Your Directors have pleasure in presenting their Seventy-ninth (79th) AnnualReport of the Company together with the audited financial statements for the financialyear ended 31st March 2017.
1. FINANCIAL PERFORMANCE
There was no improvement in the business scenario of the Textile Industry and iscontinued to remain challenging.
The revenue from operations for the year 2016-17 was Rs. 12733 lacs as compared to Rs17024 lacs in previous year a decline by 25.21%.
The loss before Prior period Exceptional item and Tax was Rs. 1412 lacs against theprevious year loss of Rs 2379 lacs.
The net loss for the year was Rs. 1114 lacs against the previous year net loss of Rs.1423 lacs.
The Board of Directors of your Company have not recommended any dividend for theFinancial Year ended 31st March 2017 considering the loss during the year andbrought forward losses.
Indias cotton production in the current season 2016-2017 is likely to be 351 lacbales. Decline in domestic yarn production Last year Pakistan had bought almost 40% ofIndias cotton due to a crop failure in its domestic market. This yearPakistans requirement will be less. With no significant increase in cotton exportsto China estimated overall shipment of cotton may decline.
Your Companys export performance in the year under review has decreased from thelast year mainly on account of reduction in the denim fabric export due to cut throatcompetition & appreciation of Rupees. The FOB value of the exports during the Yearunder review was Rs. 991 lacs against Rs 1956 lacs in the previous year.
5. ANALYSIS AND REVIEW
Indian Textiles industry is one of the oldest industry and leading sectors of theIndian economy contributes significantly to the countrys industrial output as wellas on employment generation and brings valuable foreign exchange by exporting Textilefabrics yarns and Garments.
6. OPPORTUNITIES AND CHALLENGES
The global textile industry will continue to grow along with growing consumption oftextile products in developing countries and a gradual economic recovery of majordeveloped economies. Indias textile sector is aided by several key advantages interms of availability of adequate raw material entrepreneurial skills large domesticmarket presence of supporting industries and supporting policy initiatives from thegovernment. The Government has introduced the Amended Technology Upgradation Fund Scheme(ATUFS) to give a further boost for technology investment in the textile industry.
The major challenge that the textile industry is facing is rising production costsarising out of rising wages power and interest costs. Currently the Indian Denim Industryis going through sluggish phase due to exponential capacity expansion which has created ahuge oversupply situation.
7. EXPANSION AND MODERNISATION
In view of financial constraint company did not go for modernization.
8. CONSOLIDATED FINANCIAL STATEMENT
As required by Regulation 33 of the SEBI (LODR) Regulations 2015 the ConsolidatedAudited Financial Statements have been prepared in accordance with the requirements underAccounting Standard AS-21 on "Consolidated Financial Statements" read with AS-23on the "Accounting for Investment in Associates" read with the provisions ofCompanies Act 2013 are provided forming part of the Annual Report.
9. CASH FLOW STATEMENT
In compliance with the requirement of Section 34 of the SEBI (LODR) Regulations 2015the Cash Flow Statement for the year ended 31st March 2017 prepared inaccordance with the applicable Accounting Standard is annexed to the financial statementwhich forms part of the Annual Report.
Adequate insurance cover has been taken by the Company for its properties including itsBuildings Plant & Machinery and Stocks among others against fire flood earthquakeexplosive and other such risks as considered prudent and necessary.
11. INTERNAL FINANCIAL CONTROL
The Company has in place internal financial control systems commensurate with the sizenature and complexity of its operations ensuring proper recording of financials andmonitoring of operational effectiveness and efficient conduct of its business includingadherence to the Companys Policies safeguarding of its assets prevention anddetection of frauds and errors accuracy and completeness of accounting records andcompliance of various applicable regulatory and statutory requirements.
The Internal Auditor monitors and evaluates the efficiency and adequacy of InternalControl System. Based on their report corrective actions are undertaken by the concerneddepartments and thereby strengthen the Controls. Significant audit observations correctivemeasures and actions thereon are presented to the Audit Committee of the Board.
During the year such controls were tested and no reportable material weaknesses wereobserved.
The Audit Committee comprises the majority of Independent Directors in terms of theapplicable provisions of the Companies Act 2013 and SEBI (LODR) Regulations 2015.
