Your Directors are pleased to present the Twenty fifth Annual Report of the Companytogether with the Audited Statement of Accounts for the financial year ended March 312017.
1. Financial Highlights
Highlights of financial Results for the year are as under:
| || || || ||( Rs. in Lakhs) |
|Particulars ||Standalone ||Consolidated |
| || |
For the year ended
|For the year ended || |
For the year ended
|For the year ended |
| || |
March 31 2017
|March 31 2016 || |
March 31 2017
|March 31 2016 |
|Sales and other Income || || || || |
|Revenue from operations ||54590.13 ||54581.67 ||54590.13 ||54581.67 |
|Other Income ||199.77 ||1981.66 ||199.77 ||1981.66 |
|Total Revenue ||54789.90 ||56563.33 ||54789.90 ||56563.33 |
|Profit Before Interest and Depreciation ||17233.07 ||20608.48 ||17233.07 ||20608.48 |
|Less: Finance Charges ||926.68 ||1375.67 ||926.68 ||1375.67 |
|Depreciation ||2036.28 ||2127.31 ||2036.28 ||2127.31 |
|Net Profit Before Tax ||14270.11 ||17105.50 ||14270.11 ||17105.50 |
|Less: Provision for Tax ||5016.03 ||5896.00 ||5016.03 ||5896.00 |
|Net Profit After Tax ||9254.08 ||11209.50 ||9254.08 ||11209.50 |
|Share Of Profit/ (Loss) Of Associates ||- ||- ||(875.95) ||(240.04) |
|Net Profit after share of profit of Associates ||- ||- ||8378.13 ||10969.46 |
|Balance of Profit brought forward ||31377.39 ||23025.44 ||31377.35 ||23025.44 |
|Balance available for appropriation ||40631.47 ||34234.94 ||39755.47 ||33994.90 |
|Dividend on Equity Shares || || || || |
|(Interim and Final Proposed) ||712.50 ||712.50 ||712.50 ||712.50 |
|Tax on proposed Dividend ||145.05 ||145.05 ||145.05 ||145.05 |
|Transfer to General Reserve ||16000.00 ||2000.00 ||16000.00 ||2000.00 |
|Surplus carried to Balance Sheet ||23773.92 ||31377.39 ||22897.93 ||31177.35 |
2. Operations of the Company
Your Company is into 100% exports of cotton garments especially Infantswear. TheCompany exports its products to United States and European Markets.
a) Performance review
During the year under review your Company has recorded its revenue from operations asRs. 54590.13 lakhs which is at par with Rs. 54581.67 in the previous year. Profit beforetaxation is Rs. 14270.11 lakhs which is 26% margin on its revenue from operations hasdeclined at 16.58% against last year's figure of Rs. 17105.50. Net profit after tax isRs. 9254.08 lakhs. The Basic Earnings per Equity Share (of face value of Rs. 1/-) is Rs.19.48 compared to Rs. 23.60 in the previous year.
Kitex USA LLC being Associate of your Company has posted considerably good initialturnover of around Rs. 80 lakhs ($ 128818.41) and Gross profit of around Rs. 5.5 Lakhs($ 8815.41) for the year ended March 31 2017. Your Company has consigned its productworth of Rs. 20.01 Crores to its Associate during the previous year. It has openedWorld Class Design Studio in New Jersey in the month of April 2017. Major US Clients areinvesting huge money on designing. The newly inaugurated Studio gives designing servicesbased on their unique requirements at free of cost. This value addition enables yourcompany's clients in cost saving to its buyer thereby creating good relationship withtheir client. Further we have started direct business with WALMART & TARGET.
On a consolidated basis there have been no significant changes in financial figuresduring the year under review except in case of appropriation of Rs. (875.95) Lakhs asagainst Rs. (240.04) lakhs in last year. Your Company has made investment in Kitex USA LLCof $ 1050000 in the previous year.
During the year under review your company has received order confirmations from majorInfant Garment buyers viz. Buy-Buy Baby Ross Stores Amazone Target Walmart who cancontribute major part of your Company's turnover in coming years.
