ESKAY K'N'IT (INDIA) LIMITED
ANNUAL REPORT 2011-2012
The Board of Directors hereby presents the 25th Annual Report on the
business and operations of your Company along with the Audited Statements
of Accounts for the Financial Year ended 31st March, 2012.
Particulars 2011-12 2010-11
(Rs. in Lacs) (Rs. in Lacs)
Revenue from operations 1,05,153.42 93,015.07
Finance Cost 4,960.97 3,943.67
Depreciation and amortization Expense 8,179.22 7,855.16
Profit/(Loss) before exceptional and
extraordinary items and tax (6,329.59) 31.65
Exceptional items - -
Extraordinary items - -
Profit/(Loss) before tax (6,329.59) 31.65
Deferred Tax Assets 703.45 619.87
Provision for Taxation 0.00 6.31
Net Profit/(Loss) (5,626.14) 645.21
In view of Loss of the Current year, your Directors are unable to recommend
any dividend on the equity shares for the year under review.
REVIEW OF OPERATIONS:
During the year, the Revenue from operations of the Company has
substantially increased to Rs. 1,05,153.42 Lacs as against Rs. 93,015.07
Lacs in respect of the previous Financial Year ended 31st March, 2011,
registering a growth of around 13% over the previous Financial Year. The
Company has suffered Loss before Tax Rs. 6,329.59 Lacs in the financial
year ended 31st March, 2012 as against profit of Rs. 31.65 Lacs in the
previous financial year ended 31st March, 2011. The Company has Net Loss of
Rs. 5,626.14 Lacs after considering deferred tax of Rs. 703.45 Lacs as
against Net Profit of Rs. 645.21 Lacs in the previous financial year ended
31st March, 2011. However, there is no cash loss during the year.
CORPORATE DEBT RESTRUCTURING:
The Company has entered into the scheme of Debt Restructuring with the
present Consortium Lenders, as the Company has suffered huge losses during
the current year on account of volatility in the cotton prices, increase in
power cost and heavy burden of Rate of Interest (Interest Rate increased
from 11-12% to 15-17%) and the proposal for the same has been duly filed
with Corporate Debt Restructuring Cell.
In accordance with the provisions of the Companies Act, 1956 and Articles
of Association of the Company, Shri Mahesh Prasad Mehrotra and Shri Naresh
Chandra Sharma, Directors of the Company, retire by rotation and being
eligible, have offered themselves for re-appointment.
During the year, Ms. Mrinal Tayal, has resigned from the Directorship of
the Company w.e.f. 1st November, 2011. The Board of Directors place on
record the valuable services rendered by her and Contribution made by her
during her tenure as a Director, in the growth of the Company.
DIRECTORS' RESPONSIBILITY STATEMENT:
Pursuant to requirement under Section 217(2AA) of the Companies Act, 1956
with respect to Director's Responsibilities Statement, it is hereby
(i) That in the preparation of the annual accounts for the financial year
ended 31st March 2012, the applicable Accounting Standards had been
followed along with proper explanation relating to material departures;
(ii) That the Directors had selected such accounting policies and applied
them consistently and made judgments and estimates that were 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 statement of Profit or
Loss of the Company for the year under review;
(iii) That the Directors had taken proper and sufficient care for the
maintenance of adequate accounting records in accordance with the
provisions of the Companies Act, 1956 for safeguarding the assets of the
Company and for preventing and detecting frauds and other irregularities;
(iv) That the Directors had prepared the accounts for the financial year
ended 31st March 2012 on a 'going concern basis'.
(v) That the accounts have been prepared on the basis of Revised Schedule
VI to the Companies Act. Accordingly the previous years figures have
adjusted/regrouped/rearranged to confirm with the current year figures.
The composition of Audit Committee is in accordance with the clause 49 of
the Listing Agreement and the detailed information is given in the Report
on Corporate Governance.
SHARE TRANSFER AND INVESTOR GRIEVANCES COMMITTEE:
The composition of Shareholders'/Investor Grievance Committee is as given
in the Report on Corporate Governance.
REPORT ON CORPORATE GOVERNANCE:
Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a
Management Discussion and Analysis Report and a Corporate Governance Report
are made as a part of this Annual Report.
