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Sambandam Spinning Mills Ltd.

BSE: 521240 Sector: Industrials
NSE: SAMBANDAM ISIN Code: INE304D01012
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P/E 7.89
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OPEN 134.00
CLOSE 133.25
VOLUME 2600
52-Week high 163.50
52-Week low 84.45
P/E 7.89
Mkt Cap.(Rs cr) 57
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sambandam Spinning Mills Ltd. (SAMBANDAM) - Director Report

Company director report

Your directors have pleasure in presenting the 42 Annual Report together with theAudited Accounts for the year ended March 31 2016 (the year).

1 Performance highlights 2015 - 16 2014 - 15
(Rupees in Lakhs)
Revenue from Operations
Direct exports 316 530
Merchandise exports 3713 5227
Domestic Sales 16383 18304
Total Yarn and Process Waste Sales 20412 24061
Wind Turbine Generator Power sold to third party 97 120
Other Revenue 33 52
Total Revenue from Operations 20542 24233
Profit
Gross profit [Profit before interest depreciation & Tax] 2331 2767
Cash profit [Profit before depreciation & Tax] 1194 1593
Profit before tax [PBT] 126 508
Less : Provision for Current Tax 45 0
Provision for Deferred Tax 39 163
Profit after tax [PAT] 42 345
Profit carried from previous year 107 85
Profit available for appropriation 149 430
APPROPRIATION OF PROFIT :
Transfer to General Reserve 35 195
Adjustment relating to Fixed Assets 26
Proposed Dividend on Equity Shares 85 85
Tax on proposed equity dividend 17 17
Surplus profit carried to Balance Sheet 12 107
149 430

2 DIVIDEND

With a view to maintain the dividend payment track record of the Company yourdirectors decided to recommend payment of Dividend at 20% for the year same as theprevious year subject to the approval of the bankers of the Company.

3 MANAGEMENT DISCUSSION AND ANALYSIS

Core business of the company is manufacture and sale of cotton yarn. The managementdiscussion and analysis given below discusses the key issues of the Industry with specificreference to the cotton yarn spinning sector.

a) INDUSTRY PERFORMANCE

The year 2015-16 has been a year of major challenges faced by the spinning industrywhich faced almost year long downtrend in Selling prices coupled with wide fluctuationsin cotton prices. The power situation was also bad in the first few months but gotstabilized in the subsequent period. Market demand for yarn was also continuously subduedwhich forced many units to reduce the working days and lower their production for exportorders from global retail giants. On the other hand the marketing challenges are forcingestablished players to move away from traditional market to develop new markets where thequality efficiency and productivity play a major part. In addition those with latestsophisticated machinery have an edge as they could shift between various products withina short production cycle time. The major challenge for the leading players is to beprepared for adapting to changes in the market and cater to smaller market lots andshorter cycle time of order to cash. This required rearrangement of their existingproduction facilities to adapt to market dynamics and improve their capability to cater towider variety of markets.

Since Spinning is feeder industry to weaving and knitting sectors its fortunes mainlydepend upon the dynamics of those sectors. The weakest link in the Indian Industry hasbeen weaving knitting and finishing as compared to global leaders such as China ItalyGermany and Turkey. Even the developing countries like Indonesia Vietnam and Philippineshave become our competitors due to lot of susidies available in their respectivecountries. To strengthen the spinning weaving and knitting sectors a major thrust hasbeen exerted by the consolidated efforts of the Indian Textile Machinery ManufacturesAssociation end users and the Government to undertake a moonshot and come up withalternative technologies suited to Indian textile environment affordable to these sector.This should be feasible in the coming years if dedicated efforts are undertaken with thefinancial support for R & D by the Government through its various schemes such asTextile Modernisation Fund and 'Make-In-India' campaigns. This will naturally have acascading effect on the spinning sector which feed the weaving and knitting sectors.

b) COMPANY'S PERFORMANCE

(i) During the year under review your Company's turnover reduced to Rs.205.92 croresas against Rs.243.20 crores recorded in the previous year mainly due to subdued marketconditions. Your Company's performance was adversely affected due to steep fall in theprice of yarn both in the export market and domestic market. Export orders were much lowercoupled with uneconomic price due to competition from other developing countries likeIndonesia Vietnam Bangladesh and Philippines. In order to cope-up with the marketconditions production was reduced and several cost reduction measures were adopted by theCompany such as tie-up with Private Power Producers to get the required power at a pricelesser than the TANGEDCO Power securing dedicated power supply from EB Substation to allthe three units of the Company and minimum use of diesel Gensets supported by yourCompany's Wind Turbine generated power. These measures helped to achieve improved level ofplant utilization to maintain production and quality of the product and achieve reasonableprofit after tax of Rs.42 lakhs as against Rs.345 lakhs recorded in the previous year.

