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H P Cotton Textile Mills Ltd.

BSE: 502873 Sector: Industrials
NSE: N.A. ISIN Code: INE950C01014
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OPEN 41.60
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VOLUME 772
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P/E
Mkt Cap.(Rs cr) 14
Buy Price 37.55
Buy Qty 39.00
Sell Price 0.00
Sell Qty 0.00
OPEN 41.60
CLOSE 38.00
VOLUME 772
52-Week high 47.90
52-Week low 32.10
P/E
Mkt Cap.(Rs cr) 14
Buy Price 37.55
Buy Qty 39.00
Sell Price 0.00
Sell Qty 0.00

H P Cotton Textile Mills Ltd. (HPCOTTONTEX) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 36th Annual Report on the business andoperations together with the Company's audited financial statements and the auditors'report thereon for the financial year ended March 31 2017. The financial highlights forthe year are given below:

Financial Results

(Rs. In Lacs)

Particulars March 312017 March 312016
Revenue from operations (net) 9023.89 8850.71
Other Income 45.86 52.63
Total Income 9069.75 8903.34
Profit/(Loss) Before Interest Depreciation & Tax(EBITDA) (59.55) 556.13
Finance Cost 168.39 138.59
Depreciation 108.04 120.38
Profit/(Loss) before Tax (PBT) (335.98) 297.16
Current Tax --- 114.00
Tax expenses for earlier years 4.92 5.69
Deferred Tax (118.04) (24.55)
Profit/(Loss) after Tax (PAT) (222.86) 202.02
Basic EPS (?) * (5.85) 5.30
Cash EPS (Rs)* (5.85) 5.30

* Face value Re.10 per share

Business Performance

During the year your Company has achieved a turnover of ' 9023.89 Lacs as against '8850.71 Lacs during the corresponding previous financial year. The Loss before Tax forthe year was ' 335.98 Lacs as compared to Profit of ' 297.16 Lacs during the previousfinancial year and Loss after Tax of ' 222.86 Lacs as compared to a Profit of ' 202.02Lacs in the previous financial year mainly due to increase in cotton prices throughout thefinancial year which lead to increase in cost of raw materials besides increase inemployee's benefits expenses & finance cost. Further since the value of Rupeesdenomination (INR) has been appreciated against the foreign currency i.e. $ € etc. during the year under reviewthe expected turnover of the Company reduced as theCompany exports over 70% of its production. The exports of the Company decreased from '6509 Lacs to ' 6276 Lacs.

Appropriations

Reserves

During the year Company has suffered Losses due to which no funds were transferred tothe General Reserves. Total reserves and surplus of the Company has been reduced to '1276.04 Lacs on 31st March 2017 as against ' 1498.90 Lacs on 31st March 2016 due totransitional impact of depreciation.

Dividend

In view of the Loss during the year the Board of Directors did not recommend anydividend on the Shares of the Company.

Details of significant and material orders impacting the going concern status andCompany's operations in future

During the year under review no significant and material orders were passed by anyregulator or court or tribunal which may impact the going concern status and yourCompany's operations in future.

Share Capital and Net Worth

The Authorised Share Capital of the Company as on March 312017 remains unchanged at '42500000 divided into 4250000 Equity Shares of Re. 10 each and Paid up share capitalof ' 38100000 divided into 3810000 Equity Shares of Re. 10 each.

During the year under review the Company had not issued any equity shares withdifferential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (ShareCapital and Debentures) Rules 2014.

As at the end of year under review the net worth of the Company calculated as persection 2(57) of the Companies Act 2013 ("the Act") stood at ' 1657.04Lacs as compared to ' 1879.90 Lacs at the end of the previous financial year.

Management Discussion & Analysis Report

a) Industry Structure& Competitive Position:

Indian textile industry at a glance

India's textiles sector is one of the largest contributors to India's exportscontributing almost US $ 40 billion during FY2016-17 with a share of 14% in India's totalexport towards exports. The industry is also labour intensive and employs about 40 millionworkers directly and 60 million indirectly. Hence government policies towards the sectorhave always remained favourable. The central government comes out with various policiessuch as The National Textile Policy and Technology Upgradation Fund Scheme (TUFS) toensure that the industry is internationally competitive.

Structural shift in India's competitive position; India gaining share in US hometextiles market

The Textile industry plays a vital role in the economy of the Country by contributingto GDP generating Employment and earning Foreign Exchange. During the last five yearsIndian companies have become increasingly competitive in the exports markets. Thestructural shift in competitive dynamics for the Indian companies is evident from risingmarket share in home textiles market in the US (largest market) from 13% in 2011 to 19% by2016. During the year under reviewthe performance in terms of profitability and exportsof your Company has declined however dedicated efforts of the management of the Companyaimed at improving operational efficiency quality enhancement focus on optimal productmix and effective cost saving practices in the years to come.

