To
The Members,
Kernex Microsystems (India) Limited.
Your Directors take pleasure in presenting the Thirty First Annual
Report together with the audited statement of accounts of your company for the year ended
31st March 2023.
Financial Results (Standalone)
Financial Results (Consolidated)
(Rs. in Lakhs)
Particulars |
2022-23 |
2021-22 |
Sales and Other Income |
482.18 |
838.23 |
Profit/Loss before Depreciation, Finance Cost and
Tax |
(1,633.53) |
(770.31) |
Less:- Finance Cost |
82.14 |
329.47 |
Less:- Depreciation |
238.71 |
143.68 |
Add: Extra ordinary items |
- |
- |
Profit/Loss after Depreciation, Interest and
before tax |
(1,954.38) |
(1,243.46) |
Exceptional Items |
- |
(442.58) |
Tax expense |
47.65 |
35.11 |
Profit / Loss after Tax |
(2,002.03) |
(1,721.16) |
Profit available for appropriation |
- |
- |
Earnings Per Share (Rs.) |
|
|
- Basic |
(14.67) |
(13.26) |
- Diluted |
(14.67) |
(13.26) |
Subsidiary and Joint Venture details with consolidated financial
statement
Your Company has one 100% wholly owned subsidiary Avant Garde
Infosystems Inc, In USA and one Joint Venture named KERNEX TCAS JV and there were
no associate Companies as of 31st March 2023. There has been no change in the business of
subsidiary and JV during the year under review. In accordance with section 129 (3) of the
Companies Act, 2013, the Company has prepared Consolidated financial statements of the
Company and the JV & subsidiary in the form and manner as that of its own in
compliance with the accounting standards and the listing regulations of the stock
exchanges which forms part of the Annual Report for laying before the Annual General
Meeting.
A report on the information about the subsidiary is annexed as Annexure
- A to this report.
Companies which have become or ceased to be subsidiaries, associates
and joint ventures
During the period under review, no company has become or ceased to be
subsidiaries, associates and joint ventures
Amount, if any, which the Board proposes to carry to any reserves
Your directors of the Company have not proposed to transfer any amount
to reserves.
Dividends
Your directors of the company in the absence of distributable profits
have not declared any dividend during the year.
State of Company's Affairs
Your company has recorded a turnover of Rs. 3.31 Crores in the
financial year FY 2022-23. The company has recorded a loss (before tax) of Rs.19.38 crores
as against a loss of Rs.16.22 Crores in the previous year.
Domestic
South Central Railways
Kernex has completed the execution of the TCAS contract issued by South
Central Railways in 2019. Pre-commission check list and Joint Inspection was carried out
in the entire section and complied with. The company is now in the process of Final
Handing Over of the Equipment to the Railways. Safety Integrity Level 4 (SIL4)
certification by M/s. Ital Certifier (Independent Safety Assessor) has been taken up and
is waiting for ISA (Independent Safety Assessment) Certification.
NCR A,B& ICF Projets :
The Railway Board has floated multiple tenders in various Railway zones
for the installation of Kavach System. The total budget of the tenders was to the tune of
Rs. 1,500 crores spanning across 1,500 Kms. Out of these tenders, Kernex has partnered
with KEC as a consortium and bagged two orders worth about Rs. 550 Crores in the North
Central Railway Section.
Project 1 NCR-A (North Central Railway):
Provision of Kavach (Train Collision Avoidance System), along with 2x24
fiber OFC as a backbone on ChipyanaBuzurg (Excl) - Kanpur (Excl.) Sector on North Central
Railway on 31 Aug 2022. The total value of the project is Rs.268.89 Crores.