No material changes and commitments have occurred after the close of the year till thedate of this Report which affect the financial position of the Company.
b) Dividend and Dividend Distribution Policy
As you are aware your Directors had recommended a 1st Interim dividend of Rs. 0.75 perequity share of Rs. 1/- each on October 31 2016. The company has earned a net profit ofRs. 9254.07 lakhs for the year ended March 31 2017 and accordingly your Directors haverecommended a final dividend of Rs. 0.75 per equity share of face value Rs. 1/- making itto a total of Rs. 1.50 per equity share of Rs. 1/- each which is 150%. The proposed finaldividend is subject to the approval of the members at the ensuing Annual General Meeting.
The total dividend appropriation (excluding dividend tax) for the current year is Rs.712.50 lacs as against 712.50 lacs in the previous year. The Company has paid dividenddistribution tax of Rs. 145.05 lacs for the current year.
The Board at its meeting held on April 28 2017 has adopted the dividend distributionpolicy for determining circumstances and parameters under which dividend pay-out could bemade on periodical basis. Policy is available on the Company's website www.kitexgarments.com and also annexed herewith as "Annexure A".
c) Share Capital
During the year under review there was no change in the Company's issued subscribedand paid-up equity share capital. On March 31 2017 it stood at Rs. 475 lacs divided into47500000 equity of Rs. 1 each.
With a view to distribute the benefit among the members in form of equity shares outfree reserve of the Company without receiving any consideration its Board of Directors atits meeting held on April 28 2017 has recommended issue of equity share in ratio of 2:5i.e. 2 shares for every 5 shares held by the shareholders subject to their approval. Theissue of bonus shares by way of capitalizing reserves is authorized by the Company'sArticles of Association.
d) Transfer to Reserve
Your Company has earned a total profit after tax of Rs. 9254.08 lakhs out of which asum of Rs. 16000 lakhs has been transferred to General Reserve for the purpose of futureexpansions and acquisitions.
e) Transfer of amount to Investors Education and Protection Fund
The Company has transferred unclaimed dividend of Rs. 606754 for the financial year2008-09 to Investors Education Protection Fund (IEPF) on 10.11.2016.
3. Capital Expenditure
As on 31st March 2017 the gross Fixed Assets stood at Rs. 27153.84 lakhs and netfixed assets Rs. 16095.17 lakhs. Additions during the year amount to Rs. 1088.58 lakhs.
Your Directors have approved an expenditure of a total of Rs. 7110 lakhs for upgradingtechnology modernization and infrastructural developments during the year under review.
4. Future Prospects
The Indian Textile Industry represents a rich and diverse spectrum of activities withthe hand-woven sector on one end and capital intensive mill/ power loom on the other. TheSpectrum includes activities in the decentralized powerlooms hosiery and knitting sectorsand the handicrafts segments to name a few. The textile industry plays a pivotal rolethrough its contribution to industrial output and employment generation and exportearnings of country. India is major exporting country as far as textile sector isconcerned and not dependent on import. Majority of import takes place to re-export orspecial requirement. As per UN comtrade database India is ranked as the 2nd largesttextile and clothing exporter globally after china with US$ 38.6 billion worth of exports.
Your Directors approved phase I expansion of Rs. 241 Crores of CapitalInvestment within 3 years for Automation New Plant & Machinery and otheramenities. This investment would bring an increase in the Company's turnover by 90% - 100%being more than 1000 Crores. It has also approved investment of surplus funds upto 100Crores p.a. in liquid funds debt funds and other instruments.
The international buyers show preference to your company's products due to itsadherence to international quality standards timely delivery and introduction of newdesigns based on contemporary market trends and hence your Directors are confident ofachieving better working results in the coming year.
5. Awards and Recognition
The Company has received FE CFO Award (Financial Express Capital Financial Operation)in the Medium Level Category for its robust performance during the last year.
6. Change in the Nature of Business
During the year under review there was no change in the nature of the business.
The Equity Shares of the Company continue to remain listed on BSE Limited and NationalStock Exchange of India Limited.
8. Fixed Deposit
The Company has not accepted any deposit within the meaning of Chapter V of theCompanies Act 2013 and the Rules framed there under.