(ii) Your Company's Wind Turbine Generators (WTGs) recorded generation of electricpower of the value of Rs.860 lakhs during the year (Rs.920 lakhs in 2014-15). Loss ofRs.595 lakhs in wind power generation during the year under review (as against Rs.1455lakhs recorded during the year 2012-13) was on account of TANGEDCO imposing back-outing(not allowing full generation and not accounting fully the Wind Turbine generated power)during the high wind season which resulted in loss of possible generation of about 110lakh units during the year.

(iii) Even though Bank interest rates remained high during the year Management'sconscious decision to exercise strict control on inventory levels helped to reduce theworking capital requirement resulting in considerable saving up to Rs.37.31 lakhs in thefinance cost during the year.

c) OUTLOOK FOR 2016-17

Industry expects improvement during the current financial year as cotton prices arestabilizing and yarn prices have started improving from the first quarter of the financialyear 2016-17. Considering the present market demand for products like Viscose ModalLinen Fiber and value added products like Gassed and Mercerized Yarn your Company hasplanned to produce these new products in addition to the existing products Viz. CombedCarded and Compact Yarn. The Company also started converting its yarn into fabric as ameasure of value addition.

During the year 2016-17 power generated by the Company's Wind Turbine Generators areexpected to be fully fed through its Grid by TANGEDCO (without back-out) which wouldresult in securing full benefit of the Company's Wind Turbine Generators. In order to gainmaximum benefit from the Wind Turbine generated power and the group captive powerpurchased from private power producers even during the power cut and load shedding perioddedicated feeder line connection from the E.B substation to all the three units of yourCompany has been secured. This will ensure uninterrupted power supply to the spinningmills of your company which will reduce the dependence on diesel generated power and alsomaximize production through out the day. Further life of the electrical components couldbe enhanced due to avoidance of down time during frequent power cuts and thereby qualityof the product could be maintained / improved further. As part of future plans thedeferred expansion project at Unit III will be taken up for implementation at theappropriate time.

d) RISKS AND CONCERNS

Your Company has devised risk management policy which involves identification of therisks associated with the business risks as well as the financial risks its evaluationmonitoring reporting and mitigation measures. Audit Committee and the Board of Directorsof the Company periodically review the risk management policy of the Company so that themanagement controls the risk through properly defined network. Heads of departments areresponsible for implementation of the risk management system as may be applicable to theirrespective areas of functioning and report to the Board and the Audit Committee. Detailsof the risk management mechanism and key risks faced by the Company are enumerated in therisk management policy.

Risk Management Policy adopted pursuant to the provisions of Section 134 (3) (n) of theCompanies Act 2013 is hosted on the website of the Company under the web linkhttp://www.corporate@sambandam.com

e) ENVIRONMENT PROTECTION HEALTH AND SAFETY (EHS)

EHS continues to receive the highest priority in all operational and functional areasat all locations of your Company. Systematic process safety analysis audits periodicsafety inspections are carried out by expert agencies and suitable control measuresadopted for ensuring safe operations at the site. Various processes as required forPollution Control and Environmental Protection are strictly adhered to.

f) INTERNAL CONTROL AND SYSTEMS

Your company has in place well established internal control procedures covering variousareas such as procurement of raw materials production planning quality controlmaintenance planning marketing cost control and debt servicing. Steps are taken withoutloss of time whenever any weakness is observed to correct the same.

Your Company is certified ISO 9001 ISO14001 and OHSAS18001 for the systems. Furtheryour Company's laboratory is also certified by NABL.

g) HUMAN RESOURCES MANAGEMENT

Employees are your Company's most valuable resource. Your Company continues to create afavourable environment at work place. Your Company has formulated and implemented variouswelfare measures for the employees. The Company also recognizes the importance of trainingand consequently deputes its work force in various work related courses/seminars includingimportant issues like Total Quality Management (TQM) behavioral skills soft skills etc.Because of these labour welfare and improvement measures your Company is able to attractand retain well trained and dedicated workforce.

