TO THE MEMBERS OF THE KALLAM SPINNING MILLS LIMITED
Your directors are pleased to present the Twenty-Fifth Annual Report of the Companytogether with the Audited Financial Statements for the year ended 31st March 2017.
1. CORPORATE OVERVIEW :
Kallam Spinning Mills Limited ("Your Company") is a leading Textile Company.The Group has its corporate office at Chowdavaram Guntur - 522019 Andhra Pradesh.
2. FINANCIAL RESULTS :
The financial results for the year ended 31st March 2017 are summarized below :
|Particulars ||2016-2017 ( Rs. in Lakhs) ||2015-2016 ( Rs. in Lakhs) |
|Net Sales ||28682.78 ||26913.86 |
|Other income ||1041.23 ||696.68 |
|Operating Profit (EBIDTA) ||5668.37 ||5187.71 |
|Depreciation ||(1360.90) ||(1294.07) |
|Interest ||(2198.67) ||(2829.82) |
|Earnings Before Tax (EBT) ||2108.80 ||1063.82 |
|Provision for income tax : || || |
|i) Current year Tax ||500.00 ||230.00 |
|ii) Deferred Tax ||339.01 ||242.46 |
|Earnings after tax (EAT) ||1269.79 ||591.36 |
|Earnings per share (EPS) ||3.71 ||1.73 |
3. FINANCIAL PERFORMANCE :
The Turnover of the company for the period under review increase to Rs. 28682.78 Lakhsas compared to Rs. 26913.86 Lakhs registering a growth of 6.57% on annualized basis. Theprofit before interest and taxes of the company has increased by 10.63% on annualizedbasis from Rs. 3893.64 Lakhs in previous year to Rs. 4307.47 Lakhs in the period underreview.
4. EXTRACT OF THE ANNUAL RETURN:
The details forming part of the extract of the Annual Return as on 31st March 2017 inForm MGT - 9 in accordance with Section 92(3) of the Companies Act 2013 read withCompanies (Management and Administration) Rules 2014 are set out herewith as Annexure[A] to this report.
5. DIVIDEND AND RESERVES:
Your Directors are pleased to recommend a dividend of 10% i.e. Rs. 0.20 per equityshare of face value of Rs. 2/- each aggregating to Rs. 68.511 Lakhs. During the year underreview no amount from profit was transferred to General Reserve.
The paid up share capital of the company remained unchanged at Rs. 685.11 Lakhs.Earnings per share were Rs. 3.71
6. CORPORATE GOVERNANCE:
As per Regulation 34 (3) read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a separate section on corporate governancepractices followed by the Company together with a certificate from the Company'sStatutory Auditors confirming compliance forms an
7. SUB-DIVISION OF EQUITY SHARES :
In order to improve the liquidity of your Company's shares and with a view to encouragethe participation of small investors by making Equity Shares of the Company affordableyour Company sub-divided the Equity
Shares of the Face Value of Rs. 10/- each to Face Value of Rs. 2/- each w.e.f. 03rdFebruary 2017 ("Record Date"). Accordingly 6851100 Equity Shares of Rs. 10/-each were sub-divided into 34255500 Equity Shares of Rs. 2/- each. There was no changein the total issued subscribed and paid up share capital of the Company.
8. POSTAL BALLOT :
The Board of Directors had sought approval of the Shareholders of the Company by PostalBallot process pursuant to the provisions of Sections 108 & 110 of the Companies Act2013 read with Rule 20 & 22 of the Companies (Management and Administration) Rules2014 (as amended) and Regulation 44 of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (Listing Regulations) inrespect of the Special and Ordinary Resolutions set out in the Postal Ballot Notice dated30th November 2016. The detailed voting results are given in the Report onCorporate Governance' forming part of this Annual Report.
9. NUMBER OF MEETINGS HELD OF THE BOARD:
During the year Six Board Meetings were held with a gap between not exceeding theperiod of 120 days as prescribed under the Act. Details of the Board and Board Committeemeetings held during the year are given in the Corporate Governance Report.
