You are here » Home » Companies » Company Overview » Cheviot Company Ltd

Cheviot Company Ltd.

BSE: 526817 Sector: Industrials
NSE: N.A. ISIN Code: INE974B01016
BSE LIVE 15:40 | 18 Aug 1252.35 -4.00






NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 1270.00
52-Week high 1417.90
52-Week low 738.00
P/E 15.23
Mkt Cap.(Rs cr) 565
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1270.00
CLOSE 1256.35
52-Week high 1417.90
52-Week low 738.00
P/E 15.23
Mkt Cap.(Rs cr) 565
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cheviot Company Ltd. (CHEVIOTCOMPANY) - Director Report

Company director report

Dear Members

The directors have pleasure in presenting their Annual Report on the business andoperations of the Company together with the Audited Financial Statements for the yearended 31st March 2016.


Particulars For the year ended 31st March 2016 For the year ended 31st March 2015
Operating results after charging depreciation and amortisation show a profit of 3826.64 1967.38
Add : Other income 1271.66 2166.73
Add: Exceptional item :
Provision against indirect taxes refundable written back - 97.45
Profit before tax 5098.30 4231.56
From which have been deducted :
Current tax 1453.00 749.00
Tax for earlier years (net) (0.39) 1.10
Deferred tax (1.78) 23.37
Profit after tax 3647.47 3458.09
Surplus as per last balance sheet 535.07 500.02
Making a total of 4182.54 3958.11
Which has been appropriated by the directors as under :
Interim dividend 766.91 -
Tax on interim dividend 156.13 -
Proposed dividend - 766.91
Tax on proposed dividend - 156.13
Transferred to SEZ re-investment reserve account 25.00 350.00
Transferred to general reserve 2650.00 2150.00
Balance surplus carried to balance sheet 584.50 535.07
4182.54 3958.11


Your directors consider that the interim dividend of ' 17/- per ordinary share of facevalue of ' 10/- each (i.e. 170%) paid for the year ended 31st March 2016 is reasonableand therefore do not recommend a final dividend for the year.


Directors propose to transfer an amount of ' 25 to the SEZ re-investment reserveaccount and ' 2650 to the general reserve out of the profit for the year.


Sales profitability and earnings per ordinary share show under noted position duringthe year under review as compared to previous year :

Particulars For the year ended 31st March 2016 For the year ended 31st March 2015
Gross sales 33880.62 26496.62
Export sales (C.I.F. value) 10553.34 11973.47
Operating profit 3826.64 1967.38
Other income 1271.66 2166.73
Profit before tax 5098.30 4231.56
Profit after tax 3647.47 3458.09
Earnings per ordinary share of face value of ' 10 (in ') 80.85 76.65

During the year under review the Jute Industry gradually came out from bad phase andwas able to operate at reasonable capacity largely on account of regular government orderscompared to previous year when there was an Industry-wide cut in production.

In the wake of above scenario it is a matter of great satisfaction that due to betterproduction and operational efficiency your Company achieved higher operating profit bymore than 94% i.e. ' 1859.26 being ' 3826.64 in the year under review as compared to '1967.38 in the previous year. However impact of said increase in profitability wasdiluted mainly due to lower other income largely attributable to less return on debtfunds on account of lower interest rates stagnant capital market few maturities ofinvestments as compared to previous year. Accordingly profit after tax was ' 3647.47 ascompared to ' 3458.09 during the previous year.

Demand of jute goods from overseas markets remained sluggish. There has been steep fallin export of jute yarn from India. Moreover the Company's export oriented unit at FaltaSEZ has been continuously operating at reduced capacity for want of adequate orders.Accordingly CIF value of export sales was lower at ' 10553.34 as against ' 11973.47during previous year. Nevertheless we are pursuing with our initiatives to export otherdiversified Jute products including shopping bags geo textile products conventional anddecorative hessian products and are hopeful to establish them in the time to come.


a) Industry structure and developments

Keeping in view the vital role played by the Jute Industry in the livelihood of farmersand workers government has been taking continuous measures for protecting the jutesector. Significant steps taken by the Government include extension of the mandatorypackaging norms promotion of jute diversified products like launching the Jute CFCscheme promotion of jute geo textiles MSP operations through JCI etc.