The fact that relationship with the employees continues to be cordial is testimony tothe Company's ability to retain high quality workforce. In view of the aforesaidrelationship no man days were lost during the year under report.

h) DISCLOSURE AS PER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTIONPROHIBITION AND REDRESSAL) ACT 2013

The Company has in place an Anti Sexual Harassment Policy in line with the requirementsof the Sexual Harassment of Women at Work place (Prevention Prohibition and Redressal)Act 2013. Management of the Company has set up an Internal Complaints Committee (ICC)to redress any complaint received regarding sexual harassment. All the employees of theCompany are covered under this policy. Out of 773 permanent employees on the rolls of theCompany 146 are women and 627 are men. No complaint on sexual harassment has beenreceived from any employee during the year and no complaint is pending at the end of theyear.

i) COST AUDIT

In accordance with the provisions of the Companies Act 2013 and the Rules framed thereunder Cost Audit for the Company was not applicable for the year 2014-15. However it isapplicable for the financial year commencing from 1 April 2015. On the recommendation ofthe Audit Committee Board of Directors of the Company approved the appointment of M/s.S.MAHADEVAN & CO. Cost Accountants Chennai for audit of Cost Accounts of theCompany for the years 2015-16 and 2016-17and the resolution for ratification of theremuneration payable to the Cost Auditor for the year 2016-17 will be placed before themembers for their ratification at the 42 Annual General Meeting of the Company scheduledto be held on 6.8.2016.

In view of the Company maintaining the cost records continuously and in order toprovide the comparable audited figures for the year 2014-15 in the Cost Audit Reportfor the year 2015-16 your directors decided to continue the Cost Audit for the year2014-15 on a voluntary basis. The Cost Auditor will submit to the Board of Directors hisreport for the year 2015-16 after duly certifying the cost records. Cost Audit Report forthe year 2015-16 will be submitted in XBRL format well before the due date.

j) BOARD MEETINGS :

During the year under review five board meetings were held and the intervening gapbetween any two board meetings did not exceed 120 days. Dates of the board meetings anddetails of directors' attendance at the meetings are furnished in the Corporate Governancereport at Annexure – VI.

k) DIRECTORS

At the 40 Annual General Meeting of the Company held on 28.9.2014 members had appointedSri P.S.Ananthanarayanan Dr.V.Gopalan Sri N.Asoka Sri S.Gnanasekharan and Sri KameshwarM Bhat as Independent Directors of the Company for a term of five consecutive years fromthe date of that AGM till the conclusion of the 45 AGM of the Company. Since all the fiveIndependent Directors are not liable to retire by rotation out of the remaining fivenon-independent directors Sri S.Dinakaran opted to retire by rotation at the ensuing 42Annual General Meeting. However he is eligible for reappointment by members at the 42 AGMof the Company.

The Chairman and Managing Director (CMD) and the two Joint Managing Directors (JMDs)were appointed by members at the 41st AGM of the Company held on 27.9.2015 for a term of 3years from 1.10.2015 to 30.09.2018 in accordance with the recommendation of the Nominationand Remuneration Committee and the Board of Directors of the Company and the revised(increased) remuneration payable to them during that period was also approved by membersby passing Special Resolution at the 41 AGM. However the CMD and the two JMDs have notavailed the increased remuneration till 31.3.2016 in view of the Company's sub-dueperformance.

l) DIRECTORS' RESPONSIBILITY STATEMENT AS PER SECTION 134(5) OF THE COMPANIES ACT 2013

Pursuant to the requirement of Section 134(5) of the Act and based on therepresentations received from the management the directors hereby confirm that:

i. . in the preparation of the annual accounts for the financial year 2015-16 theapplicable accounting standards have been followed and there are no material departures;

ii. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for the financial year;

iii. they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Act. They confirm that there are adequate systems and controls forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

iv. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and operating properly; and

vi. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

m) SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under view no significant material orders were passed by the Regulatorsor Courts or Tribunals impacting the going concern status and the operations of theCompany.

n) PARTICULARS OF EMPLOYEES - information pursuant to Rule 5 (2) of Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014

None of the employees or directors of the Company has drawn remuneration exceeding Rs.5lakhs per month or Rs.60 lakhs per annum during the year.

o) BOARD EVALUATION

Board of Directors carried out annual evaluation of its own performance and that of theCommittees and the individual directors pursuant to the provisions of Section 134(3)(p) ofthe Companies Act 2013 and the corporate Governance requirements prescribed in theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015. Performance of the Board was evaluated after seeking input from theDirectors on the basis of the criteria such as the Board Composition effectiveness ofboard process information flow and functioning of the Board. Performance of theCommittees was evaluated by the Board after seeking inputs from the Committee Members onthe basis of the criteria such as composition of the Committees effectiveness of theCommittee meetings etc. and it was observed that the performance of the Board as well asthe Committees was adequate.

Performance of the non-independent Directors were evaluated by the Independentdirectors at the meeting of the Independent directors on the basis of six criteria viz.attendance and participation; Qualification knowledge skill and enterprise; updating ofskill and knowledge; individual contribution; adherence to Company's policies andprocedures and benefits derived by the Company. On the basis of the above criteriaperformance of all the non-independent directors were found to be adequate. As regards theperformance of the Chairman & Managing Director after taking into consideration theviews of the Executive Directors and the non-executive directors the Independent Directorswere of the unanimous view that the Chairman & Managing Director is not only wellinformed and knowledgeable about the Industry but also has the requisite experience toexecute his duties as Chairman and Chief Executive of the Company. His insight and forwardlooking policies have elevated the status of the Company in the eyes of the stakeholdersand the wholesome performance of the Company is in his safe hands and the future of theCompany is bright.