We experience intense competition in traditional Textile Industries and see a rapidlychanging Marketplace with new competitors arising with new technologies and innovation. Wetypically compete with other industries in response to request for proposals. Clientsoften cite our Industry expertise comprehensive end to end solutions ability to scaleGlobal Delivery Model superior quality and process execution experienced managementteam talented professionals and track records as reason for awarding us contracts/orders.

b) Outlook Risks and Concerns:

This section lists forward looking statements that involve risks and uncertainties. Ouractual result could differ materially from those anticipated in these statements as aresult of certain factors. Our outlook risks and concerns are as follows;

• Since the Company derives significant portion of revenues from overseas anyappreciation in rupee poses a threat to earnings estimates. The profitability is expectedto be continued in the same trend during the first two quarters of FY2017-18 due tofluctuation in the currency rate and high prices of cotton crops however the same isexpected to be on higher side in the 2nd half (Q1 & Q2) of FY2017- 18 due toanticipated high domestic production of cotton crops and new markets domestic as well asoverseas for the Company's product besides increase in efficiency of the emplyees becouseof induction of new professionals/talents in the Company.

• Sharp rise in prices of cotton (key raw material) could affect margins as it maybe unable to take timely price hikes.

• The economic environment pricing pressures and decreased employee utilizationrates could negatively impact our revenues and operating results.

• Our revenues are highly dependent on clients primarily located in ForeignCountries as well as on clients concentrated in certain industries. An economic slowdownor other factors that affect the economic health of these foreign countries may affect ourbusiness too.

• Currency fluctuations and declining interest rates may affect the result of ouroperation.

• Wage pressure in India and the hiring of employee in other countries may preventus from sustaining some of our competitive advantage and may reduce our profit margins.

• Intense competition in market could affect our pricing which may lead to reduceour revenue.

• In the event that Govt. of India or the Govt. of foreign countries (Clients) maychanges its tax policy in a manner that is adverse to us our tax expenses may materiallyincrease reducing our profitability.

• Our international expansion plans subject us to risks inherent in doing businessinternationally.

• Our business will suffer if we fail to anticipate and develop new products andenhance existing product in order to keep pace with rapid changes in technology and in theIndustries in which we exist.

c) Opportunities and Threats:

We believe our strength give us the competitive advantage to position ourselves as theglobal Textile Industry. We have long standing relationship with our clients and our trackrecords in delivering high quality product across the entire Textile industry help us tosolidify these relationships and gain increased business from existing clients.

The Union Cabinet under the Chairmanship of Hon'ble Prime Minister Shri Narendra Modihas given approval for a special package for employment generation and promotion ofexports in Textile and Apparel sector. The package includes a slew of measures which arelabour friendly and would promote employment generation economies of scale and boostexports. The steps will lead to a cumulative increase of US$ 30 billion in exports andinvestment of ' 74000 crores over next 3 years. The majority of new jobs are likely to goto women since the garment industry employs nearly 70% women workforce. Thus the packagewould help in social transformation through women empowerment. The new textile policyannounced by the government is expected to give a major fillip to the debt-ridden textileindustry which has been reeling under rising cost and falling exports.

The Goods and Service Tax (Rs.GST') considered India's biggest and most historic taxreform has been effective from 1st July 2017 and the textile segmentkey sector inIndian economy with a direct linkage to the overall growth of Indian and global economyand plays a major role in the Indian economyis highly effected with the implementation ofGST. the GST is being levied at 5-18 per cent at all stages of textile production byconsidering the dyeing bleaching colouring and stitching involved in turning yarn intofabric as separate segments. This would result in a sharp increase in both material andproduction costs and would adversely affect all small and medium players in the textilesindustry.This adverse effect is leading to protest and strikes by the small manufacturesand traders in the country. However the Government is expected to liberalise the policyrate of tax etc. under GST for textile industry which will ultimately give some positiveimpact to the industry in long run.

d) Material development in Human Resources/Industrial relation including number ofPeople Employed:

During the year under review the total number of permanent employees on the rolls ofthe Company were 1377. Our culture and reputation as Leader in Textile industries enableus to attract and retain some of the best talent in India. OurProfessionals/Employees/Workers are our most important assets. We are committed to remainamong the industries leading Employers.

Our culture and reputation in the Textile Industry enable us to recruit and retain someof the best available talent in India. The key elements that define our culture includerecruitment training and development and

compensation. Company takes adequate steps for maintaining safety and healthyenvironment for the workers. During the year under review Industrial relations continuedto be cordial and satisfactory. Company has enjoyed cordial relationship with workers andemployees at all levels.

e) Segment wise or Product Wise Performance

The Company operate in one segment i.e. Textile (spinning).

