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SEL Manufacturing Company Ltd.

BSE: 532886 Sector: Industrials
NSE: SELMCL ISIN Code: INE105I01012
BSE 15:47 | 23 Feb 2.50 0.07
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NSE 15:47 | 23 Feb 2.50 0.05
(2.04%)
OPEN

2.50

HIGH

2.55

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OPEN 2.48
PREVIOUS CLOSE 2.43
VOLUME 45796
52-Week high 4.45
52-Week low 2.22
P/E
Mkt Cap.(Rs cr) 83
Buy Price 2.50
Buy Qty 500.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2.48
CLOSE 2.43
VOLUME 45796
52-Week high 4.45
52-Week low 2.22
P/E
Mkt Cap.(Rs cr) 83
Buy Price 2.50
Buy Qty 500.00
Sell Price 0.00
Sell Qty 0.00

SEL Manufacturing Company Ltd. (SELMCL) - Director Report

Company director report

To

The Members

SEL Manufacturing Company Ltd.

Your Directors have pleasure in presenting their 17th Annual Report on the affairs ofthe company together with Audited Financial Statements for the financial year ended 31stMarch 2017.

FINANCIAL RESULTS (Rupees in Lacs)

Current Year Previous year
(2016-17) (2015-16)
Revenue from Operations 171061.80 194773.45
Other Income 9201.25 11043.52
180263.05 205816.97
Less :
Expenditure 231641.74 203105.60
Provision for Depreciation 11408.91 28450.25
243050.65 231555.85
Profit/(loss)before exceptional items and tax: (62787.60) (25738.88)
Exceptional Items 22650.68 30060.93
Profit/(Loss) before tax: (85438.28) (55799.81)
Less :
Taxes : Deferred Tax (29682.89) (15604.21)
Earlier Yrs. (29682.89) (15604.35)
Profit/(Loss)from continuing operations (55755.39) (40195.46)
Profit/(Loss)from discontinuing operations
Profit/(Loss) for the period (55755.39) (40195.46)
Other Comprehensive Income
I) Item that will not be reclassified to Profit or Loss 32.80
ii) Item that will be reclassified to Profit or Loss (10.57) (9954.53)
Total Comprehensive Income/(Loss) for the Period (55733.16) (50149.99)

BUSINESS:

The Company is vertically integrated multi-product textile company manufacturingvarious kinds of Knitted Garments Terry Towels Knitted & Processed Fabric andvarious kind of Yarn with production facilities located at different parts of India.

State of Company's affairs:

During the year under review your company has achieved Revenue from Operations of Rs.171061.80 lacs as compared to Rs. 194773.45 lacs in the previous year. After deductingExpenses and Exceptional Items there was Loss of Rs. 85438.28 lacs as compared to Loss ofRs. 55799.81 lacs during the previous year. After providing for taxes and otheradjustments the current year loss stood at Rs. 55755.39 lacs as compared to loss of Rs.40195.46 lacs during the previous year.

The Company had opted for CDR earlier. The CDR package was approved by the competentauthority in June 2014 and implemented by lenders in September 2014.The creditfacilities envisaged & sanctioned under CDR package were not fully released by thelenders which resulted in sub-optimum utilization of manufacturing facilities and thecompany could not complete one of its spinning project where substantial amount wasalready incurred. The company as such is facing cash flow mismatch and is not servicingdebt obligations as per the terms of CDR package sanctioned earlier. The dues taken by theCompany have been categorized as Non Performing Asset. The Company is in activediscussion/negotiation with its lenders to restructure its debts at a sustainable levelincluding waiver of unpaid interest.

SUBSIDIARY COMPANY/FIRM(S):

As at 31.03.2017 the Company has the following Subsidiary Company(ies) namely SELAviation Pvt. Ltd. SEL Textiles Corporation SEL Textiles Ltd. Silverline CorporationLtd. and also a subsidiary firm namely M/s SE Exports. The Company has its branch officeat United Arab Emirates.