Board's evaluation of the independent directors was recorded by the entire boardexcluding the director being evaluated.

p) FAMILIARIZATION PROGRAMME OF THE INDEPENDENT DIRECTORS

Periodic presentations are made by Senior Management and Internal Auditors at the Boardmeetings and Committee meetings on the business and performance updates of the Companyglobal business environment business risks and its mitigation strategy impact ofregulatory changes on strategy etc. Updates on relevant statutory changes encompassingimportant laws are regularly intimated to all the Directors including the IndependentDirectors.

q) DEPOSITS

Following are the details of deposits covered under Chapter V of the Companies Act 2013:

i. Deposits Accepted from shareholders during the year (2015-16) : Rs. 303.65 lakhs
ii. Deposits remaining unpaid or unclaimed as at the end of the year : NIL
iii. Any default in repayment of deposits or payment of interest thereon during the year : NIL
iv. Total Deposits outstanding at the end of the year - - : Rs. 516.70 lakhs

Company has duly complied with the provisions of Section 73 of the Companies Act 2013read with relevant rules with respect to fixed deposits.

r) INDUSTRY ASSOCIATIONS

Sri S.Dinakaran Joint Managing Director of the Company is a member of the Committee ofAdministration and Chairman of the Yarn Committee of the Cotton Textiles Export PromotionCouncil (TEXPROCIL) Mumbai and the Confederation of Indian Textile Industry (CITI)Delhi. By virtue of the offices he holds Sri Dinakaran has been representing to theIndustries and Finance Ministries at the appropriate time to get relief to the ailingTextile Industry.

s) REPORT ON PERFORMANCE OF THE ASSOCIATE COMPANIES :

There are two associate Companies –

SPMM Health Care Services Pvt. Ltd. - 49.75% investment in the share capital

This Company has recorded total revenue of Rs.31859942 and profit after tax (PAT) ofRs.4729843 during the year ended 31.3.2016 as against Rs.39243571 Revenue andRs.4363920 PAT recorded in the previous year.

Salem IVF Centre Pvt. Ltd. – 34.70% investment in the share capital of thatCompany.

This Company incorporated on 17 November 2014 has recorded total revenue ofRs.18197704 and Loss of Rs.9331265 during the second year (first full year) of itsoperations as against the revenue of Rs.2247925 and loss of Rs4500915 recorded in thePrevious Year (Period from 17.11.2014 to 31.3.2016).

t) CHANGES OR COMMITMENTS AFTER THE YEAR END ON 31.3.2016

No material change or commitment affecting the financial position of the Company hasoccurred between the close of the financial year on 31.3.2016 and the date of this report.

Information pursuant to section 197 (12) of the Act read with Rule 5(1) & 5(2) ofthe Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 :

(i) Ratio of the remuneration of each Director Company Secretary Chief FinancialOfficer and Chief Technical Officer to the median remuneration of the employees of theCompany; AND

(ii) Percentage increase in their remuneration in 2015-16 as compared to the previousyear (2014-15): (Median Remuneration : Rs.62260 in 2015-16)

Name of whole-time Directors and KMP Remuneration in 2015-16 Remuneration in 2014-15 % increase in 2015-16 Ratio to Median Ratio of 2015-16 Remuneration to
Rs. lakhs Rs. lakhs Remn. Remn. Revenue Net Profit
Mr.S.Devarajan CMD 36.00 36.00 NIL 57.82 0.17 % 86.62 %
Mr.S.Jegarajan JMD 30.00 30.00 NIL 48.19 0.15 % 72.18 %
Mr.S.Dinakaran JMD 6.00 6.00 NIL 9.64 0.03 % 14.44 %
Mr.R.S.Shanmugam 6.60 6.50 1.54 10.60 0.03 % 15.88 %
Company Secretary
Mr. D.Niranjan Kumar CFO 18.00 18.00 NIL 28.91 0.09 % 43.31 %
Mr.J.Sakthivel - CTO 18.00 18.00 NIL 28.91 0.09 % 43.31 %

 

Name of Non-executive Directors # Remuneration in 2015-16 # Remuneration in 2014-15 % increase / (% decrease) in 2015-16 Ratio to Median Remuneration in 2015-16
Rs. lakhs Rs. lakhs Remuneration
Mr.D.Sudharsan 0.75 0.80 (6.25 %) 1.20
Smt.S.Abirami 0.75 0.15* N.A 1.20

