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Gokak Textiles Ltd.

BSE: 532957 Sector: Industrials
NSE: N.A. ISIN Code: INE642I01014
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Sell Price 39.00
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OPEN 38.05
CLOSE 40.00
52-Week high 54.20
52-Week low 32.25
Mkt Cap.(Rs cr) 25
Buy Price 38.40
Buy Qty 62.00
Sell Price 39.00
Sell Qty 26.00

Gokak Textiles Ltd. (GOKAKTEXTILES) - Director Report

Company director report

Dear Members

Your Directors submit their Report and the Audited Financial Statements for theFinancial Year (FY) ended March 31 2016 covering a period of six months ending on thesaid date.

Financial Results

(Rs. In Crores)

Particulars Standalone Consolidated
FY 15-16 FY 14-15 FY 15-16 FY 14-15
Revenue from Operations and
Other Income (Total Revenues) 105.59 331.59 106.11 336.54
Earnings before Interest
Depreciation & Taxation (EBIDT) -9.32 -18.50 -7.66 -3.56
Profit / (Loss) after Interest and
before Depreciation Exceptional
Items & Tax -19.46 -40.45 -23.12 -35.93
Depreciation 3.55 7.59 4.07 8.63
Profit / (Loss) after Depreciation
before Exceptional Items and Tax -23.01 -48.04 -27.19 -44.56
Exceptional Items -
Income/(Expense) 0.00 0.00 0.00 0.00
Profit / (Loss) before Tax (PBT) -23.01 -48.04 -27.19 -44.56
Profit / (Loss) after Tax (PAT) -23.86 -45.48 -25.23 -43.39
Minority Interest -1.17 -4.64
Profit / (Loss) after Tax (PAT) and
after Minority Interest -24.06 -38.75

The Financial Results for FY 2015-16 are drawn for the six months period ended March31 2016. This change has been effected in order to align with the definition of financialyear as per the provision of Section 2(41) of the Companies Act 2013 and hence theprevious year's figures that covered a period of full twelve months are not comparable.The Company will revert to a full twelve months accounting year from April 1 2016 andthereafter.

The consolidated financial statements for the FY 2015-16 of the Company and itssubsidiary company together with the Auditors Report thereon are attached.

Shifting of Registered Office

During the year under review the Registered Office of the Company was shifted from No.24 29th Main BTM Layout II Stage Bangalore - 560 076 to #1 2nd Floor Ideal Homes nearJayanna Circle 12th Cross Rajarajeshwari Nagar Bangalore- 560 098 with effect fromFebruary 2 2016.

Share Capital and Preference Shares

During the year under review the Company has increased the Authorised

Share Capital from Rs. 27 crores to Rs. 77 Crores.

The Paid up Share Capital of the Company has been increased from Rs. 264993080 toRs. 464993080 pursuant to allotment of two crores (number of shares) Non-cumulativeNon-convertible Redeemable Preference Shares of Rs.10 each aggregating to Rs.20 crores ona private placement basis to Shapoorji Pallonji and Company Private Limited Promoters ofthe Company.

During the year under review the Company has not issued any shares with differentialvoting rights or 'sweat equity shares' and has not granted any stock options. As at March31 2016 none of the Directors of the Company hold shares in the Company.

Dividend and Transfer to Reserves

In view of the losses during the current year the Board of Directors regret theirinability to declare dividend.

No amount was transferred to the reserves during the year.

Material changes and commitments

During the year under review there was an illegal flash strike by certain workmen as aresult there was a complete stoppage of production. The Company in the interest of safetyof the employees/workmen equipment raw material and other properties of the Company haddeclared a lockout on March 17 2016. The said lockout was lifted on May 13 2016. Thesaid strike and subsequent lockout has affected the financial position of the Companyduring the year under review.

Management Discussion and Analysis Report

Industry Structure and Development:

The Indian Textiles industry is extremely varied with the hand-spun and hand-wovenTextiles sectors at one end of the spectrum while the capital intensive sophisticatedmills sector at the other end of the spectrum. The decentralized power looms/ hosiery andknitting sector form the largest component of the Textiles sector. The close linkage ofthe Textile industry to agriculture (for raw materials such as cotton) and the ancientculture and traditions of the country in terms of Textiles make the Indian Textiles sectorunique in comparison to the industries of other countries. The Indian Textile industry hasthe capacity to produce a wide variety of products suitable to different market segmentsboth within India and across the world.

