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Modern Denim Ltd.

BSE: 500451 Sector: Industrials
NSE: MODERNDENM ISIN Code: N.A.
BSE 05:30 | 01 Jan Modern Denim Ltd
NSE 05:30 | 01 Jan Modern Denim Ltd

Modern Denim Ltd. (MODERNDENM) - Director Report

Company director report

DIRECTORS' REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS

The Members

Your Directors are pleased to present the 39th Annual Report of the Company togetherwith the Audited Financial Statements for the year ended 31st March 2017.

FINANCIAL RESULTS

(Rs. in Crores)

Particulars Year ended 31.03.2017 Year ended 31.03.2016
Turnover and other Income 77.38 35.67
Profit/(Loss) before Interest and Depreciation 3.70 (2.31)
Less: Interest 1.12 0.76
Profit/(Loss) Before Depreciation 2.58 (3.07)
Less: Depreciation 0.99 1.00
Profit/(Loss) Before Exceptional Items & Tax 1.59 (4.07)
Add: Exceptional Items - 45.83
Profit/(Loss) Before Tax 1.59 41.76
Less: Provision for taxation - -
Profit/(Loss) After Tax 1.59 41.76
Balance brought forward from previous year (92.04) (133.80)
Balance carried to Balance Sheet (90.45) (92.04)

OPERATIONS

During the Financial Year ended on 31st March 2017 your company achieved a turnoverof? 77.78 Crores as against? 35.67 Crores in the previous year. Turnover increased due toincreased production activity. Inspite of the difficult business condition prevailing onthe domestic textile market your Company has been able to generate net profit of ? 1.59crores as against loss of? 4.07 Corers in the previous year. Your Company has takenseveral remedial steps to meet the challenges viz. measures of saving in cost at allfronts of operation optimize use of available resource etc. In view of accumulatedlosses your Directors are unable to declare any dividend for the year under review.

EXPORTS

The exports of the Company during the year under review were progressive to ?4.89crores as compared to previous year of? 3.97 crores despite of continued recessionarybusiness ambiance in the global market. However the Company is continuing its efforts toenhance presence of its products in overseas markets. ANALYSIS AND REVIEW

Your Company is engaged in the business of denim fabric manufacturing. The Companymanufactures various types of denim fabrics including basic denim stretch denim ringmultiymixed count denim cross hatch face & back denim & blended denim fabric.The Company's plant at Ahmedabad has a composite denim mill with installed productioncapacity of 30 MMPA. Our experienced marketing and designing teams ensure that ourproducts meet the latest trends in the denim market.

In the recent past denim markets across the world have witnessed a remarkable upswingin demand primarily from the new generation. Further people in rural areas of India areincreasingly adopting denim as a daily wear. The growing apparel market increasingadoption of denim and rising disposable incomes of Indian population are expected topresent humongous business opportunities to our Company

Industry Overview

On the production side India is the second largest denim manufacturing country in theworld. India's average utilisation rate of its production capacity hovers between 80% -85% resulting in a total supply of 850 - 900 MMPA. China leads the global denimmarketplace with a capacity of close to 3500 MMPA with Asia alone accounting for about70% of the global production of denim fabric capacities. India is also the fourth largestexporter of denim fabric globally after China Pakistan and Turkey.

Our business is gaining momentum in'the domestic market and expects the growth tocontinue in the coming years on account of changing dynamics of the Indian consumer base;We expect our Company to benefit substantially from the favourable drivers for the Indiandenim industry as an increasing number of global denim manufacturers are looking at Indiaas an emerging denim export region owing to its quality standards cost effectiveness anda large pool of skilled workforce. Outlook Opportunities Threats Risks and concerns Thedemand for denim has been continuously rising in India and is expected to grow manifold inthe coming years. India is being positioned as one of the leading manufacturers andexporters of denim owing to its quality standards cost effectiveness and a large pool ofskilled workforce. Moreover higher disposable income westernisation of clothing cultureand growing popularity of denim jeans as a business casual wear is expected to drivefuture growth of Denim Industry.