The Company has produced two types of threads i.e. sewing threads and Hosiery Yarn. Ascompare to previous year the production of Hosiery Yarn has been declined and that ofsewing Threads has been increased. Total production during the financial year 2016-17 isup by 1.79% over the last year's production.

Detail of product wise performance in the year 2016-17 is as follows:

Type

2016-17

Sales Realisation (?)
Production (Kg) (%)
Hosiery yarn 411900 Kg 22.32% 73986350
Sewing Thread 1433518 Kg 77.68% 818703396
Total 1845418 Kg 100.00 892689746

f) Internal Control System and their adequacy

The Company has adequate Internal Control systems in all areas of operationscommensurate with the size of the operation. Your Company has an adequate and effectiveinternal control system to ensure that assets and interests of the Company are safeguardedand reliability of accounting data and accuracy are ensured with proper checks andbalances. The scope and authority of internal audit function is defined in the internalaudit manual.

The internal controls have been developed and implemented at each business processlevel across the Company. Checks & balances and control systems have been establishedto ensure that assets are safeguarded utilized with proper authorization and recorded inthe books of account. There is a proper definition of roles and responsibilities acrossthe organization to ensure information flow and monitoring. Internal audits are conductedperiodically by independent Chartered Accountant. The Audit Committee comprising ofindependent directors actively reviews the adequacy and effectiveness of internalcontrols internal audit systems and advises improvements as may be required. Post auditfollow-ups are carried out to ensure identified risks are addressed and recommendations ofthe Audit Committee are implemented. The Company has established and maintained adequateand effective internal Financial controls over Financial reporting in accordance with theframework which includes policies and procedures adopted by the Company for ensuring theorderly and efficient conduct of its business including adherence to the Company'spolicies safeguarding of its assets the prevention and detection of fraud and errorsthe accuracy and completeness of the accounting records and timely preparation ofreliable Financial information.

The Internal Control system is improved and modified continuously to meet the changesin business Conditions statutory and accounting requirements. The Audit Committee of theBoard of Directors Statutory Auditors and the business heads are periodically appraisedof the internal audit findings and the corrective actions taken. The Audit Committee ofthe Board of Directors actively reviews the adequacy and effectiveness of internalcontrols systems and suggests improvements for strengthening them.

CAUTIONARY STATEMENT:

Statements in the Management Discussion and Analysis describing the projectionsestimates expectations may be "forward looking statements" within the meaningof applicable securities laws and regulations. Actual results could differ materially fromthose expressed or implied. Important factors that could make a difference to theCompany's operations includes among others economic conditions affecting demand/ supplyand price conditions in the domestic and overseas markets in which the Company operateschanges in the Government regulations tax laws and other statutes and incidental factors.

Statement on Declaration given by Independent directors under section 149(7)

Your Company has received declarations from all the Independent Directors of theCompany confirming that they meet with the criteria of independence provided in Section149(6) of the Act and Regulation 25 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 {SEBI (LODR) Regulations} and there has been nochange in the circumstances which may affect their status as Independent Director duringthe year under review.

The terms and conditions of appointment of Independent Directors are as per Schedule IVof the Act. Information about the Subsidiaries / Associates/ Joint Ventures

As on the date of this report your Company has no Subsidiaries Associates and jointVentures.

Listing of Equity Shares

The Equity Shares of the Company continue to be listed on BSE Limited("BSE")(Formerly Known as Bombay Stock Exchange Limited). The requisite annual listing fee hasbeen paid to the Exchange.

Public Deposits

During the year under review your Company has not invited or accepted any depositsfrom the public/ members pursuant to the provisions of Section 73 and 76 of the Act.

Directors and Key Managerial Personnel

During the year under review Mr. Ojaswi Singhal Chief Financial Officer of theCompany resigned from the office w.e.f. May 04 2016 and further on the recommendationof Nomination & Remuneration Committee the Board of Directorsin its Meeting held onNovember 04 2016 has given additional charge of Chief Financial Officer to Mr. RaghavKumar Agarwal w.e.f. November 04 2016 besides his present designation of ChiefCo-ordinating Officer of the Company. Further during current financial year 2017-18 theBoard of Directors in its meeting held on August 12 2017 on the recommendation ofNomination & Remuneration Committee has promoted him to Chief Executive Officer fromChief Co-ordinating Office of the Company w.e.f. August 14 2017.

Further Ms. Priyanka Singal Company Secretary of the Company resigned from theoffice w.e.f. September 09 2016 and on the recommendation of Nomination &Remuneration Committee the Board of Directors in its Meeting held on February 14 2017has appointed Mr. Shashi Ranjan Kumar as Company Secretary and Compliance Officer of theCompany w.e.f. March 07 2017.

