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M K Exim (India) Ltd.

BSE: 538890 Sector: Industrials
NSE: N.A. ISIN Code: INE227F01010
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M K Exim (India) Ltd. (MKEXIMINDIA) - Director Report

Company director report

Directors Report & Management Discussion and analysis

To

The Members of M K Exim India Limited

Your Directors have pleasure in presenting their 25th Annual Report and theaudited financial statements for the financial year ended 31stMarch 2017

1 Financial Results

The summarized financial results for the financial year ended 31st March2017 are presented below:

Rs. In Lakhs

Details Financial year ended 31st March 2017 Financial year ended 31st March 2016
Income from operations 3179.06 3916.23
Profit before interest depreciation and taxation 313.06 262.7 1
Finance cost 88.01 95.32
Depreciation 99.66 101.51
Profit before tax 128.39 6 5.8 8
Taxation 37.52 2 1.48
Profit after tax 90.87 44.40
Minority interest 7.94 8.3 3
Profit for the year 82.93 36.07
Balance brought forward from previous year 976.88 94 0 . 8 1
Less Dividend ---
Disposable surplus available after adjustments 1059.81 976.88
Balance carried to balance sheet 1059.81 97 6 . 8 8

The income during the financial year ended 31st March 2017 is Rs. 3179.06lakhs compared to Rs. 3916.23 lakhs a decrease of about 19%. The profit after tax andafter providing minority interest is Rs. 82.93 lakhs for the year under report compared toRs. 36.07 lakhs for the financial year ended 31st March 2016. The sales by wayof exports is Rs. 1914.85 lakhs during the year ended 31st March 2017 comparedto Rs. 2897.89 lakhs in the previous year. Export sales constitute about 60% of the totalrevenue during the year.

2 Dividend and Reserves

With a view to conserve the resources for the business of the Company the

Directors do not recommend dividend for the financial year ended 31st March2017.

3 Share Capital

The paid up equity share capital of the Company as at 31st March 2017 stoodat Rs 718.05 lakhs. During the year under review the Company has not issued shares withdifferential voting rights nor has it granted any stock options or sweat equity. None ofthe directors of the Company hold instruments convertible into equity shares during thefinancial year ended 31st March 2017.

4. Analysis & Review

The Indian textile industry is one the most important industries for the Indian economyconsidering its contribution to employment generation industrial output and foreignexchange earnings. The vast sweep of Indian textile extends from the hand-woven sector onone end to the capital intensive sector on the other. The segments included thedecentralized power looms hosiery and knitting sectors the handlooms and handicraftsegments are also the wide range of fibers which include man-made fiber cotton silk andwool. The industry is the second largest employer after agriculture it accounts for 21per cent of the total employment generated in the economy. This sector is one of thelargest contributors to India's exports with approximately 11 per cent of total exports.The Indian textiles industry currently estimated at around US$ 108 billion is expectedto reach US$ 226 billion by 2023. The Indian Textile Industry contributes approximately 5per cent to India's gross domestic product (GDP) and 14 per cent to overall Index ofIndustrial Production (IIP). Traditionally Indian textile and apparel manufacturingindustries have been cotton focused. Even today cotton has more than a 60 per cent sharecompared to 40 per cent share globally. But this scenario is changing fast. Manufacturersas well as brands are increasingly looking towards man-made fibre options mainlypolyester viscose.

The Indian Textile Industry is set for good growth buoyed by strong domestic demand aswell as export demand availability of raw material skilled workforce excellentinfrastructure facilities and supporting government policies. The Indian textile sector ishighly diverse and has handspun and hand-woven segments at one end of the spectrum andcapital-intensive sophisticated and modern mills on the other. The textile industry isvertically-integrated across the value chain and extends from fibre to fabric to garments.At the same time it is a highly-fragmented sector comprising small-scale non-integratedspinning weaving processing and cloth manufacturing enterprises. Besides that the IndianTextile Sector enjoys a competitive advantage of abundant availability of raw materialssuch as cotton wool silk and jute.

India's textiles products including handlooms and handicrafts are exported to morethan a hundred countries. However the USA and the EU account for about two thirds ofIndia's textiles exports. The other major export destinations are China U.A.E. SriLanka Saudi Arabia Republic of Korea Bangladesh Turkey Pakistan Brazil Hong-KongCanada and Egypt etc.