The Annual Accounts/Financial Statements of the Subsidiary companies/firms and therelated detailed information shall be made available to shareholders of the holding andsubsidiary companies seeking such information at any point of time.

Further the Annual Accounts/Financial Statements of the subsidiary companies are keptfor inspection by any shareholders in the head office i.e. the Registered Office of theholding company and of the subsidiary companies concerned.

Your company continue to hold 99% stake in the partnership firm namely M/s SE Exports.

SEL Textiles Ltd. is the wholly owned Subsidiary of the Company. SEL Textiles Ltd. isengaged in the business of textiles and the Company has two spinning unit(s) one atNeemrana (Rajasthan) and one at Hansi Hissar (Haryana) and a terry towel unit at NawaSheher Punjab Spinning unit at Vill Punjava-Lambi Tehsil Malout Dist Sri Muktsar Sahib(Punjab). Further SEL Textiles Ltd. has a subsidiary company i.e. M/s SilverlineCorporation Ltd.. SEL Aviation Pvt. Ltd. subsidiary of the company is in the business ofAviation services. SEL Textiles Corporation is the wholly owned subsidiary of the Companyin the state of California USA. The contribution of Subsidiaries in the overallperformance is as given in Consolidated Financial Statements. Further the Report onfinancial position of subsidiaries alongwith names of companies which have ceased to beits subsidiaries associate companies etc. during the year has been duly provided as anAttachment in prescribed Form AOC1.

Consolidated Financial Statements:

The Consolidated Financial Statements of the Company and its subsidiaries prepared andpresented in accordance with Accounting Standard are attached to and form part of theAnnual Report.

CORPORATE GOVERNANCE:

Your Company is committed to adhere to the best Practices of governance. In yourCompany prime importance is given to reliable financial information integritytransparency fairness empowerment & compliances. A separate section on CorporateGovernance and a Certificate regarding compliance of conditions of Corporate Governanceforms part of the Annual Report

DIVIDEND:

Due to the losses incurred in F.Y. 2016-17 and scarcity of funds the directors havenot recommended any dividend for the Financial year 2016-17.

SHARES WITH DIFFERENTIAL RIGHTS EMPLOYEE STOCK OPTION SWEAT EUITY SHARES:

During the year the company has not issued any Equity Shares with Differential RightsEmployee Stock Options and/or Sweat Equity Shares.

FIXED DEPOSITS:

During the year your Company has not accepted any fixed deposits under the provisionsof the Companies Act 2013 and the Rules made there under.

DIRECTORS & KMP:

During the year Mr. Vinod Kumar Goyal was appointed as Chief Executive Officer of theCompany under the provisions of the Companies Act 2013. Mr. Vinod Kumar Goyal looksafter complete operations of the Company and has vast experience in the textile sector.Further the re-appointment of Mr. Navneet Gupta as Executive Director of the Company fora further period of 3 years is put for confirmation by the members of the Company in theensuing Annual General Meeting. Further Mr. Vinod Kumar Goyal Director of the Companyretires by rotation at this Annual General Meeting and being eligible offer himself forre-appointment. Further Mr. Neeraj Saluja is appointed as Chief Operating Officer (COO)w.e.f. 01.07.2017 due to his expertise in operations of textile plants. Details of hisappointment and terms are given in detail in the Notice for the ensuing Annual GeneralMeeting. Further Mr. Kanwalnain Singh Kang resigned from the post of Director of theCompany w.e.f. 20th July 2017. Further Mr. Navneet Gupta holding of office or place ofprofit/employment as "Chief Financial Officer" (CFO) of the Company due to hisvast experience in Financial Areas and Mr. Vinod Kumar Goyal holding of office or placeof profit/employment as "Chief Executive Officer" (CEO) of the Company due tohis vast experience in Textile Business is put up for approval of the Members. Details oftheir appointment/remuneration and terms are given in detail in the Notice for the ensuingAnnual General Meeting.

