Your Directors have pleasure in presenting the 26th Annual Report on thebusiness and operation of your Company together with the audited accounts for the yearended 31st March 2015.
Your Companys performance during the year is as below:
( Rs. in Lacs)
|Particulars ||Year ended ||Year ended |
| ||31.03.2015 ||31.03.2014 |
|Sales & Operating Income ||74551.14 ||68531.57 |
|Operating Profit ||6624.19 ||7600.29 |
|Add: Other Income ||273.70 ||261.45 |
|Less: Net Interest & Finance Cost ||3487.91 ||3935.72 |
|Less: Depreciation ||3070.58 ||3284.86 |
|Profit before tax ||339.40 ||641.16 |
|Provision for Tax & Deferred tax ||320.63 ||322.95 |
|Profit after Tax ||18.77 ||318.21 |
|Appropriations / Adjustments || || |
|PROFIT FOR THE YEAR ||18.77 ||318.21 |
|Balance of Profit brought forward ||18945.03 ||18626.82 |
|Depreciation on transition to Schedule II of the Companies Act 2013 ||(239.00) ||Nil |
|Profit carried to Balance Sheet ||18724.80 ||18945.03 |
The Board of Directors has not recommended any dividend on Share Capital of the Companyfor the year ended on 31st March 2015 considering the current cash flowposition of the Company.
PERFORMANCE DURING THE YEAR
During the year under review your Company reported top-line growth of 8.78% over thePrevious Year. Gross Revenue from Operations stood at Rs. 74551.14 lacs as compared toRs. 68531.57 lacs during the Previous Year.
During the year under review the Company has earned Profit Before Tax (PBT) of Rs.339.40 lacs and Profit after Tax (PAT) of Rs. 18.77 lacs as compared to PBT of Rs. 641.16lacs and PAT of Rs. 318.21 lacs during the Previous Year.
During the year under report your company has raised total Rs. 589.79 lacs through termloan and working facilities from various banks.
During the year company has paid External Commercial Borrowing (ECB) of US$ 2.57million ( Rs. 1570.36 lacs) to Standard Chartered Bank (SCB) and US$ 0.87 million ( Rs.541.94 lacs) to Bank of Baroda (UAE).
The paid up Equity Share Capital as at 31st March 2015 stood at Rs. 2345.98Lacs. During the year under review the Company has not issued shares with differentialvoting rights nor has granted any stock options or sweat equity. The Company has no schemeof provision of money for purchase of its own shares by employees or by trustees for thebenefit of employees. Hence the details under rule 16 (4) of Companies (Share Capital andDebentures) Rules 2014 are not required to be disclosed.
TRANSFER TO RESERVES
No amount is appropriated from Statement of Profit and Loss and transferred to anyReserve Account.
As per the latest GDP growth estimates India economy grew by 7.4% in financial year2015 compared to 6.9% in financial year 2014 mostly driven by improved economicfundamentals and revision of GDP methodology calculation. Even inflation showed signs ofmoderation a welcome sign wholesale price and consumer price inflation declined to4.2% and 7.4% respectively compared with last years 6.3% and 10.1% Reducedinflation falling crude oil prices stable rupee improved purchasing power and consumerspending higher capital inflows supported by the new government policy reforms havealready put India on accelerating growth track and improved the business outlook.
The Government envisages GDP growth to accelerate to 8% in financial year 2016 drivenby strengthening macro-economic fundamentals and implementation of policy reforms recentlyannounced.
Indian textile and denim industry had faced multiple challenged such as globalrecession less export orders due to reductions in inventories by global retail giantsover supply of goods in market hike in power fuel cost and man power cost. The Indiandenims industry is facing out the in-house competition due to over expansions andintroduction of new capacities in Denim.
In the backdrop of above macro-economic scenario your Company has closed the financialyear 2014-15 with 8.78% growth in Revenue as compared to Previous Year. However OperatingEarnings before Interest Depreciation and Taxes (EBITDA) has declined to 9.63% ascompared to 11.77% for the Previous Year.