The Government of India seems committed to developing and sustaining a strong andvibrant textile industry which would contribute significantly to production employmentand skill development thereby promoting economic growth. The Government has taken newinitiatives to make development participative and inclusive in line with the coregovernance philosophy of 'Sabka Saath Sabka Vikaas'. As part of the above Government hasapproved the introduction of "Amended Technology Upgradation Fund Scheme-2016-2022(ATUFS) in place of the existing Revised Restructured Technology Upgradation Fund Scheme(RR- TUFS) for technology upgradation of textile industry. The amended scheme would giveboost to "make in India" in textile sector; it is expected to attract investmentto the tune of 1.5 lac crore rupees and create over 30 lakh jobs. The new scheme targetsemployment generation and increase export earnings by encouraging the apparel and garmentindustry. Under the new scheme there will be two broad categories; one for apparelgarment and technical textiles wherein a 15% subsidy will be provided over five years oncapital investment (not exceeding Rs. 30 crore). The second category comprising all theother sub-sectors will get a 10% subsidy (subject to a ceiling of Rs. 20 crore).TheCentral Government extended the 2% export benefit under Merchandise Export from IndiaScheme (MEIS) for more countries with immediate effect. The RBI policies helped containdemand pressures created a buffer against external shocks and kept a check on thevolatility of the rupee and inflation.

Thus the growth and all round development of this industry has a direct bearing on theimprovement of India's economy.

Opportunities & Challenges

Indian textile Industry is set for strong growth buoyed by both strong domesticconsumption as well as export demand. The exports of textile and clothing productsaccount for 35% of the total textile sector in India. A strong raw material productionbase a vast pool of skilled and unskilled personnel cheap labor good export potentialand low import contents are some of the salient features of the Indian textile industry.With the increase in capacities the company will be able to achieve balancing inoperations offering wide product range and broad base its customer profile. We expectgood growth in the demand for our products in the coming years and improvement in themargins of the Company.

The Government supports modernization of the industry with a particular focus onclosing the gaps in the textile value chain and has taken several measures to create thosepositive impulses. But there are still some improvements possible. The industry waits forthe proposed reforms in labour law support to develop a skilled work force and programsto bind talents to be able to translate market needs into quality products.

The threats to the Company's product includes severe competition both in domestic andinternational markets leading to pricing pressures of finished goods inflation foreignexchange fluctuation volatility in input cost cotton crop interest rates power costetc. Government Policies also play major role in the growth of the Industry.

Nevertheless to fully tap the growth opportunities the industry needs to focus onconsolidation and modernization of weaving processing and garmenting capacities to ensureoptimum productivity and improved quality. On part of the government labour laws reformsshould be implemented at the earliest to encourage new investments.

Threats

The industry is vulnerable to its overdependence on western markets and had notsufficiently embraced new technology to remain competitive against China Korea andIndonesia. Moreover the textile industry is fiercely competitive and this remains as oneof the major concerns as the threat of competition arises from organized as well asdisorganized sector. Tight fiscal control and extremely low fiscal deficit despite thesituation where oil prices would flluctuate is one of the expectations that seems to beplaying on the minds of textile players. Nevertheless to fully tap the growthopportunities the industry needs to focus on consolidation and modernization of weavingprocessing and garmenting capacities to ensure optimum productivity and improved quality.On part of the government labour laws reforms should be implemented at the earliest toencourage new investments.

Business Risks

As stated above Export sales constitute about 60% of the total revenue during theyear. Apart from fierce competition from China Korea and Indonesia the volatility ofrupee vis a vis US dollars is a major business risk as all export invoices are issued inUS Dollars. This is sought to be overcome by appropriate forward contracts.

Raw material

The Company is exposed to the risk of raw material prices of Polyester Viscose P/Vblended yarn Silk and Wool. The Company hedges this risk by purchasing the required rawmaterial at the time of booking of sales contracts. Also this risk is being managed by wayof inventory management and forward booking.

HUMAN RESOURCES RISK

Retaining the existing talent pool and attracting new manpower are major risks. TheCompany hedges this risk by setting benchmark of the best HR practices and carrying outnecessary improvements to attract and retain the best talent. The Company has initiatedvarious measures such as rollout of strategic talent management system training andintegration of learning activities.

The Board of Directors is well aware of these risks and through the operationalmanagement continues to monitor them and guides in taking prompt action to mitigate therisks.