LISTING WITH EXCHANGES AND LISTING FEES:

The Equity Shares of the Company are presently listed with Bombay Stock ExchangeLimited (BSE) and The National Stock Exchange of India Ltd. (NSE). Further the Company haspaid listing fees to both the exchanges (i.e. BSE and NSE) upto financial year 2017-18.The GDRs of the company are listed on Luxembourg Stock Exchange.

AUDITORS:

As per the provisions of the Act the period of office of M/s Dass Khanna & Co.Chartered Accountants Ludhiana the Statutory Auditors of the Company expires at theconclusion of the ensuing Annual General Meeting.

It is proposed to appoint M/s Malhotra Manik & Associates Chartered Accountants(Firm Registration No. 015848N) as Statutory Auditors of the Company for a term of 5(five) consecutive years. M/s Malhotra Manik & Associates Chartered Accountants haveconfirmed their eligibility and qualification required under the Act for holding theoffice as Statutory Auditors of the Company.

AUDITORS' REPORT:

With reference to the Auditors remarks regarding non provision of interest on NPAclassified bank borrowings the Board would like to state that the Majority of Lenders havestopped charging interest on debts since the dues from the Company have been categorizedas Non Performing Asset. The Company is in active discussion/negotiation with its lendersto restructure its debts at a sustainable level including waiver of unpaid interest. Inview of the above pending finalization of their restructuring plan the Company has notprovided interest amounting to Rs.35901 lakhs on majority of NPA classified accounts forthe year in its books of account.

Further the report of Auditors and notes on accounts are self explanatory and do notcall for any further comments as there are no further adverse remarks by the Auditors.

Further regarding Auditors Emphasis of Matter in their Report the Board would like tostate as under;

a) With reference to the Auditors remarks regarding Non confirmation of debit/creditbalances the same were not confirmed by the respective parties despite the letters/mailsin this regard been sent to them. However the management does not expect any materialchanges on account of such reconciliation/non-receipt of confirmation from parties. Forwith reference to no provision in respect of Trade Receivables the management is of theview that the said receivables are recoverable and as such no provision is required to bemade thereof.

b) In respect of contingency related to "compensation payable in lieu of banksacrifice" the outcome of which is materially uncertain and cannot be determinedcurrently.

c) The management is of the view that the company is an operative company and will beable to meet its obligations to lenders and as such the financial statements have beenprepared on a going concern basis. Deferred tax Asset and MAT Credit Entitlement have beenrecognized considering virtual certainty that sufficient taxable income will be availableduring specified period against which such can be adjusted.

d) The company has revised the useful life of the machinery installed in Spinning/TerryTowel units based on technical reports effective from April 1 2016.

Further regarding compliance of Ind-AS 109 w.r.t. accounting of corporate guaranteegiven to lenders of one of the subsidiary of the company the same could not be done asthe same is not presently ascertainable.

COST AUDITORS:

In terms of the Section 148 of the Companies Act 2013 read with Companies (CostRecords and Audit) Rules 2014 the Company is required to maintain cost accountingrecords and get them audited every year. The Board appointed M/s. Jatin Sharma & Co.Cost Accountants as cost auditors of the Company for the financial year 2017-18 at a feeof INR 77000 plus applicable taxes and out of pocket expenses subject to the ratificationof the said fees by the shareholders at the ensuing annual general meeting. The cost auditreport for the financial year ended March 31 2017 would be filed with the CentralGovernment within prescribed timelines. The cost audit report for the financial year endedMarch 31 2016 was filed on 12.10.2016 (due date being 12.10.2016).

Number of Board Meetings held during the year:

The Board met 12 times during the financial year 2016-17 the details of which aregiven in corporate governance section.

Annual Evaluation made by the Board of its own performance and that of its Committeesand Individual Directors

The Board of Directors has evaluated the performance of the Board its Committees andthe Individual Directors as per the Nomination and Remuneration Policy. The Independentdirectors of the Company also review the performace of Non-Independent Directors and theBoard.