The Board of Directors supports to maintain highest standards of corporate governanceand adhere to corporate governance requirements set out by SEBI. In addition to basicgovernance issues Board lays strong emphasis on transparency accountability andintegrity. The Report on corporate governance as stipulated under Clause 49 of the ListingAgreement forms part of the Annual Report. The requisite certificate from the Auditors ofthe Company confirming compliance with conditions of corporate governance as stipulatedunder aforesaid Clause 49 is attached to the Report on corporate governance.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.
Your company has accepted the deposits aggregating to Rs. 1070.29 lacs during the yearunder review after complying with the provisions of the said act and Companies (Acceptanceof Deposits) Rules 2014. There has been no default in repayment of deposits or payment ofinterest thereon during the year under review. There are no deposits which are not incompliance with the requirements of Chapter V of the Companies Act 2013.
Your directors appreciate the support which the company has received from the publicand shareholders to its fixed deposit scheme.
INSURANCE AND CLAIMS
All properties and insurable interests of the company including building plant andmachinery and stocks wherever necessary and to the extent required have been adequatelyinsured.
During the previous Financial Year a fire broke at Companys Inspection andPacking Department of Vijay Farm Unit resulting into loss of finished goods semi-finishedgoods Plant & Machinery Factory Building Furniture & Fixtures and OtherMiscellaneous Items. The carrying value of the assets destroyed in fire is estimated atRs. 1732.21 lacs.
The company has insurance policies of all affected assets so the Company has lodgedclaims with the insurance companies which claims include claim towards loss of the abovestated assets.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions that were entered into during the financial year were atarms length basis. A detailed report on material contracts and arrangements madeduring the year 2014-15 being arms length transactions have been reported andannexed hereto in form AOC-2 as Annexure - A and forms part of this report.
There are no materially significant related party transactions made by the company withpromoters key managerial personnel or other designated persons which may have potentialconflict with interest of the company at large.
The Company has adopted a Related Party Transactions Policy. The Policy as approved bythe Board is uploaded on the Companys website at the web link:http://www.aarvee-denims.com/pdfs/related-party-transaction-policy.pdf
Your Company does not have any subsidiary.
The Company has adopted a Risk Management Policy in accordance with the provisions ofthe Act and Clause 49 of the Listing Agreement. It establishes various levels ofaccountability and overview within the Company while vesting identified managers withresponsibility for each significant risk.
The Internal Audit Department facilitates the execution of Risk Management Practices inthe Company in the areas of risk identification assessment monitoring mitigation andreporting. Through this programme each Function and Unit addresses opportunities andrisks through a comprehensive approach aligned to the Companys objectives. TheCompany has laid down procedures to inform the Audit Committee as well as the Board ofDirectors about risk assessment and management procedures and status.
Sustainability is embedded in the Corporate Enterprise Risk Management programme whichgives an opportunity to increase the effectiveness of risk management practices and forimproving business efficiency.
This risk management process which is facilitated by internal audit covers riskidentification assessment analysis and mitigation. Incorporating sustainability in theprocess also helps to align potential exposures with the risk appetite and highlightsrisks associated with chosen strategies. The current risk slate and the comprehensive riskpolicy have been further redefined during the year. The major risks forming part of theEnterprise Risk Management process are linked to the audit universe and are covered aspart of the annual risk based audit plan.
INTERNAL CONTROLS SYSTEMS AND ADEQUACY
The Companys internal audit systems are geared towards ensuring adequate internalcontrols commensurate with the size and needs of the business with the objective ofefficient conduct of operations through adherence to the Companys policiesidentifying areas of improvement evaluating the reliability of Financial Statementsensuring compliances with applicable laws and regulations and safeguarding of assets fromunauthorized use. Details of the internal controls system are given in the ManagementDiscussion and Analysis Report which forms part of the Directors Report.