STATUS OF PROCEEDINGS AT NCLT

After abatement of BIFR the Company has submitted rehabilitation/revival scheme toNCLT which is under consideration.

FIXED DEPOSITS

The Company has an unpaid amount of Fixed Deposits & Interest thereon outstandingas on 31 st March 2017 the details of which have been given in the Note No. 4 annexedwith the financial statements. However payment on companionate ground are continued to bemade as per decision of die committee formed by National Company Law Tribunal for thispurpose.

The Company has not accepted any deposits during the year under review within themeaning of Section 73 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014.

PARTICULAR OF LOANS. GUARANTEES AND INVESTMENT

Pursuant to the provisions of Section 186(4) of the Act and SEBI (LODR) disclosures onparticulars relating to loans advances and investments are provided as part of theFinancial Statements. There are no guarantees issued or securities provided by yourCompany in terms of Section 186 of the Act read with the Companies (Meetings of Board andits Powers) Rules 2014.

CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES ' During the financial year underreview all contracts/ arrangements/ transactions entered into by your Company withRelated Parties were on arm's-length basis and in the ordinary course of business. Therewere no transactions with Related' Parties which qualify as material transaction underthe SEBI (LODR). Since all the contracts/arrangements/transactions with Related Partiesduring the year under review were in the ordinary course of business and at arm's-lengthand were not considered material disclosure in Form AOC-2 under Section 134(3)(h) of theAct read with the Companies (Accounts of Companies) Rules 2014 is not applicable. Thedetails of contracts and arrangement with Related Parties of - your Company for thefinancial year ended 31 st March 2017 are given in Note No. 31 to the FinancialStatements forming part of this Annual Report.

SUBSIDIARY. JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary Joint Ventures and Associate Companies as on31.03.2017.

DIRECTORS AND KEY MANAGARIAL PERSONNEL During the year under review the Board acceptedthe request of Sbri H.L. Sharma for an early retirement from the office of the Whole-TimeDirector with effect from 30th September 2016. The Board placed on record its deepappreciation for the valuable contribution and services rendered by Shri H.L. Sharmaduring his association spanning over three decades with the Group.

Subject to the approval of the shareholders the Board has on the recommendation ofthe Nomination and Remuneration Committee appointed Shri T.C. Chejara (DIN: 07619881) asan Additional Director under the category Non-Executive Non- Independent Director of theCompany w.e.f. 1st October 2016. As an Additional Director Shri T.C. Chejara holdsoffice upto the date of the ensuing AGM and is eligible to be appointed as a Director ofthe Company. The Company has received a notice from Shri T.C. Chejara along with therequisite deposit signifying his candidature for appointment as a Director at the ensuingAGM.

The resolution seeking the appointment of Shri T.C. Chejara as Director w.e.f. 1 stOctober 2016 have been included in the Notice of the AGM. Youx Directors recommend theresolution for your approval.

In accordance with the provisions of Section 1S2 of the Companies Act 2013 and theArticles of Association of the Company Smt. Meenu Sacheti (DIN: 02266703) Non-ExecutiveDirector of the Company will retire by rotation at the ensuing AGM and being eligiblehave offered himself for re-appointment. Resolutions seeking their appointment have beenincluded in the Notice of the AGM. Your Directors commend the Resolutions for yourapproval.

In terms of the provisions of Sections 2(51) and 203 of the Act read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 Shri SachinRanka Chairman & Managing Director Shri C.S. Jain Chief Financial Officer and ShriKirit shah Company Secretary are the Key Managerial Personnel (KMP) of the Company. Theappointment and remuneration of Directors and KMPs are as per policy of the Company.

The Company has received declarations from all the Independent directors of the Companythat they meet the criteria of independence as laid down under section 149(6) of theCompanies Act 2013 and the SEBI (Listing Obligation and Disclosure Requirements)Regulations 2013.

BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligationsand Disclosure Requirements) Regulation 2015 the Board has carried out the evaluation ofits own performance the Directors Individually as well as the evaluation of the workingof its Audit Committee Nomination & Remuneration Committee Stakeholders RelationshipCommittee and Corporate Social Responsibility Committee. Standard parameters were preparedafter taking into consideration various aspects of the Board functioning such as adequacyof the composition of the Board and its Committees Board culture execution andperformance of specific duties obligations and governance etc.

A separate exercise was carried out to evaluate the performance of Individual Directorsincluding the Chairman of the Company who were evaluated on parameters such as level ofengagement and contribution independence of judgment safeguarding the interest of theCompany and its minority shareholders etc. The performance evaluation of the IndependentDirectors was carried out by the entire Board and the performance evaluation of theChairman and the Non Independent Directors of the Company was carried out by theIndependent Directors who have expressed their satisfaction with the evaluation process.MEETING OF THE BOARD

The Board meets at regular intervals to discuss and decide on business strategies andpolicies and review the financial performance of the Company. The notice and detailedagenda alongwith other material information are sent in advance separately to eachDirectors.

During the year ended 31st March 2017 four Board Meetings were held on 25th June201622nd September 201630th December 2016 and 28th March 2017. Further details onDirector attendance in the Board Meetings are as follows:

Name of the Directors

Date of Board Meeting

25th June 2016 22nd Sept. 2016 30th Dec. 2016 28th March 2017
Shri Sachin Ranka
Shri B.L. Verma
Shri S.K Sharma Leave of Absence Leave of Absence
Shri H.L. Sharma N.A. N.A.
Smt. Meenu Sacheti Shri T. C. Chejara Leave of Absence Leave of Absence
(From 01.10.2016) N.A. N.A.

COMMITTEES OF THE BOARD Audit Committee

The Board has constituted an Audit Committee comprising of Shri T.C. Chejara Shri B.L.Verma and Shri S.K. Sharma as its members. Further details relating to the Audit Committeeare provided in the Corporate Governance Report forming part of this Annual Report.

All the recommendations made by the Audit Committee during the year were accepted bythe Board of Directors of the Company. Further details on Members attendance in theMeeting are as follows:

Name of the Members

Date of Committee Meeting

25th June 2016 22nd Sept. 2016 30th Dec. 2016 28th March 2017
Shri H.L. Sharma N.A. N.A.
Shri T. C. Chejara (From 01.10.2016) N.A. N.A.
Shri B.L. Verma
Shri S.K. Sharma Leave of Absence Leave of Absence

Nomination and Remuneration Committee

The Board has constituted a Nomination and Remuneration Committee comprising of ShriT.C Chejara Shri B.L. Verma and Shri S.K. Sharma as its members.

The Board has on the recommendation of the Nomination and Remuneration Committeeformulated the Remuneration Policy of the Company. Further details on Members attendancein the Meeting are as follows:

Name of the

Date of Committee Meeting

Members 25th June 2016 22nd Sept. 2016 28th March 2017
Shri H.L. Sharma N.A.
Shri T. C. Chejara (From 01.10.2016) N.A. N.A.
Shri B.L. Verma
Shri S.K. Sharma Leave of Absence

Corporate Social Responsibility Committee

The Board has constituted a Corporate Social Responsibility Committee comprising ofShri Sachin Ranka Shri T.C. Chejara and Shri S.K. Sharma as its members.

The Company has also formulated and adopted the CSR Policy. However as the Company doesnot meet the criteria of Section 135 (5) of the Companies Act

2013 no amount was required to spend on CSR activity during the year under review. '

During the year ended 31st March 2017 one Meeting of Corporate Social ResponsibilityCommittee was held i.e. on 28th March 2017 and the same was attended by all the membersof the Committee.

Stakeholders Relationship Committee

The Board has constituted a Stakeholders Relationship Committee comprising of Shri T.C.Chejara Shri B.L. Verma and Shri S.K. Sharma as its members.

