DIRECTORS REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS
The Members of M K Exim India Limited
Your Directors have pleasure in presenting their 24th Annual Report and the auditedfinancial statements for the financial year ended 31st March 2016
1. Financial Results
The summarized financial results for the financial year ended 31st March 2016 arepresented below:
| || ||Rs. In lacs |
|Details ||Financial year ended 31st March 2016 ||Financial year ended 31st March 2015 |
|Income from operations ||3916.23 ||5093.03 |
|Profit before interest depreciation and taxation ||262.71 ||107.93 |
|Finance cost ||95.32 ||21.60 |
|Depreciation ||101.5 1 ||17.45 |
|Profit before tax ||65.88 ||68.88 |
|Taxation ||24.34 ||18.00 |
|Profit after tax ||52.86 ||50.88 |
|Minority interest ||11.71 ||--- |
|Profit for the yea r ||41.14 ||50.88 |
|Balance brought forward from previous year ||940.81 ||933.17 |
|Less Dividend ||- ||43.25 |
|Disposable surplus available after adjustments ||981.95 ||940.81 |
|Balance carried to balance sheet ||98 1.95 ||940.81 |
The income during the financial year ended 31st March 2016 is Rs. 3916.73 lacs comparedto Rs. 5093.03 a decrease of about 23%. The profit after tax and after providing minorityinterest is Rs. 41.14 lacs for the year under report compared to Rs. 50.88 lacs for thefinancial year ended 31st March 2015. The sales by way of exports is Rs. 2897.89 lacsduring the year ended 31st March 2016 compared to Rs. 4591.40 lacs
in the previous year. Export sales constitute about 74% of the total Revenue during theyear.
2 Dividend and Reserves
With a view to conserve the resources for the business of the Company the Directors donot recommend dividend for the financial year ended 31st March 2016.
3 Share Capital
The paid up equity share capital of the Company as at 31st March 2016 stood at Rs718.05 lacs. 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 2016.
4. Analysis & Review
Textile Industry Conditions
For the Textiles industry the global focus is shifting from China to India due to costand stability factors. The government's positive steps are expected to help this shift andif foreign investments in textiles retail materialises the consumption of the textileproducts in the domestic market should increase in the years to come. Recently Governmenthas withdrawn the requirement of export contract registration for cotton and cotton yarnand now these are in the free list without any requirement of registration which shouldboost export of cotton yarn and simultaneously the domestic market is expected toimprove. Further Egypt has removed anti dumping duty of 5% against import of cotton yarnfrom India with effect from 31/12/2014 which will boost the exports of Indian Cotton Yarnto Egypt. The Government has recently announced the much awaited Foreign Trade Policy2015- 2020 in which the export obligation for domestic procurement of capital goods underEPCG has been reduced from 90% to 75% and the said Policy has also introduced a singleMerchandise Exports from India Scheme (MEIS) as against 5 different schemes for rewardingmerchandise exports with different kinds of scripts with varying conditions. This hassimplified the procedure/documentation to get the export benefits quickly which willpromote textile exports from India. Power and labour costs are increasing due to whichcost of production has been going up. The expected fall in the value of rupee should actpositively for promotion of exports.
Opportunities & Challenges
The opening of the international markets has thrown a host of opportunities with uniqueset of challenges. opportunity to India as compared to other countries including China inthe polyester-viscose fabrics the very product in which the Company specializes. This isespecially because viscose fibre is available in abundant quantity in India as compared toChina. As such India is stronger in polyester/ viscose fibre suiting as compared to Chinaand other countries. Thus in India new designs can be injected faster allowing the Indianmanufacturers to cater to the larger section of the people with a variety of colourchoices and designs which is not feasible for the Chinese manufacturers. This is one ofthe reasons that the Indian fabrics particularly viscose suiting dominates the market ascompared to the Chinese fabrics. India therefore has a massive edge compared to China inviscose polyester fabrics and China is in effect not a competition considering the targetmarket and business model.
The future looks bright for the Indian textile industry. There are positive driverswhich indicate future growth opportunities. There is growing export as well as domesticmarket demand. The Government supports modernization of the industry with a particularfocus on closing the gaps in the textile value chain. To convert the potential intoreality the country first of all needs entrepreneurs who are willing to invest.Investment prospects depend on a business-friendly environment and good businessexpectations. The Government has taken several measures to create those positive impulses.But there are still some improvements possible. The industry waits for the proposedreforms in labour law support to develop a skilled work force and programs to bindtalents to be able to translate market needs into quality products.