10. PUBLIC DEPOSITS :
During the year under review your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 (including any statutory modification(s) orre-enactment(s) for the time being in
11. DIRECTORS AND KEY MANAGERIAL PERSONNEL :
Retirement by rotation and subsequent re-appointment :
Sri P.Venkateswara Reddy Managing Director retire by rotation at the ensuing AGMpursuant to the provisions of Section 152 of the Companies Act 2013 read with theCompanies (Appointment and
Qualification of Directors) Rules 2014 and the Articles of Association of your Companyand being eligible has offered himself for reappointment. Appropriate resolution for hisre-appointment is being placed for your approval at the ensuing AGM.
The Independent Directors of your Company hold office upto 26th September 2019 and arenot liable to retire by rotation.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
The Board at its meeting held on 26th August 2017 appointed Mr. Ajeya Kallam (DIN :00278595) as an Additional (Independent) Director of the company with effect from 29thSeptember 2017 subject to approval of Shareholders at the ensuing Annual General Meetingand he is not liable to retire by rotation in terms of Section 149(4) (10) & (11) and152(6)(e) of the Companies Act 2013.
The Board at its meeting held on 26th August 2017 appointed Mr. V.Ramgopal (DIN :02889497) as an Additional (Independent) Director of the company with effect from 29thSeptember 2017 subject to approval of Shareholders at the ensuing Annual General Meetingand he is not liable to retire by rotation in terms of Section 149(4) (10) & (11) and152(6)(e) of the Companies Act 2013. During the year under review there is no change inthe Board of Directors of the Company.
Disclosure Relating to Remuneration of Directors Key Managerial Personnel andparticulars of Employees : The remuneration paid to the Directors is in accordance withthe Nomination and Remuneration Policy formulated in accordance with Section 178 of theCompanies Act 2013 and Regulation 19 of the Listing
Regulations (including any statutory modification(s) or re-enactment(s) for the timebeing in force). The salient aspects covered in the Nomination and Remuneration Policy hasbeen outlined in the Corporate Governance Report which forms part of this report.
The information required under Section 197 of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofDirectors/ employees of your Company is set out in Annexure [B] to this report
Directors Responsibility Statement:
Pursuant to Section 134(3)(c) of the Companies Act 2013 (including any statutorymodification(s) or re-enactment(s) for the time being in force) the Directors of yourCompany confirm that:
(a) in the preparation of the annual accounts for the financial year ended 31st March2017 the applicable Accounting Standards and Schedule III of the Companies Act 2013(including any statutory modification(s) or re-enactment(s) for the time being in force)have been followed and there are no material departures from the same;
(b) for the financial yearended31 st March 2017 the Directors have selectedsuch accounting policies and applied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairsof your Company as at 31st March 2017 and of the profit and loss of the Company for thefinancial year ended st March 2017;
(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 (includingany statutory modification(s) or re-enactment(s) for the time being in force) forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) the annual accounts have been prepared on a going concern' basis;
(e) proper internal financial controls laid down by the Directors were followed by yourCompany such internal financial controls are adequate and operating
(f) proper systems to ensure compliance with the provisions of all applicable laws werein place and that such systems were adequate and operating effectively.
12. MANAGEMENT DISCUSSION AND ANALYSIS :
The Management Discussion and Analysis forms an integral part of Annexure [C] tothis report and gives details of the overall industry structure economic developmentsperformance and state of affairs of your Company's various businesses viz. Textiles andpower business internal controls and their adequacy risk management systems and othermaterial developments during the financial
13. A STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS :
During the year under review one meeting of Independent Directors was held on 10thNovember 2016 in compliance with the requirements of Schedule IV of the Companies Act2013.
All the Independent Directors of the Company have declared that they meet the criteriaof Independence in terms of Section 149(6) of the Companies Act 2013 and that there is nochange in status of Independence.
