To The Members of Cravatex Limited
Your Directors present the audited Financial Statements of the Company includingaudited Balance Sheet and the Statement of Profit and Loss together with their Report forthe year ended March 31 2017.
| ||Current Year ||Previous Year |
| ||Rupees ||Rupees |
|FINANCIAL RESULTS || || |
|Earnings before Finance Cost Depreciation and Taxation ||16932613 ||60467587 |
|Less: Finance Cost ||96175134 ||119778663 |
|Less: Depreciation ||31159836 ||30836271 |
|Profit (Loss) before Exceptional Item ||(110402357) ||(90147347) |
|Exceptional Item: || || |
|Add : Profit on Sale of Undertaking ||46074156 || |
| ||(64328201) ||(90147347) |
|Tax Expense || || |
|Deferred Tax Asset / (Liability) ||34778757 ||(2110836) |
|Profit (Loss) after Taxation ||(29549444) ||(92258183) |
|Add : Brought forward from Previous Year || ||20163231 |
|Balance available for Appropriation/ (Deficit) ||(29549444) ||(72094952) |
|Add : Debit Balance adjusted by transfer from general reserve ||29549444 ||72094952 |
|Amount Available for Appropriation || || |
|Balance in Profit and Loss Account || || |
STATEMENT OF COMPANY AFFAIRS
The turnover of the Company for the year under review was Rs.156.97 lacs as againstRs.18591 lacs in previous year while the profit before finance cost depreciation andtaxation stood at Rs.169.32 lacs as against Rs.604.67 lacs for the respective year. Lossafter tax for the year was Rs.295.49. lacs as against the loss of Rs 922.58 lacs forprevious year.
Since the company has reported losses the Directors have decided not to recommend anydividend on the shares of the Company for the year ended March 31 2017.
The company had on April 12 2016 allotted 9000000 4% Non - Convertible CumulativeRedeemable Preference shares to the Promoter Group on Private Placement basis.Consequently the total issued subscribed and fully paid up share capital of the Companyw.e.f April 12 2016 was Rs. 115841600/- divided into 2584160 equity shares of Rs.10/- each and 9000000 4% Non - Convertible Cumulative Redeemable Preference shares ofRs. 10/- each.
INCREASE IN AUTHORISED SHARE CAPITAL
The authorized share capital of the Company was increased w.e.f. April 2 2016 fromRs.50000000/- divided into 4850000 Equity Shares of Rs.10/- each and 15000 9.5%Cumulative Redeemable Preference Shares of Rs.100/- each to Rs.150000000/- divided into4850000 Equity Shares of Rs.10/- each and 10150000 Preference shares of Rs. 10/-each. The existing 15000 9.5% Cumulative Redeemable Preference Shares of Rs.100/- eachhas been reclassified and increased to 10150000 Preference Shares of Rs. 10/- each.
TRANSFER TO RESERVES
The company has not transferred any amount to the general reserves due to losses.
The Company had accepted unsecured fixed deposits from its various members under theprovisions of erstwhile Section 58A of the Companies Act 1956 and the rules madethereunder. The Company did not invite or accept any fresh deposits from its member butrenewed the unsecured deposits as and when due for renewal.
The fixed deposits had been repaid to all the fixed deposit holders as on March 312017 and there were no unclaimed deposits as on that date.
There has been no default in repayment of deposits or payment of interest thereonduring the year and all deposits were in compliance with the requirements of Chapter V ofthe Companies Act 2013
The fixed assets of the Company have been adequately insured.
ISO 9001 : 2008
The Company successfully conducted the Surveillance Audit for year 2016 under ISO 9001: 2008 certification for its Fitness division.
DIRECTORS & KMP
Mr. Rajiv Batra (DIN 00748729) is retiring by rotation and being eligibleoffer himself for re-appointment.
Mr. Arjun Bulchandani (DIN 00049092) ceased to be the Independent Director ofthe Company w.e.f. November 8 2016 due to resignation. Your Directors wish to place onrecord their sincere appreciation of the guidance and valuable advice received from Mr.Arjun Bulchandani during his tenure as an Independent Director.
Mr. Divakar Kamath - President Corporate Affairs was appointed as the ChiefFinancial Officer of the company to be designated as President Corporate Affairs &CFO w.e.f August 26 2016.
Mr. Rajesh Batra (DIN 00020764) was re-appointed as the Managing Director of theCompany for a period of 3 years w.e.f. June 1 2016.