A Certificate from M/s. A. F. Khasgiwala, Practicing Chartered Accountants
regarding compliance of the conditions of Corporate Governance as
stipulated by Clause 49 of the Listing Agreement is attached to this
SAFETY, HEALTH AND ENVIRONMENT:
Sustained and meticulous efforts continue to be exercised by the Company at
all plants of the Company, towards greener production and environment
conservation. The Company perseveres in its efforts to indoctrinate safe
and environmentally accountable behaviour in every employee, as well as
vendors, by rigid compulsory annual training and refresher courses, as well
as frequent awareness programme. Mock drills of emergency preparedness are
regularly conducted at all the plants showing Company's commitment towards
safety, not only of its own men and plants, but also of the society at
Safety records, at all plants showed considerable improvement and accident
statistics showed downward trend. This was made possible by strict
adherence to laid down procedures and following of international
guidelines. Involvement of workers in all safety matters has been
encouraged by their participation in shop floor safety meetings. To achieve
the goals, environment protection systems and processes are well in place.
To meet the challenge of environment protection in a proactive manner,
unavoidable wastes are dealt with in the most efficient and scientific way.
The health of employees and the environment in and around the Plant area
have been given due care and attention. The Company continued to comply
with the prescribed industrial safety environment protection and pollution
control regulation at its production plant, through periodic checks of the
system involved and constant monitoring to meet the standards set by the
pollution control authorities, etc. All the mills of the Company are eco-
friendly and do not generate any harmful effluents. They have facilities
for captive power generation as a stand-by arrangement, to meet any
contingency. Safety devices have been installed wherever necessary,
although both the spinning and knitting activities are known to be quite
safe and free from usual hazards of water and air pollution.
INDUSTRIAL RELATIONS & HUMAN RESOURCES MANAGEMENT:
The Company is of firm belief that good Human Resource Management would
ensure success through high performance. HR strategy and plans of the
Company are deeply embedded with the organizational goals. In order to
enhance the manpower productivity the goal is set to increase the
production capacity of the various plants and rationalize the manpower
through scientific study. All the operational goals of the top management
emanate from the business plan. The goals of MD are shared with his
subordinates who in turn share their goal with their respective
subordinates and so on. Regular visits by HR team are being made to all the
plants to meet the employees and also interaction meetings are conducted to
get their feed back, based on which HR policies are improved continuously.
The process has resulted in better employee relationship.
The Company lays due emphasis on all round development of its human
resource. Hence training of the employees is aimed at systematic
development of knowledge, skills, aptitude and team work. Training is
designed for the development of personal skills necessary for the
performance of the present job and to prepare them for future growth.
Individual development is given top priority to groom high caliber
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS
Information in accordance with the provisions of Section 217(1)(e) of the
Companies Act, 1956, read with the Companies (Disclosure of Particulars in
the Report of Board of Directors) Rules, 1988, regarding conservation of
energy, technology absorption and foreign exchange earnings and outgo are
given in the Annexure forming part of this Report.
CORPORATE SOCIAL RESPONSIBILITY:
The Company, in keeping with its Corporate Social Responsibility policy,
focuses on healthcare, education, and other social initiatives. We continue
to strive for sustainability in our operations by promoting the integration
of CSR into our business strategy as well as our everyday functioning.
During the year under review, we focused on providing residence to our
labourers along with school & educational facilities to their children and
also maintaining consistent duty towards fellow employees of our
The Directors are happy to state that the relations between the Company and
its Employee remained cordial throughout the year. The Directors
acknowledge and express their appreciation for the contributions made by
the employees at all levels. Focused attention was given for knowledge
updating and application of new technologies available to reduce costs and
to meet the business challenges.
None of the employees drew remuneration of Rs. 60,00,000/- or more per
annum/Rs. 5,00,000/- or more per month during the year. This information is
furnished as required under Section 217(2A) of the Companies Act, 1956,
read with the Companies (Particulars of Employees) Rules, 1975.
The Company has not invited/received any Fixed Deposits from the Public
during the year under report.
The properties/assets of your Company are adequately insured.