14. EVALUATION OF BOARD'S PERFORMANCE:
Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (including any statutory modification(s) or re-enactment(s) for the time being inforce) the process for evaluation of the annual performance of the Directors/ Board/Committees was carried out. The criteria applied in the evaluation process are detailed inthe Corporate Governance Report which forms part of this report.
15. COMMITTEES OF THE BOARD:
The Board of Directors has the following Committees:
1. Audit Committee
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
4. Corporate Social Responsibility Committee.
5. Share Transfer Committee
The details of the Committees along with their composition number of meetings andattendance at the meetings are provided in the Corporate Governance Report.
16. STATUTORY AUDITORS AND AUDITORS' REPORT :
M/s. Brahmayya & Co. Chartered Accountants (Firm Reg No: 000513S) had givennotice expressing their desire to retire as auditors of the Company at the ensuing annualgeneral meeting in order to enable the Company to comply with the provisions of theCompanies Act 2013 governing rotation of auditors. The Board of Directors wishes to placeon record their sincere appreciation of the services of the statutory auditors especiallyin terms of ensuring timely completion and the quality of audit.
M/s. Chevuturi Associates. Chartered Accountants (Firm Reg No : 000632S) Vijayawadahad given their consent if appointed to hold office as the statutory auditors for a termof five (5) years from the conclusion of this 25th Annual General Meeting till theconclusion of 30th Annual General Meeting. The said firm has confirmed their eligibilityunder Sections 139 and 141 of the Companies Act 2013 and rules framed there under fortheir appointment as the statutory auditors of the Company.
The Audit Committee considered recommended and the Board of Directors propose theappointment of M/s. Chevuturi Associates. Chartered Accountants (Firm Reg No : 000632S)Vijayawada as the statutory auditors of the Company. Necessary resolution is being placedbefore the members for their approval.
17. COST AUDITOR:
As per the requirement of Central Government and pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time your Company has been carrying out audit of cost recordsrelating to Textile and Power Divisions every year. The Board of Directors of yourCompany on the recommendations made by the Audit Committee at its meeting held on 27thMay 2017 has approved the appointment of Mr. P.Srinivas Cost Accountant (Membership No.
21170) as the Cost Auditor of your Company to conduct the audit of cost records for thefinancial year
2017-18. Your Company has received consent from Mr. P.Srinivas Cost Accountant to actas the Cost
Auditor for conducting audit of the cost records for the financial year 2017-18. Asrequired under the Companies Act 2013 a resolution seeking member's approval for theremuneration payable to the Cost Auditor forms part of the Notice convening the AnnualGeneral Meeting for their ratification.
18. SECRETARIAL AUDITORS:
In terms of Section 204 of the Companies Act 2013 read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof your Company at its meeting held on 27th May 2017 has appointed M/s. K. Srinivasa Rao& Co a firm of Company Secretaries in Practice Guntur (C.P.No: 5178) as SecretarialAuditors to conduct an audit of the secretarial records for the financial year 2017-18.Your Company has received consent from M/s.K.Srinivasa Rao & Co to act as the auditorfor conducting audit of the Secretarial records for the financial year ending31 st March2018. The Secretarial Audit Report for the financial year ended 31st March 2017 isannexed herewith as Annexure [D] to this report. The Board has made utmost effortfor appointment of the Company Secretary as KMP but unable to appoint a Company Secretarydue to lack of suitability of the Candidate to the profile of the Company in terms of worklocation job profile and remuneration.
19. RELATED PARTY TRANSACTIONS:
During the financial year 2016-17 your Company has entered into transactions withrelated parties as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definitions Details) Rules 2014 all of which were in theordinary course of business and on arm's length basis and in accordance with theprovisions of Section 188 of the Companies Act 2013 read with the Rules issuedthereunder and the Listing Regulations. Further there were no transactions with relatedparties which qualify as material transactions under the Listing Regulations. All RelatedParty Transactions are placed before the Audit Committee as also to the Board forapproval. Prior omnibus approvals are granted by the Audit Committee for related partytransactions which are of repetitive nature entered in the ordinary course of businessand are on arm's length basis in accordance with the provisions of Companies Act 2013read with the Rules issued thereunder and the Listing Regulations. The policy on RelatedParty Transactions as approved by the Board of Directors has been uploaded on the websiteof the Company. The web-link of the same has been provided in the Corporate GovernanceReport.
