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Suditi Industries Ltd.

BSE: 521113 Sector: Industrials
NSE: SUDITIND ISIN Code: INE691D01012
BSE LIVE 15:40 | 21 Aug 72.30 0.80
(1.12%)
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71.50

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NSE 05:30 | 01 Jan Stock Is Not Traded.
OPEN 71.50
PREVIOUS CLOSE 71.50
VOLUME 1161
52-Week high 86.50
52-Week low 33.00
P/E 55.62
Mkt Cap.(Rs cr) 121
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 71.50
CLOSE 71.50
VOLUME 1161
52-Week high 86.50
52-Week low 33.00
P/E 55.62
Mkt Cap.(Rs cr) 121
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Suditi Industries Ltd. (SUDITIND) - Director Report

Company director report

Dear Shareholders

The Directors have pleasure in presenting the Twenty Fifth Annual Report of the Companytogether with the Audited Balance Sheet as at 31st March 2016 and the Profit and LossAccount for the year ended on that date.

Financial Results: (Rs. in Lakhs)
Particulars Current Year Ended 31.03.2016 Previous Year Ended 31.03.2015
Export Sales 10.15 29.99
Local Sales 8044.09 6960.00
Other Income 56.71 57.18
Gross income 8110.95 7047.17
Profit before Interest and Depreciation 736.05 565.24
Finance Cost 298.55 250.24
Profit after Finance Cost 437.50 315.00
Depreciation 173.90 194.27
Profit / (Loss) before Tax 263.60 120.73
Provision for Tax 222.43 23.05
Profit / (Loss) after Tax before extra ordinary items 41.17 97.68
Extra Ordinary Items (Net) 105.50 (3.56)
Net Profit 146.67 97.68
Add: Brought forward from the previous year 901.23 832.27
Transfer to General Reserve - -
Amount available for appropriation 1047.90 926.39
Proposed Dividend 29.35 20.97
Tax on Proposed Dividend 6.06 4.19
Balance carried to Balance Sheet 1012.49 901.23

In order to balance the growth and developmental activities of the company as well asto fulfill the aspirations of the public stakeholders the promoters have in writingwaived their entitlement on the profit distribution in the form of dividend if anydeclared by the company for the year 2015-16. Accordingly the Board after considering allthese aspects has recommended a dividend for the year under review at the rate of Rs.0.70per Equity Share only on the portion of the paid up equity capital held by the public ason 31st March 2016. No amount has been transferred to General reserve from the profits forthe year 2015-16.

Operations:

The company has registered substantial improvement in the overall performance duringthe year under review in comparison to previous year. The company has achieved an increaseof over 15% in the sales figures and a substantial increase of around 118% in the netprofits before tax in comparison to previous year. During the year the Retail division hasgiven a significant contribution towards the growth in the sales and overall profit of thecompany in comparison to the previous year. However the performance of the Retail divisionseparately as a division needs to be improved further to bring the same on anticipatedlevels. Consequently the company had to absorb some amount of the losses generated by theRetail business activities. Because of this the overall profit recorded by the company islower than the projections for the year under review. The improved economic conditions inthe country augur well for the textile sector and in general there is optimism prevailingall over the country even though the situations continued to remain grim in the otherpart of the world. Hence the export of textile goods still needs to gain momentum whichagain depends largely on global factors. Since the company has a strong presence in thedomestic market there is no negative slide in the sales growth. However for the retaildivision the company needs to give further thrust in the development of product ranges inthe licentiate items as well as the marketing network.

The company continued to take necessary measures to strengthen the operations of theRetail division to make it a profitable business. Many unviable outlets selectively chosenin various formats were either discontinued or converted into own stores to bring bettermanagement in the operation. The company is now giving major thrust to expand the businessthrough on line sales network like Flip kart Jabbong Myntra etc. Further the company isalso using other social network to expand the reach of the products to the actual users aswell as to increase the sales network through other media like Television channels andother social media. Finally regarding the pending EPCG License issue the company isactively pursuing the case with DGFT office to resolve the matter at the earliest.

Export Sales:

The textile export market remained sluggish throughout the year because of economicslowdown in almost all parts of the world. Apart from this the preferential trade regimefollowed by some leading importers of textile goods has a negative impact on the growthof export trade in the world. Hence the export performance for the year is not as per theestimates made by the company. Because of these factors the company continued to remainfocused maximum in the local market. The negligible exports were mainly sent in the formof finished fabrics to neighboring countries like Bangladesh. The company is now makingall-round efforts to increase the volume of fabric shipments to Bangladesh which againdepends upon the global economic conditions as Bangladesh mainly caters to the exportmarket. The company still pursue with some export promotion agencies to explore thepossibility of developing new markets in African and Far East countries. However muchdepends upon the positive changes in the global economic conditions particularly in the USand European economies. The company still pursues its objective to achieve the target ofexporting 50% of its capacity to the overseas customers with better value addition.Similarly efforts are made with various reputed buyers to align with their brands in theoverseas market to promote the exports in large volume.