Merchandise Exports from India Scheme (MEIS) introduced by the Government of Indiaduring last year which inter-alia provides rewards for export of Jute Goods in the form ofduty free scrips of 5% of realised FOB value in free foreign currency on all jute productsexported out of India continues. Likewise various schemes being implemented by NationalJute Board for workers' welfare scholarship scheme for children of jute mill workersexport market development assistance scheme and incentive scheme for acquisition of plantand machinery also continues.

On the other hand the Industry experienced historical rise in prices of raw jute to alevel which is unprecedented and highest triggered as a result of shortage of raw jutecoupled with ban on export of raw jute imposed by Bangladesh. The shortage of raw jute wasdue to poor crop which resulted on account of unfavourable weather and climaticconditions.

In order to handle the crisis Government has been taking several measures includingstipulation of stock limits for holding raw jute persuading Bangladesh to lift the ban onthe export of raw jute. As a long term measure to improve availability of raw jute it issine qua non for the Government to take appropriate steps for improving area productionand productivity of raw jute.

b) Opportunities and threats


> Awareness to use eco-friendly bio-degradable jute goods across the world willkeep jute goods always in demand;

> Steps taken by the Government of India to assist the jute mills to upgradeold/obsolete machineries and to promote jute diversified products will provide opportunityto increase market of jute goods.


> Farmers are allured to take up agricultural activities other than jute whichresult in poor jute crop;

> Dilution of Jute Packaging Materials (Compulsory use in packing commodities) Act1987 (JPMA) leads to use of alternate synthetic products for packaging of food grains andsugar;

> Hard work required in jute industry drive away new generation of workers to optfor alternate opportunities.

c) Segment-wise or product-wise performance

The Company is engaged in a single business segment i.e. manufacturing and sale of Jutegoods. Hence disclosure requirements as required by Accounting Standard - 17 are notapplicable in respect of business segment. However the geographical segments consideredfor disclosure are as under :

Within India

Outside India


31st March 2016 31st March 2015 31st March 2016 31st March 2015 31st March 2016 31st March 2015
Sales(gross) 23327.28 14523.15 10553.34 11973.47 33880.62 26496.62
Carrying amount of segment assets 45078.37 39756.23 - - 45078.37 39756.23
Capital expenditure 663.42 262.54 - - 663.42 262.54

d) Outlook

Sowing for the new jute crop for the season 2016-17 is presently under process. It iswidely believed that weather conditions are likely to remain favourable yielding a betterjute crop than last season. However movement in prices of raw jute would be governed bythe overall availability of raw jute in India including by way of import from Bangladeshwhich will depend on export policy of the Bangladesh Government.

The phenomenal rise in price of raw jute has pushed the jute goods prices upward andmade them uncompetitive both in domestic and international markets. Consequently thedemand of jute goods other than government orders has been severely affected leading toloss of domestic market as also the loss of export orders.

Export markets remaining sluggish traditional jute sacking products will constitutemajor share in the Company's revenue. The Company endeavours to control other input costsin all possible manners.

Looking to the above scenario the outlook for the current year does not appear to bepromising.

e) Risks and concerns

The key elements of business risks identified by the Company and its mitigationmeasures are as under :

• Competition risk and mitigation measures

There is a strong competition from Bangladesh in the international market. The cost oflabour and power in India are significantly higher than Bangladesh. As a result the pricequoted by Bangladesh in the global market cannot be matched by Indian jute manufacturers.Moreover current high prices of jute goods have made them uncompetitive in domesticmarkets as against other packaging materials. In order to survive and mitigate the saidrisk the Company is making endeavour to improve operational efficiency and cut costs inall possible areas.

• Economic environment and market conditions risk and mitigation measures

Despite jute products being environmental friendly and enjoying statutory protectionfor mandatory use for specified products alternate packaging materials likeHDPE/Polypropylene are used as substitute in the packaging market due to the latter beingcost effective. To mitigate this risk of using environmental harmful packaging materialand to face competition effectively the Company is making efforts to increase varied useof jute goods by manufacturing diversified jute products including shopping bags andexplore avenues to penetrate into new markets. Besides efforts are being made to developlighter products of jute goods with less jute content.

