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S P Apparels Ltd.

BSE: 540048 Sector: Industrials
NSE: SPAL ISIN Code: INE212I01016
BSE LIVE 15:40 | 17 Nov 380.85 13.35
(3.63%)
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NSE 15:31 | 17 Nov 381.05 13.95
(3.80%)
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OPEN 375.65
PREVIOUS CLOSE 367.50
VOLUME 4457
52-Week high 482.00
52-Week low 280.30
P/E 17.82
Mkt Cap.(Rs cr) 959
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 375.65
CLOSE 367.50
VOLUME 4457
52-Week high 482.00
52-Week low 280.30
P/E 17.82
Mkt Cap.(Rs cr) 959
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

S P Apparels Ltd. (SPAL) - Director Report

Company director report

To

The Members

The Directors of your Company are pleased to present the 12th Annual Report on thebusiness and operations of the Company together with the Audited Financial Statements forthe year ended March 31 2017. The Management Discussion and Analysis is also included inthis Report.

FINANCIAL RESULTS

Highlights of Financial Results for the financial year 2016-2017 are as under:

During the current year we have increased the capacity of yarn production by adding afew machines. Currently we are producing more counts compared to last year.

During the current year we have balanced our dyeing and finishing capacities by addinga compacting machine.

Retail Division:

During the year EBO business grew due to increase in the number of stores and changein the product mix Offered to customers. We have re-aligned our product mix according tothe market expectation and fashion trend.

( Rs In Millions)
Particulars Standalone Consolidated
2016-17 2015-16 2016-17 2015-16
Sales and other income
Domestic sales 1417.97 1127.08 1546.64 1086.53
Export Sales 4809.88 4241.72 4809.89 4241.72
Other Income 208.25 48.63 210.27 49.29
Total 6436.10 5417.43 6566.80 5377.54
Profit before Interest & Depreciation 1257.76 772.10 1283.68 733.66
Less: Interest 134.35 252.44 134.87 252.72
Depreciation 223.85 207.15 207.71 201.00
Profit Before Tax 899.56 312.51 941.10 279.94
Less : Taxation
Provision for Current Tax 308.29 66.89 308.29 68.45
MAT Credit - -14.88 -30.34
Deferred Tax Expenses / (Credit) 26.17 55.62 26.17 55.32
Profit After Tax (before appropriation) 565.10 204.88 606.64 186.51

REVIEW OF OPERATIONS:

Garment Division:

During the financial year growth in the garment division was supported by the increasein capacities and increase in customer demand. Higher growth has led to increase inmargins.

Increase in capacity was due to setting up of new factories as also increase incapacities of the existing factories. During the current year we have re-aligned ourproduct mix. The basic volume products have increased in percentage when compared to theprevious years. This new product mix also helped us improve our worker eficiency and thiscontributed to revenue growth.

Our Large Format Stores' sales also have grown substantially due to opening up of newoutlets. Our products were well accepted in all regions and our partners have Offered usmore space looking at the brand's performance.

E- com business posted good growth as we targeted quality conscious customers.

SPUK :

During the year under review we have started business relationship with some newcustomers and also have started working on new products.

DIVIDEND

The Board in its meeting held on 24th May 2017 has recommended a dividend of 10% forthe 20000000 Redeemable preference shares of Rs 10/-each for the Financial Year 2016-17amounting to Rs 20.00 million subject to the approval of shareholders at the ensuingAnnual General Meeting (Previous Year: 3% from the date of its allotment ie.22.09.2011 to31.03.2016 aggregating Rs 44.00 million). The Board further recommended dividend of 5% onthe 25167600 Equity shares of Rs 10/- each for the Financial Year 2016-17 amounting toRs 12.58 million subject to the approval of shareholders at the ensuing Annual GeneralMeeting (Previous Year: Nil).

RESERVES & SURPLUS

As at March 312017 the Company had reserves of Rs 3576.53 million. During the currentyear company had transferred Rs 2463.43 million to the reserves. (Share premium Rs1922.40 Dividend & Dividend tax ( Rs 24.07) and profits of Rs 565.10)

Your Company has earned a total profit after tax of 565.10 millions out of which a sumof Rs 20.00 million was transferred to towards dividend proposed to be distributed toPreference shareholders and the remaining has been transferred to Reserves & surplusfor the purpose of future expansions and acquisitions.