The Central Government's Cost Audit Committee Order specifies audit of Cost
Accounting Records for certain products of the company every year. The
Board of Directors, subject to the approval of the Central Government, have
appointed M/s J. K. Kabra & Co., Cost Accountants, as Cost Auditors to
carry out this audit in respect of manufacture of textile products for the
year ending 31st March 2012.
M/s. A. F. Khasgiwala & Co., Chartered Accountants, the Statutory Auditor
of the Company, hold office till the conclusion of the ensuing Annual
General Meeting and are being eligible for re-appointment. The Company has
received a letter from M/s. A. F. Khasgiwala & Co. to the effect that their
re-appointment as Statutory Auditors, if made, would be within the limits
under Section 224(1B) of the Companies Act, 1956.
The Directors have pleasure in recording their appreciation of the
assistance, co-operation and support extended to your Company by the
shareholders, all Government Authorities, Financial Institutions, Banks,
Consultants, Solicitors, Customers.
By the order of the Board of Directors
Place: Mumbai Navin Kumar Tayal
Date : 27th April, 2012 Chairman
ANNEXURE TO THE DIRECTORS' REPORT:
Information as per Section 217(1)(e) of the Companies Act, 1956, read with
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988 and forming part of the Directors' Report for the year 2011-
I. CONSERVATION OF ENERGY:
a) Energy conservation measures taken:
The Company has been making concerted efforts for enhancement in capacity
utilization, cost competitiveness and quality through systematic process
monitoring and adherence to technological norms. Sophisticated instruments
are used for regulation and adjustment as per parameters. Efforts are also
made for up gradation of the quality of the Plant Operation. Utilities are
being combined for effective energy conservation.
b) Additional Investments and Proposals being implemented for reduction of
consumption of energy:
Studies are being made to reduce energy consumption and make suitable
investments in this area, if necessary.
c) Impact of the measures (a) & (b) above for reduction of energy
consumption and consequential impact on the cost of production of goods:
The Company has economized considerably the cost of power despite steep
hike in the tariffs and is constantly exploring avenues for cost saving as
an on-going process.
Total energy consumption and energy consumption per unit of production in
accordance with Form 'A' of the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, in respect of Industries
specified in the Schedule thereof:
Year ended Year ended
A. Power and Fuel Consumption:
1. Units (KWH in Lacs) 369.24 178.08
2. Total Amount (Rs. in Lacs) 2259.78 731.32
3. Rate/Unit (Rs.) 6.12 4.25
(b) Own Generation (through Diesel
1. Units (KWH in Lacs) 471.68 885.95
2. Units per Liter of fuel 3.80 3.77
3. Cost per unit (Rs.) 11.01 6.57
2. Coal - -
3. Furnace Oil - -
4. Others/Internal Generation/Steam - -
B. Consumption per unit of production
(Product: Yarn & Fabric)
1. Electricity (KWH per tone) 4238.00 2035.52
2. Coal (Kgs.) - -
3. Furnace Oil (Ltrs.) - -
4. Steam (Tones) - -
Note: Since the Company manufactures different qualities of fabrics/yarns
with product-mix changing significantly, there are no specific norms for
per unit of production.
II. TECHNOLOGY ABSORPTION:
Efforts made in technology absorption in prescribed Form 'B':
1. Research and Development (R & D)
a) Specified areas in which R & D : R & D activities are being carried out
by the Company continuously activities
are carried out by the Company to
produce better quality of yarn and
b) Benefits derived as a result of : As a result of R & D activities, the
the above Company has been able to produce
quality yarn and fabrics conforming
to international standards.
c) Future Plan of Action : Efforts aimed at cost reduction,
improvement in quality of products
and development of new process will
d) Expenditure on R & D : Expenditure on R & D is being booked
under the respective heads in the
Profit & Loss Account as no separate
account is maintained.
2. Technology Absorption, Adaption : The Company has not utilized any
and Innovation imported technology.