India's Textiles sector is one of the oldest industries in Indian economy dating backseveral centuries. It is the third largest producer and exporter in the world after China.Even today Textiles sector is one of the largest contributors to India's exports withapproximately 11 per cent of total exports. The Textiles industry is also labour intensiveand is one of the largest employers.

The future for the Indian Textile industry looks encouraging in the long term buoyedby both strong domestic consumption as well as export demand. With consumerism anddisposable income on the rise the retail sector has experienced a rapid growth in thepast decade with the entry of several international players. The organised apparel segmentis expected to grow at a Compound Annual Growth Rate (CAGR) of more than 13 per cent overa 10-year period. Textile and apparel exports from India are estimated to increase US $ 65billion by 2016-17.

There is optimism in the revival of the global economic outlook in the coming yearsthough this view is not presently supported by economic fundamentals driven by highereconomic growth in the advance economies and constrained by moderate growth in emergingmarkets.

The volume growth in the industry has been quiet modest over the past few years. Indianyarn production is at 7 million tons per annum and growing at around 3% per annum. Textileindustry continues to be the second largest employer after agriculture providing directemployment to 45-50 million people and indirect employment to another 50-60 millionpeople. Labour forms a significant part of the cost of manufacture and hence theperformance of this sector is very much dependent on various labour policies.

Opportunities and Threats:

The Textile Policy recently announced by Central Government will strengthen employmentin the country. The policy is aimed at creating one crore jobs over the next 3 yearsfollowing labour friendly measures such as initiation of fixed term employment andenhancing duty drawback to push Textile and apparel exports. The policy aims to increaseexports by $30 billion for which the Government will invest around Rs. 74000 Crores inthe Textiles & Apparels sector over the next three years. The new policy is expectedto provide more employment in the garment sector and will give a boost to spinning mills.The recently announced Rs 6000 crore Textiles package that envisages significantflexibility in labour laws is part of a larger policy for the sector which will boostexports and generate employment.

The Indian Textile industry has various opportunities like technical Textiles productdevelopment and diversification Foreign Direct Investment and brand recognition.Technical Textiles offer the opportunity to the Indian Textile industry to maintain thepresent current growth and flourish in near future.

China is the biggest threat to the Indian Textile industry in the global market. Indiaalso has a threat from low cost producing countries like Pakistan and Bangladesh which mayhinder India's exports demand in the future. The challenges of availability of Cottonenergy and manpower at competitive price will continue to be a challenge. In view ofthis your Company will continue to put extra efforts in augmenting the labour shortagesand conserving the energy which will result into high utilisation consequently giving riseto overall contributions.

The average prices for fibre are also likely to stay higher in FY 2017 as compared tothe previous year which will also support the growth in value of Textile exports. Whilethe volume growth is positive however yarn export volumes may also come under pressuredue to the recent spurt in domestic cotton prices.

Segment-wise product-wise performance:

During the period the Company has developed several new products. In particularcompact yarn fine counts for fine shirting and saree segments were successfullyintroduced in to the market. Specialty yarns like 100% polymultifold yarn for industrialapplication PVA- HygroyarnSlub grindle fancy yarn TFO dyed grindle yarn were introducedfor home furnishing segment. The sale Dyed Yarn remains consistent. Export to the MiddleEast Europe South Africa has seen steady demand. Melange yarns for sportswear andundergarment manufacturing industry were introduced successfully and well accepted by themarket.

Business outlook:

The Company has been taking all efforts to focus on the production and marketing ofthose products that have better demand from Domestic and International market.

Your company has initiated and exploring the possibilities to increase

Yarn trading on a large scale in coming years.

Risks and Concerns:

Risk management process includes identification of risks mitigation mechanismmeasurement of risks along with key indicators and monitoring them on periodical basis. ACompany-wide awareness of risk management policies and practices is being inculcated tominimize the adverse effect of risks on the operating results and the subject ofmanagement of risks is being approached in a planned and co-ordinated manner. The Companyis accelerating this process by moving up the value chain by well researched and designedproducts. Company has taken several steps to introduce high performance fibres to move upin the value chain and in-house research in developing these products commercially

Internal Control Systems and their adequacy:

The Company has an Internal Control systems developed over years that ensures that alltransactions are satisfactorily recorded and reported and all assets are protected againstloss from an unauthorized use or otherwise. The internal control systems are supplementedby an internal audit system carried out by independent firms of Chartered Accountants andare periodically reviewed by the management. The findings of such Internal Audits areaddressed through suitable corrective measures. The Audit Committee of the Board meets atregular intervals and advises on significant issues raised by both the Internal Auditorsand the Statutory Auditors. The process of internal control systems statutorycompliance risk analysis information technology and its management are woven together toprovide a meaningful support to the management of the business. The system adoptedespecially relating to internal control systems are adequate and commensurate with thenature of its business and size of its operations though continues efforts are being madeto strengthening the same.