Further Since the term of Mr. Kailash Kumar Agarwal Managing Director of the Companyhas expired on August 05 2017 the Board of Directors on the recommendation ofNomination & Remuneration Committee in its meeting held on May 29 2017 hasre-appointed him as a Managing Director of the Company as per Schedule V of the Act forfurther period of three (3) years with effect from August 06 2017 on the terms andconditions mentioned in the notice of 36th Annual General Meeting ("AGM") of theCompany subject to your approval.

Further in accordance with Section 152 of the Act Mr. Raj Kumar Agarwal (DIN:02950710) is liable to retire by rotation. Being eligible he had offered himself forre-appointment as director at the ensuing AGM.

The brief resumes of the Directors who are to be re-appointed in the ensuing AGM thenature of their expertise in specific functional areas names of companies in which theyhave held directorships committee memberships/chairmanships and their shareholding etc.are furnished as an Annexure to the Notice of 36th AGM of the Company.

The Board recommends re-appointment of the above said directors in the ensuing AGM.

Board Meetings

During the year under review seven (7) Board Meetings were held on May 28 2016August 12 2016 September 10 2016 September 23 2016 November 04 2016 November 142016 and February 14 2017.

The intervening gap between two Board Meetings was less than the maximum periodprescribed under the Act and SEBI (LODR) Regulations.

Audit Committee

The Audit Committee of the Board of Directors consists entirely of IndependentDirectors. The details of the constitution/composition terms of reference and scope aregiven hereunder:

Name Designation Category
Mr. Parshotam Das Agarwal Chairman of the Committee Independent Director
Mr. BibhutiCharan Talukdar Member of the Committee Independent Director
Mr. Mohan Lal Jain Member of the Committee Independent Director
Ms. CA Ritu Bansal Member of the Committee Independent Director
Mr. Anil Agarwalla Member of the Committee Independent Director

The management is responsible for the Company's internal controls and the financialreporting process while the statutory auditors are responsible for performing independentaudits of the Company's financial statements in accordance with generally acceptedauditing practices and for issuing reports based on such audits. The Board of Directorshas entrusted the Audit Committee to supervise these processes and thus ensure accurateand timely disclosures that maintain the transparency integrity and quality of financialcontrol and reporting.

The terms of reference and scope of the Audit Committee include the following:

• To oversight the Company's financial reporting process and the disclosure of itsfinancial information to ensure that the financial statements are correct sufficient andcredible

• Recommending to the Board the appointment remuneration and terms ofappointment of auditors of the Company.

• Approval of payment to statutory auditors for any other services rendered by thestatutory auditors.

• Reviewing with management the annual financial statements and auditor's reportthereon before submissions to the Board for approval with particular reference to:

- Matters required to be included in the Directors' Responsibility Statement to beincluded in the Board's Report in terms of section 134(3)(c) of the Act;

- Any changes in accounting policies and practices and reasons for the same;

- Major accounting entries based on exercise of judgment by management;

- Qualifications in draft audit report;

- Significant adjustments made in the financial statements arising out of audit;

- Compliance with listing and other legal requirements relating to financialstatements;

- Disclosures of any related party transactions; and

- Modified opinion(s) in the draft audit reports.

• Reviewing with the management the quarterly financial statements beforesubmission to the Board for approval;

• Reviewing with the management the statement of uses / application of fundsraised through an issue (public issue rights issue preferential issue etc.) thestatement of funds utilized for purposes other than those stated in the offer document /prospectus / notice and the report submitted by the monitoring agency monitoring theutilization of proceeds of a public or rights issue and making appropriaterecommendations to the Board to take up steps in this matter;

• Review and monitoring the auditors' independence and performance andeffectiveness of audit process;

• Approval or any subsequent modification of transactions of the Company withrelated parties;

• Scrutiny of inter-corporate loans and investments;

• Valuation of undertakings or assets of the Company wherever it is necessary;

• Evaluation of internal financial controls and risk management systems;

• Reviewing with the management performance of statutory and internal auditorsthe adequacy of internal control systems;

• Reviewing the adequacy of internal audit function if any including thestructure of internal audit department staffing and seniority of the official heading thedepartment reporting structure coverage and frequency of internal audit;

• Discussions with internal auditors any significant findings and follow upthereon;

• Reviewing the findings of any internal investigations by the internal auditorsinto matters where there is suspected fraud or irregularity or a failure of internalcontrol systems of a material nature and reporting the matter to the Board;

• Discussion with statutory auditors before the audit commences about the natureand scope of audit as well as have post-audit discussion to ascertain any area of concern;

• To look into the reasons for substantial defaults in the payment to thedepositors debenture holders shareholders (in case of non-payment of declared dividends)and creditors;

• To review the functioning of the Whistle Blower Mechanism;

• Approval of appointment of chief financial officer after assessing thequalifications experience and background etc. of the candidate;

• To carry out any other function as is mentioned in the terms of reference of theAudit Committee; and

• Any other duties/terms of reference which are incidental/necessary for thefulfillment of the above- mentioned terms of reference.