 

Name of Independent Directors # Remuneration in 2015-16 # Remuneration in 2014-15 % increase / (% decrease) Ratio to Median Remuneration
Rs. lakhs Rs. lakhs in 2015-16 in 2015-16
Remuneration
Mr.P.S.Ananthanarayanan 2.65 2.70 (1.85%) 4.26
Dr. V.Gopalan 2.65 2.70 (1.85%) 4.26
Mr.N.Asoka 2.65 2.15 23.26% 4.26
Mr.S.Gnanasekharan 2.50 2.45 2.04% 4.02
Mr.Kameshwar M Bhat 2.50 0.55* N.A 4.02

# Only sitting fees is payable to Non-executive and Independent Directors for themeetings of the Committee or of the Board attended by them.

* Part of the year – appointed at the AGM held on 28.9.2014.

(iii) Percentage increase in the remuneration of employees in 2015-16 : NIL

(a) No increase in the remuneration of any employee or Key Managerial Personnel duringthe year 2015-16 (b) No increase in the sitting fees of Directors also.

(c) Variation in the sitting fees paid to Directors depends on their attendance at theBoard / Committee Meetings.

(iv) Number of permanent employees on the rolls of the Company : 773

(v) Explanation on the relationship between average increase in the remuneration of theemployees and Key Managerial Personnel (KMP) as against the Company performance is notapplicable due to above reference (iii) (a).

(vi) No employee of the Company is in receipt of remuneration in excess of the highestpaid remuneration of the director during the year.

(vii) Variations in the Market Capitalisation & Price Earning Ratio as at the closeof the Financial Year on 31.3.2015 and 31.3.2016 and percentage increase or decrease inthe market quotation of the shares :

Paid-up Capital : Rs.42646000 – 4264600 equity shares of Rs.10 each fullypaid-up Equity shares of the Company are listed in the Bombay Stock Exchange (BSE) Equityshares were listed only after the last public issue in 1995.

As such no market quotation at the time of last public issue of the Company's shares.

Issue price of the equity share in 1995 was rupees fifty including premium of rupeesforty per share

Year end date Closing market Price per share Earning Per Share Price Earning Ratio Market Capitalisation
(Rupees lakhs)
31.3.2015 Rs.59.90 Rs.8.10 7.40 2554.49
31.3.2016 Rs.66.50 Rs.0.97 68.56 2835.96
Variation % 11.02 % (88.02%) 826 % 11.02 %

(viii) No variable component of the remuneration availed by any director.

(ix) Remuneration payable to the Directors is as per the Remuneration Policy of theCompany

23 AUDITORS

Auditors M/s. M.S. Krishnaswami & Rajan Chartered Accountants retire at theensuing annual general meeting and they have confirmed their eligibility and willingnessto accept office if reappointed. On the recommendation of the Audit Committee yourCompany's Board is placing the Resolution u/s 139(2) of the Company's Act 2013 forappointing him as the Statutory Auditors of the Company for the current financial year– 2016-17.

24 CAUTIONARY NOTE

Statements in the Board's report and the management discussion and analysis describingthe Company's objectives expectations or predictions may be forward looking within themeaning of applicable securities laws and regulations. Actual results might differmaterially from those expressed in the statement. Important factors that could influencethe Company's operations include global and domestic demand and supply conditionsaffecting selling prices of finished goods input availability and prices changes ingovernment regulations tax laws economic developments within the country and otherrelated factors such as litigation and industrial relations.

25 VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has an established vigil mechanism for Directors / Employees to reportconcerns about unethical behaviour actual or suspected fraud or violation of the code ofconduct or ethics policy. It also provides for adequate safeguards against victimizationof directors/ employees who avail of the mechanism. The Company affirms that no personnelhave been denied access to the audit committee. The Company has formulated a Policy onVigil Mechanism and has established a mechanism that any personnel may raise ReportableMatter after becoming aware of the same. All suspected violations and Reportable Mattersare reported to an Independent Director and member of the Audit Committee at his e-mail idksg_comsec@yahoo.com. The key directions/actions are informed to the Managing Director ofthe Company.

The Company has adopted Whistle Blower Policy in line with the provisions of Section177(9) of the Companies Act 2013 which can be accessed on the Company's Website under theweb link http://www.corporate@sambandam.com

26 REPORTS OF STATUTORY AUDITORS AND SECRETARIAL AUDITORS

Reports of the Statutory Auditors and the Secretarial Auditors for the year underreview are free from any qualification reservation or adverse remark or disclaimer.Secretarial Audit Report in Form MR-3 is attached which forms part of this report –refer Annexure VII.