• Fluctuations in foreign exchange risk and mitigation measures

Export sales of the Company are transacted in foreign currencies where fluctuation incurrency may impact margins of the Company. In order to mitigate this risk company entersinto forward contract for hedging foreign exchange exposure against exports and imports.

• Business operations risk and mitigation measures

Some of the business operations risks and their mitigation measures are outlined below:

Revenue concentration : The domestic market primarily depends on the Governmentprocurement level for packaging of food grains. India remains a residual supplier in theexport market which is dominated largely by Bangladesh jute manufacturers. The Companygenerates revenue from domestic as well as export sales. Few measures being taken tomitigate this risk include innovative usage of jute goods reach out to potential buyersboth in domestic and export front creating infrastructure for value added and diversifiedjute products including shopping bags.

Raw Materials : Availability of raw jute is very crucial for smooth functioning of themills. The previous season witnessed acute shortage of raw jute. Moreover Bangladeshimposed a restriction on export of raw jute to India in the later part of the year. Thestock built-up was also regulated by the office of Jute Commissioner. Under such difficultconditions the Company maintained a policy of regular procurement of raw jute in aplanned manner linked with production and order position to mitigate this risk. Inaddition to the above weight reduction by Government for procurement of B. Twill bagsfrom 665 gms to 580 gms helped in conservation of raw jute.

Manpower : Inadequate availability of skilled and unskilled workers at various levelsof production is a serious concern for smooth operations and good quality of end juteproducts. The problem is further accentuated with high rate of absenteeism amongstworkers. To mitigate such risk the Company is continuously providing required in-housetraining to freshers and suitably incentivising good performers from time to time. Inorder to find long term solution to the problem it is imperative to focus onmodernisation and automation of manufacturing process to the extent feasible.

f) Internal control systems and their adequacy

The Company has in place an adequate internal control system commensurate with the sizeand the nature of operations and the same was operating effectively during the year. TheBoard have designed the policies and procedure to ensure generation of reliable financialinformation from the accounting records maintained with proper authorisation in a securedserver. The senior management ensures completeness of the accounting records with areasonable assurance of its accuracy. The audit committee satisfied itself of the adequacyand effectiveness of the internal financial control system from the findings of statutoryauditors and internal auditors. Suggestions for improvement are considered and the auditcommittee monitors the implementation of corrective measures. The Board keep propervigilance on safeguarding assets of the Company from any unauthorised use and adherence toCompany policies by employees at all level.

g) Discussion on financial performance with respect to operational performance

The following are the significant areas of financial performance during the year underreview :

• Revenue from sale of jute goods was at ' 33880.62 during the year as comparedto ' 26496.62 during previous year;

• Operating profit of the Company has increased by ' 1859.26 during the yearunder review;

• Finance cost was ' 81.63 during the year under review as against ' 86.72 inprevious year;

• Inventories were valued at ' 5928.92 as at 31st March 2016 as against '4525.86 as at 31st March 2015. Increase in inventories is partly due to higher stock offinished goods and partly due to higher average rate of stocks;

• The Company has invested ' 663.42 in fixed assets inclusive of capital advancesgiven during the year.

h) Material developments in Human Resource / Industrial Relations front includingnumber of people employed

Industrial relations remained harmonious during the year under review. Shortage of newskilled entrants in the Jute Industry coupled with high rate of worker absenteeism havebeen areas of concern. The Company is working on all possible measures to overcome theissue of availability of skilled workers.

The Company has approached Sulabh International to explore possibility of constructionof toilet blocks for workers in the Company's premises under the National Jute Boardscheme for workers welfare in Jute sector. Further the eligible children of workers werebenefitted under the National Jute Board Scholarship Scheme. Humidification systemsinstalled by the Company continue to provide a comfortable working atmosphere within thefactory. Workers are encouraged to take in-house training to enhance their skill andknowledge. Benefits and other facilities provided by the Company under its various staffwelfare schemes are upgraded from time to time in the overall interest of the staffs.