9. Particulars of Loans Guarantees or Investments:
Particulars of investments made during the period under review are provided in thestandalone financial statement (Please refer to Note. 13 to the standalone financialstatement). There were no Loan given guarantees given and securities provided by theCompany during the reporting period.
10. Extract of Annual Return
Details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as "Annexure B".
11. Directors and Key Managerial Personnel
Mr. K. L. V. Narayanan retires in the forthcoming Annual General Meeting and beingeligible offers himself for reappointment. The details of the aforesaid Directors hisexpertise in various functional areas as required to be disclosed under Regulation 36 (3)of the Listing Regulations form part of the Notice of the ensuing Annual General Meeting.
During the year under review Mr. Sabu M Jacob being the Chairman & ManagingDirector was appointed by entrusting additional duty of Chief Financial officer w.e.f.20.07.2016.
During the year under review 5 (Five) meetings of the Board of Directors BoardCommittees were held details of which are set out in the Corporate Governance Reportwhich forms a part of this Report.
11.1. Declaration by Independent Directors
Pursuant to sub section (6) of Section 149 of the Companies Act 2013 and Reg 16(1) (b)of the SEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 theIndependent Directors of the Company viz. Mr. Benni Joseph Mr. E. M. Poulose Mr. C. P.Philipose and Mr. K. L. V. Narayan have given declaration to the Company that they qualifythe criteria of independence as required under the Act and the regulations.
11.2. Annual Board Evaluation and Familiarisation programme
The Board has carried out an annual evaluation of its own performance the directorsand also committees of the Board based on the guidelines formulated by the Nomination& Remuneration Committee. Board composition quality and timely flow of informationfrequency of meetings and level of participation in discussions were some of theparameters considered during the evaluation process.
A note on the familiarizing programme adopted by the Company for the orientation andtraining of the Directors and the Board evaluation process undertaken in compliance withthe provisions of the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is provided in the Corporate Governance Report which formspart of this Report.
Further the Independent Directors of the Company met once during the year on January30 2017 to review the performance of the Non-executive directors Chairman of the Companyand performance of the Board as a whole. The manner in which the evaluation has beencarried out has been set out in the Corporate Governance Report which forms an integralpart of this Report. The details of the programme for familiarisation of the Independent
Directors of your Company are available on the Company's website www.kitexgarments.com.
11.3. PolicyonNominationandRemuneration and Performance evaluation of Directors KMPand Senior Management Personnel
The Company believes that a diverse and inclusive culture is integral to its success. Adiverse Board among others will enhance the quality if decisions by utilizing differentskills qualifications professional experience and knowledge of the Board membersnecessary for achieving sustainable and balanced development. Accordingly Board based onthe recommendation of the Nomination and Remuneration Committee has formulated a policy onremuneration of Directors Key Managerial Personnel and Senior Management of the Company.The policy covers the appointment including criteria for determining qualificationpositive attributes independence and remuneration of its Directors Key ManagerialPersonnel and Senior Management Personnel. The Nomination and Remuneration Policy isannexed as Annexure C to this report.
Nomination and Remuneration Committee has also carried out the evaluation of everydirector's performance.
12. Board Committees
Detailed composition of the mandatory Board committees namely Audit CommitteeNomination and Remuneration Committee CSR Committee Stakeholders Relationship Committeenumber of meetings held during the year under review and other related details are set outin the Corporate Governance Report which forms a part of this Report.
There have been no situations where the Board has not accepted any recommendation ofthe Audit Committee.
13. Directors' Responsibility Statement
Pursuant to the requirement under section 134 (5) of the Act the Board of Directors ofthe Company hereby state and confirm that; a) in the preparation of the annual accountsfor the financial year ended March 31 2017 the applicable accounting standards had beenfollowed and there were no material departures; b) the directors had selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe company at the end of the financial year as at March 31 2017 and of the profit of thecompany for that period; c) the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of this Actfor safeguarding the assets of the company and for preventing and detecting fraud andother irregularities; d) the directors had prepared the annual accounts on a going concernbasis; e) the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively. f) the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
14. Employees' Stock Option Scheme
The Company has not granted any Employee Stock Option within the meaning of section 62(1) (b) of the Companies Act 2013 read with its Rules framed there under and respectiveSEBI regulations.