The project is to be completed by August 2024
The RSSI, Drone Survey, Station & locomotive surveys, tower
location survey were carried out and the drawings were submitted. The detailed procurement
plan and project schedules were worked out and were submitted. The procurement of material
was initiated along with the pre-production works for the manufacturing of Station Kavach,
Loco Kavach etc.,
Project 2 NCR-B(North Central Railway):
Provision of Kavach (Train Collision Avoidance System), along with 2x24
fiber OFC as a backbone on Kanpur (Incl) - Pt Deen Dayal Upadhyay Nagar (Excl) on 30 Sep
2022. The total value of the project is Rs.268.52 Crores
The project is to be completed by September 2024
The RSSI, Drone Survey, Station & locomotive surveys, tower
location survey were carried out and the drawings were submitted. The detailed procurement
plan and project schedules were worked out and were submitted. The procurement of material
was initiated along with the pre-production works for the manufacturing of Station Kavach,
Loco Kavach etc.
Project 3 ICF(Integral Coach Factory, Chennai)
Your company bagged an order worth of 26 Cr to supply and commission
Kavach equipment on Vande Bharat trains being manufactured at Integral Coach Factory,
Chennai.
The delivery and commissioning will be completed within the Fiscal year
2023-24.
International
Egyptian National Railways (ENR), Cairo
Having supplied all the 136 gates earlier, your company has completed
installation and Commissioning of 124 gates and preliminary handed over to the customer
was completed. Your company is in the process of Final Handover process.100% material
supplies are completed. Project short closed from 136 Lx to 124 Lxs on mutual agreement
between Kernex and ENR , 2 Lxs repaired and rebuilt and the remaining material lying in
store related to 10 Lx gates needs to be handed over to ENR, the process is started and
handed over 102 nos wheel sensors to ENR, as a part of this material 2 years warranty
maintenance for three PHO groups (34 Lx each) has been completed and warranty Maintenance
of fourth Group (22Lxs) is under progress, likely to be completed in January 2024FHO of Lx
sites is under progress, FHO of 6 Lx sites has been completed out of 96 Lx sites which are
under operation currently.
28 Lx sites have been dismantled and removed by ENR out of 124 Lxs
commissioned.
Sri Lanka Railways
Execution of the order from Sri Lanka Railways for Supply,
Installation, Testing, Commissioning and Maintenance of 200 Nos of Bell and Light Level
Crossing Protection Systems could not be done in 2021- 22 due to the circumstances arising
from Covid and Economic crises in Sri Lanka. During end of March 2022, Sri Lankan economy
plunged into payments crisis with depleting Foreign Exchange reserves. The Sri Lankan
Government has imposed Import controls and restrictions on foreign exchange utilization.
Kernex has been evaluating the situation ever since, and due to the COUNTRY RISK, wanted
to exit the project through a "Conciliated dialogue with SLR". It is expected to
have Marginal financial implications, as the EXIT would be mutual.
Change in Nature of business
Your Company is mainly in the business of manufacturing of safety
systems for Railways. During the period under review there is no change in the business of
the Company.
Material changes and commitments, if any, affecting the financial
position of the company, having occurred since the end of the Year and till the date of
the Report
There have been no material changes and commitments affecting the
financial position of your Company which have occurred between the end of the financial
year of the Company to which the financial statements relate and the date of the Report.
Details of revision of financial statement or the Report
During the period under review, there was no revision of financial
statement or the Report
Share Capital
Members are aware that the Company has taken approval for the Increase
in Authorized Share Capital
of the Company from Rs. 15,00,00,000/- divided into 1,50,00,000 equity
shares of Rs. 10/- each to Rs. 25,00,00,000/- divided into 2,50,00,000 equity shares of
Rs. 10/- each.Further, the Company has issued and allotted 13,00,000 equity shares of Rs.
10/ each at a premium of Rs. 103/- per share to the specified investors (non-Promoter
group) on preferential basis on 25.04.2022. As a result of which the issue, subscribed and
paid-up capital of the Company has been increased from Rs. 12,49,96,550/- to Rs.