DECLARATION BY INDEPENDENT DIRECTORS
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149 (6) of the Companies Act 2013 and Regulation16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
The details pertaining to the composition of audit committee are included in theCorporate Governance Report which forms part of this report.
BB (UK) Ltd. a wholly owned subsidiary of the Company completed its sixth year ofoperations. It operates the FILA license in parts of the UK Ireland Middle East andAfrica. It also provides sourcing services to several FILA licensees across the world. Ina volatile economic environment it achieved a turnover of Rs10826.40 lacs (previous yearRs. 6882.63 lacs) and a profit before tax of Rs.200.86 lacs (previous year Rs. 157.93lacs).
The Company acquired 100% equity stake of Cravatex Brands Limited (CBL) from all itsexisting shareholders at face value on 02/02/2017 resulting into CBL becoming a whollyowned subsidiary of the Company. Consequent to the issue of 100 equity shares by CBL toParagon Partners Growth Fund-I on 24/03/2017 CBL has become a subsidiary of the Company.
The turnover of CBL for the year under review was Rs.85.82 lacs while the lossesbefore finance cost depreciation and taxation stood at Rs.513.17 lacs. Loss after tax forthe year was Rs. 695.55 lacs.
In accordance with the provisions of Section 129(3) of the Companies Act 2013 theCompany has prepared a consolidated financial statement of the Company and itssubsidiaries which is forming part of the annual report.
The salient features of the financial statement of the subsidiary is set out in theprescribed Form AOC-1 which forms part of the annual report.
The annual accounts of the subsidiaries will also be kept open for inspection for theMembers at the Registered Office of the Company during the Company's business hours on anyworking day upto and including the date of the Annual General Meeting.
DIRECTORS' RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act 2013 the Directors state 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 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 and ofthe profit and loss 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 this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities;
(d) the directors had prepared the annual accounts on a going concern basis; and
(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.
Your Company has taken adequate steps to ensure that all mandatory provisions ofCorporate Governance in terms of Regulation 4(2) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 has been complied with. A separate report onCorporate Governance is being incorporated as a part of the Annual Report along with aCertificate from a Practicing Company Secretary.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Management Discussion and Analysis Report for the year under review as stipulatedunder Regulation 34(2)(e) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is annexed and forms a part of this report.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information required pursuant to Section 134(3)(m) of the Companies Act 2013 read withThe Companies (Accounts) Rules 2014 is given in the Annexure I to this Report.
PARTICULARS OF THE EMPLOYEES
There was only no person employed throughout the year who was in receipt of Rs.102lacs per annum or more and none of the employee employed for part of the financial yearwas in receipt of remuneration of Rs.8.5 lacs per month or more. During the financial yearended March 31 2017 the company had 11 permanent employees on the rolls of company.
The Information required under Section 197(12) of the Companies Act 2013 read withrules made thereunder forms part of this report. However as per provision of Section136(1) of the Companies Act 2013 the accounts are being sent to all Members excluding thestatement of particulars of employees under Section 197(12) of the Act. The company willmake available the particulars available to the Members seeking such information at anypoint of time. The particulars of the employees u/s 136(1) will also be kept open forinspection for the Members at the Registered Office of the Company during the Company'sbusiness hours on any working day upto and including the date of the Annual GeneralMeeting or any adjournment or adjournments thereof.
CHANGES IN THE NATURE OF BUSINESS & MATERIAL CHANGES
The Company entered into a Business Transfer Agreement dated February 6 2017 withCravatex Brands Limited (CBL) for the sale and transfer of the Company's businessundertaking engaged in the business of import marketing distribution and servicing offitness equipment as well as through licensing arrangements with global brands thedesign sourcing and the marketing distribution and retail of footwear apparel andsporting goods together with associated employees assets and liabilities (Business
Undertaking) to Cravatex Brands Limited having become a wholly owned subsidiary of theCompany (Buyer) as an inseparable whole as a going concern on slump sale basis withoutvalues being assigned to the individual assets and liabilities in accordance with theprovisions of Section 50B read with Section 2(42C) of the Income-tax Act 1961 the lumpsum consideration for such sale and transfer being Rs. 326800000/- (Rupees Thirty TwoCrores and Sixty Eight Lacs Only) (determined by an independent valuer). The said lump sumconsideration has been discharged in full by CBL by issuance and allotment to the Companyof 3268000 equity shares of CBL at face value credited as fully paid.