Declaration by Independent Directors as required under Section 149(7) of the CompaniesAct 2013

All the Independent directors of the company have given their statement of declarationunder Section 149(7) of the Companies Act 2013 ("the Act") that they meet thecriteria of independence as provided in Section 149(6) of the Act and their Declarationshave been taken on record.

Development and implementation of a Risk Management Policy: The main objective ofRisk Management is risk reduction and avoidance as also identification of the risks facedby the business and optimize the risk management strategies. The Company has put in placea well-defined Risk Management framework for drawing up implementing monitoring andreviewing the Risk Management. It controls the risks through properly defined framework.

POLICY ON DIRECTORS' APPOINTMENT & REMUNERATION

The Company strives to maintainan appropriate combination of executive non-executiveand independent Directors including at least one woman Director. The Nomination &Remuneration Committee of the Company leads the process for Board appointments inaccordance with the requirements of Companies Act 2013 listing agreement and otherapplicable regulations or guidelines. All the Board appointments are based on meritocracy.The potential candidates for appointment to the Board are interalia evaluated on the basisof highest level of personal and professional ethics standing integrity values andcharacter; appreciation of the Company's vision mission values; prominence in businessinstitutions or professions; professional skill knowledge and expertise; financialliteracy and such other competencies and skills as may be considered necessary.

In addition to the above the candidature of an independent Director is also evaluatedin terms of the criteria for determining independence as stipulated under Companies Act2013 listing agreement and other applicable regulations or guidelines. In case ofre-appointment of Independent Directors the Board shall take into consideration theresults of the performance evaluation of the Directors and their engagement level. TheBoard of Directors of the Company has adopted a Remuneration Policy for Directors KMPsand other employees. The policy represents the overarching approach of the Company to theremuneration of Director KMPs and other employees.

LOANS GUARANTEES AND INVESTMENTS BY THE COMPANY

Details of loans guarantees and investments by the Company to other body corporates orpersons are given in Financial Statements/Notes to the financial statements.

MATERIAL AND SIGNIFICANT ORDERS PASSED BY REGULATORS & COURTS

No significant and material orders have been passed by any regulators or courts ortribunals against the Company impacting the going concern status and Company's operationsin future.

MATERIAL CHANGES & COMMITMENTS

No material changes and commitments affecting the financial position of the Companyhave occurred after the end of the financial year 2016-17 and till the date of thisreport.

THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE:

Your Company has always believed in providing a safe and harassment free workplace forevery individual working in SEL through various interventions and practices. The Companyalways endeavors to create and provide an environment that is free from discrimination andharassment including sexual harassment. The Company believes in prevention of harassmentof employees as well as contractors. During the year ended 31 March 2017 no complaintspertaining to sexual harassment were received.

RELEVANT EXTRACT OF THE ANNUAL RETURN

Relevant extract of annual return for the financial year 2016-17 under the CompaniesAct 2013 is given in Annexure V to this report

SECRETARIAL AUDIT

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 appointedM/s P. Sharma & Co. Company Secretaries in practice to undertake the SecretarialAudit of the Company. The report of the Secretarial Audit is annexed to this report asAnnexure VI. Secretarial Auditors' report is self explanatory and therefore does notrequire further comments and explanation.

RELATED PARTY TRANSACTIONS

The Board has adopted a policy to regulate the transactions of the Company with itsrelated parties. As per policy all related party transactions require approval as per theprovisions of the companies Act 2013 and listing Agreement entered into with StockExchanges. The said policy is available on the Company's website viz.www.selindia.in/policy.html

Further the Company has also formulated a policy for determining 'material'subsidiaries. The said policy is available on the Company's website viz .www.selindia.in/policy.html. Details of transactions are also given in Annexure IV to thisreport in the prescribed form.