13,79,96,550/-. Further also the Company has issued and allotted 10,59,767 equity shares
of Rs. 10/- each at the premium of Rs. 256/- per share to the Promoters and Non-Promoters
including conversion of un-secured loan of Promoter and Promoter Group on preferential
issue basis on 10.01.2023, and the Company has issued 6,00,000 Share Warrants carrying an
entitlement to subscribe to an equivalent number of Equity Shares having face value of
Rs.10/- (Rupees Ten Only) each at a premium of Rs. 256/- each to the person belonging to
non-Promoter group on preferential basis on 10.01.2023. The Company has received full
subscription amount as per the terms of issue of warrants and allotted 6,00,000 equity
shares of Rs. 10/- each to the warrant holder on 17.02.2023. As a result of the above
allotments, the Issued, Subscribed and Paid-Up Capital of the Company has increased from
Rs. 13,79,96,550/- to Rs. 15,45,94,220/-
Issue of equity shares with differential rights,
During the period under review, the Company hadn't issued equity shares
with differential rights.
Issue of Sweat Equity Shares
During the period under review, the Company hadn't issued sweat equity
shares.
Details of Employee Stock Options
During the period under review, the Company hadn't issued stock options
to the employees of the Company.
Transfer of unclaimed dividend
There is no Un-claimed dividend to be transferred to IEPF (Investor
Education and Protection Fund).
Directors and Key Managerial Personnel
During year under review, members are aware that the Directors of the
Company have co-opted Mr. Narender Kumar as an Additional Director of the Company on
18.09.2022 and members of the Company has approved the appointment of Mr. Narender Kumar
as a Director of the Company at the EGM held on 12.10.2022. Further Mr. Sunny Sharma has
been appointed as Chief Financial Officer of the Company on 05.12.2022.
During the period, Mr. B Vishnu Varma has been appointed as CTO of the
Company from 15th May 2023.
Further, Mr. V Ramayya, Chief Financial Officer of the Company has been
resigned on 05.12.2022 and Mr. K Satyanarayana Raju, Chief Executive Officer of the
Company has been resigned on 20.03.2023.
Further, in accordance with the provisions of Section 152 of the
Companies Act, 2013 Ms. Sreelakshmi Manthena and Dr. Vinta Janardhana Reddy, Directors of
the company retires by rotation and being eligible offers themselves for re-appointment.
Further, the term of Mr. M B Narayana Raju and Mr. Sitarama Raju M as
whole-Time Directors will be expiring on 01.09.2023. The Board at its meeting held on 13th
August 2023 as recommended by Nomination and Remuneration committee, has re-appointed Mr.
M B Narayana Raju and Mr. M Sitarama Raju as whole-time directors for further period of
three years with effect from 02.09.2023.
The brief profiles of the Directors who are to be
appointed/re-appointed have been furnished in the notice convening AGM.
Declaration by Independent Directors
All the Independent Directors have submitted their disclosures to the
Board that they fulfill the requirements as stipulated in Section 149 (6) of the Companies
Act 2013 to qualify themselves to be appointed as Independent Directors under the
provisions of the Companies Act, 2013 and the rules
framed there under. In terms of Section 150 of the Act read with Rule 6
of the Companies (Appointment and Qualification of Directors) Rules, 2014, as amended,
Independent Directors of the Company have enrolled their names in the data bank of
Independent Directors maintained with the Indian Institute of Corporate Affairs and the
said directors have taken the test conducted by the Indian Institute of Corporate Affairs.
Meetings
During the year, nine meetings of the Board of Directors were held, as
more particularly disclosed in the attached Report on Corporate Governance. The
intervening gap between any two meetings was within the prescribed period.
The number and dates of meetings held by the Board and its Committees,
attendance of Directors and details of remuneration paid to them is given separately in
the Corporate Governance Report in terms of Section 134(3) (b) of the Companies Act, 2013.
None of the Directors are disqualified under Section 164(2) of the Act.
Certificate on non-disquali- fication, as required under Regulation 34 of SEBI (Listing
Obligation & Disclosure Requirements) Regulations, 2015 is annexed to this Annual
Report.