The company also takes initiatives to develop export potential by taking activeparticipation in various international Fairs/exhibitions as well as selling garments byusing the brand and logos of some important sports clubs/events. The company has startedselling garments in the local market under licentiate arrangements by executing agreementswith some reputed football clubs in Europe. In the future the company may be able toenhance the scope of the sales through these arrangements in the other part of the world.Once the present turmoil in the global market is settled India can look forward to have abetter market share than other competitors in the global markets. Hence the prospects forthe company are good in terms of better unit value realization and volume. Besides thisthe company has developed capability to make better product range particularly in printedand embroidery varieties. In view of these company continues to follow its plans toincrease the exports business in sizable volume in the future.

New Licentiate Rights:

The company has developed and produced wide range of garments under licentiate rightsexecuted with globally well known football clubs like FC Barcelona Manchester City andReal Madrid. These brand LOGOS are embossed on the garments under licentiate rightsacquired for India. The overall response is very good and encouraging. The company has nowacquired adequate experience and expertise in this particular style of production. Hencethe company has now associated with "YouWeCan" backed by celebrity cricketer Mr.Yuvraj Singh to create a clothing line under YWC label. For the company this is the firstsuch venture and anticipates a good outcome from this venture. The company is now alsoexploring other avenues in the similar lines to promote the sales with better valueaddition.

Expansion:

The management continues to maintain the plan adopted earlier in respect of expansionplan and accordingly the company has not undertaken any new projects during the year underreview. Further in the prevailing economic conditions there will not be any majorexpansion plan in the current year some except addition of balancing equipments andreplacement of old machineries and equipments. The remaining portion of the fundsavailable for retail expansion plan as proposed in the Rights issue offer documents isutilized completely and hereafter any utilization of the funds for the Retail expansionwill have to be financed by the company from its own sources.

Human Resources & Industrial Relations:

Human resources are one of the most important assets for the company. Efforts are madesystematically in attraction retention and development of talent as an ongoing process. Anumber of programs are made that provide focused people attention. The thrust is on thepromotion of talent internally through job rotation and job enlargement. The Industrialrelations with the employees at the Company’s plant at MIDC TTC Industrial AreaPawne Village; Navi Mumbai and in the other locations continue to remain healthy andcordial.

Share capital:

During the year under review the company has not issued any class of shares likeshares with preferential rights or sweat equity shares and accordingly there is no changein the Subscribed and Issued capital. However after the closing of the financial year2015-16 the company in the month of May 2016 has issued 88930 shares to employees underSUDITI ESOP PLAN 2011.

Suditi Employee Stock option Plan 2011 (Suditi ESOP 2011):

The company had granted options to the employees in the year 2013 under the SuditiEmployee Stock Option Plan 2011. Each option is equal to one share at par (Rs.10/- each)being the price fixed for exercising the right. To facilitate the employees to exercisetheir right to buy the options granted to them the Company has divided the total optionsgranted on certain prescribed basis over a period of 5 years. The share arising onexercise of the options shall be subject to a lock in period of 1 year from allotment. Thethree parts of the grant has been vested till the date of 31st March 2016. The reviseddetails are as follows:

Granted Accepted Rejected Vested
No of Employees Total options (Nos.) No of Employees Total options (Nos.) No of Employees (Nos.) Total options Upto third part part of Grant
83 350800 20 253200 63 97600 103000

The disclosure of the details is as follows:-

(a) Options granted & accepted; 253200

(b) The pricing formula: At par

(c) Options vested: 103000

(d) Options exercised:

During the year under review no employee has exercised their options under the Scheme.However during the current year in the month of May 2016 12 employees have exercisedtheir options under the SUDITI ESOP PLAN 2011.

(e) The total number of shares arising as a result of exercise of option: During theyear under review there were no shares allotted as there were no exercise of options.During the current year in the month of May 2016 the board allotted 88930 shares on therecommendation of the Compensation Committee for 12 employees on exercise their optionsunder SUDITI ESOP PLAN 2011.