Review of information by Audit Committee

Apart from other matters as per Regulation 18(3) of SEBI (LODR) Regulations the AuditCommittee reviews to the extent applicable the following information:

• Management discussion and analysis of financial condition and results ofoperations;

• Statement of significant related party transactions (as defined by the auditcommittee) submitted by the Management;

• Management letters/letters of internal control weaknesses if any issued bystatutory auditors;

• Internal Audit Reports relating to internal control weaknesses; and

• Appointment removal and terms of remuneration of the internal auditors;

• Statement of Deviations;

(a) Quarterly statement of deviation(s) including report of monitoring agency ifapplicable submitted to stock exchange(s) in terms of Regulation 32(1) of SEBI (LODR)Regulations.

(b) Annual statements of funds utilized for purposes other than those sated in theoffer documents/pro- spectus/notice in terms of Regulation 32(7) of SEBI (LODR)Regulations.

The Audit Committee is also vested with the following powers:

• To investigate into any matter in relation to the items specified in Section 177of the Act or referred to it by the Board and for this purpose shall have full access tothe information contained in the records of the Company and external professional adviceif necessary;

• To seek information from any employee;

• To obtain outside legal or other professional advice; and

• To secure attendance of outsiders with relevant expertise if it considersnecessary

During the year all recommendation made by the Audit Committee were accepted by theBoard.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee of the Board of Directors of the Company hadbeen constituted as per Section 178 of the Act and Regulation 19 of SEBI (LODR)Regulations.

The composition of the Committee as on March 312017 was as under:

Name Designation Category
Mr. Bibhuti Charan Talukdar Chairman of the Committee Independent Director
Mr. Parshotam Das Agarwal Member of the Committee Independent Director
Mr. Mohan Lal Jain Member of the Committee Independent Director
Mr. Anil Agarwalla Member of the Committee Independent Director
CA Ritu Bansal Member of the Committee Independent Director

During the year under review 2 meetings of the Nomination and Remuneration Committeewere held on September 23 2016 and February 14 2017. The attendance of members of theNomination and Remuneration Committee at these meeting was as follows:

Name of the member Designation Category of Directorship No. of meetings held No. of meetings attended
Mr. Bibhuti Charan Talukdar Chairman Independent 2 2
Mr. Parshotam Das Agarwal Member Independent 2 2
Dr. Mohan Lal Jain Member Independent 2 2
Mr. Anil Agarwalla Member Independent 2 1
CA Ritu Bansal Member Independent 2 2

Role & Terms of Reference of Committee

The role of the Nomination and Remuneration Committee inert-alia includes thefollowing:

i. Formulate criteria for determining qualifications positive attributes andindependence of a director and recommend to the Board a Policy relating to theremuneration for the directors key managerial personnel (KMPs) and other employees;

ii. Formulation of criteria for evaluation of performance of independent directors andthe board of directors;

iii. Devising a policy on diversity of the Board of Directors;

iv. Identifying persons who are qualified to become directors and who may be appointedin senior management in accordance with the criteria laid down and recommend to the Boardof Directors their appointment and removal.

v. Recommending to the Board whether to extend or continue the term of appointment ofthe independent director on the basis of report of performance evaluation of independentdirectors.

The Company Secretary is acting as the Secretary to the Nomination and RemunerationCommittee. The Chairman of the Committee Mr. Bibhuti Charan Talukdar was present at theAGM of the Company held on September 26 2016.

Nomination and Remuneration Policy

The Company's remuneration strategy is market-driven and aims at attracting andretaining high caliber talent. The strategy is in consonance with the existing industrypractice and is directed towards rewarding performance based on review of achievementson a periodical basis.

The key components of the Company's Nomination & Remuneration Policy are:

• Compensation will be a major driver of performance.

• Compensation will be competitive and benchmarked with a select group ofcompanies from the pharmaceutical sector.

• Compensation will be fully transparent and tax compliant.

The details of this policy are available on the Company's website viz. www.hpthreads.com

Policy on Directors' appointment &remuneration

Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBI(LODR) Regulations and as per the recommendations of the Nomination and RemunerationCommittee the Board has adopted a policy for selection & appointment of Directors andKey Managerial Personnel of the Company and their remuneration including criteria fordetermining qualification positive attributes and all other matters as provided under thesaid section of the Act and all appointments/re-appointments of Directors/KMPs during thefinancial year has been done according to the said policy.