As on 31st March 2016 the Company had 4168 employees on its rolls.

The Company has a policy on prevention prohibition and redressal ofcomplaints/grievances on the sexual harassment of women at work places which is beingmonitored by a committee constituted by the Company for the said purpose. During the yearunder review no complaint of sexual harassment has been received by the Company.

i) Cautionary statement

Statement made in this section of the report is based on the prevailing position in thejute industry and market conditions. Actual results might differ from what we perceivewith respect to Company's outlook and performance.


The corporate governance report and a certificate from the statutory auditors M/s Jain& Co. Chartered Accountants regarding compliance of the conditions of corporategovernance as stipulated in Schedule V to the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is given in Annexure - I forming part of this report.


An extract of the annual return for the year ended 31st March 2016 in the prescribedForm MGT-9 is given in Annexure - II forming part of this report in compliance withSection 92 of the Companies Act 2013.


Particulars of investments made by the Company have been disclosed in Note 11 and Note14 to the financial statements for the year ended 31st March 2016.


During the year under review all transactions with related parties were in theordinary course of business and on arm's length basis. There being no 'material' contractsor arrangement or transactions at arm's length basis with related parties no disclosurein From AOC-2 is therefore required. Disclosures as required under accounting standard-18have been made in Note 46 to the financial statements for the year ended 31st March 2016.Since the Company has not extended any loan or advance to its associate holding orfirms/companies in which directors are interested no disclosure is required as per PointA(2) to Schedule V to the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.


The information and details on conservation of energy technology absorption foreignexchange earnings and outgo as stipulated in Section 134(3)(m) of the Companies Act 2013and the Rules framed thereunder are given in Annexure - III forming part of this Report.


The Board has developed and implemented a risk management policy identifying thereinthe elements of risk and concern that may threaten the existence of the Company. Auditcommittee reviews the risk elements and decides the appropriate mitigation procedures. TheBoard keeps an overall watch on the business risks and opportunities. Detailed discussionon risks/concern/threat has been made under the head 'management discussion and analysisreport'.


During the year the Company made direct expenditure on restoration of two schoolbuildings near the factory area as part fulfillment of the CSR towards promotingeducation. Besides CSR activities were carried out through eligible registered trustshaving established track records in the field of promoting education and health care. CSRPolicy of the Company is available on Company's website ( AnnualReport on CSR is given in Annexure - IV forming part of this report.


The Company has established a vigil mechanism/whistle blower policy to report anyconcern or misconduct by affected persons. This Policy also allows a direct access to theChairman of audit committee in exceptional cases. The whistle blower policy is hosted onthe Company's website (


During the year under review there was no change in the composition of the Board ofDirectors.

Mr. Harsh Vardhan Kanoria Chairman and Managing Director and CEO (holding DIN00060259) was re-appointed for a period of five years with effect from 1st August 2015 bythe members at the AGM held on 13th August 2015.

Mrs. Malati Kanoria non-executive director (holding DIN 00253241) was re-appointed asa Director at the AGM held on 13th August 2015 whose period of office was liable todetermination by retirement of directors by rotation.

Mr. Nawal Kishore Kejriwal (Mr. Kejriwal) (holding DIN 00060314) retires from the Boardby rotation at the forthcoming AGM and being eligible offers himself for re-appointment.

Mr. Kejriwal has been re-appointed as Wholetime Director of the Company by the Boardwhose period of office shall be liable to determination by retirement of directors byrotation for a further period of 2 years with effect from 1st June 2016 subject to theapproval of the members at the forthcoming AGM.

Brief details of Mr. Kejriwal seeking re-appointment have been given in the noticeconvening AGM.

All independent directors of the Company have given declarations that they meet thecriteria of independence as provided in Section 149(6) of the Companies Act 2013.

The Board of directors have carried out the annual performance evaluation of its ownperformance performance of various committees constituted by the Board and the individualdirectors. The criteria for said evaluation has been stated in the corporate governancereport annexed hereto.