(f) Options lapsed: 97600

(g) Variation of terms of options: NA

(h) Money realised by exercise of options: Nil

(i) Total number of options in force: 253200

(j) Employee wise details of options granted to:

(i) Senior managerial personnel: 243500 (includes 35000 options granted to CompanySecretary & V.P. (F) and no Director is granted any options under Suditi ESOP Plan2011).

(ii) Any other employee who receives a grant in any one year of option amounting to 5%or more of option granted during that year: Nil

(iii) identified employees who were granted option during any one year equal to orexceeding 1% of the issued capital (excluding outstanding warrants and conversions) of thecompany at the time of grant: Nil

(i) Diluted Earnings per Share (EPS) pursuant to issue of shares on exercise of optioncalculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’]:No options are exercised till date.

(j) Where the company has calculated the employee compensation cost using the intrinsicvalue of the stock options the difference between the employee compensation cost socomputed and the employee compensation cost that shall have been recognized if it had usedthe fair value of the options shall be disclosed.

The impact of this difference on profits and on EPS of the company shall also bedisclosed: The impact on account of this will reduce the profits by Rs.1574753/- andaccordingly on proforma basis the company’s basic and diluted earnings would havebeen Rs.0.79 and Rs.0.78 respectively:

(k) Weighted-average exercise prices and weighted-average fair values of options shallbe disclosed separately for options whose exercise price either equals or exceeds or isless than the market price of the stock: NA

(l) A description of the method and significant assumptions used during the year toestimate the fair values of options including the following weighted-average information:

(i) Risk-free interest rate: 6.31%

(ii) Expected life: 5 years

(iii) Expected volatility: 5.59%

(iv) Expected dividend: Rs.0.70 per share

(v) The price of the underlying share in market at the time of option granted: Rs.7.68

Particulars of Employees

Pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 details are stated separately in the Managerial Remuneration.

Meetings:

A calendar of Meetings is prepared and circulated in advance to the Directors. Duringthe year four Board Meetings and four Audit Committee Meetings were convened and held. Thedetails of which are given in the Corporate Governance Report. The intervening gap betweenthe Meetings was within the period prescribed under the Companies Act 2013.

Board Evaluation:

Pursuant to the provisions of the Companies Act 2013 and Regulation 25 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the IndependentDirectors have reviewed the performance of all the Directors including their ownperformance as well as the evaluation of the working of its Audit committee Nomination& Remuneration committee and other Compliance Committees. The details are provided inthe Corporate Governance Report.

Declaration by an Independent Director(s) and reappointment if any:

A declaration by an Independent Director(s) that they meet the criteria of independenceas provided in sub-section (6) of Section 149 of the Companies Act 2013 has beensubmitted to the Board in the first Board Meeting for the year 2016-17. An independentdirector shall hold office for a term up to five consecutive years on the Board of aCompany but shall be eligible for reappointment for next five years on passing of aspecial resolution by the Company and disclosure of such appointment in the Board’sreport.

Remuneration Policy:

The Board has on the recommendation of the Nomination & Remuneration Committeefollows a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report.

Managerial Remuneration:

A) Details of the ratio of the remuneration of each director to the medianemployee’s remuneration and other details as required pursuant to Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014. (Enclosed asAnnexure II).

B) Details of the every employee of the Company as required pursuant to 5(2) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014. Thestatement of the name of the top ten employees of remuneration drawn is given in AnnexureII). Further the statement showing the requisite information pursuant to the Companies(Appointment of Managerial Personnel) Rules 2014 is not annexed herewith as there are noemployees covered by the rule (2) (i)(ii) & (iii).

C) Any director who is in receipt of any commission from the company and who is aManaging Director or Whole-time Director of the Company shall receive any remuneration orcommission from any Holding Company or Subsidiary Company of such Company subject to itsdisclosure by the Company in the Board’s Report. Nil

D) There are no disclosures to be made as the directors except the Chairman &Managing Director are not in receipt of any remuneration or stock options other thansitting fees and reimbursement of expenses incurred for attending the meeting. The detailsare furnished separately in the corporate governance report.

Details of Subsidiary/Joint Ventures/Associate Companies:

The company has incorporated two subsidiaries in the month of March 2015 and thesubsidiaries have commenced their business from April 2015. One of the subsidiaries M/s.Suditi Design Studio Limited has commenced sales business activities while the othersubsidiary M/s. Suditi Sports Apparel Limited is yet to commence their sales businessoperations. The details pursuant to sub-section (3) of section 129 of the Act containingthe salient feature of the financial statement of a company’s subsidiary orsubsidiaries associate company or companies and joint venture or ventures etc are annexedherewith. The Company has also presented the Consolidated Financial Results along with theStandalone Financial Results of the Company for the first time. The Consolidated FinancialResults are the combined performance of the Company along with its Subsidiaries and thedetails of the same are provided along with Notes to Accounts.