Board Evaluation

In terms of the provisions of the Act and Regulation 19(4) of SEBI (LODR) Regulationsthe Board has adopted a formal mechanism for evaluating its performance as well as that ofits Committees and individual directors including the Chairman of the Board. The exercisewas carried out through a structured evaluation process covering various aspects such asBoard composition & quality strategic & risk management board functioning etc.

Performance evaluation of independent directors was conducted by the Board of Directorsexcluding the director being evaluated on the criteria such as ethics and valuesknowledge and proficiency behavioral traits etc.

Auditors

Pursuant to the provisions of Section 139 of the Act and the Companies (Audit andAuditors) Rules 2014 any firm which had been appointed as a Statutory Auditors of theCompany for 10 years or more before the applicability of the Companies Act 2013mayfurtherhold office of statutory auditors for a maximum period of three (3) consecutive years i.e.from the conclusion of first AGM of the Company after enforcement of the Companies Act2013 till the conclusion of 3rd AGM of the Company. Accordingly M/s. A.K. AssociatesChartered Accountants (Regn. No. 000596N) had been appointed as statutory auditors of theCompany from the conclusion of the 33rd AGM of the Company held on September 26 2014 tillthe conclusion of the 36th AGM and his appointment was ratified in 34th & 35th AGM ofthe Company.

Since the said term of three (3) years of statutory auditors M/s. A.K. AssociatesChartered Accountants is going to expire in the ensuing AGM your Board of Directors onthe recommendation of the Audit Committee of the Board of Directors of the Company hasrecommended the appointment of M/s Bhargava Associates Chartered Accountants 308 PearlsBest Heights-II C-9 Netaji Subhash Place Delhi 110034 as statutory auditors of theCompany for a term of five (5) consecutive years from the date of conclusion of 36th AGMtill

the date of conclusion of 41st AGM of the Company on such terms and conditionsincluding remuneration as decided by the Board of Directors of the Company.

In this regard the Company has received a certificate from M/s Bhargava Associatestothe effect that if the appointment is made it would be in accordance with the provisionsof Section 141 of the Act and Rules thereof.

Auditors' Report

The Audit Report does not contain any adverse remarks. The Notes forming part of theAccounts being selfexplanatory the comments made by the Auditors in their report are notbeing dealt separately.

Cost Auditors

Ministry of Corporate Affairs has issued a notification dated 31.12.2014 to makeamendment in the Companies (Cost Records and Audit) Rules 2014 that -

"Textile Company shall get its Cost record audited in accordance with these rulesif the overall annual turnover of the company from all its products and services duringthe immediately preceding financial year is ' 100 Crore or more and the aggregate turnoverof the individual product or products or service or services for which cost recordrequired to be maintained under Rule 3 is ' 35 Crore or more".

As the Company's annual turnover from all its products in the preceding financial yearis less than ' 100 Crore so the Company is not required to get its cost record audited.

Secretarial Auditor

Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company engagedthe services of Mr. Neelesh Kumar Jain M/s NKJ & Associates Company Secretaries (COPNo. 5233) Pandav Nagar Delhi to conduct the Secretarial Audit of the Company for thefinancial year ended March 312017. Furtherthe Board of Directors in its meeting held onMay 29 2017 re-appointedMr. Neelesh Kumar Jain M/s NKJ & Associates CompanySecretaries to act as Secretarial Auditor of the Company for the financial year2017-2018.

Secretarial Audit

The Secretarial Audit Report for the financial year ended March 31 2017 (in Form MR-3)is attached as Annexure-A to this Report which is Self-explanatory andneeds no comments.

Extract of Annual Return

In accordance with the provisions of section 134(3)(a) of the Act an extract of AnnualReturn in Form MGT-9 as on March 312017 is attached as Annexure B theretoand forms a part of this Report.

Particulars of Contracts or Arrangements with Related Parties and Related Partydisclosure

As per the provisions of the Act and the SEBI (LODR) Regulations your Company hasformulated a Policy on Related Party Transactions. The Policy intends to ensure thatproper reporting approval and disclosure processes are in place for all transactionsbetween the Company and Related Parties.

This Policy specifically deals with the review and approval of Material Related PartyTransactions keeping in mind the potential or actual conflicts of interest that may arisebecause of entering into these transactions. All Related Party Transactions are placedbefore the Audit Committee for review and approval. Wherever applicable prior approval isobtained for related party transactions on a quarterly basis for transactions which are ofrepetitive nature and / or entered in the ordinary course of business and are at arm'slength basis.

During the year all the related party transactions entered into were on an arm'slength basis. The Company has not entered into any material related party transactionsi.e. transactions exceeding 10% of the annual consolidated turnover as per the lastaudited financial statements. Suitable disclosures as required under Accounting StandardAS-18 have been made in the notes to the financial statements.

