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Sri Ganapathy Mills Company Ltd.

BSE: 521236 Sector: Industrials
NSE: N.A. ISIN Code: INE488F01018
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Sri Ganapathy Mills Company Ltd. (SRIGANAPMILLS) - Director Report

Company director report

TO THE MEMBERS OF

THE SRI GANAPATHY MILLS COMPANY LTD FOR THE FINANCIAL YEAR ENDED 31st MARCH2016

To the Members

Your directors have pleasure in presenting their 68th Annual Report on thebusiness and operations of the company together with the Audited Statement of Accounts forthe year ended 31st March 2016

Financial Highlights:

During the year under review performance of your company as under:

(Rupees in Lakhs)
Particulars Year ended 31st March 2016 Year ended 31st March 2015
Turnover 865.96 1305.40
Operating Expenses 675.37 1533.16
Operating Profit / Loss 190.59 –227.76
Financial Cost 109.25 169.02
Depreciation 31.52 61.81
Net Profit / Loss before exceptional items 49.82 -458.59
Amortization / Exceptional item 27.87 30.38
Net Profit / Loss 21.95 -488.97

GENERAL PERFORMANCE

The company’s main business activity is manufacture of Cotton / Blended Polyesteryarn. During the current financial year under review the company has resumed itsmanufacturing operations from January 2016 after a holiday period of four months and alsosold its one of the undertaking(s) with prior consent from bankers and members. The entiresale proceeds have been adjusted against the loan liability with our Bankers M/s The KarurVysya Bank Ltd resulted to restrict our finance cost to Rs. 109.25 lacs when compared withRs. 169.02 lacs in the previous year. Due to the sale the company had showed a net profitof Rs. 21.95 lacs as against a net loss of Rs. 488.97 lacs in the previous year. Howeverthe severe recession in the textile industry no change in the government policiesfavouring the industry mismatch in cotton and yarn prices are still remaining in forcefor the operating loss of the company.

RISK MANAGEMENT POLICY

During the year your Directors have constituted a Risk Management Committee which hasbeen entrusted with the responsibility to assist the Board in (a) Overseeing and approvingthe Company’s enterprise wide risk management framework; and (b) Overseeing that allthe risks that the organization faces such as strategic financial credit marketliquidity security property IT legal regulatory reputational and other risks havebeen identified and assessed and there is an adequate risk management infrastructure inplace capable of addressing those risks. A Group Risk Management Policy was reviewed andapproved by the Committee. The Company manages monitors and reports on the principalrisks and uncertainties that can impact its ability to achieve its strategic objectives.The Company’s management systems organisational structures processes standardscode of conduct and behaviors together form the Ganapathy Management System (GMS) thatgoverns how the Group conducts the business of the Company and manages associated risks.The Company has introduced several improvements to Integrated Enterprise Risk ManagementInternal Controls Management and Assurance Frameworks and processes to drive a commonintegrated view of risks optimal risk mitigation responses and efficient management ofinternal control and assurance activities. This integration is enabled by all three beingfully aligned across Group wide Risk Management Internal Control and Internal Auditmethodologies and processes.

Details of Directors and Key Managerial Personnel

Smt. Amutharajendran has resigned from the Board as Non-Executive Director with effectfrom 18/04/2016 after a long term association with the company. The Board of Directorsrecords their deep appreciation for the enormous contribution made by Smt. Amutharajendranas Director of the company. The company and board benefitted immensely from Smt.Amutharajendran’s vast experience knowledge and insights of the Industry andoperations of the company.

Sri. K.Balaji has resigned from the Board as Non-Executive Director – Independentwith effect from 20/04/2016 due to his pre occupation in the other business. The Board ofDirectors records their appreciation for his contribution to the company.

Smt. Niranjani Kousigan retire by rotation in the ensuing Annual General Meeting andbeing eligible she offer her selves for reappointment.

Sri. A.Jerard has been appointed as "Additional Director" of the company inthe Board Meeting held on 03rd August 2016 and being eligible and offeringhimself for appointment is proposed to be appointed as an Independent Director for fiveconsecutive years.

Key Managerial Personnel
K.Vee.Rajenthiran - Managing Director
R.Karthikeyan - Whole Time Director
R.Santhosh Kumar - Chief Financial Officer

Statement in Respect of Adequacy of Internal Financial Control with Reference to theFinancial Statements

The Company has in place adequate internal financial controls with reference tofinancial statements. During the year such controls were tested and no reportablematerial weakness in the design or operation was observed.