III. FOREIGN EXCHANGE EARNINGS AND OUTGO:
a) Activities relating to export : The Company is exploring avenues to
Markets for products and services export its premium quality yarns.
and export plan
b) Foreign Exchange Outgo (Rs. in Lacs) - -
c) Foreign Exchange earned (Rs. in Lacs) - -
For and on Behalf of the Board of Directors
Place: Mumbai Navin Kumar Tayal
Date : 27th April, 2012 Chairman
MANAGEMENT DISCUSSION AND ANALYSIS
The Management of ESKAY K'n'IT (INDIA) LIMITED presents its Analysis report
covering performance and outlook of the Company. The Report has been
prepared in compliance with the requirement of Corporate Governance as laid
down in the Listing Agreement. The Management accepts responsibility for
the integrity and objectivity of the financial statements. However,
investors and readers are cautioned that this discussion contains certain
forward looking Statements that involve risk and uncertainties.
INDUSTRY STRUCTURE AND DEVELOPMENTS:
The Textile Industry occupies a unique place in our Country by contributing
around 4% of India's GDP, 14% of the Country's Industrial Production, 18%
of Industrial employment and 17% of the export earnings. It is the second
largest provider of employment after agriculture. It provides direct
employment to over 35 million people and indirect employment to around
another 60 million people in the Country.
The Industry contributes around 25% share in the world trade of cotton
yarn. India is the largest exporter of yarn in the international market and
has a share of 25% in world cotton yarn export market. India contributes
for 12% of the world's production of textile fibers and yarn. Indian
textile industry is second largest after China in terms of spindlage, and
has share of 23% of the world's spindle capacity. India has around 6% of
global rotor capacity.
The industry is expected to grow from the present US$ 70 billion to US$ 220
billion by 2020; India's textile export is expected to reach US$ 25 billion
The availability of concessional loans under the Technology Upgradation
Fund Scheme (TUFs) and growing demand for Value Added lifestyle-driven
retail products are other contributing factors which encourage new
investment in up gradation of machineries.
India has the potential to increase its textile and apparel share in the
world trade from the current level of 4.5 per cent to 8 per cent and reach
US$ 80 billion by 2020.
India is the second largest producer of cotton in the world. The
International Cotton Advisory Committee (ICAC) noted that India has
produced 4.74 metric tones (MT) of cotton during the year. India's
production next season is likely to touch 5.61 MT. Cotton is the
predominant fabric used in the Indian industry, accounting for nearly 60
per cent of production. The average yield of cotton per hectare in Indian
is about 400 kilograms which is considered low. During the year India
produced total 32 million bales, out of which 10.5 million has been
produced in Gujarat.
The Spinning Industry in India is on set to hit the global market with its
enthusiasm and consistency in work. The spinning sector in India is
globally competitive in terms of variety, process and production quantity.
It has already reached a phenomenal status in India by beating the
obstacles that caused a downfall since past few years and is now on its way
to cover a wider area in the spinning sector. India has about 40 million
spindles (23 per cent of the world).
Weaving and knitting converts cotton, manmade, or blended yarns into woven
or knitted fabrics. India's weaving and knitting sector remains highly
fragmented, small-scale, and labour intensive.
This sector consists of about 3.9 million handlooms, 380,000 power loom
enterprises that operate about 1.7 million looms, and just 137,000 looms in
the various composite mills. Power looms are small firms, with an average
loom capacity of four to five owned by independent entrepreneurs or
weavers. Modern shuttleless looms account for less than 1 percent of loom
Knitting units are successful in export channels. Some of the prominent
weaving/knitting clusters include Tirupur in Tamil Nadu and Ludhiana in
i) OPPORTUNITY AND THREATS:
The textile industry is undergoing a major reorientation towards non-
clothing applications of textiles, known as technical textiles, which are
growing roughly at twice rate of textiles for clothing applications and now
account for more than half of total textile production. Technical textiles
segment is expected to employ over 3,00,000 additional workers increasing
the total employment to 1.2 million by 2012. The Government of India has
set up 4 Centres of Excellence for Meditech, Agrotech, Geotech and Protech
group of technical textile providing one-stop facility for testing, human
resource development and research and development.
The present global economic scenario provides ample opportunities for
strong integrated textile companies such as like your company. Over the
years the Company has built up capacities of scale by installing state-of-
art production facilities. By reinforcing its position across the value
change and presenting customers with diversified range of products, the
company has developed sustainable business model with strength and
resilience to combat any down turn in demand.