Further pursuant to the provisions of clause (h) of sub-section (3) of section 134 ofthe Companies Act 2013 related party transactions during the financial year ended 31stMarch 2017 has been attached in Form AOC-2 as Annexure C.

Material changes and commitments affecting the financial position of the Company whichhave occurred between March 312017 and date of the Report

Except as disclosed elsewhere in the Annual Report there have been no material changesand commitments which can affect the financial position of the Company between the end ofthe financial year and the date of report.

Energy Conservation Technology Absorption and Foreign Exchange Earnings/ Outgo

The information required under Section 134(3) (m) of the Companies Act 2013 read withthe Companies (Accounts) Rules 2014 is provided as follows and forms part of this report.

A) Conservation of Energy:

a) Company ensures that the manufacturing operations are conducted in the mannerwhereby optimum utilization and maximum possible savings of energy is achieved.

b) No specific investment has been made in reduction in energy consumption.

c) As the impact of measures taken for conservation and optimum utilization of energyare not quanti

tative its impact on cost cannot be stated accurately.

B) Technology Absorption:

Company's products are manufactured by using in-house technology and no outsidetechnology is being used for manufacturing activities. Therefore no technology absorptionis required. The Company constantly strives for maintenance and improvement in quality ofits products and Research & Development activities are directed to achieve theaforesaid goal.

C) Foreign Exchange Earning and Out-Go (Rs. In Lacs):

2016-17 2015-16
Foreign Exchange earned (FOB value of exports) 6276.33 6509.28
Foreign Exchange used
(CIF value of imports and expenditure in foreign currency) 1020.11 109.04

Environment and pollution Control

The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy is to conduct all operations in a manner to ensure safetyof all concerned compliance of statutory and industrial requirements for environmentprotection and conservation of natural resources to the extent possible.

As the Company has decided to implement Zero Liquid Discharge Project ("ZLD")for effluent water management as per the guidelines issued by Haryana state pollutionControl Boardthe ("ZLD") Project is on track and all the Civil works have beencompleted and is under commissioning.

Quality Management System

The Company continues to lay emphasis on excellence in quality and services and iscommitted to total customer satisfaction. The high quality of the Company products isreflected in the Company ability to export its product in quality conscious world markets.The company continues to be on a mission to provide customer with products that can matchwith international standards and will surpass their expectations.

Significant and Material Orders Passed by the Regulators/ Courts If Any

There are no significant material orders passed by the regulators/ courts which wouldimpact the going concern status of your Company and its future operations.

Directors' Responsibility Statement

The Directors hereby confirm:

a) that in the preparation of the annual financial statements for the financial yearended March 31 2017 the applicable Accounting Standards had been followed along withproper explanation relating to material departures;

b) that for the financial year ended March 31 2017 such accounting policies asmentioned in the Notes to the financial statements have been applied consistently andjudgments and estimates that are reasonable and prudent have been made so as to give atrue and fair view of the state of affairs of the Company and of the profit and loss ofthe Company for the year ended March 312017;

c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d) that the annual accounts have been prepared on a going concern basis;

e) that proper internal financial controls were followed by the Company and that suchinternal financial controls are adequate and were operating effectively; and

f) that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively.

Particulars of loans guarantees or investments under Section 186 of the Act

Details of loans guarantees and investments covered under the provisions of Section186 of the Act are given in the notes to the financial statements.

Business Risk Management

Pursuant to Section 134 (3) (n) of Companies Act 2013 and SEBI (LODR) Regulations theCompany has constituted a Business Risk Management committee.

Risk mitigation continues to be a key area of concern for the Company which hasregularly invested in insuring itself against unforeseen risks. The Company's stocks andinsurable assets like building plant & machinery computer equipment officeequipment furniture & fixtures lease hold improvements and upcoming projects havebeen adequately insured against major risks.

At present the company has not identified any element of risk which may threaten theexistence of company.

Vigil Mechanism

Your Company has adopted a Vigil Mechanism with a view to provide its employees anavenue to raise any sensitive concerns regarding any unethical behavior or wrongfulconduct and to provide adequate safeguard for protection from any victimization.

Further the Act and Regulation 22 of SEBI (LODR) Regulations has mandated every listedCompany to establish a vigil mechanism. Accordingly the Company has framed the policy toalign the same with the provisions of Section 177(9) of the Act read with Rule 7 of theCompanies (Meetings of Board and its Powers) Rules 2014 and Regulation 22 of SEBI (LODR)Regulations and the same is available on the website of the Company. This Policyinter-alia provides a direct access to the Chairman of the Audit Committee.

Your Company hereby affirms that no Director/employee have been denied access to theChairman of the Audit Committee and that no complaints were received during the year.

Corporate Social Responsibility

The provisions of Section 135 of the Act regarding Corporate Social Responsibility arenot attracted to the Company as the Company does not fall under the threshold limit of networth of ' 500 crore or turnover of ' 1000 crores or a net profit of ' 5 Crore during thefinancial year.