Receipt of any commission by MD / WTD from the Company or for receipt of Commission /remuneration from it Holding or subsidiary

The Managing Director/ Whole Time Director are not receiving any commission from thecompany.

Declaration by Independent Director

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under the Actand Clause 49 of the Listing Agreement with the Stock Exchanges. The Company has devised aPolicy for performance evaluation of Independent Directors Board Committees and otherindividual Directors which include criteria for performance evaluation of thenon-executive directors and executive directors.

FUTURE PROSPECTS

The company has proposed to dispose of some of the vacant lands admeasuring 5.04 acresat Tirunelveli for the pupose of reducing further liability with banks to renovate ormodernise need based machineries at unit A to improve the quality of the product to theglobal standard and also improve the working capital. The company has got prior consentfrom the bankers and members for the sale proposal. The said proposal will definitelyreduce the overall cost of the product substantially and thereby gets better margin forour product in the global market to earn improved turnover and better profit in the comingyears.

Dividend

In view of the losses during the financial year your directors are unable to recommendany dividend for the year ended 31st March 2016

Changes in Share Capital if any Nil
Disclosure regarding Issue of Equity Shares with Differential Rights Nil
Disclosure regarding issue of Employee Stock Options Nil
Disclosure regarding issue of Sweat Equity Shares Nil

Extract of Annual Return

The extract of Annual Return in format MGT -9 for the Financial Year 2015-16 has beenenclosed with this report vide Annexure I

Number of Board Meetings

During the Financial Year 2015-16 11 meetings of the Board of Directors of the companywere held. 15-05-2015 17-07-2015 14-08-2015 07-09-2015 28-09-2015 14-11-201530-11-2015 15-12-2015 12-02-2016 26-02-2016 & 30-03-2016.

Particulars of Loan Guarantees and Investments under Section 186

During the year under review the company has not given any loan guarantee and madeany investment as prescribed under section 186 of the companies Act2013

Particulars of Contracts or Arrangements with Related Parties

The particulars of contracts and arrangements with related parties are given in FormAOC 2 which is annexed with this report vide Annexure II

Explanation to Auditor’s Remarks

With regard to the auditor’s report para no 9a in Annexure I we wish to reportthat the company could not pay the provident fund and employees state insurance dues onthe respective due dates regularly mainly because of the paucity of funds. However theCompany has not permission from the department for making payment by installments.

With respect to the opinion in the auditor’s report regarding AS 15 in respect ofprovisioning of gratuity all the employees are not attaining the eligibility of gratuitybecause of the 5 years service limitation and for eligible few staffs the company ismaking payment of gratuity as and when they leave on cash basis. However your directorsare taking necessary steps to get the actuarial valuation and provisioning will be doneaccordingly.

Material Changes Affecting the Financial Position of the Company

In order to withstand in the existing scenario of the industry it is proposed deployfunds from own sources for which the Company has to sell lease mortgage or otherwisedispose of the whole of or substantially the whole of the undertakings including movable /immovable of the company at such time and on such terms and conditions as the Board maydeem fit in the best interest of the company. The Unit B at Virudhunagar had beendisposed off and thereby reduced substantial portion of the liabilities with our bankers.In respect of 5.04 acres of land at Tirunelveli is proposed to dispose off to improve theworking capital moderate changes in the machinery and further reduction of liabilitieswith Bankers to reduce finance cost to that extent.

Conservation of Energy Technology Absorption foreign exchange earnings and outgo.

The details are given in Form A vide Annexure III

Secretarial Audit Report

The Board has appointed Sri. S.Muthuraju B.Sc. F.C.A A.C.S Practising CompanySecretary as Secretarial Auditor of our company to conduct Secretarial Audit for thefinancial year 2015-16. The Secretarial Audit Report for the financial year ended March31 2016 is annexed herewith marked as Annexure IV to this Report. With respect to theobservation made in the Secretarial Audit Report regarding non filing of MGT 14 fordisclosure of interest by the Directors it is mainly due to ambiguity and uncertainty ofthe applicability of the same for the relevant period. In respect of the appointment ofcompany secretary despite sincere efforts made by the company for appointment of fulltime company secretary the efforts turnout to be in vain as none of the company secretaryis being prepared to work in a remote rural area at Sankar Nagar. Regarding the suspensionof listing by BSE Limited the company has submitted required details to BSE and requestedBSE to revocate the suspension. The company is making full efforts to restore the listingat the earliest. However the company is being supported with prompt and proper advises atthe times of need of the same from Mr. S.Muthuraju Secretarial Auditor. Further thecompany would ensure in future that all the provisions will be complied as per the rules.