* Self reliant industry producing the entire supply-chain i.e., cotton and
* Highly competitive spinning sector.
* Large and growing domestic market.
* Second-largest textile producer in the world.
* Abundant Raw Material availability that helps industry to control costs
and reduces the lead-time across the operation;
* Low labour cost and availability of skilled and technical labour force.
* Excellence in fabric and garment designing.
* Vast textile production capacity and efficient multi-fiber raw material
* Availability of large varieties of cotton fiber and has a fast growing
synthetic fiber industry;
* Promising export potential
* Small size and technologically outdated plants result in lack of
economies scale, low productivity and week quality control.
* Cotton availability is vulnerable to erratic monsoon and low per hectare
* With the exception of spinning, other sectors are fragmented. Sectors
such as knitted garments still remaining as a SSI domain
* Labour laws and policies lack reforms.
* Infrastructure bottlenecks for handling large volumes.
* India lacks in trade pact memberships, which leads to restricted access
to the other major markets.
* Huge unorganized and decentralized sector.
* End of quota system and full integration of the textile industry.
* Low per-capita consumption of textile indicating significant potential
* Increased use of CAD to develop designing capabilities and for developing
* Shift in domestic market towards readymade garments, and domestic textile
consumption increasing with growing disposable income.
* Cheaper production and marketing costs and enormous opportunities have
tempted Taiwanese Companies to work on Joint Ventures with the Indian
Companies specially for the manufacture of manmade fabrics.
* Survival of the fittest-in term of quality, size delivery and cost. There
is an increased global competition in the post 2005 trade regime under WTO.
* Pricing pressures.
* Stiff competition from other Asian countries.
* Increase in regional trade could reduce share of market opened for India,
China and other countries.
* High production cost with respect to other Asian competitors.
ii) GOVERNMENT INITIATIVES:
The Government of India has promoted a number of export promotion policies
for the textile sector in Union Budget 2011-12 and Foreign Trade Policy
2009-14. This also includes the various incentives under Focus Market
Scheme and Focus Product Scheme; broad basing the coverage of Market Linked
Focus Product Scheme for textile products and extension of Market Linked
Focus Product Scheme etc. to increase the Indian Shares in the global trade
of textiles and clothing. The various Schemes and promotions by the
Government of India are as follows:
1. It has allowed 100 per cent Foreign Direct Investment (FDI) in textiles
under the automatic route.
2. Welfare Scheme: The Government has offered health insurance coverage and
life insurance coverage to 161.10 million weavers and ancillary workers
under the Handloom Weavers' Comprehensive Welfare Scheme, while 7,33,000
artisans were provided health coverage under the Rajiv Gandhi Shilpi
Swasthya Bima Yojna.
3. E-Marketing: The Central Cottage Industries Corporation of India (CCIC),
and the Handicrafts and Handlooms Export Corporation of India (HHEC) have
developed number of e-marketing platforms to simplify marketing issues.
Also, a number of marketing initiatives have been taken up to promote niche
handloom and handicraft products with the help of 600 events all over the
4. Skill Development: As per the 12th Five Year Plan, the Integrated Skill
Development Scheme aims to train over 26,75,000 people within next 5 years
(this would cover over 2,70,000 people during the first two years and
remaining in next three years). This scheme would cover all sub sectors of
the textile sector such as Textiles and Apparel; Handicrafts; Handlooms;
jute; and Sericulture.
5. Credit Linkages: As per the Credit Guarantee program, over 25,000
Artisan Credit Cards have been supplied to artisans, and 16.50 million
additional applications for issuing credit cards have been forwarded to
banks for further consideration with regards to the Credit Linkage scheme.
6. Financial package for waiver of over dues: The Government of India has
announced a package of US$ 604.56 million to waive overdue loans in the
handloom sector. This also includes the waiver of overdue loans and
interest till 31st March, 2010, for loans disbursed to handloom sector.
This is expected to benefit at least 3,00,000 handloom weavers of the
industry and 15,000 cooperative societies.