27 EXTRACT OF ANNUAL RETURN

Extract of Annual Return in Form MGT-9 pursuant to Section 92(3) of the Companies Act2013 is also attached which forms part of this report – refer Annexure VIII.

28 ACKNOWLEDGEMENT

Your directors thank the Company's customers vendors and investors for their continuedsupport during the year. Your directors place on record their appreciation for thecontribution made by the employees at all levels. Your Company's consistent growth hasbeen made possible by the hard work solidarity cooperation and support of the managementteam.

Your directors thank State Bank of India Karnataka Bank Limited Canara Bank AxisBank Limited and IDBI Bank Limited and the State and Central Government departments fortheir support and look forward to their continued support in future.

Salem D.Niranjan Kumar R.S.Shanmugam S.Dinakaran S. Devarajan
May 21 2016 Chief Financial Officer Company Secretary Joint Managing Director Chairman & Managing Director

Annexures to this Report

The following are the annexures to this report

1. Statement containing salient features of the financial statement of associatecompany (Form AOC – 1) in Annexure I

2. Form AOC - 2 in Annexure II

3. CMD / CFO Certification in Annexure III

4. Conservation of energy technology absorption Research and development and foreignexchange earnings and outgo in Annexure IV

5. Details of CSR Expenditure in Annexure V

6. Secretarial Audit Report (Form MR-3) in Annexure VI

7. Extract of Annual Report (Form MGT-9) in Annexure VII

FORM AOC - 1

PART "A": SUBSIDIARIES

Not Applicable since the Company does not have any subsidiary.

PART "B": ASSOCIATES

Statement pursuant to Section 129 (3) of the Companies Act 2013 related to AssociateCompanies

Sl. No. Name of Associate SPMM Healthcare Services P Ltd Salem IVF P Ltd
1. Latest audited Balance Sheet Date 31-03-2016 31-03-2016
Shares of Associate held by the Company on the year end:
2. Number of Shares 1990000 704060
Amount of Investment in Associates Rs. 19900000 Rs. 7040600
Extend of Holding % 49.75% 34.70%
3. Description of how there is significant influence Associate Company Associate Company
4. Reason why the associate / joint venture is not consolidated Associate Companies accounts have been consolidated
5. Networth attributable to Shareholding as per latest audited Balance Sheet Rs. 9420167 Rs. 2338921
6. Profit / (Loss) for the year Rs. 4729843 (Rs. 9331265)
Profit/(Loss) attributable to the Shareholding Rs. 2353097 (Rs. 3237949)

1. Names of associates or joint ventures which are yet to commence operations: NIL

2. Names of associates or joint ventures which have been liquidated or sold during theyear: NIL

3. The Company does not have any joint venture.

For and on behalf of the Board
Salem S. Devarajan
May 21 2016 Chairman and Managing Director

FORM NO. AOC-2 ANNEXURE - II

Form for disclosure of particulars of contracts / arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso thereto

[Pursuant to clause (h) of sub-section (3)of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014]

1. Details of contracts or arrangements or transactions NOT at Arm's LengthBasis – NIL

2. Details of material contracts / arrangements / transactions at Arm's LengthBasis – NIL

NOTE

All transactions entered by the Company with Related Parties were in the OrdinaryCourse of Business and at Arm's Length pricing basis. The Audit Committee granted omnibusapproval for the transactions (which are repetitive in nature) and the same was reviewedby the Audit Committee and the Board of Directors.

There were no materially significant transactions with Related Parties during thefinancial year 2015-16 which were in conflict with the interest of the Company. Hence therelated party transactions of the Company for the financial year 2015-16 not fall underthe purview of disclosure under Form AOC – 2. Suitable disclosures as required underAS-18 have been made in Note 3.8 of the Notes to the financial statements.

For and on behalf of the Board
Salem S. Devarajan
May 21 2016 Chairman and Managing Director

CERTIFICATION BY CHAIRMAN & MANAGING DIRECTOR (CMD) AND CHIEF FINANCIAL OFFICER(CFO) TO THE BOARD

We S.Devarajan Chairman and Managing Director and D.Niranjan Kumar Chief FinancialOfficer of Sambandam Spinning Mills Limited certify that:

1. We have reviewed the financial statements and the cash flow statement for the year2015-16 and that to the best of our knowledge and belief:

a) these statements do not contain any materially untrue statement or omit any materialfact or contain statements that might be misleading;

b) these statements together present a true and fair view of the state of affairs ofthe company and are in compliance with the existing accounting standards applicable lawsand regulations.

2. There are to the best of our knowledge and belief no transactions entered into bythe Company during the year which are fraudulent illegal or violative of the Company'sCode of Conduct.