12. FIXED DEPOSITS
The Company has not accepted any deposits from public falling within the meaning ofSection 73 of the Companies Act 2013 read with Companies (Acceptance of Deposit) Rules2014 and as such there are no outstanding deposits as on the Balance Sheet closure date.
13. SHARE CAPITAL
During the year there was no change in the Companys Issued Subscribed andPaid-up Equity and Preference Share Capital. On 31st March 2017 the EquityShare Capital stood at Rs. 3303.30 Lacs divided in to 33033000 Equity Shares of Rs. 10each and Preference Share Capital stood at Rs. 975 Lacs divided in to 975000 0.01%Cumulative Redeemable Non-convertible Preference Shares of Rs. 100 each.
14. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Shri S. K. Somany (DIN: 00001131) will retire by rotation at the forthcoming AnnualGeneral Meeting and being eligible offers himself for re-appointment in accordance withthe provisions of the Companies Act 2013 and Articles of Association of the Company. TheBoard recommends his re-appointment.
Brief resume nature of expertise and details of directorship held in other companiesof Shri S. K. Somany proposed to be appointed is given in the Notice of the EnsuingGeneral Meeting (AGM) as stated under Secretarial Standard 2 and Regulation 36 of theSEBI (LODR) Regulations 2015.
None of the Directors are disqualified from being appointed or holding office asDirectors as stipulated under Section 164(2) of the Companies Act 2013.
Change in Key Managerial Personnel
Shri R. S. Sharma ceased as Company Secretary effective from 1st October2016 and Shri Abhishek Kumar Mishra has been simultaneously appointed as Company Secretarywith effect from 1st October 2016.
Shri Maghraj Parakh continues to be Chief Financial Officer (CFO) of the Company.
15. DECLARATION OF INDEPENDENT DIRECTORS
The Company has received declarations from all the Independent Directors of the Companyunder section 149(7) of the Companies Act 2013 confirming that they continue to meet thecriteria of independence as prescribed under Section 149(6) of the Companies Act 2013 andRegulation 25 of the SEBI (LODR) Regulations 2015.
16. CORPORATE SOCIAL RESPONSIBILITY
The Company does not fall within the ambit of Section 135 of the Companies Act 2013read with the Companies (Corporate Social Responsibilities Policy) Rules 2014. Thereforethe Annual Report on Corporate Social Responsibility initiatives as required under thesaid act is not applicable to the Company. In view thereof the Annual Report on CSRactivities is not annexed.
17. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE
COMPANIES ACT 2013
The Company has not given loans made investments or given guarantees under theprovisions of Section 186 of the Companies Act 2013 during the year under review.
18. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTY
During the financial year ended 31st March 2017 all the contracts orarrangements or transactions entered into by the Company were in the ordinary Course ofbusiness and on arms length and were in compliance with applicable provisions of theCompanies Act 2013 and the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 as applicable. Further the Company did notentered into any contract or arrangement or transactions with related parties that couldbe considered material as per the Policy of the Company on Materiality of Related PartyTransactions. In view of the above disclosure of Related Party Transactions in Form AOC-2is not applicable as required under Section 134(3)(h) and relevant rules made thereunder.
The Policy on Materiality of Related Party Transactions and dealing with the relatedparty transactions as approved by the Board is available on the Companys website atthe web link: www.somatextiles.com/home.php/investors/policies.
None of the Directors has any pecuniary relationships or transactions vis--vis theCompany.
19. LISTING ON STOCK EXCHANGES
The Equity Shares of the Company are listed at the following Stock Exchanges:-(a) BSELimited (BSE).
Address: Phiroze Jeejeebhoy Towers Dalal Street Mumbai400001 (b) National StockExchange of India Limited (NSE).
Address: Exchange Plaza Bandra Kurla Complex Bandra (East) Mumbai400051.
(i) Listing fees have been paid to the Stock Exchanges for the year 2017-18.
(ii) The Calcutta Stock Exchange Association Ltd. has vide its Letter No.CSEA/ID/223/2008 dated 16th April 2008 confirmed the delisting ofCompanys Shares from the official List of their exchange. However Equity Shares havebeen allowed to be traded under the "Permitted Category" on the Exchangeconsidering the interest of General Investors in the Company.