7. Textile Parks: The Indian Government has given approval to 40 new
Textile Parks to be set up and this would be executed over a period of 36
months. The new Textile Parks would leverage employment to 4,00,000 textile
workers. The product mix in this parks would include apparels and garment
parks, hosiery parks, silk parks, processing parks, technical textiles
including medical textiles, carpet and power loom parks.
iii) AREA OF CONCERNS:
The major areas of concerns are however as follows:
1. Certain Regional trade blocks and trade agreements can change
2. Enhancement of Preferential Access Programme for select countries. For
instance, under the new GSP scheme, formulated by the EU, India's textile
sector has been graduated while those from Pakistan and other countries
(excluding China) have been included.
3. Evolution of Non Tariff Barriers in the form of packaging/labelling
requirements, customs and other formalities; environmental safeguards,
sanitary and phyto-sanitary measures.
4. The developed countries continue to seek quantitative restrictions on
textiles and clothing. Their imports show that quotas are still being used
as an instrument of restraining growth. The recent settlement arrived at by
the European Commission under intense domestic pressure undermines the free
play of market forces.
The Company has suffered huge losses during the current year on account of
volatility in the cotton prices, increase in power cost and heavy burden of
Rate of Interest (Interest Rate increased from 11-12% to 15-17%) and
therefore, the Company has entered into the scheme of Corporate Debt
Restructuring with the present Consortium Lenders and the proposal for the
same has been duly filed with Corporate Debt Restructuring Cell.
v) RISK AND CONCERN:
There are no major risk and concern to the Company's operation except from
the competitive pricing pressure from cheaper imports, unethical
competitions from sick units, free market policies and removal of
vi) INTERNAL CONTROL SYSTEM:
The Company has been marinating a well-established procedure for internal
control system. For the purpose financial control, Company is adequately
staffed with experienced and qualified personnel at all levels and play an
important role in implementing and monitoring the statutory and Internal
policy control environment. There has been a review conducted by M/s. B.
James & Co., the Internal Auditor, about the financial and operating
controls. The Audit Committee of the Company reviews the adequacy of
internal audit functions.
vii) FINANCIAL PERFORMANCE VS. OPERATIONAL PERFORMANCE:
During the year, the Turnover of Company has substantially increased to
Rs.105,153.42 Lacs as against Rs. 93,015.07 Lacs in respect of the previous
Financial Year ended 31st March, 2011, registering a growth of around 13%
over the previous Financial Year. The Loss before Tax is Rs. 6,329.59 Lacs
in the financial year ended 31st March, 2012 as against profit of Rs. 31.65
Lacs in the previous financial year ended 31st March, 2011. The Company has
Net Loss of Rs. 5,624.14 Lacs after considering deferred tax of Rs. 703.45
Lacs as against Net Profit of Rs. 645.21 Lacs in the previous financial
year ended 31st March, 2011.
viii) DEVELOPMENT IN HUMAN RESOURCES/INDUSTRIAL RELATION FRONT:
As part of HR-initiatives, thrust is given for Leadership Development to
meet the aspirations and long-term goals of the Company. The Company has
also laid qualitative objectives to maximize overall growth. Emphasis was
placed on building a cohesive workforce to maximize returns to all
stakeholders. Focused attention was given for knowledge updating and
application of new technologies available to reduce costs and to meet the
The focus of Human resource is on building and developing intellectual
capital through innovative ideas. The industrial relation climate of the
Company continues to remain harmonious with focus on quality and safety.
ix) RESEARCH AND DEVELOPMENT:
Increased globalization has made the marketing of products and retention of
customers highly competitive. The need of the hour is total customer
satisfaction and value for money from the products marketed. Keeping this
objective as paramount, the research and development activities were
focused into prompt attention to major customer complaints/suggestions in
order to retain/enhance customer satisfaction. The Company has started
launching products of better quality and new look as per customer
x) CAUTIONARY STATEMENT:
Statements Made in this Report may be 'forward looking statements' within
the meaning of applicable securities laws and regulations. These statements
are based on certain assumptions and expectations of the future events that
are subject to risks and uncertainties. Actual future results and trend may
differ materially from historical results, depending on variety of factors
like changes in economic conditions affecting demand/supply, price
conditions in which the Company operates, Government regulations, tax laws
and other statutes and incidental factors.