VIGIL MECHANISM

The Company has in place a whistleblower policy to support the Code of BusinessEthics. This policy documents the Company's commitment to maintain an open workenvironment in which employees consultants and contractors are able to report instancesof unethical or undesirable conduct actual or suspected fraud or any violation ofCompany's Code of Business Ethics at a significantly senior level without fear ofintimidation or retaliation.

Individuals can also raise their concerns directly to the chairman of the AuditCommittee of the Company. Any allegations that fall within the scope of the concernsidentified are investigated and dealt with appropriately. Further during the year noindividual was denied access to the Audit Committee for reporting concerns if any. Thedetails of establishment of vigil mechanism for Directors & employees to reportgenuine concerns are available at the website of the Company viz.www.selindia.in/policy.html

INTERNAL FINANCIAL CONTROLS AND ITS ADEQUACY

SEL continuously invests in strengthening its internal control processes. The Companyhas put in place an adequate system of internal financial control commensurate with itssize and nature of business which helps in ensuring the orderly and efficient conduct ofits business. These systems provide a reasonable assurance in respect of providingfinancial and operational information complying with applicable statutes safeguarding ofassets of the Company prevention & detection of frauds accuracy & completenessof accounting records and ensuring compliance with corporate policies.

FAMILIARISATION PROGRAM FOR DIRECTORS

The Company provides an orientation and business overview to all its new Directors andIndependent directors and provides materials and briefing sessions periodically whichassists them in discharging their duties and responsibilities.

The Directors of the Company are also informed of the important developments in theCompany and Industry. Directors are fully briefed on all business related matters and newinitiatives proposed by the Company and updated on changes and developments in thedomestic & global corporate and industry scenario. The details of the familiarisationprogram for Directors is available on the website of the Company viz.www.selindia.in/policy.html

CHANGES IN CAPITAL STRUCTURE

During the year there was no change in the Capital Structure of the Company.

AUDIT COMMITTEE:

The Board has constituted its Audit Committee pursuant to the provisions of Section 177of the Companies Act 2013 and provisions of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. The Audit Committee of the Company presently comprises ofthe following members namely Mr. Ashwani Kumar Mr. Ranjan Madaan Mr. Amit Narang and Mr.Navneet Gupta. Sh. Ashwani Kumar is the chairman of the said committee.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

Information on conservation of energy technology absorption and foreign exchangeearnings and outgo is given in Annexure I to this report.

PARTICULARS OF EMPLOYEES:

In accordance with the provisions of Section 197(12) of the Companies Act 2013 andRule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014the names and other particulars of employees are set out in the Annexure-II to this reportand forms part of this report.

DIRECTORS' RESPONSIBILITY STATEMENT:

The Directors would like to assure the Members that the financial statements for theyear under review conform in their entirety to the requirements of the Companies Act2013.

The Directors confirm that:

• In the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures;

• Appropriate accounting policies have been selected and applied consistently andhave made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at 31st March 2017 and of theprofit/loss of the Company for the year ended on 31st March 2017;

• Proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

• The annual accounts have been prepared on a going concern basis.

• That Internal financial controls were laid down to be followed by the companyand that such internal financial controls are adequate and were operating effectively.

• Proper systems had been devised to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

CORPORATE SOCIAL RESPONSIBILITY

The Company has adopted Corporate Social Responsibility initiatives and focuses on keyareas as education healthcare etc. in accordance with the provisons of the relative Actand rules made thereunder.

The Corporate Social Responsibility Committee consists of Sh. Amit Narang (Chairman)Sh. Ram Saran Saluja and Sh. Ranjan Madaan. The Board of Directors on recommendation ofthe CSR Committee has formulated the CSR policy of the Company. The CSR activities of theCompany are implemented in accordance with the core values viz. protecting stakeholderinterests proactive engagement with the local communities and striving towards inclusivedevelopment. The CSR activities are focused on the following five broad themes with goalsto improve overall socioeconomic indicators of Company's area of operation:

• Promoting healthcare sanitation and making safe drinking water available;

• Employment enhancement through training and vocational skill development;

• Income enhancement through farm based and other livelihood opportunities;

• Promoting education and sports; and

• Ensuring sustainable environment.

