through reputed institutes, namely, National Institute of Banking Studies and Corporate Management, Administrative Staff College of India and Institute of Public Enterprises. A total of 99 Managers participated in these programmes which had an in-built programme evaluation system. In all, the Company conducted 20 in-house management development programmes including a series of Training / Handholding programmes on implementation of new Performance Management System (PMS). A total of 343 employees benefitted from these training and learning initiatives. The Company also nominated 91 employees for specialised training programmes organised by external agencies. OFFICIAL LANGUAGE In compliance with the Government's Policy on official language, continuous efforts were made for promoting the use of Hindi in day to day official work. Hindi Diwas and Rajbhasha Week/Fortnight were organised in the Corporate Office as well as Branch Offices of the Company. During these events, employees who had done exemplary work in Hindi were felicitated. The Company was awarded the Rajbhasha Shield by the Ministry of Commerce & Industry in view of progressive use of Hindi in official work. The employees of the Company won prizes in various Hindi competitions organised by Town Official Language Implementation Committee (TOLIC). VIGILANCE ACTIVITIES With a view to create greater awareness amongst employees for eradication of corruption and maintenance of high standards of integrity, Vigilance Division of the Company took a number of steps during the year. As part of Vigilance Awareness Week, it organized a seminar on 'Combating Corruption - Technology as an Enabler', which was conducted by a senior CBI officer. Training programmes were also organised on 'Combating Corruption - Role of Vigilance" and "Management of Discipline & Departmental Proceedings'. During the year, the Company also formulated an Anti-Fraud Policy to enforce controls and to aid in prevention and detection of frauds. In addition to investigation of complaints and maintaining liaison with external agencies like CVC, CBI, MOC&I, etc., the Vigilance Division also conducted inspection of branch offices of the Company thereby bringing out areas for corrective/ preventive action. PERFORMANCE OF SUBSIDIARY COMPANY STCL Ltd. (Formerly, Spices Trading Company Limited) In view of extraordinary losses suffered by STCL leading to erosion of its net worth and remote possibility of its turnaround, the Union Cabinet had, in August 2013, decided to wind up STCL. Accordingly, a winding up petition was filed by STCL before the Hon'ble High Court of Karnataka. Also, a Voluntary Separation Scheme (VSS) was offered to all the employees of STCL, which was opted by 32 out of 42 eligible employees. At present, STCL has 14 employees including the Managing Director. However, the winding up petition continues to be pending in the High Court of Karnataka due to objections by Banks. As a result of the above developments, no business operations were undertaken by STCL during the year. The Company incurred a loss of Rs. 410 crore during 2014-15 mainly on account of the interest accured on outstanding loans and had a negative net worth of Rs. 2860 crore as on 31.03.2015. MANAGEMENT DISCUSSION AND ANALYSIS REPORT As per the requirement of Clause 49(IV)(F) of the Listing Agreement with the Stock Exchanges, a detailed Management Discussion and Analysis Report forming part of the Annual Report of the Company is placed at Annexure I. EXTRACT OF THE ANNUAL RETURN As required under Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual Return pursuant to Section 92(3) of the Act is annexed to this report at Annexure II. ANTI SEXUAL HARASSMENT POLICY The Company has laid down an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to redress complaints received in this regard. All employees (permanent, contractual, temporary, trainees) are covered under this policy. No sexual harassment complaints were received during the year 2014-15. RIGHT TO INFORMATION In order to promote transparency and accountability, an appropriate mechanism has been put in place in the Company to provide information to citizens under the provisions of Right to Information (RTI) Act, 2005. For this purpose, the Company has, in line with the RTI Act, nominated Central Public Information Officers at all its Divisions at New Delhi and at Branch Offices across the country. For the convenience of public, a coordinating CPIO has also been nominated. First Appellate Authority has also been nominated for considering the appeals of information seekers against the orders of Public Information Officers. DEPOSITS The Company has not accepted any deposits from Public. Therefore, the requirement of Chapter V of the Companies Act, 2013 is not applicable to it. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 During the year, the Company has not provided/given any loans, guarantees or made any investment as specified under section 186 of the Companies Act, 2013. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUBSECTION (1) OF SECTION 188 IN THE PRESCRIBED FORM The Company has not entered into any contracts or arrangements with related parties as referred to in subsection (1) of section 188 of the Companies Act, 2013. CORPORATE SOCIAL RESPONSIBILITY (CSR) AND SUSTAINABILITY In line with the Corporate Social Responsibility (CSR) Policy, the Company took up CSR projects during the year 2014-15 in the areas of skill development, health and promotion of art & culture. The projects were taken up after due deliberations by the Board level CSR Committee. Besides these, two projects having longer execution period relating to skill development and conservation of monument/heritage, got rolled over from the previous year. As per the Companies (Corporate Social Responsibility Policy) Rules, 2014, an annual report on Corporation's CSR activities in prescribed format is placed at Annexure III. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ETC. The information required to be disclosed in accordance with the Companies (Accounts) Rules, 2014 is 'nil' as the Company is mainly engaged in trading activities. FINANCIAL ACCOUNTING The Financial Statements have been prepared in accordance with the Generally Accepted Accounting Principles (GAAP) and in compliance with all applicable Accounting Standards issued by The Institute of Chartered Accountants of India (ICAI) and provisions of the Companies Act, 2013. ADEQUACY OF THE INTERNAL FINANCIAL CONTROLS The Company has in place a well-established and efficient mechanism for internal financial controls. The Company has a well-defined delegation of powers (DOP), which lays down the financial powers available to various levels of company's executives. The DOP helps facilitate faster and prudent commercial decision-making by executives at various levels. The Company has an Internal Audit Division, which is supported by an outside professional Chartered Accountant firm which conducts internal audit of company's corporate office as well as branches and suggests various preventive and corrective steps. The audit observations are periodically reviewed by the Management Audit Committee and the Audit Committee of the Board of Directors and necessary directions are issued wherever required. DECLARATIONS GIVEN BY INDEPENDENT DIRECTORS All the Part-time Non-official Directors (Independent Directors) have affirmed that they meet the criteria of Independence as provided in Section 149(6) of the Companies Act, 2013 for the financial year ending 31st March 2015. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION ETC. STC being a Government company, the terms and conditions of appointment and remuneration of its whole-time functional Directors are determined by the Government through the Ministry of Commerce and Industry, the administrative ministry of the company. The non-executive part-time official Directors (Government nominees) do not draw any remuneration or sitting fee. The non-executive part-time non-official (Independent) Directors are paid a sitting fee of Rs. 20,000/- for each Board/ Committee meeting attended by them. The eligibility criterion for appointment of Independent Directors is laid down by the Department of Public Enterprises of the Govt of India. The positive attributes expected to be exhibited by the Independent Directors are conveyed to them on their appointment and a declaration in the appropriate proforma is obtained from them every year to confirm that they continue to qualify as Independent Director. ANNUAL EVALUATION OF THE PERFORMANCE OF THE BOARD, ITS COMMITTEES AND INDIVIDUAL DIRECTORS As required under revised clause 49 of the Listing Agreement entered into with the Stock Exchanges, the Nomination and Remuneration Committee (NRC) of Directors of the company has formulated the following criteria for evaluating the performance of Independent Directors: • Commitment to Corporate Governance • Rendering independent, unbiased opinion • Adherence to ethical standards and code of conduct prescribed by Company • Long term/ strategic perspective/ sound management practices • Emphasis on systems and processes • Improvement in quality of decision making • Hygiene factors (Attendance etc.) For performance evaluation of non-independent Directors, the NRC has prescribed the following criteria: • Quality of Presentation of Agenda Notes • Quality of discussion • Follow up / action taken • Monitoring • Process improvement made in the system • Enforcement of recoveries The NRC of the Company, in its meeting, noted that benchmarks for evaluation of the performance of the Board should be set at the beginning of the year and the performance of the Board should be evaluated at the end of the year on the basis of those benchmarks. Since no benchmarks were set for evaluating the performance of the Board in the beginning of the year 2014-15, the performance evaluation of the Board for 2014-15 was not taken up by the NRC. DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY A Risk Management Framework has been put in place to add objectivity to the process of risk assessment while taking a decision on accepting or rejecting a trade proposal. The Risk Management Framework measures the risk involved in a business proposal in the form of a total risk score which is weighed vis-a-vis available risk mitigation measures. The Company has also developed a model for Enterprise Level Risk Assessment. In this model, risk assessment of all ongoing back-to-back trade transactions (involving financing or extending of L/C limits) will be carried out to arrive at the overall enterprise level risk. Further, the company has implemented an Anti-Fraud Policy in order to enforce controls and to aid in prevention and detection of frauds in the Company. The Policy intends to promote consistent legal and ethical organizational behavior by assigning responsibility for the development of controls, and providing guidelines for reporting and conduct of investigations of suspected fraudulent behavior. CORPORATE GOVERNANCE The Company believes that Corporate Governance is at the root of the shareholders value creation. Pursuant to clause 49 of the Listing Agreement with the Stock Exchanges and Guidelines on Corporate Governance for CPSEs issued by the Department of Public Enterprises (DPE), Govt. of India, a report on Corporate Governance for the year 2014-15 forming part of this report is placed at Annexure IV. Shri Parveen Rastogi, Prop. M/s Parveen Rastogi & Co., Practicing Company Secretary have examined and certified your Company's compliance with respect to the conditions enumerated in revised Clause 49 of the Listing Agreement and DPE guidelines