The Internal Audit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company. Based on the report of internalaudit function process owners undertake corrective action in their respective areas andthereby strengthen the controls. Significant audit observations and corrective actionsthereon are presented to the Audit Committee of the Board.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
1) Changes in Directors and Key Managerial Personnel
Mrs. Komal S. Majmudar resigned from the Board of Directors of the Company with effectfrom 29th May 2015. Your Directors take this opportunity to express their deepsense of appreciation for the valuable services rendered during her tenure as a Director.
Mrs. Komal Majmudar was appointed w.e.f. 30th September 2014 during theyear. Mr. Amish Shah Company Secretary has resigned w.e.f. 30th September2014. Mr. K. K. Mohale CEO of the Company retired w.e.f. 31st December 2014and Mr. Utsav Pandwar CFO of the Company has resigned w.e.f. 30th May 2015.
Mr. Hardik Modi has been appointed as Company Secretary w.e.f. 8th October2014. Mr. Suketu Shah has been appointed as CEO of the Company w.e.f. 6thApril 2015 and Ms. Shivani Shah has been appointed as an Additional Director of theCompany (Woman Director) w.e.f. 13th August 2015.
Mr. Kalpesh V. Shah Director shall retire by rotation at the forthcoming AnnualGeneral Meeting of the Company and being eligible offer himself for re-appointment.
2) Declaration by an Independent Director(s) and reappointment if any
All Independent Directors have given declarations that they meet criteria ofindependence as laid down under Section 149 (6) of the Act and Clause 49 of the ListingAgreement entered into with the Stock Exchanges. In opinion of the Board they fulfillconditions of independence as specified in the Act and the Rules made there under and areindependent of management.
3) Procedure for Nomination and Appointment of Directors
The Nomination and Remuneration Committee is responsible for developing competencyrequirements for the Board based on the industry and strategy of the Company. Boardcomposition analysis reflects in-depth understanding of the Company including itsstrategies environment operations financial condition and compliance requirements.
The Nomination and Remuneration Committee conducts a gap analysis to refresh the Boardon a periodic basis including each time a Directors appointment or re-appointmentis required. The Committee is also responsible for reviewing and vetting the CVs ofpotential candidates vis--vis the required competencies and meeting potentialcandidates prior to making recommendations of their nomination to the Board. At the timeof appointment specific requirements for the position including expert knowledgeexpected is communicated to the appointee.
4) Criteria for Determining Qualifications Positive Attributes and Independenceof a Director
The Nomination and Remuneration Committee has formulated the criteria for determiningqualifications positive attributes and independence of Directors in terms of provisionsof Section 178 (3) of the Act and Clause 49 of the Listing Agreement.
Independence: In accordance with the above criteria a Director will be consideredas an Independent Director if he/ she meets with the criteria forIndependent Director as laid down in the Act and Clause 49 of the ListingAgreement.
Qualifications: A transparent Board nomination process is in place that encouragesdiversity of thought experience knowledge perspective age and gender. It is alsoensured that the Board has an appropriate blend of functional and industry expertise.While recommending the appointment of a Director the Nomination and RemunerationCommittee considers the manner in which the function and domain expertise of theindividual will contribute to the overall skill-domain mix of the Board.
Positive Attributes: In addition to the duties as prescribed under the Act theDirectors on the Board of the Company are also expected to demonstrate high standards ofethical behavior strong interpersonal and communication skills and soundness of judgment.Independent Directors are also expected to abide by the Code for IndependentDirectors as outlined in Schedule IV to the Act.
5) Annual Evaluation of Board Performance and Performance of its Committees andof Directors
Pursuant to the provisions of the Act and Clause 49 of the Listing Agreement the Boardhas carried out an annual evaluation of its own performance performance of Directors aswell as evaluation of working of its Committees.
The Nomination and Remuneration Committee has defined the evaluation criteriaprocedure and time schedule for Performance Evaluation process for the Board itsCommittees and Directors.