15. Subsidiary & Associate Company
As on March 31 2017 the Company has a Associate Company Kitex USA LLC accounts ofwhich shall be made available to the shareholders of the Company seeking such informationat any point of time. The Consolidated Financial Statements of the Company along with itsAssociate prepared for the year 2016-17 in accordance with relevant Accounting Standardissued by Institute of Chartered Accountants of India forms part of this Annual Report. AReport on the highlights of performance of subsidiaries associates and joint venturecompanies and their contribution to the overall performance of the company during theperiod under report is provided as Annexure D.
The Company does not have any subsidiary as on reporting date. During the year underreview companies does not have become or ceased to be Company's subsidiaries jointventures or associate companies.
16. Corporate Social Responsibility
The Company undertakes "Corporate Social Responsibility" initiatives directlyto the public of Kizhakkambalam Panchayat in improving the quality of life. During theyear 2016-17 the Company has undertaken many initiatives through a policy framework forexpanding some of the present initiatives and undertaking newer CSR initiatives in theyear to come.
The CSR Policy may be accessed on the Company's website at the link: http://www.kitexgarments.com
Our vision on Corporate Social Responsibility where we dream to make KizhakkambalamPanchayat the best in the state among the total 978 Panchayaths.
The Annual Report on CSR Activities in prescribed format is enclosed with this asAnnexure - E.
Detailed composition of the CSR Committee number of meetings held during the yearunder review and other related details are set out in the Corporate Governance Reportwhich forms a part of this Report.
17. Management's Discussion and Analysis Report
The Management's Discussion and Analysis Report for the year under review asstipulated under Regulation 34(2)(e) of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 forms an integralpart of this Report.
18. Corporate Governance
Your Board confirms their continued commitment to best practices of CorporateGovernance. Corporate Governance principles form an integral part of the core values ofyour Company.
In terms of Regulation 34(3) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a separate report on CorporateGovernance along with a certificate from the Auditors' on its compliance forms anintegral part of this Report.
19. Business Responsibility Report
As per Regulation 34(2)(f) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 a separate section on BusinessResponsibility Report describing the initiatives taken by your Company fromenvironmental social and governance perspective forms an integral part of this Report"Annexure - F"
20. Business Risk Management
Your Company recognizes that Risk as an integral part of business and is committed tominimizing the risk in a pro-active and efficient manner. Your Company has a comprehensiverisk management policy/framework which is reviewed by the Risk Management Committee. Moredetails on risk management are covered in the Management Discussion and Analysis formingpart of this Annual Report.
The Risk Management committee consists of Mr. Sabu M. Jacob as the Chairman and Mr.Benni Joseph and Mr. E. M. Paulose as the members. The Committee has been entrusted withthe responsibility to assist the Board in (a) Reviewing and approving the Company'senterprise wide risk management framework; and (b) Monitoring the risks which the Companyfaces such as Commodity Price Risks Uncertain Global economic environment risk Interestrate risk Foreign Exchange Risk Human Resource Risk Competition Risk Compliance RiskIndustrial Safety Employee Health Risk and other risks have been identified and thatprocedure has been laid down to inform members of the Board of Directors about riskmanagement plan for the minimization of risk.
Your Company's Risk Management Committee periodically monitors assesses the risk anduncertainties in the internal and external environment along with the cost of mitigatingrisk and incorporates Risk Mitigation Plans in its strategy business and operation plans.The Risk Management Policy has been adopted by the Committee.
A detailed report on Risk Management is included in Management Discussion and Analysiswhich forms part of this Report.
21. Internal Financial Control
Details in respect of adequacy of internal financial controls with reference to theFinancial Statements are stated in Management Discussion and Analysis which forms part ofthis Report.
22. Conservation of Energy Technology Absorption and Foreign Exchange earnings andoutgo
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act are provided inAnnexure - G to this Report.