Audit Committee

The Audit Committee comprises Independent Directors namely Mr. E.GabrielJesudasan(Chairman) Mr. D.Anand Samuel and Mr. S.Kanthimathi Nathan as other members. Allthe recommendations made by the Audit Committee were accepted by the Board.

Statement Indicating the Manner in which Formal Annual Evaluation has been made by theBoard of its own Performance its Directors and that of its Committees

The Company has devised a Policy for performance evaluation of Independent DirectorsBoard Committees and other individual Directors which include criteria for performanceevaluation of the non-executive directors and executive directors. The Company had engagedtwo consultants for looking at the best practices prevalent in the industry and advisingwith respect to evaluation of Board members. On the basis of recommendations of theconsultants and the Policy for performance evaluation of Independent Directors BoardCommittees and other individual Directors a process of evaluation was followed by theBoard for its own performance and that of its Committees and individual Directors.

Nomination & Remuneration Committee Policy

The Company has constituted Remuneration Committee comprising of three independentNon-Executive directors. The remuneration payable to the Managing Director and Whole TimeDirectors as recommended by the remuneration Committee is determined by the Board subjectto the approval of the shareholders.

Name Designation Salary & Perquisites (Rs in lacs)
K.Vee.Rajenthiran Managing Director 19.10
R.Karthikeyan Whole Time Director 9.00

Disclosure on Establishment of a Vigil Mechanism

The Vigil Mechanism of the Company which also incorporates a whistle blower policy interms of the Listing Agreement includes an Ethics & Compliance Task Force comprisingsenior executives of the Company. Protected disclosures can be made by a whistle blowerthrough an e-mail or dedicated telephone line or a letter to the Task Force or to theChairman of the Audit Committee.

Corporate Governance

Report on Corporate Governance is enclosed herewith vide Annexure V and it forms partof this Directors Report.

Disclosures under Sexual Harassment of Women at Workplace (Prevention Prohibition& Redressal) Act 2013 –

The Company has been employing about 75 women employees in various cadres within thefactory premises. The Company has in place an Anti harassment policy in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. Internal Complaint Committee are set up at shop floor level toredress complaints received regularly and are monitored by women line supervisors whodirectly report to the Chairman & Managing Director. All employees (permenantcontractual temporary trainees) are covered under the policy. There was no compliantreceived from any employee during the financial year 2015-16 and hence no complaint isoutstanding as on 31.03.2016 for redressal.

Statutory Auditors

The Company’s Statutory Auditors M/s Krishnan & Raman Chartered Accountantsretire at the ensuing Annual General Meeting. They have confirmed their eligibility forreappointment in terms of the provisions of Companies Act 2013 and rules made thereunder.

The Audit Committee and the Board of Directors recommend appointment of M/s Krishnanand Raman as the Company’s Statutory Auditors for the residual period of one yearfrom the conclusion of the ensuing Annual General Meeting. However such re-appointment isto be confirmed in every Annual General Meeting to be held thereafter on a yearly basis.

Cost Records

In terms of the provisions of Section 148 and all other applicable provisions of theCompanies Act 2013 read with the Companies (Audit and Auditors) Rules 2014 the companyis maintaining cost records and the same is reviewed periodically.

Management Discussion and Analysis Report

The management discussion and analysis which forms part of this report is given asAnnexure VI to this report

Directors Responsibility Statement

In accordance with the provisions of Section 134(5) of the Companies Act 2013 yourdirectors confirm that:

a) in the preparation of the annual accounts for the financial year ended 31st March2016 the applicable accounting standards had been followed along with proper explanationrelating to material departures;

b) the directors had selected such accounting policies and applied them consistentlyand 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 2016 and of the profit/loss of the Company for that period;

c) the directors had 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;

d) the directors had prepared the annual accounts on a going concern basis;

e) the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

f) The directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively.

GENERAL

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Act.

2. Issue of equity shares with differential rights as to dividend voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company underany scheme.

4. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company’s operations in future.

5. Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and also pursuant to any fraud by and against the company.

ACKNOWLEDGEMENT

Your Directors express their gratitude for the wholehearted support rendered by thesuppliers The Karur Vysya Bank Ltd NBFC’s and other Statutory Bodies in all theactivities of your Company.

The Board expresses its warm appreciation for its dedicated employees whom it considersas its valuable asset.

MAY THE LORD GANAPATHY SHOWER HIS BLESSINGS ON THE PROSPECTS OF

YOUR COMPANY IN THE YEARS TO COME