Particulars of Employees and Related disclosures

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in the Annexure D forming partof this Report.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014during the year under review none of the employee drawing remuneration in excess of thelimits set out in the said Rules.

As per Rule 5 (2) of Companies (Appointment and Remuneration of Managerial Personnel)Amendment Rule 2016 the details of top ten employees with regards to their salary in theFinancial Year 2016-17 is as follow:

Serial No. Name Designation Gross Salary Plus Perks (2016-17) ( 'In lacs)
1 Mr. Ashok Kumar Agarwal Joint Managing Director 14.17
2 *Mr. D S Bhati President Administration 13.41
3 Mr. Kailash Kumar Agarwal Managing Director 11.20
4 Mr. RavindrraAgarwaal President (Export) 10.36
5 Mr. Surender Kumar Agarwal President (Commercial) 10.36
7 Mr. Raj Kumar Agarwal Whole Time Director 10.21
8 Mr. Shashikant Saha GM Quality Control 8.48
9 $Mr. Devender Singh Rathor GM Spinning 8.27
10 Mr. RaghavKumar Agarwal CCO & CFO 7.47
10 Mr. Girish Kumar Agarwal Sr. Manager Maintenance 6.56

*Retired w.e.f. 24th July 2017 $Resigned w.e.f. 25th May 2017.

Prevention of Sexual Harassment at Workplace

The company has in place an anti-sexual harassment policy in line with the requirementsof The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. All the employees (permanent contractual temporary trainees) are coveredunder this policy. During the year under review there were no cases filed pursuant tothis act.

Corporate Governance

As per clause (2) of Regulation 15 of SEBI (Listing Obligation and DisclosureRequirements) Regulations 2015:

"The compliance with the corporate governance provision as specified inregulations 17 to 27 and Clause (b) to (i) of Sub regulation (2) of Regulation 46 and paraC D E of SCHEDULE V shall not apply in respect of:

The listed entity having paid up Equity Share Capital not exceeding rupees ten croreand Net Worth not exceeding rupees twenty-five crore as on the last day of the previousfinancial year."

As both the paid-up Equity Share Capital as well as the Net worth of the Company do notexceed the above-mentioned limits the provisions of Corporate governance are notapplicable on the Company. Hence Corporate Governance report does not form part of thisAnnual Report.

Investor Services

The Company has been engaged with the services of M/s Alankit Assignments Limited NewDelhi as Registrar and Share Transfer Agent (RTA). No complaint / query from any of theshareholders are pending to be resolved by the Company or RTA.

Publication of Financial Results

In conformity with the provisions of Regulation 47 of the SEBI (LODR) Regulations theCompany has published unaudited financial results for the quarter ended 30th June 2016;30th September 2016; 31st December 2016 and audited financial results for the quarter/year ended on 31st March 2017. The summarized results are published in Business Standard(English) Delhi & Mumbai and Aaj Samaj (Hindi) Hisar.

Code of Conduct

The board of Directors has approved a Code of Conduct which is applicable to theMembers of the Board and all employees in the course of day to day business operations ofthe Company. The Company believes in "Zero Tolerance" against briberycorruption and unethical dealings / behaviors of any form and the Board has laid down thedirectives to counter such acts. The code laid down by the Board is known as "Code ofBusiness Conduct.

The code lays down the standard procedure of business conduct which is expected to befollowed by the Directors and the designated employees in their business dealings and inparticular on matters relating to integrity in the work place in the business practicesand in dealing with stakeholders.

The code also lays down that Board Members and Senior Managers of the Company shallensure compliance with SEBI (Prohibition of Insider Trading) Regulations 2015 as alsoother regulations as may be applicable to them from time to time.

All the Boards Members and The Senior Management personnel have confirmed compliancewith the Code for the Financial Year ended 31st March 2017. All Management Staff weregiven appropriate training in this regard.

Website of the Company

The Company maintains a website www.hpthreads.com where detailed information of theCompany & its products is provided.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received fromthe Central Government State Governments and all other Government agencies andencouragement they have extended to the Company. Your Directors also thank theshareholders financial institutions banks/ other lenders customers vendors and otherbusiness associates for their confidence in the Company and its management and lookforward for their continuous support. The Board wishes to place on record its appreciationfor the dedication and commitment of your Company's employees at all levels which hascontinued to be our major strength.

For and on behalf of the Board of Directors
Mr. Kailash Kumar Agarwal Mr. Ashok Kumar Agarwal Mr. Raj Kumar Agarwal
Managing Director Joint Managing Director Whole Time Director
(DIN:00063470) (DIN:00046627) (DIN No. 02950710)

Place: New Delhi

Dated: 12.08.2017