The consolidated financial statements of the Company are prepared in accordance withthe relevant accounting standards viz AS-21 AS-23 and AS-27 issued by the Institute ofChartered Accountants of India and forms a part of this report.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the annual return in Form MGT-9 as requiredunder Section 92(3) of the Companies Act 2013 and Rule 12(1) of the Companies (Managementand Administration) Rules 2014 is included in this report as Annexure II and forms a partof this report.
Pursuant to the provisions of the Companies Act 2013 and Regulation 4(2) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 a structuredquestionnaire was prepared after taking into consideration the various aspects of theBoard functioning composition and the Board and its committee culture execution andperformance of specific duties obligations and governance.
The performance evaluation of the Independent Directors was completed. The performanceof the Chairman and Non-Independent Directors were carried out by the IndependentDirectors. The Board of Directors expressed their satisfaction with the evaluationprocess.
NUMBER OF BOARD MEEETINGS
The Company held 7 (seven) Board Meetings during the Financial Year 2016 - 17. Thesewere on May 27 2016 August 12 2016 August 26 2016 November 7 2016 February 22017 February 10 2017 and March 23 2017.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Details of loans guarantees and investments covered under section 186 of the CompaniesAct 2013 are given in the notes to the financial statement.
WHISTLE BLOWER POLICY
The Company has a whistle blower policy to report genuine concerns or grievances. Thewhistle blower policy has been posted on the website of the Company.
NOMINATION AND REMUNERATION POLICY
Pursuant to the provisions of the Companies Act 2013 and Regulation 19 of the SEBI(LODR) Regulations 2015 the Remuneration Policy has been formulated and adopted by theBoard. The details are as follows:
PURPOSE OF THE POLICY
(a) To provide guidelines to the Board while identifying persons for appointment asdirectors / for positions in senior management
(b) To identify and evaluate the suitability of persons for recommending them to theBoard for their appointment as directors including managing directors and executivedirectors as also persons who may be appointed in senior management positions.
(c) To recommend to the Board the Remuneration payable to the Directors Key ManagerialPersonnel and Senior Management.
The terms of remuneration shall be based keeping in view various aspects includingqualifications experience performance commitment leadership skills etc.
(d) To devise plans from time to time to motivate retain and promote talent so as toensure long term continuity of such personnel and in the process creating competitiveadvantage for the Company.
ROLE OF THE COMMITTEE
(a) To identify persons who are suitable for appointment as directors.
(b) To recommend the remuneration policy for the directors KMP and senior management.(c) To formulate the criteria for evaluation of Independent Directors and the Board; (d)To devise a policy on Board diversity.
(e) To disclose the remuneration policy and the evaluation criteria in its AnnualReport.
(f) To recommend Board about the appointment and removal of directors.
(g) While formulating such a policy the Committee shall ensure that:
the level and composition of remuneration is reasonable and sufficient toattract retain and motivate directors of the quality required to run the companysuccessfully;
relationship of remuneration to performance is clear and meets appropriateperformance benchmarks.
RELATED PARTY TRANSACTIONS
The Company sold and transferred its business undertaking engaged in the business ofimport marketing distribution and servicing of fitness equipment as well as throughlicensing arrangements with global brands the design sourcing and the marketingdistribution and retail of footwear apparel and sporting goods together with associatedemployees assets and liabilities to its wholly owned subsidiary M/s. Cravatex BrandsLimited (CBL) a related party u/s 188(1) of the Companies Act 2013 and Regulation 23 ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 on slump sale basis for lump sum consideration of Rs.326800000/-(Rupees Thirty Two Crores and Sixty Eight Lacs Only). The said lump sum consideration wasdischarged in full by CBL by issue and allotment to the Company of 3268000 equity sharesof CBL at face value of Rs.100/- each. The disclosure under Form AOC - 2 is included asAnnexure III and forms a part of this report.
Further there are no material related party transactions during the year under reviewwith the Promoters Key Managerial Persons and Senior Management Personnel. The Companyhas developed a related party transactions framework through standard operating proceduresfor the purpose of identification and monitoring of such transactions. All related partytransactions are placed before the audit committee and board for approval.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
There are no significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company's operations in future.
CORPORATE SOCIAL RESPONSIBILITY
Since the company has reported losses and not being the specified class of company theprovisions of Section 135 of the Companies Act 2013 were not applicable to the Company.