The details of the related party transactions as per Accounting Standard 18 are set outin point 31 of the Notes on Accounts to the Financial Statements forming part of thisreport. The Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act 2013 readwith Rule 8(2) of the Companies (Accounts) Rules 2014 is set out as Annexure [E].
20. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY:
During the year There were no Loans Guarantees Investments and securitiesgiven/made/provided by the Company under the provisions of Section 186 of the CompaniesAct 2013.
21. VIGIL MECHANISM / WHISTLE BLOWER POLICY:
The Company has a Whistle Blower Policy to report genuine concerns or grievances.YourCompany is committed to highest standards of ethical moral and legal conduct of businessoperations. Accordingly the Board of Directors have formulated a Whistle Blower Policywhich is in compliance with the provisions of Section 177(10) of the Companies Act 2013and Regulation 22 of the Listing Regulations. Employees can raise concerns regarding anydiscrimination harassment victimization any other unfair practice being adopted againstthem or any instances of fraud by or against your Company. Any incidents that are reportedare investigated and suitable action taken in line with the whistle blower policy. TheWhistle Blower Policy is also available on your Company's website (www.ksml.in).
22. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS:
There are no significant and material orders passed by the concern status of theCompany and its future operations.
23. CORPORATE SOCIAL RESPONSIBILITY (CSR):
The CSR expenditure incurred by your Company during the financial year 2016-17 was Rs.32.75 Lakhs which was higher than the statutory requirement of 2% of the average netprofits for the last three financial years.
(Which amounted to Rs. 28.29 Lakhs)
The CSR initiative of your Company was under the area of Social business projects.
Your Company's CSR Policy statement and annual report on the CSR activities undertakenduring the financial st March 2017 in accordance with Section 135 of the Companies Act2013 andyearended31 Companies (Corporate Social Responsibility Policy) Rules 2014 isannexed to this report as Annexure [F].
24. UNSECURED LOANS RECEIVED FROM DIRECTORS DURING THE YEAR 2016-17 :
During the year 2016-17 The Company has received Loans from Three Executive Directors.
|S. No ||Name of the Director ||Amount Received During the year (Amount in Rs. ) |
|1. ||Sri.P.Venkateswara Reddy ||2500000 |
|2. ||Sri G.V.Krishna Reddy ||2000000 |
|3. ||Sri M.V.Subba Reddy ||800000 |
All the Directors were at the time of giving the money furnished their declaration inwriting to the effect that the amount is not being given out of funds acquired by them byborrowing or accepting loans or deposits from others.
25. RISK MANAGEMENT:
The Company has implemented an integrated risk management approach through which itreviews and assesses significant risks on a regular basis to help ensure in place. YourCompany believes that managing risks helps in maximizing returns. The Company's approachto addressing business risks is comprehensive and includes periodic review of such risksand a framework for mitigating controls and reporting mechanism of such risks. The riskmanagement framework is reviewed periodically by the Board and the Audit Committee.Company has put in place response mechanisms that mitigate environmental operational andbusiness risks and minimise impact on business.
26. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO:
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134 of the Companies Act 2013 read withRule 8 (3) of the Companies (Accounts) Rules 2014 is set out herewith as Annexure [G]to this report.
27. DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS:
Your Company has put in place adequate internal financial controls with reference tothe financial statements and the Company has effective risk-mitigation system. YourCompany has adopted accounting policies which are in line with the Accounting Standardsprescribed in the Companies (Accounting Standards) Rules 2006 that continue to applyunder Section 133 and other applicable provisions if any of the Companies Act 2013 readwith Rule 7 of the Companies (Accounts) Rules 2014 and relevant provisions of theCompanies Act 1956 to the extent applicable. These are in accordance with generallyaccepted accounting principles in India. Changes in policies if any are approved by theAudit Committee in consultation with the Statutory Auditors.