Keeping in view the requirements of Companies Act 2013 and SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the nomination and remuneration committee(NRC) review the composition and diversity of the Board and identify persons who arequalified to become directors in accordance with the criteria laid down by the Board ofDirectors of the Company. NRC recommend to the Board about the appointment/re-appointmentof eligible candidates including their terms of appointment and remuneration. Theremuneration policy including criteria for determining qualifications positiveattributes independence of a director have been disclosed in Annexure - V forming part ofthis Report.


In terms of Section 134(5) of the Companies Act 2013 it is hereby stated to the bestof our knowledge and belief that :

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgements 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 and ofthe profit of the Company for that period;

(c) the directors had 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 had 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;

(f) the directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.


The Board of directors met 5 (five) times during the year under review. More detailsare available in the corporate governance report.


The Board has constituted the audit committee with three independent directors. Moredetails on the audit committee are given in the corporate governance report.


There was no change in the Key Managerial Personnel during the year under review.


The ratio of the remuneration of each director to the median employee's remunerationand other details as required under Section 197(12) of the Companies Act 2013 read withRules framed thereunder have been disclosed in Annexure - VI forming part of this Report.


The Company has not accepted deposits from Public under Section 73 of the CompaniesAct 2013 read with Rules framed thereunder.


Following disclosures are made under the Companies (Accounts) Rules 2014 :

(i) The financial summary or highlights are discussed at the beginning of this report;

(ii) There is no change in the nature of business;

(iii) There is no company which has become or ceased to be the Company's subsidiaryjoint venture or associate company during the year;

(iv) No significant and material order was passed by the regulators or courts ortribunals which impact the going concern status and its future operations.


The existing Articles of Association of the Company were adopted in accordance with theprovisions of the Companies Act 1956. With the enactment of Companies Act 2013 and itssubstantial Sections having come into force it is now expedient to replace the existingArticles of Association with the new set of Articles of Association. It is accordinglyproposed that a new set of Articles of Association be adopted by the members and aresolution to this effect is included at Item No. 5 of the notice convening the annualgeneral meeting. The Board recommends passing of the said resolution by the members.


M/s Jain & Co. Chartered Accountants (ICAI Registration No. 302023E) wasappointed as the statutory auditor of the Company at the AGM held on 8th August 2014 tohold office until the conclusion of the AGM to be held in 2017 subject to ratification bymembers at every AGM.

The Board recommends ratifying the tenure of M/s Jain & Co. Chartered Accountantsas Statutory Auditors of the Company from the conclusion of ensuing AGM until theconclusion of the next AGM.

A certificate from the auditors has been received to the effect that they meet thecriteria laid down under Section 141 of the Companies Act 2013 and are willing tocontinue as statutory auditors of the Company. Moreover the Statutory Auditors have alsoconfirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.


The cost accounting records maintained by the Company for the current financial yearending on 31st March 2017 are required to be audited pursuant to Section 148 of theCompanies Act 2013 read with Rules framed thereunder. In this regard the Board ofdirectors on the recommendation of audit committee had reappointed M/s D. Radhakrishnan& Co. Cost Accountants (Registration No. 000018) to carry out the cost audit at aremuneration of ' 32500/- plus applicable taxes and re-imbursement of out of pocketexpenses incurred by them.

The resolution included at Item No. 9 of the notice convening the annual generalmeeting seek members' ratification to the remuneration payable to the cost auditor.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Rulesframed thereunder the Company has appointed M/s MR & Associates a firm of practicingcompany secretaries (CoP 2551) as the secretarial auditor for the year ended 31st March2016. The secretarial audit report dated 14th May 2016 is attached as Annexure - VII tothis report.


The directors sincerely thank financial institutions banks government authoritiesbusiness associates and all stakeholders for their continued co-operation and support tothe Company. The directors record with appreciation the dedicated service and valuedcontributions made by employees at all levels.

For and on behalf of the Board
Harsh Vardhan Kanoria
Chairman and Managing Director
Chief Executive Officer
Kolkata 25th May 2016 DIN :00060259