5 Performance highlights

(a) Share Capital

The Authorised Share Capital of the Company is 100000000/- comprising of 10000000equity shares of Rs. 10/- each. The paid-up capital of the Company is Rs. 71805000/-.

(b) Loan funds

During the year the Secured Loan of the Company was decreased by 4.74% i.e. from Rs.447.20 Lakhs to Rs. 426.02 Lakhs resultant the interest cost will be reduce during theyear.

(c) Sales

During the year the turnover of the Company has decreased by 10 % i.e. from Rs.2896.70 Lakhs to Rs. 2611.27 Lakhs the board is making their possible efforts to improvethe performance of the company during the current financial year.

6 Finance& Accounts

The Company prepares its financial statements in accordance with the requirements ofthe Companies Act 2013 (hereinafter referred as "the Act" or "Act")and the Generally Accepted Accounting Principles (GAPP) as applicable in India. Thefinancial statements have been prepared on historical cost basis. The estimates andjudgments relating to the financial statements are made on a prudent basis so as toreflect in a true and fair manner the form and substance of transactions and reasonablypresent the Company's state of affairs profits and cash flows for the financial yearended 31st March 2017.

7 Corporate Social Responsibility

Section 135 of the Act and the rules made there under relating to corporate socialresponsibility are not applicable to the Company during the financial year ended 31stMarch 2017.

8 Subsidiaries

Kolba Farm Fab Private Limited is the subsidiary of the Company . The sales of thesubsidiary Company were Rs. 278.02 Lakhs during the financial year ended 31st March 2017compared to Rs. 98.66 lakhs in the previous year. The net profit after tax was Rs. 79.62lakhs during the year under report compared to Rs. 20.83 Lakhs in the previous year.

The salient features of the financial statement of the subsidiary are given in form AOC1.

9 Consolidated Financial Statement

As required by Regulation 33 of the SEBI (LODR) Regulations 2015 the ConsolidatedAudited Financial Statements have been prepared in accordance with the requirements underAccounting Standard AS-21 on "Consolidated Financial Statements" read with AS-23on the "Accounting for Investment in Associates" read with the provisions ofCompanies Act 2013 are provided forming part of the Annual Report.

Pursuant to section 129(3) of the Act and the relevant rules made there under astatement containing salient features of the financial statement of the subsidiary companyis given in form AOC 1 and forms an integral part of this report.

Corporate Governance

In terms of Regulation 15(2) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 provisions of corporate governance contained in Regulations 17 to 2646(2)(b)(i) and paras C D and E of Schedule V to the above SEBI regulations are notapplicable to the Company.

10 Listing of shares in BSE

During the financial year under report the equity shares continued to be listed atBSE Which has nationwide trading terminals.

11 Extract of Annual Return

The extract of annual return in form MGT 9 as required under section 92 of the Act asat 31st March 2017 is annexed to this report as Annexure A which forms part ofthis report.

12 Key Managerial Personnel

The key managerial personnel of the Company are given below:

Name Designation
Shri Dayaram Khanchandani Chairman and Whole time Director
Shri Manish Murlidhar Dialani Managing Director
Shri Mahaveer Prasad Jain Chief Financial Officer
Ms. Prakriti Sethi Company Secretary

13 Board of Directors

In accordance with provisions of section 152 of the Act Smt. Lajwanti M Dialani (DIN05201148) Director retires by rotation and being eligible offers himself forreappointment.

All independent directors have given declarations that they meet the criteria ofindependence as laid down under section 149(6) of the Act.

14 Number of meetings of the Board

During the year under report the board met 7 times on 30.05.2016 11.06.201630.07.2016 01.09.2016 29.10.2016 19.12.2016 30.01.2017

15 Board Evaluation

The performance evaluation of the independent directors was completed. The performanceevaluation of the Chairman and non-independent directors was carried out by theindependent directors and was accepted by the Board. The Board of directors expressedsatisfaction of the evaluation process adopted by the Company

16 Particulars of loans guarantees or investments by the Company

During the year the Company has not given any loan or issued any guarantee inconnection with the loan.

17 Whistle Blower policy

The Company has in place a mechanism to report genuine concerns or grievances.

18 Remuneration and Nomination policy

The Board of directors has adopted a policy framework for selection appointment andremuneration of directors key managerial personnel and senior management of the Company.