Committees of the Board
The Board of Directors has the following Committees:
Audit Committee
Nomination and Remuneration Committee
Stakeholders' Relationship Committee
Risk Management Committee
Corporate Social Responsibility Committee
The details of the Committees along with their composition, number of
meetings and attendance at the meetings are provided in the Corporate Governance section
of this Report.
Nomination and Remuneration Policy of Directors, Key Managerial
Personnel and other Employees
In terms of section 178 (1) of the Companies Act 2013 the Board on the
recommendation of the Nomination and remuneration committee approved the criteria and
policy for selection and appointment of directors, key managerial persons and their
remuneration. The remuneration policy forms part of the report on corporate governance.
Board Evaluation
Pursuant to the provisions contained in the Companies Act 2013 and
listing regulations the Board has carried out annual performance evaluation of its own
members, The chairman of the Board, individual directors as well as the evaluation of the
working of the Audit, Nomination and Remuneration committee and other committees. The
evaluation was based on the attendance, contribution, independence of judgment and
preparedness for the meetings
Particulars Relating to Remuneration of Directors/Key Managerial
Personnel and Employees.
Disclosures pertaining to remuneration and other details as required
under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014 are provided separately and annexed as
Annexure - B to this report.
In terms of Rule 5(2) of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, the Company does not have any employee who is employed
throughout the financial year and in receipt of remuneration of Rs.102 Lakhs or more, or
employees who are employed for part of the year and in receipt of Rs. 8.50 Lakhs or more
per month.
Remuneration received by Managing/Whole time Director from holding or
subsidiary company
The Whole Time Directors have not received any remuneration from the
subsidiary company. The details are provided in the report on corporate Governance.
Directors' Responsibility Statement
The Directors to the best of their knowledge hereby state and confirm
that:
in the preparation of the annual accounts, the applicable accounting
standards had been followed along with proper explanation relating to material departures
the Directors had 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 that period
the Directors had taken proper and sufficient care for the maintenance
of adequate accounting records in accordance with the provisions of the Act for
safeguarding the assets of the Company and for preventing and detecting fraud and other
irregularities
the Directors had prepared the annual accounts on a going concern basis
and
the internal financial controls to be followed by the Company were laid
down and such financial controls were adequate and were operating effectively
the Directors had devised proper systems to ensure compliance with the
provisions of all applicable laws and that such systems were adequate and were operating
effectively
Internal Financial Controls
The Company has laid down policies and procedures to be adopted for
ensuring the orderly and efficient conduct of its business, including adherence to
company's policies, safeguarding of its assets, prevention and detection of frauds and
errors, accuracy and completeness of the accounting records, and timely preparation of
reliable financial information. An independent audit committee of the Board reviews the
adequacy of internal controls.
Auditors Statutory Auditors
In terms of Section 139, 141 and 142 of the Companies Act, 2013
("the Act"), and the Companies (Audit and Auditors) Rules, 2014 made there
under, members of the Company have re-appointed M/s. P R S V & Co LLP, Chartered
Accountants (FRN: S200016) as Statutory Auditors of the Company to hold office for a
period of 5years from conclusion of the 30th Annual General Meeting of the Company.
M/s. P R S V & Co LLP, Chartered Accountants, Hyderabad, have
confirmed that they are eligible to conduct and within the prescribed limits under Section
141 of the Companies Act, 2013.
The financial statements have been audited by M/s. P R S V & Co
LLP, Chartered Accountants, Statutory Auditors of the Company, and no
qualifications/comments have been made.
However, the Auditors have emphasized the matter which was mentioned in
the Auditors Report and is self explanatory.
Frauds reported by the Auditor
There has been no such instance during the period.
Secretarial Audit
In terms of section 204 of the Companies Act'2013 and the Companies
(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company has
appointed Mr. D S Rao, Practicing Company Secretary to conduct Secretarial Audit for the
year 2022-23 and their report is annexed as AnnexureC to this report.