Further details on Members attendance in the Meeting are as follows:

Name of the Members

Date of Committee Meeting

25th June 2016 22nd Sept. 2016 30th Dfcc. 2016 28th March 2017
Shri H.L. Sharma Shri T. C. Chejara N.A. N.A.
(From 01.10.2016) N.A. N.A.
Shri B.L. Verma
Shri S.K. Sharma Leave of Absence Leave of Absence

NOMINATION AND REMUNERATION POLICY Pursuant to the provisions of section 178 of theCompanies Act 2013 read with rules made there under the Board has constituted aNomination & Remuneration Committee. The Board on the recommendation of the Nomination& Remuneration Committee has framed a policy i.e. Nomination & Remuneration Policyfor selection and appointment of Directors senior managerial personnel and theirremuneration.

The Executive/whole time/Managing Director Key managerial personnel and otheremployees shall be of requisite qualification high integrity and have relevant expertiseand experience.

In case of appointment of Independent Directors the committee shall satisfy itselfwith regard to the independence of the Directors and also ensure that the candidateidentified for appointment as an Independent Director is not disqualified for appointmentunder Section 149 and 164 of the Companies Act 2013.

AUDITORS AND AUDITORS' REPORT Statutory Auditors

M/s. J.T Shah & Company Chartered Accountants Ahmedabad (ICAI Firm RegistrationNo. 109616WC) is the Statutory Auditors of the Company. The present statutory auditorshave completed their tenure of two terms of 5 consecutive years and also an additionalperiod of 3 years as stipulated under section 139 of the Companies Act 2013. M/s. J.TShah & Company Chartered Accountants Ahmedabad will thus be holding the office ofstatutory auditors upto the conclusion of the forthcoming annual general meeting. TheBoard of Directors on recommendation of the Audit Committee has proposed to appoint M/sSamir Shah & Associates Chartered Accountants Ahmedabad (ICAI Firm Registration No.122377W) as the Statutory Auditors of the Company for a period of 5 years commencing hornthe conclusion of 39th Annual General Meeting till the conclusion of 44th Annual GeneralMeeting. M/s Samir Shah & Associates Chartered Accountants Ahmedabad has consentedto the said appointment and confirm that their appointment if made would be within dielimits mentioned u/s 141 (3)(g) of the Companies Act 2013 and the Companies (Audit andAuditors) Rules 2014.

The Board places on records its appreciation for the contribution of M/s. J.T Shah& Company Chartered Accountants Ahmedabad during their tenure as the statutoryauditors of the Company.

The observations made by the Statutory Auditors on the Financial Statements of theCompany in their Report for the financial year ended 31st March 2017 read with theexplanatory notes therein are self-explanatory and therefore do not call for anyfurther explanation or comments from the Board under Section 134(3X0 of the Act.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Act read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hadappointed M/s JAKS & Associates Company Secretaries Jaipur to conduct thesecretarial audit for the financial year 2016-17. The Secretarial Audit Report issued byM/s JAKS & Associates Company Secretaries for the financial year 2016-17 forms partof this Report and is set out in Annexure 'A' to this Report.

The observations in Secretarial Audit Report which pertains mainly listing agreementrequirements stock exchange compliances etc. It is clarified that the Company will takenecessary action on implementation of rehabilitation scheme pending for examination.

EXTRACT OF ANNUAL RETURN

In accordance with the provisions of Section 134(3Xa) of die Act an extract of theAnnual Return of the Company for the financial year ended 31st March 2017 is given inAnnexure 'B' to this Report

VKrIL MECHANISM/WHISTLE BLOWER POLICY

The Company has established a Vigil Mechanism for reporting of concerns through theWhistle Blower Policy of the Company which is in compliance of the provisions of Section177 of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules2014 and SEBI (LODR) Regulations 2015. The Policy provides for framework and processwhereby concerns can be raised by its employees against any kind of discriminationharassment victimisation or any other unfair practice being adopted against them.Adequate safeguards are provided against victimisation to those who avail of themechanism and access to the Chairman of the Audit Committee in exceptional cases isprovided to them.