23.1. Statutory Auditors
Messrs Varma & Varma Chartered Accountants (FRN 004532S) statutory auditors of theCompany retires at this ensuing Annual General Meeting and are eligible forre-appointment. The Auditors if appointed shall hold office from the conclusion of thisAnnual General Meeting till the conclusion of next Annual General Meeting. Consent of theAuditors and certificate u/s 139 of the Act have been obtained from the Auditors to theeffect that their re-appointment if made shall be in accordance with the applicableprovisions of the Act and the Rules issued thereunder. As required under the SEBI (LODR)Regulations 2015 M/s. Varma & Varma Chartered Accountants have confirmed that theyhold a valid certificate issued by the Peer Review Board of ICAI.
There is no qualification disclaimer reservation or adverse remark made by theStatutory Auditors in Auditors' Report. Your Board of Directors recommends theirappointment as Statutory Independent Auditors for the financial year 2017-18.
23.2. Secretarial Auditors
Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Board of the Directors of theCompany had appointed M/s. SVJS & Associates Company Secretaries to undertake theSecretarial Audit of the Company for the year ended March 31 2017. The Secretarial AuditReport is annexed as Annexure H.
23.3. Internal Auditor
The Board had appointed Messrs. K Venkitachalam Aiyer & Co Chartered Accountantsas Internal Auditors for the financial year 2016-17.
24. Related Party Transactions
During the financial year under review all transactions entered into by the Companywith the Related Parties were on an arm's length basis and in the ordinary course ofbusiness. Prior approval of the Audit Committee of your Company has been obtained for allRelated Party Transactions.
None of the Directors has any pecuniary relationships or transactions except to theextent of remuneration drawn by the directors.
The Particulars of contracts and arrangement with Related Parties of your Companyreferred to in Section 188(1) of the Companies Act 2013 in prescribed form AoC-2 isappended as Annexure I to the Director's Report.
The Policy on Related Party Transactions as approved by the Board is available onyour Company's website http://www.kitexgarments. com
25. Significant and Material Order
There were no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status and company's operations in future for theyear under review.
26. Whistle Blower Policy
Pursuant to Section 177 of the Companies Act 2013 the rules made thereunder and theRegulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Company has established a Vigil Mechanism for directors and employees to reportgenuine concerns about any instance of any irregularity unethical practice and/ormisconduct. The Policy provides for framework and process whereby concerns can be raisedby its employees against any kind of discrimination harassment victimization or anyother unfair practice being adopted against them. Adequate safeguards are provided againstvictimization to those who avail of the mechanism and access to the Chairman of the AuditCommittee in exceptional cases is provided to them. The
Details of the Vigil policy is explained in the Corporate Governance Report.
27. Disclosure as per Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013
Considering gender equality the Company has zero tolerance for sexual harassment atworkplace. The Company has an Anti Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition and Redressal)Act 2013. An Internal Complaints Committee (ICC) has been set up to redress complaintsreceived regarding sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed offduring the reporting period:
No. of complaints received: Nil
No. of complaints disposed off: Nil
The Company has filed Annual Report for the year ended December 31 2016 under the Actwith District officer.
28. Particulars of Employees
The Disclosure as required under Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 is annexed as Annexure J and forms apart of this report.
Information relating to remuneration of Directors under Section 197 read with Rule 5(2)of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 has beengiven Annexure K to the Director's Report
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:
Neither the Managing Director nor the Whole-time Directors of the Companyreceive any remuneration or commission from any of its subsidiaries.
there were no frauds reported by the auditors under provisions of the CompaniesAct 2013
Issue of equity shares with differential rights as to dividend voting orotherwise;
There were no revisions in the financial statements
Your Directors thank various Central and State Government Departments Organizationsand Agencies for the continued help and co-operation extended by them. The Directors alsogratefully acknowledge all stakeholders of the Company viz. customers members dealersvendors banks and other business partners for the excellent support received from themduring the year. The Directors place on record their sincere appreciation to all employeesof the Company for their unstinted commitment and continued contribution to the Company
For and on behalf of the Board of Directors
Kitex Garments Limited
April 28 2017
Sabu M. Jacob
Chairman & Managing Director