Reply to the Comments made in the Secretarial Auditors' Report
1. in terms of SEBI Circular No.Cir/ISD/3/2011 the entire shareholding
of Promoters/ Persons Acting in-Concert (PACs) has not been dematerialized. Therefore, the
stock exchanges have kept the trading in the shares of the Company under trade-to-trade.
The Company is pursuing the same but unable to fulfill the condition as
the promoters were not Responded
INTERNAL AUDITORS:
The Board of Directors based on the recommendation of the Audit
Committee has appointed M/s. Thirupathi and Associates. Chartered Accountants, Hyderabad,
as the Internal Auditors of your Company. The Internal Auditors are submitting their
reports on quarterly basis.
Deposits
During the year, your Company has not accepted any deposits, within the
meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of
Deposits) Rules, 2014. No amount on account of principal or interest on deposits from
public was outstanding as on Balance Sheet date. Further, the Company has availed an
amount of Rs. 0.10 crores from Mr. M B Narayana Raju, Whole- Time Director, and M/s.Capgro
Private Limited., Rs.7.50 crores, during the period 2022-23 which is exempt from the
definition of Deposit. The outstanding unsecured loan balances which were exempted from
the definition of Deposit as on 31st March 2023 is Rs. 5.28 crores (including ICDs).
Particulars of Loans, Guarantees and Investments.
The details of Loans, Guarantees and Investments covered under the
provisions of Section 186 of the Companies Act, 2013 are given in notes forming part of
the financial statements.
Related Party Transactions
All the related party transactions by the Company during the year
2022-23 were on an arms' length basis and were in the ordinary course of business and as
such the provisions of section 188 are not attractive. There are no materially significant
Related Party Transactions with Promoters, Directors, Key Managerial Persons, or other
designated persons during the year. However, during the year the Company has taken
approval from shareholders for related party transactions which were falling under the
material events. However, these transactions are not likely to have any conflict with the
Company's interest. Further, the details of the related party transactions entered
into by the company during the year under the provisions of section 188 of the Companies
Act, 2013 in Form AOC2 is annexed as Annexure-D to this report.
Corporate Social Responsibility (CSR)
The Company had adopted a Corporate Social Responsibility Policy and
constituted a CSR Committee as per the provisions of Section 135 of the Companies Act
2013. The details of policy and committee are placed on the website of the Company i.e.,
www.kernex.in. Further the Company was not required to spend any amount on CSR as the
average three years net profits of the Company are in negative i.e., Rs. (655.67) lakhs.
Hence, the requirement of disclosure under the said provisions and rules are not
applicable to the Company.
Conservation of Energy, Technology Absorption and Foreign Exchange
Earnings and outgo:
The information pertaining to conservation of energy, technology
absorption, foreign exchange earnings and outgo as required under section 134 (3) (m) of
the Companies Act '2013 read with Rule 8
(3) of the Companies (Accounts) Rules 2014 is furnished and annexed as
Annexure-E to this report.
Risk Management
Your Company has in place a mechanism to identify, assess, monitor and
mitigate various risks to key business objectives. Major risks identified by the
businesses and functions are systematically addressed through mitigating actions on a
continuing basis. These are also discussed at the meetings
of the Audit Committee and the Board, Your Company has put in place
internal control systems and processes to optimize the risk mitigation measures for review
by the audit Committee and approval by the Board. The executive management is guided from
time to time by the Board to improve the risk mitigation measures and initiate timely
action.
Vigil Mechanism
Your Company in compliance with the provisions of Section 177 (9) of
the Companies Act, 2013 framed a whistle Blower Policy/Vigil Mechanism for reporting
illegal or unethical behavior. The employees are free to report violations of applicable
laws and regulations and the Code of Conduct. The Audit Committee reviews reports received
from the employees who may also report to the Chairman of the Audit Committee. During the
year under review, no employee was denied access to the Audit Committee. The Directors and
senior management staff are to maintain confidentiality of the reporting and ensure that
the whistle blowers are not subjected to any kind of discrimination.