3. We accept overall responsibility for establishing and maintaining internal controlfor financial reporting. This is monitored by the internal audit function whichencompasses the examination and evaluation of the adequacy and effectiveness of internalcontrol. The internal auditor works with all levels of management and statutory auditorsand reports significant issues to the audit committee of the Board. The auditors and theaudit committee are apprised of any corrective action taken with regard to significantdeficiencies in the design or operation of internal controls.

4. We have indicated to the auditors and to the audit committee:

a) All Significant changes in internal control over financial reporting during theyear;

b) Significant changes in accounting policies during the year; and that the same havebeen disclosed in the notes to the financial statements; and

c) No Instance of significant fraud of which we have become aware of and which involvemanagement or other employees having significant role in the Company's internal controlsystem and financial reporting.

Salem D. Niranjan Kumar S . Devarajan
May 21 2016 Chief Financial Officer Chairman & Managing Director

ANNEXURE - IV

Conservation of energy technology absorption and research and development and foreignexchange earnings and outgo

A. Conservation of energy

(a) Power and fuel consumption 2015-16 2014-15
1. Electricity
(.i) . Purchased units* '000 KWH 35655 33076
Total cost Rs. lakhs 2609 2530
Cost/unit Rs. 7.32 7.65
*net of units generated thro' wind energy converters
(ii) Own generation
1) Through diesel generator
Generated units '000 KWH 258.8 152.7
Units per litre of diesel KWH 3.05 3.98
Cost/unit Rs. 13.69 12.77
2) Through steam turbine/generator
3) Through Wind energy converters
Generated units(fed to TNEB Grid) '000 KWH 11455 16419
Cost/unit* Rs. 3.91 3.26
*Cost includes maintenance charges interest and depreciation
2. Coal
3. Furnace oil
4. Others
(b) Consumption per unit of production
Production (yarn) Kgs. lakhs 90.30 100.62
Consumption of electricity '000 KWH 47369 51022
Consumption per kg. of Yarn KWH 5.25 5.06
B. Technology absorption and research and development
C. Foreign exchange earnings and outgo
(a) Activities relating to exports
Yarn exports (including merchandise exports) Rs. lakhs 4029 5757
(b) Total Foreign exchange used and earned
1) CIF value of Imports
Capital goods* Rs. lakhs
Spares for Capital goods* Rs. lakhs 79.73
Raw materials – cotton* Rs. lakhs 670.41 2170.62
*exclusive of net exchange difference
2) Other expenditure in foreign currency
Travel Rs. lakhs 5.85 8.43
Interest Rs. lakhs 2.82 7.66
Other matters Rs. lakhs 4.53 6.98
3) Foreign exchange earned
Yarn export Rs. lakhs 316.29 530.09
Freight recovery Rs. lakhs 0.52 3.32

 

For and on behalf of the Board
Salem S. Devarajan
May 21 2016 Chairman and Managing Director

ANNEXURE - V

Brief outline of the Company's CSR policy programs undertaken during the year andreference to the web-link to the CSR policy.

Sambandam Spinning Mills Ltd. (SSML) has been upholding the Group's tradition byearmarking a part of its income for carrying out its social responsibilities. Promoters ofthe Company believe that social responsibility is not just a corporate obligation that hasto be carried out but it is one's dharma. Therefore philanthropic endeavour is areflection of the Company's spiritual conscience and this provides a way to discharge itsresponsibilities to various sections of the society.

SSML has been carrying out Corporate Social Responsibility (CSR) activities for a longtime through the SPMM Charitable Trust and the Trust for Mentally Challenged Childrenwhich are registered autonomous charitable trusts in the field of Education andHealthcare while also pursuing CSR activities for the benefit of the community in andaround Salem.

Corporate Social Responsibility Purpose Statement

SSML seeks to impact the lives of the underprivileged by supporting and engaging inactivities that aim at improving their well-being. Promoters of the Company have dedicatedto the cause of empowering people educating them and in improving their quality of life.While they undertake programmes based on the identified needs of the community educationand healthcare remain their priority. Across the different programme areas identified bythe trust its main endeavour is to reach the underprivileged and the marginalisedsections of the society to make a meaningful impact on their lives.

The CSR Policy of the Company can be viewed on the Company's Website under the web linkhttp://www.corporate@sambandam.com

Accordingly the programme areas include the following:

1) Promoting preventive health care facilities to economically backward societies

2) Promoting education and Sustainable livelihood to differently abled.

3) Provision of Skill Development / Vocational Training

4) Rural Development and Environmental sustainability

5) Promoting Rural Sports Traditional Arts & Culture

Scope

This policy applies to all projects/programmes undertaken as part of the Company'sCorporate Social Responsibility and it is developed reviewed and updated periodicallywith reference to relevant changes in corporate governance international standards andsustainable and innovative practices.