M/s Kalyaniwalla & Mistry the statutory auditors of the Company have audited thefinancial statements and has issued report inter alia on the internal controls relevant topreparation and fair presentation of the financial statements which in their opinion isadequate and commensurate with the size of the business.

Human Resources / Industrial Relations

Material developments in Human Resources / Industrial Relations front:

Hiring talent for core industry like Textile is becoming more difficult and moreparticularly for spinning industry like our company. Therefore the Company is focussingon nurturing and developing its human assets to upgrade skill and competency level throughthe process of training and provide them opportunity to take higher responsibilities.Performance appraisal scheme reward and recognition policy career plan succession planare some of the initiative undertaken by company for retaining and developing talent.

On the Industrial Relations front the company is passing through critical phase ofindustrial unrest. Since there are various facets to this localised dispute includingsocial political and cultural complexities the company is trying its level best to reachto an amicable solution to the present dispute looking at the long term businessobjectives.


During the year under review the Company has not accepted any deposits within themeaning of Section 73 of the Companies Act 2013 and The Companies (Acceptance ofDeposits) Rules 2014.

Particulars of loans guarantees or investments under Section 186

Particulars of Loans Guarantees or Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.

Directors and Key Managerial Personnel

As per provisions of Section 152 (6) of the Companies Act 2013. Mr. Ashok Barat (DIN00492930) is due to retire by rotation at the ensuing Annual General Meeting and beingeligible seek re-appointment.

Mr. Sachin Kulkarni Whole time Director resigned from the services of the Companywith effect from May 16 2016

The Board condoles the sad demise of Mr. K. Ramananda Pai Company Secretary of theCompany on February 16 2016.

The Board of Directors places on record their sincere appreciation for the valuableservices rendered by Mr. Sachin Kulkarni and late Mr. K Ramananda Pai to the Board and theCompany during their association with the Company.

Mr. Vikram V. Nagar (DIN 07526281) was appointed as an Additional Director and subjectto the approval of the shareholders the Whole time Finance Director with effect from May27 2016

Mr. Mohan Ketkar was appointed Company Secretary and Compliance Officer of the Companywith effect from July 8 2016.

Mr. Ramesh R. Patil (DIN 07568951) was appointed as an Additional Director and subjectto the approval of the shareholders Chief Executive Officer & Managing Director witheffect from July 18 2016.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet with the criteria of Independence as prescribed both under theCompanies Act 2013 and Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015. Independent Directors are familiar with theirroles rights and responsibilities in the Company.

The disclosures required pursuant to Regulation 36 (3) of the Securities and ExchangeBoard of India (Listing Obligations and Disclosure Requirements) Regulations 2015 aregiven in the Notice of the Annual General Meeting forming part of the Annual Report anddisclosure pursuant to Schedule V Part II proviso of Section II B(iv)IV of the CompaniesAct 2013 and Schedule V of Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 forms part of the report.

Meetings of the Board

The Board met at least once in each quarter and 6 (six) meetings of Board were heldduring the year and the maximum time gap between two Board meetings did not exceed thetime limit prescribed under the Companies Act 2013. The details have been provided in theCorporate Governance Report.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 and Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardhas carried out an annual performance evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Audit Committee Nominationand Remuneration Committee Stakeholders Relationship Committee. In a separate meeting ofIndependent Directors performance of Non-Independent Directors of the Board as a wholeand the performance of the Chairman were evaluated.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed and adopted a policy for selection and appointment of Director Senior Managementand their remuneration. Remuneration Policy of the Company acts as a guideline fordetermining inter alia qualifications positive attributes and independence of aDirector matters relating to the remuneration appointment removal and evaluation ofthe performance of the Directors Key Managerial Personnel and Senior Managerialpersonnel.

Nomination & Remuneration Policy is annexed as Annexure "III" tothis Report.

Disclosure as required under section 197C of the Companies Act 2013 read with rule 5of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 areAnnexed as Annexure 'IV' to this Report.

Details of Subsidiary/Joint Ventures/Associate Companies

Subsidiary Company : Gokak Power & Energy Limited (GPEL)

The Company is engaged in generation transmission distribution trading ofhydro-power and other renewal and non-renewal sources of energy. A significant portion ofthe power generation is used for captive consumption of the Holding Company.