Regulatory / Court Orders
No significant and material orders were passed by the regulators or
courts or tribunals impacting the going concern status of the Company and its future
operations.
Compliance with Secretarial Standards
The Company is in compliance with the applicable secretarial standards.
Corporate Insolvency Resolution process initiated under the Insolvency
and Bankruptcy Code, 2016 (IBC)
During the period under review, there was no one initiated Corporate
Insolvency Resolution process under the Insolvency and Bankruptcy Code, 2016 (IBC).
Failure to implement any Corporate Action
There were no instances occurred during the period under review.
Annual Return
The Annual Return of the Company as on 31stMarch 2023 is available on
the Company's website and can be accessed at www.kernex.in
Disclosure under the sexual harassment of women at workplace
(prevention, prohibition and redressal) Act, 2013
Your Company has put in place a Policy for prevention of Sexual
Harassment of Women at the Workplace in line with the requirements of the Sexual
Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.
Internal Complaints Committee (ICC) of the Company has been constituted to redress
complaints regarding sexual harassment.
During the period under review, the Company has not received any
complaints.
Familiarization Programs for Independent Directors
The Company familiarizes all the independent directors about their
roles, rights and responsibilities in the Company, nature of Industry, Risk Management,
Board evaluation process and procedures, financial controls and management, Board
effectiveness, strategic direction etc., The Directors also were explained in detail the
compliances required from them under the Companies Act, SEBI (LODR) Regulations, 2015 and
other relevant regulations and their affirmation taken with respect to the same. With a
view to familiarize with the Company's operations, the functioning of various divisions /
departments, the Company's market share and the markets in which it operates, governance
and internal control processes and other relevant information pertaining to the Company's
business. The Whole time Director/ CEO also has personal discussions from time to time
with the Independent Directors. The above initiatives help the Directors to understand the
Company, its business and the regulatory framework in which the Company operates and
equips them to effectively fulfill their role as Independent Directors of the Company.
Other General Disclosures
Consolidated financial statements is also being presented in addition
to the standalone financial statements of the company
No delay in holding the annual general meeting
Cost records are not required to be maintained by the Company.
Statement of deviation or variation
During the year the Company has raised funds from the public through
private placement/preferential issue basis. All the proceeds were used for the objects as
stated in the Notice and Private Placement Offer Letter which was circulated to the
Allottees.
Management Discussion & Analysis (MDA)
Management's Discussion and Analysis Report for the year under review,
as stipulated under Regulation 34(2) (e) of the Listing Regulations is presented in a
separate section forming part of the this report and annexed as AnnexureF.
Corporate Governance Report
Your Company is committed to adhere to the corporate governance
requirements. The report on Corporate Governance as stipulated under Schedule V of the
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is given
separately and annexed as AnnexureG to this report.
The requisite certificate from the Practicing Company Secretary
confirming compliance with the conditions of corporate governance is attached.
Suspension of Trading
The shares of the Company have been listed and traded on the BSE
Limited and NSE. The securities of Company have not been suspended from trading on BSE
Limited and NSE
Acknowledgements:
Your directors would like to express their sincere appreciation for the
guidance, assistance and co- operation received from the Indian Railways, South Central
Railways, NCR (A) and NCR (B), RDSO, Egyptian Railways, Sri Lanka Railways, State Bank of
India, Government authorities and members during the year under review. Your directors
also wish to place on record their deep sense of appreciation for the commendable and
dedicated contribution of all employees.
By order of the Board
For Kernex Microsystems (India) Limited
Sd/- Sd/-
M Badari Narayana Raju Sitarama Raju Manthena
Whole-Time Director Whole-Time Director
DIN: 07993925 DIN: 08576273
Place: Hyderabad Place: Hyderabad
Date: 13th August 2023 Date: 13th August 2023