(i) NSE - SOMATEX (ii) BSE - 521034 (iii) CSE - 29067. De-mat ISIN Number in NSDL& CDSL ISIN INE 314C01013.
20. EXPLANATION OR COMMENTS ON QUALIFICATIONS RESERVATIONS OR ADVERSE REMARKS OR
DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS
The Auditors Report and Secretarial Auditors Report do not contain any reservationqualification or adverse remark and therefore need no explanations or comments from theBoard of Directors.
21. BOARDS EVALUATION OF THE PERFORMANCE
In compliance with the Companies Act 2013 and SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 the Board has carried out an annual evaluationof its own performance and that of its Committees and individual Directors. The manner inwhich the evaluation has been carried out has been given in the Corporate GovernanceReport.
22. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW
During the year Four (4) Board Meetings were held the details of which are given inthe Report on Corporate Governance that forms part of the Boards Report.
The maximum interval between the two meetings did not exceeded 120 days as prescribedin the Companies Act 2013 and SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015.
23. AUDIT COMMITTEE
The Audit Committee comprises of four (4) members Majority of them are IndependentDirectors namely; Shri B. K. Hurkat Chairman Shri M. H. Shah and Smt. N. Singh and ShriS. K. Somany a Non-Independent & Promoter Director as other member of the Committee.Thus the composition is in conformity with the requirements of section 134(3) and section177(8) of the Companies Act 2013 read with the provisions of SEBI (LODR) Regulations2015.
Four (4) Meetings of the Audit Committee were held during the year under review thedetails of which are given in the Report on Corporate Governance forming part of thisReport. The Board of Directors accepted all recommendations of the Audit Committee in thereporting period.
24. ESTABLISHMENT OF VIGIL MECHANISM / WHISTLE BLOWER MECHANISM
The Company has in place a Vigil Mechanism/ Whistle Blower Policy for DirectorsEmployees and other Stockholders of the Company to report genuine concerns about anywrongful act with respect to the Company or its business or affairs. The policy coversmalpractices misuse or abuse of authority fraud violations of the Companys policyor Rules manipulations negligence and such other matters and activity on account ofwhich interest of the Company is affected or is likely to be affected and formerlyreported by Whistle Blowers.
The Mechanism provides for adequate safeguards against victimization of Directorsemployees and others who use such mechanism and makes provisions for direct excess to theChairman of the Audit Committee. The details of the Whistle Blower Policy/ Vigil Mechanismhave been provided in the Corporate Governance Report forming part of this Report and arealso available on the Companys website;www.somatextiles.com/home.php/investors/policies.
25. REMUNERATION POLICY
The Board has on recommendation of the Nomination & Remuneration Committee frameda policy for selection and appointment of Directors Senior Management and theirremuneration including criteria for determining qualifications positive attributesindependence of Directors and other matters as per section 178 and Clause 49(IV)(B) ofListing Agreement. The Nomination & Remuneration Policy is stated in the CorporateGovernance Report. The Policy is also available on the website of the Company i.e.http://www.somatextiles.com.
26. CORPORATE GOVERNANCE
Your Company has complied with requirements under the Corporate Governance asstipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.
A detailed reports on Corporate Governance pursuant to the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 along with an AuditorsCertificate on Compliance with the conditions of Corporate Governance is annexed andforms part of the Annual Report.
27. CORPORATE GOVERNANCE VOLUNTARY GUIDELINES 2009
The Ministry of Corporate Affairs Government of India had issued a set of VoluntaryGuidelines 2009 on Corporate Governance in December 2009 for voluntary adoption of a setof good practices by the Corporate Sector. These guidelines are expected to serve as abench mark for the Corporate Sector and also help them in achieving the highest Standardof Corporate Governance. Guidelines are reviewed by the Management from time to time toensure the adherence of the same voluntarily commensurate with the requirements bestsuited to your Company gradually in phases.
28. LISTING AGREEMENT
Your Company entered in to new Listing Agreements with BSE Limited and National StockExchange of India Ltd. in compliance with Regulation 109 of the SEBI (LODR) Regulations2015.
29. MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis Report under review as stipulated under SEBI(Listing Obligations & Disclosure Requirements) Regulations 2015 is presented byvirtue of an Annexure forming part of the Directors Report.
30. DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act 2013 the Board of Directors ofyour Company to the best of their knowledge and belief and on the basis of information andexplanation obtained from the operating management hereby states and confirms:
(a) that in the preparation of attached Annual Accounts for the Financial Year ended 31stMarch 2017 the applicable Accounting Standards have been followed along with properexplanation relating to material departures wherever applicable;
(b) that they have selected the Accounting Policies described in notes to accountswhich have been consistently applied except where otherwise stated and made judgments andestimates that are reasonable and prudent so as to give a true and fair view of the stateof affairs of the Company as on 31st March 2017 and of the loss of the Companyfor the year ended on that date;
(c) that they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities; and
(d) that they have prepared the attached Annual Accounts on a going concernbasis.
(e) that they had laid down internal financial controls to be followed by the Companyand that such internal controls are adequate and were operating effectively.
(f) that they had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
In terms of the provisions of Section 139 of the Companies Act 2013 read with theCompanies (Audit and Auditors) Rules 2014 Pipara & Co LLP Chartered Accountants(ICAI Firm Registration No.107929W) the Statutory Auditors of your Company shall holdoffice till the conclusion of the ensuing Annual General Meeting and they shall not beeligible for re-appointment due to expiry of the maximum permissible tenure as theStatutory Auditors of the Company. Your Board places on record its deep appreciation forthe valuable contributions of the Auditors during their long association since theinception of your Company and wishes them success in the future.
Based on the recommendation of the Audit Committee and in terms of the requirement ofthe Companies Act 2013 your Board at its meeting held on 12th July 2017appointed a New Firm of Chartered Accountants M/s. A. K. Ostwal & Co. CharteredAccountants (ICAI Firm Registration No.107200W) as the Statutory Auditors of the Companyin place of the retiring statutory auditors M/s. Pipara & Co LLP CharteredAccountants to hold office for a period of consecutive five (5) years from the conclusionof the ensuing 79th Annual General Meeting (AGM) until the conclusion of 84thAnnual General Meeting (AGM) of the Company on such remuneration as may be fixed by theBoard of Directors of the Company subject to approval of the Members of the Company atthe ensuing 79th AGM and ratification by the Members of the Company every yearthereafter.
Your Company has received a certificate from M/s. A. K. Ostwal & Co. CharteredAccountants confirming their eligibility to be appointed as Statutory Auditors of theCompany in terms of the provisions of Section 141 of the Companies Act 2013 and Rulesframed thereunder. They have also confirmed that they hold a valid certificate issued bythe Peer Review Board of the Institute of Chartered Accountants of India (ICAI) asrequired under the provisions of Regulation 33 of the Listing Regulations. The proposalfor their appointment has been included in the Notice convening the 79th AGMfor obtaining approval of the Members of the Company.
32. SECRETARIAL AUDITOR
The Company has appointed M/s. Drolia & Company Company Secretaries Kolkata inpractice having certificate of Practice No. 1362 as the Secretarial Auditor to undertakeSecretarial Audit for the year ended 31st March 2017 pursuant to theprovisions of Section 204 of the Companies Act 2013 and the Companies (appointment andRemuneration of Managerial Personnel) Rules 2014.
33. MANAGERIAL REMUNERATION
Details of the ratio of the remuneration of each director to the median employeesremuneration and other details as required pursuant to Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is attached to thisReport.
34. SECRETARIAL AUDIT REPORT
The Secretarial Audit Report for the financial year ended 31st March 2017as given in the prescribed form MR-3 is annexed herewith as Annexure to this Report andforms an integral part of this Report.
The Secretarial Audit Report does not contain any qualification reservation andadverse remark.
35. AUDITORS REPORT
There are no qualifications reservations or adverse remarks of the Auditor in theirAuditors Report that may call for any clarifications/explanations.
The Notes on financial statement referred to in the Auditors Report areself-explanatory and do not require any elucidation and comments thereof.
36. INDUSTRIAL RELATIONS
Industrial relations in your Company during the year under review continued to becordial and harmonious.