19 Related party transactions

All transactions entered with related parties for the financial year ended 31stMarch 2017 were on arm's length basis and in the ordinary course of business under thirdproviso to section 188(1) of the Act. Hence details are not given in form AOC 2 asrequired under section 134(3) (h) of the Act.

Pursuant to section 188 of the Companies Act 2013 a resolution has been included inthe notice for approval of members for the transactions with M/s. Manish Overseas inwhich some directors are interested.

Omnibus approval wherever required was given for transactions of repetitive nature onhalf yearly basis. All related party transactions are placed before the Audit Committeeand the Board of Directors for approval. All related party transactions entered during thefinancial year ended 31st March 2017 are disclosed in the notes to accounts.

20 Significant and material orders passed by the regulators or courts

There are no significant and material orders passed by the regulators or courts againstthe Company during the year.

21 Directors responsibility statement

To the best of knowledge and belief and according to the information and explanationobtained by them your directors make the following statement in terms of section 134(3)(c) of the Companies Act 2013:

(i) That in preparation of the annual accounts for the year ended 31st March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures if any;

(ii) And applied them consistently and made judgments and estimates that are reasonableand prudent so as to give a true and fair view of the state of affairs of the Company asat 31st March 2017 and of the profit of the Company for the year ended on thatdate;

(iii) That the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

(iv) That the annual accounts have been prepared on a going concern basis

(v) That the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.

22 Statutory auditors

M/s.Vimal Agrawal & Associates Chartered Accountants who are statutory auditorsof the Company hold office upto the forthcoming annual general meeting. If theirappointed is rectified under section 139 of the Companies Act 2013 they shall holdoffice from the conclusion of the ensuing annual general meeting till the conclusion ofthe annual general meeting relating to the financial year ending 31st March2019. The Company has obtained written confirmation from the auditors that theirappointment if made would be in conformity with the limits specified in the saidsection. Members are requested to ratify the appointment of auditors and fix theremuneration

23 Qualification in the auditor's report

With reference to the auditor's remarks in regard to AS 15 for Employees Benefits(Revised 2005) for provision of gratuity the Directors clarify that the liability forgratuity payable by the Company is being worked out in consultation with LIC andappropriate policy as advised by LIC will be taken in due course during the currentfinancial year.

24 Cost Audit

The provisions of the Companies (Cost Records and Audit) Rules 2014 are not applicableto the Company's operations.

25 Secretarial Audit Report

As required under section 204 of the Companies Act 2013 the Secretarial Audit Reportfrom Mr. Suresh Chandra Sharma S. C. Sharma & Associates Practising CompanySecretary (CP No 3374) is annexed to this report as Annexure B which forms part of thisreport.

With reference to the observations in the secretarial audit report in the matter ofappointment of independent directors the Directors state that the Company has compliedwith the provisions of section 149 of the Companies Act 2013 and no action need to betaken further.

26 Internal control system and their adequacy

The Company has an effective internal control system commensurate with its size andscale of its operations. The internal audit is entrusted to M/s Madhur & AssociatesChartered Accountants.

The Audit Committee reviews the adequacy and effectiveness of the internal controlsystems and suggests improvements wherever required.

27 Environment and Safety

The Company's operations do not pose any environment hazards and are conducted in sucha manner that safety of all concerned and compliances with environmental regulations areensured.

28 Statutory Information

(A) Conservation of energy:

The Company has committed to conserve energy improve energy efficiency throughreduction of wastage and optimum utilisation.

(B) Steps taken for utilizing alternate sources of energy: Nil

(C) Capital investment on energy conservation: Nil

(D) Details of disclosure pursuant to section 197(12) of the Companies Act 2013 and therelevant rules framed there under are given in annexure C which forms part of this report.

(E) Details pursuant to rule 5(2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 are not given as none of the employees drew remunerationwithin limits mentioned in the said rule.

Technology Absorption: The Company has no technology agreement and the issue oftechnology absorption does not arise.

(F) Foreign exchange out go and expenses

Foreign exchange earnings: Rs. 1910.91 lakhs

Foreign Exchange outgo Rs. 8.71 lakhs

29 Acknowledgment

The Directors wish to place on record their appreciation of the contribution made bythe employees at all levels but for whose efforts; the Company could not have achieved theremarkable financial results for the financial year.

By order of the Board

For M.K. Exim (India) Limited

SD/-

Daya Ram Khanchandani

Chairman

DIN:0161546

Place : Jaipur

Date : 21.08.2017