The policy ensures compliance and alignment with the activities listed in Schedule VIIread with Section 135 of the Companies Act 2013 and the Rules framed there under.

Implementation

The Company undertakes CSR projects / programmes identified by the CSR Committee andapproved by the Board of Directors in line with the CSR Policy and implements its CSRprogrammes accordingly.

1 Composition of the CSR Committee :
CHAIRMAN : SRI S.DEVARAJAN - Chairman and Managing Director
MEMBERS : SRI P.S.ANANTHANARAYAN - Chairman of Audit Committee
SRI S.JEGARAJAN - Joint Managing Director
SRI S.DINAKARAN - Joint Managing Director
SRI D.SUDHARSAN - Non-executive Director

 

2 Average net profit of the company for the last three financial years - Rs.73104587
3 Prescribed CSR Expenditure (two per cent of Rs.73104587) - Rs.1462092
4 Details of CSR spent during the financial year :
(i) Preventive Health Care (Item (i) of Schedule VII of the Comp.Act 2013) - Rs.360000
(ii) Livelihood enhancement of differently abled - Provision of artificial limbs - Rs.100000
(iii) Trainning to mentally challenged children - (item (ii) of Schedule VII of the Companies Act 2013) - Rs.15500
(iv) Promote Education (Item (ii) of Schedule VII of the Companies Act 2013) - Rs.30000
(v) Environment Sustainability (Garbage cleaning Cart to Salem Municipality) (Clause (iv) of Schedule VII of the Companies Act 2013) - Rs.5890
5 Total amount spent during the financial year 2015-16 - - Rs.511390
6 Amount unspent if any - Rs.950702 *

* The balance amount of Rs.950702/- has been earmarked to be spent on a specificproject for making available safe drinking water and toilet facilities at the Girls HighSchool in Ammapet Salem. However on account of the annual examination and the summervacation the school authorities requested the company to take up this project after May2016. This expenditure is covered under Item (i) of Schedule VII of the Companies Act2013.

7 Manner in which the amount spent during the financial year is detailed below.

Sl. No. CSR project or activity identified. Sector in which the Project is covered Local area in which the programs were under taken in Tamil Nadu Amout outlay - project or Program- wise Amount spent on the projects or Programs Cumulative Expenditure upto the reporting period Amount spent: * Direct or through imple- menting agency
Rupees Rupees Rupees Rupees
1 Promoting preventive health care Item No(i) of Sch. VII of the Comp. Act 2013 Salem & Chennai Rs.360000 Rs.360000 Rs.360000 Rs.360000
2 Livelihood enhancement & Trainning of differently abled Persons Item No(ii) of under Sch. VII of the Comp. Act 2013 Salem & other Districts Rs.115500 Rs.115500 Rs.115500 Rs.115500
3 Promote Education Item No(ii) of under Sch. VII of the Comp. Act 2013 High School & Poly-technic in Salem Dt Rs.30000 Rs.30000 Rs.30000 Rs.30000
4 Environment Sustainability Clause (iv) of Schedule VII of the Companies Act 2013 Salem Town Rs.5890 Rs.5890 Rs.5890 Rs.5890
5 Promoting Sanitation and making available safe drinking water at the girls High School Ammapet Salem. Item No(i) of under Sch. VII of the Comp. Act 2013 Salem Town Rs.950700
Total Rs.1462090 Rs.511390 Rs.511390 Rs.511390

* Details of the implementing agency:

The First item refers to Pediatric Surgery done at the SPMM Hospital to poor childrenjointly organised by Sharon Hospital.

The Second item on Livelihood Enhancement of differently abled has been organizedthrough the Salem District Differently Abled Welfare Association. by providing ArtificialLimbs to Amputees

The Third item for Promoting Education – payment to Athanur High School andPolytechnic.

The Fourth item is the cost of the Cart ( for cleaning Garbage) given to theCorporation of Salem – Ammapet 37 Division.

CSR Committee confirms that implementation and monitoring of the CSR projects detailedabove are in compliance with the CSR objectives and the CSR Policy of the Company. Howeverthe balance amount of Rs.950702 would be spent on the aforesaid CSR Project stated atSl.No.5 above during the current financial year since the School authorities requested theCompany to take up the project after the examination and the school term is over in May2016.

Salem S . DEVARAJAN
May 21 2016 Chairman - CSR Committee

Declaration by Independent Directors

Independent directors of the Company have submitted a declaration that each of themmeets the criteria of independence as provided in Sub-Section (6) of Section 149 of theAct. Further there has been no change in the circumstances which may affect their statusas Independent director during the year.