The Audited Financial Statements for the Financial Year (FY) (six months) ended March31 2016 together with the Auditors' Report along with the Report of Board of Directors ofGokak Power & Energy Ltd. for FY 2015-16 are attached separately to this AnnualReport.

During the year under review (Six Months) the revenues from operation and other incomewere Rs. 3.38 Crores as against Rs. 19.11 Crores for FY 2014 -15 (Twelve Months). TheEBIDTA for FY 2015-16 (Six Months) were Rs. 2.58 Crores as against Rs. 16.24 Crores for FY2014 -15 (Twelve Months).

The Financial Statements for FY 2015-16 are drawn for the six months period ended March31 2016. This change has been effected in order to align with the definition of financialyear as per the provision of Section 2(41) of the Companies Act 2013 and hence theprevious year's figures that are for a twelve months period is not comparable. The Companywill revert to a full twelve months accounting year from April 1 2016 and thereafter.

While preparing Consolidated Financial Statements of the Company the financials ofGPEL have been consolidated; this forms part of the Annual Report.

Details of GPEL are set out in the statement in Form AOC-1 pursuant to Section 129 ofthe Companies Act 2013 and are attached herewith as Annexure I to this Report.

The Company does not have any joint ventures/associate companies.

Auditors and Auditors Report

Statutory Auditors


The Shareholders of the Company at their 8 Annual General Meeting (AGM) held onDecember 29 2014 had appointed Messrs. Kalyaniwalla & Mistry Chartered Accountantsas Statutory Auditors of the Company until the conclusion of 11th AGM to be held in theyear 2017 subject to ratification of their appointment by the Shareholders at every AGM.

Messrs. Kalyaniwalla & Mistry have under Section 139(1) of the Companies Act 2013and Rules framed thereunder furnished a certificate of their consent and eligibility forappointment.

The ratification of appointment of Auditors by the shareholders is sought at theensuing AGM. The report of the Statutory Auditors forms part of the Annual Report.

The Auditors' Report does not contain any qualification. Notes to Accounts and Auditorsremarks in their report are self-explanatory and do not call for any further comments.

Cost Auditors

As per the requirements of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 the cost accounts of the Company arerequired to be audited by a Cost Accountant. The Board of Directors of the Company haveon the recommendation of the Audit Committee appointed Messrs. A G Anikhindi & Co.Cost Accountants as Cost Auditors for the financial year 2015-16 on a remuneration of Rs.3.00 lakhs plus out of pocket expenses. As required under the Companies Act 2013necessary resolution seeking Shareholders ratification for the remuneration to CostAuditor is included in the Notice convening the 10th Annual General Meeting of theCompany.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Kiran Desai & Associates Company Secretaries to conduct Secretarial Auditof the Company. The Report of the Secretarial Auditor is annexed herewith as

Annexure V.

Corporate Social Responsibility

The Board of Directors of the Company has constituted a Corporate Social ResponsibilityCommittee in compliance with Section 135 of the Companies Act 2013. The Company is notrequired to undertake any project under the provisions of the Companies Act 2013. Howeverthe Company is spending on afforestation schools and hospitals and continued to supportcauses of public utility both directly and indirectly in the field of education medicalrelief relief of poverty and promotion of sports and art. The Company is re-cycling allthe process waste and manufacture quality yarns and other products for both local andexport markets which greatly helped in reduction of carbon-emission. The Company hasalways strived to increase its output to input ratio which once again reducescarbon-emission.

Vigil Mechanism/ Whistle Blower Policy

The Company has Whistle Blower Policy/Vigil Mechanism to deal with instances of fraudand mismanagement if any. The policy is also available on the website of the Company.

Extract of Annual Return

The details forming part of the extract of the Annual Return in Form

MGT-9 is annexed herewith as Annexure VI forms part of this Report.

Particulars of contracts or arrangements with related parties

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of business. There were no materiallysignificant related party transactions made by the Company with the Promoter DirectorsKey Managerial Personnel or the designated persons which may have a potential conflictwith the interest of Company at large except power purchase from the subsidiary companyfor captive consumption and sale.

All related party transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained for transactions which are of aforeseen and repetitive nature and are incurred in the ordinary course of business. Thetransactions entered pursuant to the omnibus approval so granted are placed before theAudit Committee on a quarterly basis.