SHARE CAPITAL

During the year under review the Company has issued 8922388 Equity shares of facevalue Rs 10 each through an IPO. IPO included 8022388 Equity shares as fresh issue and900000 equity shares by way of Offer for sale by New York Life Investment ManagementIndia Fund (FVCI) II LLC. The fully paid up Equity Shares of Rs 10/- each of the Companyas on March 31 2017 Rs 251676000/- 10% Redeemable Cumulative Preference Shares of Rs10/- each of the Company as on March 31 2017 Rs 200000000/- and total paid up capitalof the Company as on March 31 2017 Rs 451676000/-.

CAPITAL EXPENDITURE

As on 31st March 2017 the gross fixed assets block stood at Rs 4829.16 Million andnet fixed assets block at Rs 2978.83 Million. Additions to Fixed Assets during the yearamounted to Rs 415.66 Million.

SUBSIDIARY COMPANIES

The Company has two subsidiary companies viz. Crocodile Products Private Limited and S.P. Apparels (UK) Private Limited their financials and details as required Under Section136 of the Companies Act 2013 (hereinafter referred to as the ‘Act') are availablein the website of the company.

A statement pursuant to first proviso to Section 129(3) of the Companies Act 2013 inForm No. AOC-1 in respect of subsidiary companies is attached vide Annexure.

Crocodile Products Private Limited:

During the year under review CPPL has made a profit of Rs 1.6 Million as against thelosses of Rs 8.4 Million during the previous year. This increase is due to increase in theroyalty collection during the current year.

S. P. Apparels (UK) Private Limited:

During the year under review SPUK had made a revenue of GBP 1.47 Million as against arevenue of GBP 0.20 Million during the previous year. SPUK broke even at the PAT levelduring the current year as against a loss of 1.56 million during the previous year.

FIXED DEPOSITS

The Company has not accepted any deposits from public within the meaning of Section 73of the Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014and hence no amount on account of principal or interest were outstanding for payment onthe date of the Balance Sheet.

FINANCE

Prompt repayments and pre-closure of certain high cost debt facilitated by healthycash flows elevated the standing of your Company. It enabled prudent application of fundsand better negotiation strength. This trend is expected to continue.

DIRECTORS

a) Change in Director's Designation:

The Board at its meeting held on 24th August 2016 had redesignated Mr. SrinivasChidambaram Nominee Director as Non-Whole Time Director of the Company.

b) Directors Retire by Rotation:

In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Mrs. S. Latha Sundararajan Executive Director retiresby rotation at the forthcoming Annual General Meeting and being eligible she Offersherself for re-appointment.

The details of the above Director required to be disclosed under Regulation 36(3) ofSEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 form part of theNotice to the ensuing Annual General Meeting. All the Directors of the Company haveconfirmed that they are not disqualified from being appointed as Directors in term ofSection 164 (2) of the Act.

The Company has adequate number of Independent Director in compliance with the Act andSEBI (LODR) Regulations 2015 hereinafter referred to as Listing regulations.Familiaraization Program on the Company and its operation was conducted for theIndependent Directors. Requisite declaration from the Independent Directors of the Companyunder Section 149 (7) of the Act confirming that they meet with the criteria of theirIndependence laid in Section 149 (6) have been obtained.

STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTOR

The Company has received declaration pursuant to Section 149(6) of Companies Act 2013from all independent directors.

KEY MANAGERIAL PERSONNEL AND MANAGERIAL REMUNERATION CRITERIA

In pursuance of the Act the Company has Key Managerial Personnel. None of the ManagingDirectors or Whole Time Directors receive any remuneration or commission from theSubsidiary Companies and the remuneration paid to them is within the purview of theprovisions of Section 197 read with Schedule V of the Act. The Company pays remunerationby way of salary to its Chairman cum Managing Director and fixed monthly remuneration toits Executive Director and Whole Time Director Director (Operations) in line with theapprovals accorded by the General Meetings in pursuance of the recommendation of theNomination and Remuneration Committee as per the guiding principles laid down in theNomination and Remuneration Policy and also by the Board of Directors. The information asrequired by Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is appended.

ANNUAL PERFORMANCE EVALUATION

The Board has carried out an annual evaluation of its own performance the Directorsand also committees of the Board based on the guideline 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 familiarization 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 February14 2017 to review the performance of the Non-executive directors Chairman of the Companyand performance of the Board as a whole.