The annual report on CSR containing particulars specified in Companies (CSR Policy)Rules 2014 is given in Annexure III. The CSR policy of the Company is also placed on thewebsite of the Company viz. www.selindia.in/policy.html

ACKNOWLEDGEMENTS:

Your Directors express their gratitude to the Company's vendors customers BanksFinancial Institutions Shareholders & society at large for their understanding andsupport. Finally your Directors acknowledge the dedicated services rendered by allemployees of the company.

For and on Behalf of the Board

For SEL MANUFACTURING COMPANY LTD.

PLACE : LUDHIANA (RAM SARAN SALUJA)
DATED : 25.07.2017 CHAIRMAN
DIN: 01145051

ANNEXURE-I TO THE DIRECTORS' REPORT

A. Conservation of energy

i) Steps taken or Impact on conservation of energy:

The company provides high priority to energy conservation schemes to conserve naturalresources and is regularly taking effective steps to conserve energy wherever possible.This continues to remain thrust area with studies discussions and analysis beingundertaken regularly for further improvements. Energy Conservation is an ongoing processin the Company. The Company continued its efforts to improve energy usage efficiencies.

ii) Steps taken by the company for utilizing alternate sources of energy:

SEL continues to work on reducing carbon footprint in all its areas of operationsthrough initiatives like

a) green infrastructure

b) green IT (data centers laptops and servers etc.

c) operational energy efficiency

d) Green data centers.

e) Power generation thorough own captive power plants.

iii) Capital Investment on energy conservation equipments etc.:

The company has installed its own Captive Power Plant (CPP turbine). The details of itsutilisation is given as under:

(a) Captive Power Plant (CPP Turbine) 2016-17 2015-16
Units (Lacs) 988.18 1096.00
Husk per Unit (Kg) 0.70 0.66
Cost/Unit (Rs.) 4.36 5.78

B. RESEARCH & DEVELOPMENT TECHNOLOGY ABSORPTION

Specific areas in which R & D activities/Technology Abrorption were carried out bythe company

• Quality Improvement

• Yield/Productivity Improvement

• Energy Conservation

• New Technology/Product development

Benefits Derived

• Better Quality; reduced wastages

• Cleaner environment

• Safer operations and improved competitiveness

Future Plan of Action

Management is committed to strengthen R & D activities for product development andto improve its competitive ness in the times to come.

Expenditure on R & D

(Rs. In Lacs)
a) Capital : --
b) Recurring : 06.16
Total : 06.16

Technology Absorption

The Company has not imported any technology from abroad during the last five years.However the company has been using the imported machinery. The Company has been makingefforts for absorption of latest technology.

Benefits Derived

The Company has achieved improvement in quality and lower cost of production.

C. FOREIGN EXCHANGE EARNINGS & OUTGO EFFORTS AND INITIATIVES IN RELATION TOEXPORTS:

The Company has continued to maintain focus and avail of export opportunities based oneconomic considerations. There have been concentrated efforts to maintain and improveexports performance and to meet the need of end users.

(Rs. in Lacs)
2016-17 2015-16
(i) Foreign Exchange earned
(a) FOB value of exports as per Balance Sheet 98052.07 103293.07
(b) Overseas Income 3879.36 5257.44
(ii) Foreign Exchange used
(a) CIF value of Imports 249.29 652.25
(b) Other Expenditure 3103.31 2158.89
(c) Overseas Expenditures 3633.73 5145.84
For and on Behalf of the Board
For SEL MANUFACTURING COMPANY LTD.
PLACE : LUDHIANA (RAM SARAN SALUJA)
DATED : 25.07.2017 CHAIRMAN
DIN: 01145051