The main thrust of internal audit is to test and review controls appraisal of risksand business processes besides benchmarking controls with best practices in the industry.The Internal Audit is entrusted to M/s Mastanaiah & Co. (Firm Reg No : 002039S)Chartered Accountants Guntur who submit their reports to the Managing Director & CEOand has direct access to the Audit Committee and they participated in the meetings of theAudit Committee of the Board of Directors of your Company.
The Audit Committee of the Board of Directors actively reviews the adequacy andeffectiveness of the internal control systems and suggests improvements to strengthen thesame. The Audit Committee of the Board of
Directors and Statutory Auditors are periodically apprised of the internal auditfindings and corrective actions taken. Audit plays a key role in providing assurance tothe Board of Directors. Significant audit observations and corrective actions taken by themanagement are presented to the Audit Committee of the Board. To maintain its objectivityand independence the Internal Audit function reports to the Chairman of the AuditCommittee.
28. ENVIRONMENT AND SAFETY:
The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy requires conduct of operations in such a manner so as toensure safety of all concerned compliances of environmental regulations and preservationof natural resources for future Generations.
29. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition &
Redressal) Act 2013 (Act') and Rules made there under the Company hasformulated and implemented a policy on prevention of sexual harassment at workplace with amechanism of lodging complaints. For that purpose Company has constituted InternalComplaints Committees (ICC). The Company has designated the external independent member asa Chairperson for each of the Committees which was beyond the requirements of law. Duringthe year under review no complaints were received in this regard.
30. REGISTRAR'S AND SHARE TRANSFER AGENTS:
Your Registrar and Share Transfer Agents of the Company M/s Big share Services PrivateLimited 306 3rd Floor Right Wing Amrutha Ville Opp. Yashodha Hospital Raj BhavanRoad Somajiguda Hyderabad 500 082.
31. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF:
Pursuant to the provisions of section 124 of the companies Act 2013 the declareddividends which remained un paid or unclaimed for a period of seven years have beentransferred by the company to the Investor Education and Protection Fund (IEPF)established by the Central Government.
During the year 2016-17 Unclaimed Dividend For the year 2008-09 was transferred toInvestor Education and Protection Fund (IEPF). Pursuant to the provision of rule 3 of theInvestor Education and Protection Fund (Awareness and Protection of Investor) Rules 2001necessary e-form (Form 1 INV) which contains the Statement of amounts credited to IEPF wasfiled to Registrar of Companies (ROC).
The following are the details of dividends paid by the Company and respective due datesfor transfer of unclaimed dividend to IEPF.
|Dividend Year ||Date of Declaration of Dividend ||Due date for transfer to IEPF |
|2009-10 ||18-09-2010 ||23-10-2017 |
|2010-11 ||27-08-2011 ||01-10-2018 |
|2013-14 ||27-09-2014 ||01-11-2021 |
|2014-15 ||26-09-2015 ||31-10-2022 |
|2015-16 ||28-09-2016 ||02-11-2023 |
32. APPRECIATIONS AND ACKNOWLEDGEMENTS :
Your Directors sincerely convey their appreciation for the unbelievable commitmentsupport dedication made by employees in ensuring sustained growth of thehardworkenthusiasmandsignificant
Company. The Directors also take this opportunity to thank all shareholders ClientsVendors Bankers Government and Regulatory Authorities and Stock Exchanges for theircontinued support.
| ||For and on behalf of the Board of Directors |
| ||P.Venkateswara Reddy |
| ||Managing Director |
|Place : Chowdavaram Guntur ||DIN : 00018677 |
|Date : 26-08-2017 || |
| ||G.V.Krishna Reddy |
| ||Joint Managing Director |
| ||DIN : 00018713 |