In terms of Section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company had appointed M/s. HemanshuKapadia & Associates Practising Company Secretary to conduct the Secretarial Auditfor the financial year 2016-17. The secretarial audit report is included as Annexure IVand forms a part of this report.
INTERNAL CONTROL SYSTEMS
Objective evaluation of adequacy and efficiency of internal controls and systems aredone by qualified audit firm and monitored closely by the top management. Present controlsystems are considered as adequate though constantly improved up on.
The risks that the Company is exposed to and the measures taken by the Company totackle the same are as follows:
|Sr. || || || |
| ||Risk Description ||Key Risk Matrix ||Mitigation Measure |
|No. || || || |
|1 ||Increase in cost of goods due to adverse movement of foreign exchange rates. ||Reduction in profit margin. ||Open position is monitored daily and hedging is done by way of forward cover. |
|2 ||Destruction of properties and assets due to fire etc ||Loss of assets resulting in financial loss. ||Comprehensive insurance is taken and monitored from time to time for adequacy. We have tied up with a corporate insurance consultant for all our insurance needs. |
|3 ||Termination of licenses/selling arrangements ||Discontinuation of business in related specified product ||1. FILA License: |
| || || ||A comprehensive document listing all compliance parameters with name of persons responsible is in place. |
| || || ||2. Johnsons Distribution Arrangement: Achieving of annual sales target is the main compliance parameter which is discussed with the licensor and complied with. |
There are no qualifications reservation adverse remark or disclaimer made by theStatutory Auditors and do not call for any explanation or comment under Section 134(1)(f)of the Companies Act 2013.
The Secretarial Auditor have mentioned in their Secretarial Audit Report that theCompany has appointed the Chief Financial Officer with a delay of 82 days after the expiryof six months from the vacancy created in the office of Chief Financial Officer sinceSection 203(4) of the Companies Act 2013 provides that if the office of anywhole-time key managerial personnel is vacated the resulting vacancy shall be filled-upby the Board at a meeting of the Board within a period of six months from the date of suchvacancy. The members are informed that Mr. Divakar Kamath was promoted and re-designatedas President Corporate Affairs of the Company w.e.f. December 7 2015 andaccordingly he ceased to be the Chief Financial Officer of the Company w.e.f. December
7 2015. Thereafter Mr. Divakar Kamath took the additional charge of Chief FinancialOfficer and was designated as President Corporate Affairs & CFO w.e.f August 26 2016as he was most qualified to hold this post.
M/s. S. P. Chopra & Co. (Registration No.101911W) Chartered Accountants willretire at the conclusion of this Annual General Meeting. In terms of the Companies Act2013 ("the Act") no Company shall appoint or re-appoint an audit firm as anAuditor for more than 2 terms of 5 consecutive years. On completion of the said tenurethe audit firm will not be eligible for re-appointment as auditor in the same Company for5 years. M/s. S. P. Chopra & Co. have completed their tenure of 10 consecutive yearswith the Company and the cooling period of 3 years. It is proposed to appoint M/s. GPS andAssociates Chartered Accountants Mumbai (Firm Regd. No. 121344W) as the StatutoryAuditors of the Company for a period of 5 years to hold office from the conclusion of the65th Annual General Meeting until the conclusion of the 70th Annual General Meetingsubject to ratification of their appointment at every annual general meeting of theCompany.
PREVENTION OF SEXUAL HARASSMENT
The Company is committed to provide a safe and conductive work environment to all womenemployees. The Company strive's hard to ensure that all women employees are treated withdignity and respect and are committed to providing a work environment free of sexualharassment. Pursuant to the Sexual Harassment of Women at Workplace (ProhibitionPrevention and Redressal) Act 2013 and rules made thereunder the Company has a Policyfor prevention of Sexual Harassment in the Company. This policy is applicable to allcategories of employees of the Company including permanent management temporary stafftrainees and employees on contract at its workplace.
During the financial year under review there were no cases filed pursuant to theSexual Harassment of Women at Workplace (Prohibition Prevention and Redressal) Act 2013.
Your directors wish to place on record their appreciation for the efforts hard workdedication and commitment put by employees at all levels as also for the valuable supportextended by the Members Bankers and other business associates.
| ||For and on behalf of the Board of Directors |
| ||Rajesh Batra |
| || |
Chairman & Managing Director
|Place : Mumbai || |
|Dated : May 29 2017 || |