COMMITTEES

As required by the provisions of the Act and Listing Regulations the Company hasalready formed the following Committees the details of which are disclosed in the Reporton Corporate Governance forming part of this Report.

I. Audit Committee

II. Stakeholders Relationship Committee

III. Nomination and Remuneration Committee

IV. Corporate Social Responsibility (CSR) Committee

POLICIES

As required by the provisions of the Act and the Listing Regulations the followingpolicies have been framed and disclosed on the Company's website‘www.spapparels.com'.

I. Nomination & Remuneration Policy

II. Related Party Transaction Policy

III. Corporate Social Responsibility Policy

IV. Vigil Mechanism Policy

V. Policy on Determining Material Subsidiaries

VI. Code for Fair Disclosure

VII. Risk Management Policy

RISK MANAGEMENT

Pursuant to section 134 (3) (n) of the Companies Act 2013 & Regulation 17 (9) ofthe Listing Regulations the Company has framed an Effective Risk Management policy inorder to analyze control or mitigate risk. The board periodically reviews the risks andsuggests steps to be taken to control the same.

VIGIL MECHANISM & WHISTLE BLOWER POLICY

The Company has a vigil mechanism for reporting of genuine concerns or grievancesthrough its Whistle Blower policy. The Company provides key positions to womenprofessionals and encourages no disparity in any manner. This has created a congenial workatmosphere for women and to express their confidence of reporting of any grievances. TheCompany afirms that no personnel have been denied access to the Audit Committee. Allsuspected violations and reportable matters can be reported to the Chairman of the AuditCommittee at e-mail id – vigilance@s-p-apparels.com. The Whistle Blower Policy hasbeen posted on the website of the Company.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Corporate Social Responsibility Committee consisting of Directors Mr. Sundararajan- Chairman Mrs. S Latha and Mr. V Sakthivel as members of the committee have formulatedand recommended to the Board a Corporate Social Responsibility Policy (CSR Policy)indicating the activities to be undertaken by the Company as specified in Schedule VII ofthe Companies Act 2013 which has been approved by the Board. The CSR policy may beaccessed on the Company's website www.spapparels.com. The annual report on CSR activitiesis annexed herewith.

During the year the Company could spend Rs 2.08 Million on CSR Activities out of thestipulated sum of Rs 4.61 Million. The Company's CSR initiatives involve setting thefoundation of various programs at a small scale to learn from on-ground realities gettingfeedback from community and then putting an enhanced sustainable model to ensure maximumbenefit to the community. For this reason during the year the Company's spend on the CSRactivities has been less than the limits prescribed under Companies Act 2013 and anamount of Rs 2.53 Million remains unspent. The existing CSR activities are scalable andnewinitiatives are being considered. Going forward the Company will endeavour to spend on CSRactivities in accordance with the legal requirements.

BOARD MEETINGS

The Board of Directors met seven times during the financial year on 06.06.201608.07.2016 19.07.2016 06.08.2016 24.08.2016 14.11.2016 and 14.02.2017. The Compositionof Board procedure dates and other details are included in the Corporate GovernanceReport that forms part of this Report.

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial Statementspursuant to the provisions of the ‘Act' and the Listing Regulations entered into withthe Stock Exchanges. They are prepared in accordance with the Accounting Standardsprescribed by the Institute of Chartered Accountants of India in this regard. TheConsolidated Financials also show a significant increase in Revenues as well asProfitability.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

The Company has duly complied with the provisions of Section 186 of the Act and asrequired therein the details of the Borrowals Security Investment etc. are annexed byway of notes to accounts.

RELATED PARTY TRANSACTIONS

All transactions entered with Related Parties for the year under review were on arm'slength basis and in the ordinary course of business and the provisions of Section 188 ofthe Companies Act 2013 and the Rules made thereunder are not attracted. Thus disclosurein Form AOC-2 in terms of Section 134 of the Companies Act 2013 is not required.

Further these transactions are placed before the Audit Committee and Board of theCompany specifying the nature and value of transactions for their consideration andapproval.

The Transactions covered by Accounting Standards AS-18 are reported in the Notes toAccounts of the Consolidated Financial Statements as well as Standalone FinancialStatements of your Company. The Company's Policy on dealing with related partytransactions is available on the Company's website.

EMPLOYEE WELFARE

The Employee Welfare Initiatives and practices followed by the Company is among thebest in the Corporate sector. The Company employs close to 10070 workers.