The Boards functioning was evaluated on various aspects including inter aliadegree of fulfillment of key responsibilities Board structure and compositionestablishment and delineation of responsibilities to various Committees effectiveness ofBoard processes information and functioning.
Directors were evaluated on aspects such as attendance and contribution at Board/Committe Meetings and guidance/ support to the management outside Board/ CommitteeMeetings. In addition the Chairman was also evaluated on key aspects of his roleincluding setting the strategic agenda of the Board encouraging active engagement by allBoard members and motivating and providing guidance to the Managing Director.
Areas on which the Committees of the Board were assessed included degree of fulfillmentof key responsibilities adequacy of Committee composition and effectiveness of meetings.
The performance evaluation of Independent Directors was carried out by entire Boardexcluding Director being evaluated. The performance evaluation of the Chairman and the NonIndependent Directors was carried out by Independent Directors who also reviewedperformance of the Board as a whole. The Nomination and Remuneration Committee alsoreviewed performance of the Board its Committees and of Directors.
The Chairman of the Board provided feedback to the Directors on an individual basis asappropriate. Significant highlights learning and action points with respect to theevaluation were presented to the Board.
The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel and other employees pursuant to the provisions of the Act and Clause 49 of theListing Agreement.
The philosophy for remuneration of Directors Key Managerial Personnel and all otheremployees of the Company is based on the commitment of fostering a culture of leadershipwith trust. The Remuneration Policy of the Company is aligned to this philosophy.
The Nomination and Remuneration Committee has considered following factors whileformulating Policy:
(i) The level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully;
(ii) Relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and
(iii) Remuneration to Directors Key Managerial Personnel and Senior Managementinvolves a balance between fixed and incentive pay reflecting short and long-termperformance objectives appropriate to the working of the Company and its goals.
It is affirmed that the remuneration paid to Directors Key Managerial Personnel andall other employees is as per the Remuneration Policy of the Company.
Details of the Remuneration Policy are given in the Corporate Governance Report.
NUMBER OF MEETINGS OF THE BOARD
During the year four board meetings and four audit committee meetings were convenedand held the details of which are given in the corporate governance report. Theintervening gap between the meetings was within the period prescribed under the CompaniesAct 2013.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the provisions of section 134 (5) of the Companies Act 2013 yourdirectors would like to state that:
a. in the preparation of the annual accounts the applicable accounting standards havebeen followed;
b. the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year as on31st March 2015 and of the profit of the company for that period;
c. the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
d. the directors have prepared the annual accounts on a "going concern"basis;
e. the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and
f. the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
CORPORATE SOCIAL RESPONSIBILITY
The Board has constituted a Corporate Social Responsibility Committee headed by Mr.Ashish V. Shah as Chairman and Mr. Amol Dalal and Mr. Vinod P Arora as Members of theCommittee.
The Company has adopted a Corporate Social Responsibility (CSR) Policy in compliancewith the provisions of the Act.
As part of its CSR initiatives the Company could not initiate CSR activities becauseof shortage of funds due to volatile textile market during the Previous Year. Further itis to be noted that one of unit suffered sudden major fire accident on 1stMarch 2015 which affected heavy loss of stock building plant and machineries due tofire. Report on CSR activities is annexed as Annexure - B.
POLICY ON PREVENTION PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE
The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on Prevention Prohibition and Redressal of Sexual Harassment at the Workplace inline with the provisions of the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013 and the Rules there under. The Policy aims to provideprotection to employees at the workplace and prevent and redress complaints of sexualharassment and for matters connected or incidental thereto with the objective ofproviding a safe working environment where employees feel secure.
The Company has not received any complaint of sexual harassment during the financialyear 2014-15.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has adopted a Whistle Blower Policy to provide a formal mechanism to theDirectors and employees to report their concerns about unethical behaviour actual orsuspected fraud or violation of the Companys Code of Conduct or ethics policy. ThePolicy provides for adequate safeguards against victimization of employees who avail ofthe mechanism and also provides for direct access to the Chairman of the Audit Committee.It is affirmed that no personnel of the Company has been denied access to the AuditCommittee.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
No significant material orders have been passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company and its futureoperations.