on Corporate Governance for CPSEs. The certificate forms part of this report and is placed at Annexure V. Management Reply on the comments of Practicing Company Secretaries is annexed to this Report. The Company has got its Secretarial Audit for the financial year ended 31st March, 2015 conducted by Practicing Company Secretaries, M/s Chandrasekaran Associates and their report forms part of this Annual Report and is placed at Annexure VI. Management Reply on the comments of Secretarial Auditors is annexed to this Report. In line with the best practices, your Company has made available all information of interest to its investors on the Company's corporate website, namely, www.stc.gov.in The Company has also put in place Whistle Blower Policy, which is also available on STC's website. The Company has also put in place a Related Party Transactions Policy, which is also available on STC's website. The Independent Directors of the Company held one separate meeting during 2014-15. STATUTORY AUDITORS M/s P. Jain & Company, Chartered Accountants were appointed as Statutory Auditors of the company for the financial year 2014-15 by the Comptroller & Auditor General of India (C&AG). Their report, along with replies of the Management, is attached and forms part of this report. COMMENTS OF C&AG The comments of C&AG under Section 143(6) of the Companies Act, 2013 on the accounts of the Corporation for the year 2014-15 and replies of the Management thereto are attached and form part of this Report. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134(5) of the Companies Act, 2013, in relation to Directors' Responsibility Statement, it is hereby confirmed that: (a) in preparation of the annual accounts for the year ended 31st March, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; (b) the directors have selected such accounting policies and applied them consistently and made judgements 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 profit and loss of the company for the year under review; (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) the directors have prepared the annual accounts on a going concern basis for the year ended 31st March, 2015; (e) the directors have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and operating effectively; (f) 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. BOARD OF DIRECTORS Since the last Annual General Meeting, Shri Rajani Ranjan Rashmi, Additional Secretary, Department of Commerce, Ministry of Commerce and Industry, was appointed as Part-time Official Director on the Board of STC vice Shri Madhusudan Prasad w.e.f. 24.02.2015. Subsequently, Shri Ajay Kumar Bhalla, Additional Secretary, Department of Commerce, Ministry of Commerce and Industry was appointed as Part-time Official Director on the Board of STC vice Shri Rajani Ranjan Rashmi w.e.f. 29.04.2015. Shri Jitendra Kumar Dadoo, AS&FA, DoC was appointed as Part-time Official Director on the Board of STC vice Shri Bhagwati Prasad Panday w.e.f. 06.08.2015. The terms of five Independent Directors viz. Shri Uday N. Abhyankar, Shri S.C. Tripathi, Shri Subhash Chandra Saraf, Dr.(Smt.) B. Kinnera Murthy and Shri Jayendra N. Shah, expired on 09.10.2014, 13.10.2014, 27.03.2015, 17.04.2015 and 17.04.2015 respectively. The Board places on record its deep appreciation for the valuable contributions made by Shri Madhusudan Prasad, Shri Bhagwati Prasad Panday and Shri Rajani Ranjan Rashmi as Part-time Official Directors and Shri Uday N. Abhyankar, Shri S.C. Tripathi, Shri Subhash Chandra Saraf, Dr.(Smt.) B. Kinnera Murthy and Shri Jayendra N. Shah as Part-time Non-official (Independent) Directors on the Board of the Corporation. There is no Independent Director presently on the Board of STC. The Directors on the Board of STC are appointed by the President of India. Department of Commerce, Ministry of Commerce & Industry, GOI has been requested to appoint Independent Directors on STC Board. It is understood that necessary action in this regard is already underway. Pursuant to the provisions of Section 152 of the Companies Act, 2013, Shri Rajiv Chopra, Director (Marketing) would retire by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment. As stipulated in the revised Clause 49 of the Listing Agreement with the stock exchanges, brief resumes of all Directors seeking appointment/ re-appointment are given in the notice convening the 59th Annual General Meeting of the Company. KEY MANAGEMENT PERSONNEL The Company has nominated its CMD, Director (Finance), Director (Marketing), Director (Personnel) and Company Secretary as key management personnel pursuant to Section 203 of the Companies Act, 2013. CODE OF CONDUCT Pursuant to the requirements of Clause 49 of the Listing Agreement and DPE guidelines on Corporate Governance for CPSEs, the Board Members and Senior Management Personnel have affirmed compliance to the Code of Conduct for the financial year ending 31st March 2015. ACKNOWLEDGEMENT The Board of Directors places on record its appreciation of the continued patronage and the confidence posed by business associates and customers during the year. The Board expresses its gratitude for the continued co-operation and support provided by the Ministry of Commerce and Industry, various state governments, financial institutions, banks, railways, ports, regulatory and statutory authorities, shareholders, legal advisers and consultants from time to time. The Board also acknowledges the constructive suggestions received from Comptroller & Auditor General of India, Statutory Auditors and Internal Auditors. Last but not the least, the Board places on records its appreciation for the hard work and dedication of all the employees. For and on behalf of Board of Directors Sd/- (Khaleel Rahim) Chairman & Managing Director DIN 02455606 Place : New Delhi Date : 13th August 2015 |