37. COST AUDITORS
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords & Audit) Amendment Rules 2014 the cost records maintained by the Company inrespect of its products are required to be audited. Your Directors on the recommendationof the Audit Committee appointed M/s. N. D. Birla & Co. Cost Accountants as CostAuditors of the Company to conduct the Audit of the Cost Accounts in respect ofmanufacturing of Textile for the Financial Year ending March 31 2018 on a remunerationfixed by the Board and has recommended their remuneration to the Shareholders for theirratification at the ensuing Annual General Meeting (AGM). Accordingly a resolutionseeking Members ratification for payment of remuneration to M/s N. D. Birla &Co. Cost Accountants is included in the Notice of the ensuing AGM.
38. DEPOSITORY SYSTEMS
The Companys Shares are currently traded in dematerialized form as per the SEBIdirectives and the Company has entered in to agreements with the following Depositoriesi.e. National Securities Depository Limited (NSDL) and Central Depository Services (India)Limited (CDSL) for trading in dematerialized form.
Members are therefore advised to avail of the services either of the depositories todematerialize their physical shares if any held by them for trading in Companysshares smoothly and conveniently.
As on March 31 2017 32503346 Equity Shares are held in dematerialized form andrepresent 98.40% of the Companys total paid up Capital.
40. SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE
The Company has in place as Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy.
No sexual harassment complaint was received during the year under review.
41. ACCOUNTS OF THE SUBSIDIARIES ASSOCIATE COMPANIES AND JOINT VENTURES
The statement containing the silent features of the financial statement of thecompanys associate companies under the first proviso to sub-section (3) of section129 of Companies Act 2013 is enclosed as AOC-1 in the Annexure.
42. PARTICULARS OF EMPLOYEES
During the year under report none of the employees of the Company was in receipt ofremuneration for any part of the year in excess of the amount of remuneration prescribedunder Section 197 of the Companies Act 2013 read with Rule 5(2) and 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended upto date.
The information required under Section 197 of the Act read with Rule 5(1) of theCompanies (Appointment and Remuneration) Rules 2014 is Annexed and forms a part of thisReport.
43. EXTRACT OF ANNUAL RETURN
In terms of provisions of Section 134(3)(a) read with Section 92 of the Companies Act2013 and Rule 12 of the Companies (Management and Administration) Rules 2014 theextracts of Annual Return of the Company in form no. MGT-9 is attached to this Report.
44. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The Company is primarily engaged in the business of manufacturing of Cotton Yarn DenimFabrics Shirtings and Garments.
Information on conservation of energy technology absorption foreign exchange earningsand outgo required to be disclosed pursuant to Section 134(3)(m) of the Companies Act2013 read with rule 8(3) of the Companies (Accounts) Rules 2014 as amended is given inthe Annexure and forms part of this Report.
45. RISK MANAGEMENT
The Company has in place mechanism to inform Board Members about the Risk Assessmentand Risk Minimization procedure which is periodically reviewed to ensure that risks anduncertainties are systematically identified prioritized and initiated on constant basis.
The risk management procedure is reviewed by the Audit Committee from time to time toensure that the executive management controls the risks and uncertainties through a properdefined framework and major risks are properly and systematically addressed throughmitigation actions on continuing basis.
46. OTHER DISCLOSURES
Business Responsibility Report as per Regulation 34(2)(f) of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 describing the initiatives taken by themfrom an environmental social and governance perspective is not applicable to the Companyfor the financial year 2016-17 as per the SEBI Notification dated 22ndDecember 2015 and Frequently Asked Questions issued by SEBI on SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 dated 29th January 2016.
47. CAUTIONARY STATEMENT
Statements in the Boards Report and the Management Discussion & Analysisdescribing Companys objectives expectations or forecasts may be forward-lookingwithin the meaning of applicable securities laws and regulations. Many factors may affectthe actual results which could be different from what the Directors envisage in terms offuture performance and outlook.
Your Directors place on record their sincere thanks and appreciation for the continuingsupport and assistance received from the financial institutions banks government as wellas non-government authorities customers vendors stock exchange and members during theperiod under review.
Your Company takes pride in all of its dedicated officers employees and workers whohave been wholeheartedly supporting and sincerely contributing their best for the successand growth of your Company as well as maintaining harmonious relations throughout theCompany.
| ||On behalf of the Board || |
|Place : Ahmedabad ||(A. K. SOMANY) ||(S. B. BHAT) |
|Date : 12th July 2017 ||Managing Director ||Director |