(1) Statutory Auditors
Pursuant to the provisions of Section 139 of the Act and the rules framed thereunderM/s. Deloitte Haskins & Sells Chartered Accountants Ahmadabad (Registrant No.17365W) and M/s N.C. Shah & Associates Chartered Accountants Ahmedabad (RegistrationNo. 109692W) were appointed as Joint Auditors of the Company from conclusion of the 25thAnnual General Meeting (AGM) of the Company held on 30th September 2014 tillthe conclusion of the 28th AGM to be held in the year 2017 subject toratification of their appointment at every AGM.
(2) Cost Auditors
The company has received a letter from the cost auditors M/s N. D. Birla and Co. CostAccountant to the effect that their appointment if made would be within the prescribedlimits under section 141(3) (g) of the Companies Act 2013 and that they are notdisqualified for appointment. The board of directors of the company at its meeting held on29th May 2015 appointed M/s. N. D. Birla & Co. Cost Accountants as thecost auditors of the Company to conduct the audit of cost records maintained by theCompany as required by the Companies (Cost Records and Audit) Rules 2014 as amended fromtime to time.
The members are requested to ratify the remuneration to be paid to the cost auditors ofthe company
(3) Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and The Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board of Directors of the Companyhad appointed Mr. Tapan Shah Company Secretaries in Practice to undertake the SecretarialAudit of the Company for the year ended 31st March 2015. The Secretarial AuditReport is annexed as Annexure - C.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134 (3) (m) of the Act read with Rule 8 (3) ofThe Companies (Accounts) Rules 2014 is annexed as Annexure - D.
PARTICULARS OF EMPLOYEES AND REMUNERATION
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 employeesof the Company will be provided upon request. In terms of Section 136 of the Act theReport and Accounts are being sent to the Members and others entitled thereto excludingthe information on employees particulars which is available for inspection by theMembers at the Registered Office of the Company during business hours on working days ofthe Company up to the date of the ensuing Annual General Meeting. If any Member isinterested in obtaining a copy thereof such Member may write to the Company Secretary inthis regard.
EXTRACT OF ANNUAL RETURN
Pursuant to Section 92 (3) of the Act and Rule 12 (1) of The Companies (Management andAdministration) Rules 2014 the extract of Annual Return in form MGT.9 is annexed as Annexure- E.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The management discussion and analysis report as required under clause 49 of thelisting agreement with the Stock Exchanges has been attached and forms part of thisreport.
The Auditors Report to the members on the Accounts of the Company for thefinancial year ended 31st March 2015 does not contain any qualification.
Members attention is invited to the observation made by the Auditors under"Emphasis of Matter" appearing in the Auditors Report.
The industrial relations continued to be generally peaceful and cordial.
In conformity with provision of Clause 32 in the Listing Agreement(s) the Cash FlowStatement for the year ended 31st March 2015 is annexed hereto.
The Equity shares of your company are listed on the BSE Limited and the National StockExchange of India Limited (NSE).
The Company has paid the listing fees for the year 2015-16 to above stock exchanges.
Your Directors thank the various Central and State Government DepartmentsOrganizations and Agencies for the continued help and co-operation extended by them. TheDirectors also gratefully acknowledge all stakeholders of the Company viz. customersmembers dealers vendors banks and other business partners for the excellent supportreceived from them during the year and look forward to their continued support in future.The Directors place on record their sincere appreciation to all employees of the Companyfor their unstinted commitment and continued contribution to the Company.
| ||For and on behalf of Board of Directors |
| ||Vinod P. Arora |
|Place : Ahmedabad ||Chairman and Managing Director |
|Date : 13/08/2015 ||(DIN: 00007065) |