Form AOC-2 is annexed as Annexure "II" to this report pursuant toSection 188 of the Companies Act2013. The policy on Related Party Transactions asapproved by the Board is uploaded on the Company's website.

Corporate Governance

The guiding principle of the Code of Corporate Governance is 'harmony' that isbalancing the need for transparency with need to protect the interest of the Companybalancing the need for empowerment at all levels with the need for accountability andinteraction with all stakeholders including shareholders employees lenders andregulatory authorities. A detailed report on Corporate Governance is annexed as a part ofthis Annual Report. The Management Discussion and Analysis forms part of this report.

A Certificate on compliance of conditions of Corporate Governance issued by Kiran Desai& Associates Company Secretaries is annexed to the Report on Corporate Governance.

Significant and Material Orders passed by the Regulators or Courts

There are no significant and material orders passed by the Regulators / Courts whichwould impact the going concern status and Company's operations in future.

Statutory Compliances

The Company ensured compliances of applicable laws. However due to industrial strikeand subsequent lockout between March 17 2016 and May 13 2016 that rendered access torecords and data servers inaccessible during that period a few statutory compliancesduring the said period of industrial unrest were compiled after lifting of the lockout.

Sexual Harassment of Women at Workplace (Prevention Prohibition and

Redressal) Act 2013

The Company has zero tolerance for sexual harassment at workplace and has adopted apolicy on prevention prohibition and redressal of sexual harassment at workplace as perthe provisions of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and Rules made there under for prevention prohibition and redressalof complaints of sexual harassment at workplace.

During the year under review no complaints on sexual harassment were received.

Particulars of Employees Energy Conservation Technology

Absorption and Foreign Exchange Earnings and Outgo

a. During the financial year 2015-16 the Company has not employed anyone with aremuneration in access of the limits specified in Rule V (2) of the Companies (Appointmentand Remuneration of Managerial Personnel).

b. The details of Conservation of Energy Technology Absorption Foreign

Exchange Earnings and Outgo are as follows:

(i) the steps taken or impact on conservation of energy i. Replacement of lower efficiency motors to higher efficiency motors.
ii. Electronic Ballast installed instead of copper Ballast.
iii. Optimization of cooling tower Compressors.
iv. Optimum utilization of motors in Speed- Frame Machines.
v. Arresting of air leakages from Compressors.
(ii) the steps taken by the company for utilizing alternate sources of energy None
(iii) the capital investment on energy conservation equipment's Nil

(b) Technology absorption :

(i) the efforts made towards technology absorption Nil
(ii) the benefits derived like product improvement cost reduction product development or import substitution Nil
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) Nil
(a) the details of technology imported Nil
(b) the year of import; Nil
(c) whether the technology been fully absorbed Nil
(d) if not fully absorbed areas where absorption has not taken place and the reasons thereof and future plan of action Nil
(iv) the expenditure incurred on Research and Development Nil

(c) Foreign exchange earnings and Outgo

1 Earnings 15.85
2 Outgo 0.32

Directors' Responsibility Statement

Pursuant to the provisions of Section 134(3)(c) and 134 (5) of the Companies Act 2013and based on the representations received from the Operating Management the Directorshereby confirm :-

a. that in the preparation of the annual accounts the applicable Accounting Standardshave been followed along with proper explanation relating to material departures;

b. that they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit or loss of the Company for that period;

c. that they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;

d. that they have prepared the annual accounts on a 'going concern' basis

e. that they have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively and

f. that they have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Cautionary Statement:

Statements in the Board's Report and 'Management Discussion and Analysis' describingthe Company's objectives estimates expectations or projections outlook etc. may be'forward looking statements' within the meaning of the applicable securities laws andregulations. Actual results may differ materially from those expressed or implied due tofactors beyond control. Important factors that could make a difference to the Company'soperations include economic conditions affecting demand/supply and price conditions in thedomestic and overseas markets in which the Company operates changes in the governmentregulations tax laws and other statutes and other incidental factors.


Yours Directors acknowledge and thank all stakeholders of the Company viz. customersmembers employees dealers vendors banks and other business partners for their valuablesustained support and encouragement. Your Directors look forward to receiving similarsupport and encouragement from all stakeholders in the years ahead.

For and on behalf of the Board of Directors
Place : Mumbai Ashok Barat
Date : July 8 2016 Chairman
Registered Office :
# 1 2nd FloorIdeal Homes
Near Jayanna Circle
12th Cross Rajarajeshwari Nagar
Bangalore- 560 098