BUSINESS RISK MANAGEMENT

The Company has formally adopted Risk Management Policy for framing implementing andmonitoring the risk management plan of the Company. The main objective of the policy is toensure sustainable business growth with stability and to promote a pro-active approach inreporting evaluating and accomplishing the growth plans of the Company are imperative.The common risks of the Company inter alia are financial risk human resource risktechnology obsolescence regulatory risk and strategic risk etc. As a matter of policythese risks are assessed and appropriate steps are taken to mitigate the same.

INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The internal control framework is designedto ensure proper safeguarding of assets maintaining proper accounting records andproviding reliable financial information and other data. This system is supplemented byinternal audit reviews by the management and documented policies guidelines andprocedures. The Company has a well-defined organization structure authority levelsinternal rules and guidelines for conducting the business transactions. The Companyintends to undertake further measures as necessary in line with its intent to adhere toprocedures guidelines and regulations as applicable in a transparent manner.

An external independent firm carries out the internal audit of the Company operationsand reports its findings to the Audit Committee. Internal Audit also evaluates thefunctioning and quality of internal controls and provides assurance of its adequacy andeffectiveness through periodic reporting. Internal Audit is carried out as per risk basedinternal audit plan which is reviewed by the Audit Committee of the Company. The Committeeperiodically reviews the findings and suggestions for improvement and is apprised on theimplementation status in respect of the actionable items

PARTICULAR OF EMPLOYEES

The information required pursuant to Section 197 read with rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company will be provided upon request In terms of Section 136 of the Act thereports and accounts are being sent to the members and others entitled thereto excludingthe information on employees' particulars which is available for inspection by the membersat the Registered office of the Company during business hours on working days of theCompany up to the date of ensuing Annual General Meeting. If any member is interested ininspecting the same such member may write to the Company Secretary in advance.

ENERGY CONSERVATION. TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as Annexure-'C' andforms part of this Report.

MATERIAL CHANGES AND COMMITMENTS EFFECTING THE FINANCIAL POSITION OF THE COMPANY

Except as disclosed elsewhere in this Report no material changes andcommitments which could affect the Company's finlncial position have occurred betweenthe end of the financial year of the Company and the date of this Report. CODE OF CONDUCT

In compliance of SEBI (Listing Obligations and Disclosure Requirements) Regulation2015 and the Companies Act 2013 the Company has framed and adopted a Code of Conduct andEthics. The Code is applicable to the Board of Directors Key Managerial Personnel and allother employees in the course of day to day business operations of the Company. The Codelays down the standard procedure of business conduct which is expected to be followed bythe Directors Key Managerial Personnel and all other designated employees of the Companyin their business dealings and in particular on matters relating to integrity in the workplace in business practices and in dealing with stakeholders.

DIRECTORS' RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act 2013 the directors would like tostate that:

(a) In the preparation of the annual accounts the applicable accounting standards havebeen followed alongwith proper explanation relating to material departures;

(b) The directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that were reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

(c) The directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) The directors have prepared the annual accounts on a going concern basis;

(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 the provisionsof all applicable laws and that such system were adequate and operating effectively.

GENERAL

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:

• Issue of equity shares with differential rights as to dividend voting orotherwise;

• Issue of shares (including sweat equity shares) to employees of the Companyunder any Scheme;

• There were no revisions in the financial statements;

• No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and the Company's operations in thefuture; and

• No cases or complaints were received pursuant to the Sexual Harassment of Womenat Workplace (Prevention Prohibition and Redressal) Act 2013.

• No material changes and commitments affecting the financial position of theCompany occurred between the end of the financial year to which this financial statementrelate and the date of this report.

KNOWLEDGEMENTS

Your Directors express their deep sense of gratitude to the banks financialinstitutions stakeholders business associates Central and State Governments and allregulatory bodies for their co-operation and support and look forward to their continuedsupport in future.

ON BEHALF OF THE BOARD

(Sachin Ranka)

Chairman & Managing Director

DIN 00335534

Place: Ahmedabad

Date: 29th May 2017