PARTICULARSOFEMPLOYEESANDRELATEDDISCLOSURES

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.

PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE

Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013 provides for protection against sexual harassment of women at workplace and for theprevention and redressal of complaints of sexual harassment and also for the mattersincidental thereto. The Company has accordingly adopted the policy against SexualHarassment of Women at Workplace for the purpose of preventing prohibiting andredressing sexual harassment of female employees at all the workplace within the Companywhich are based on fundamental principles of justice and fair play.

Further Anti Sexual Harassment Committee has been constituted at each unit which shallbe responsible for redressal of complaints related to sexual harassment. The details ofall such complaints and its proper redressal through prompt corrective steps are informedto the Top Management so as to ensure that suitable processes and mechanisms are put inplace to ensure that issues of sexual harassment if any are Effectively addressed.

During the year no complaints of sexual harassment were received by the Company fromany of its Units.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars relating to energy conservation technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act read with theCompanies (Accounts) Rules 2014 are provided in the Annexure to the Report.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directors hereby statethat:

a) in the preparation of the annual accounts for the year ended March 31 2017 theapplicable accounting standards read with requirements set out under Schedule III to thesaid Act have been followed and there are no material departures from the same;

b) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of aflairs of the Company as at March 31 2017 and of the profit ofthe Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the 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 have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingEffectively; and f) the Directors have devised proper systems to ensure compliance withthe provisions of all applicable laws and that such systems are adequate and operatingEffectively.

MATERIAL CHANGES AND COMMITMENTS

There are no material changes and commitments afiecting the financial position of theCompany that would impact the going concern status of the Company and its futureoperations which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of the report. Further there has beenno change in the nature of business of the Company.

SIGNIFICANT & MATERIAL ORDER PASSED BY THE REGULATORS

No significant and material order was passed by any Regulators that have any impact onthe going concern status and the operations of the Company.

CORPORATE GOVERNANCE REPORT AND MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT

In pursuance of Listing Regulations the Corporate Governance Report and ManagementDiscussion and Analysis Statement are attached to this Report. Certificate from theSecretarial Auditor of the Company confirming the compliance with the conditions ofCorporate Governance is also attached to this report.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The details of Internal Financial Control (IFC) and theiradequacy are included in the Report of Management Discussion and Analysis which formspart of this report.

RATIO OF REMUNERATION TO EACH DIRECTOR

Details / Disclosures of Ratio of Remuneration of Director to the median employee'sremuneration as required by the Act and Companies Rules are appended.

AUDITORS:

a) STATUTORY AUDITORS

M/s. Deloitte Haskins & Sells Chartered Accountants Coimbatore are statutoryauditors of the Company and their appointment expires at the conclusion of the ensuingAnnual General Meeting of the Company since their completion of two terms of fivecontinuous years.

M/s. ASA & Associates LLP Chartered Accountants Chennai have given a certificateof consent under Section 139 of the Companies Act 2013 for their appointment at theensuing Annual General Meeting to act as the statutory auditors of the Company for fiveyears from the conclusion of the ensuing Annual General Meeting.

b) SECRETARIAL AUDITOR

Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. S.Rajaguru & Associates Company Secretary in Practice to undertake theSecretarial Audit of the Company. The Secretarial Audit reports in Form MR-3 for the yearended 31st March 2017 is annexed to this report. There is no secretarial auditqualification for the year under review.

c) INTERNAL AUDITOR

The Board had appointed M/s BM & Associates Chartered Accountants as InternalAuditors for the financial year 2016-17.

AUDITORS REPORT

The Auditor's Report to the Shareholders does not contain any qualification.

EXTRACT OF ANNUAL RETURN

Pursuant to section 92 (3) of the Act and Rule 12 (1) of the Companies (Management andAdministration) Rules 2014 an extract of annual return in MGT - 9 forms part of thisReport.

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation for the contribution made byall the employees at all levels but for whose hard work and support your Company'sachievements would not have been possible. Your Directors also wish to thank itscustomers suppliers and bankers for their continued support and faith reposed in theCompany.

For and on behalf of the Board of Directors
P. Sundararajan S. Latha
Managing Director Executive Director
(DIN : 00003380) (DIN : 00003388)
Place : Avinashi V. Balaji K. Vinodhini
Date : 07.07.2017 Chief Financial Officer Company Secretary