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 fluctuate 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.
As stated above exports constitute about more than 90% of Company's sales. Apart fromfierce competition from China Korea and Indonesia the volatility of rupee vis a vis USdollars is a major business risk as all export invoices are issued in US Dollars. This issought to be overcome by appropriate forward contracts.
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 increased by 163% i.e. from Rs.169.91 Lakhs to Rs. 447.20 Lakhs which is need for better performance of the company.
During the year the turnover of the Company has decreased by 38 % i.e. from Rs.4612.14 Lakhs to Rs. 2896.70 Lakhs the board is making their possible efforts to improvethe performance of the company.
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") andthe Generally Accepted Accounting Principles (GAPP)as applicable in India. The financialstatements have been prepared on historical cost basis. The estimates and judgmentsrelating to the financial statements are made on a prudent basis so as to reflect in atrue and fair manner the form and substance of transactions and reasonably present theCompany's state of affairs profits and cash flows for the financial year ended 31st March2016
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 2016.
Kolba Farm Fab Private Limited has become the subsidiary of the Company during the yearunder report. The sales of the subsidiary Company were Rs.98.66 Lakhs during the financialyear ended 31st March 2016 compared to Rs. 766.22 lakhs in the previous year. The netprofit after tax was Rs.29.29 lakhs during the year under report compared toRs.(33.45)Lakhs in the previous year.
The salient features of the financial statement of the subsidiary are given in form AOC1
9 Consolidated Financial Statement
The consolidated financial statements of the Company are prepared in accordance withthe relevant accounting standards issue by the Institute of Chartered Accountants of Indiaand forms an integral part of this 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.
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 as at 31st March 2016 is annexed to this report as Annexure A which forms part of thisreport.
12 Key Managerial Personnel
The key managerial personnel of the Company are given below:
|Sr No. ||Name ||Designation |
|1 ||Shri Dayaram Khanchandani ||Chairman and Whole time Director |
|2 ||Shri Manish Murli Dialini ||Managing Director |
|3 ||Shri Shashi Kant Vyas ||Chief Financial Officer |
|4 ||Ms. Prakriti Sethi ||Company Secretary |
13 Board of Directors
In accordance with provisions of section 152 of the Act Mr. Manish Murlidhar Dialani(DIN 05201121) Managing Director retires by rotation and being eligible offers himselffor reappointment.
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 13 times on 13.04.2015 22.05.201530.05.2015 24.06.2015 06.07.2015 23.07.2015 31.07.2015 30.10.2015 18.11.201515.01.2016 08.02.2016 09.03.2016 and 14.03.2016.
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 31st March2016 were on arm's length basis and in the ordinary course of business under third provisoto section 188(1) of the Act. Hence details are not given in form AOC 2 as required undersection 134(3)(h) of the Act.
The Company had transactions of purchasing cloth from Kolba Farm Fab Private Limited asubsidiary of the Company during the financial year 2015-16 amounting to Rs. 49.76 lacs.The prices quoted by Kolba are comparable with the prices of similar suppliers for thesame product.
Pursuant to section 188 of the Companies Act 2013 a resolution has been included inthe notice for approval of members for the transactions wtih 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 2016 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 section134(3)(c) of the Companies Act 2013:
(i) That in preparation of the annual accounts for the year ended 31st March 2016the 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 arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31st March 2016 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 maintenanceof adequate 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 their appointedis rectified Under section 139 of the Companies Act 2013 they shall hold office from theconclusion of the ensuing annual general meeting till the conclusion of the annual generalmeeting relating to the financial year ending 31st March 2019. The Company has obtainedwritten confirmation from the auditors that their appointment if made would be inconformity with the limits specified in the said section. Members are requested to ratifythe appointment of auditors and fix the remuneration.
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 isensured.
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 the relevant rules framed thereunder are given in annexure C which forms part ofthis 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. 2897.89 lacs |
|Foreign Exchange outgo ||Rs.6.82 lacs |
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 |
|Place : Jaipur ||Chairman |
|Date : 01.09.2016 ||DIN:0161546 |