Summary of Sales:

(Rs. in Lakhs)

Particulars Suditi Industries Limited Suditi Design Studio Limited (Subsidiary) Suditi Sports Apparel Limited (Subsidiary) Consolidated
Sales 8110.95 524.70 - 8565.89
Profit 146.67 (16.88) - 129.99

The growth in the Business activities of the Subsidiaries will help the Company toincrease the sales volume of the Company as the Subsidiary also sources their part of thematerial requirement from the Company at the best prevailing market rate on arms lengthbasis. In addition to this it also provides value addition to the Company in the Marketapart from building brand value. It enables the Company to ensure focused attention to thecertain market segment which otherwise not catered or explored by the Company.

Deposits:

The Company has not accepted any deposits within the meaning of Section 73 & 76 ofCompanies Act 2013 and the rules made there under.

Energy Technology and Foreign Exchange:

The particulars relating to conservation of Energy Technology Absorption and ForeignExchange earnings and outgo as required under Section 134 (3) (m) of the Companies Act2013 is given in the Annexure I forming part of this report.

Directors & the Key Managerial Personnel:

In accordance with the provisions of section 152 of The Companies Act 2013 Smt.Sanjula Sanghai retire by rotation at the forthcoming Annual general meeting and beingeligible offer herself for reappointment. Further the company is in the process ofappointing a Chief Financial Officer (CFO) internally to take over the functions of CFOwhich hitherto was held by Chairman & Managing Director.

Directors’ Responsibility Statement:

The Directors hereby confirm: -

i) That in the preparation of the annual accounts the applicable accounting standardshave been followed along with proper explanation relating to material departures;

ii) That the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period;

iii) That the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

iv) That the Directors have prepared the annual accounts on a ‘going concern’basis;

v) That the directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively and;

vi) That the directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and were operatingeffectively;

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors and external consultants including audit of internal financialcontrols over financial reporting by the statutory auditors and the reviews performed bymanagement and the relevant board committees including the audit committee the board isof the opinion that the Company's internal financial controls were adequate and effectiveduring FY 2015-16.

Corporate Governance:

A separate section on Corporate Governance and a certificate from the Auditors of theCompany regarding compliance of conditions of Corporate Governance as stipulated underRegulation 34 & other applicable Regulations of the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 form part of the Annual Report.

Cost Audit:

In view of the new Companies (Cost Records & Audit) Rules 2014 and amendmentthereof the company is now out of the purview of the Cost Audit Report Rules. Hence thecompany has not appointed any Cost Auditor for the year 2016-17.

Auditors:

Pursuant to the provisions of section 139 of the Act and the rules framed thereafterM/s. Chaturvedi & Co Chartered Accountants were appointed as statutory auditors ofthe Company from the conclusion of the twenty third annual general meeting (AGM) of theCompany held on September 12 2014 till the conclusion of the Twenty Sixth AGM to be heldin the year 2017 subject to ratification of their appointment at every AGM.

Secretarial Audit Report:

In terms of Section 204 of the Companies Act 2013 and the rules made there under Shri.Shivhari Jalan Practicing Company Secretary had been appointed as Secretarial Auditors ofthe Company. The report of the Secretarial Auditors is enclosed as Annexure separately tothis report. The report is self-explanatory and does not call for any further commentother than the explanation given on the appointment of Chief Financial Officer.

Internal Audit & Controls:

The Company had engaged SGCO & Co as its Internal Auditor for part of the period.Subsequently due to their non availability to continue with the Internal Audit assignmentof the Company Board has appointed M/s. Ram Agarwal & Associates as the internalAuditor to continue the task of suggesting and implementing the recommendations to improvethe control environment. Their scope of work includes review of processes for safeguardingthe assets of the Company review of operational efficiency effectiveness of systems andprocesses and assessing the internal control strengths in all areas. Internal Auditorsfindings are discussed with the process owners and suitable corrective actions taken asper the directions of Audit Committee on an ongoing basis to improve efficiency inoperations.

Vigil Mechanism:

In pursuant to the provisions of section 177(9) & (10) of the Companies Act 2013a Vigil Mechanism for directors and employees to report genuine concerns has beenestablished. The Vigil Mechanism Policy has been made available to each and everystakeholder and the Company has designated two senior officials as Vigilance Officers tosupport the Vigilance Mechanism functions.

Risk management policy:

A statement indicating development and implementation of a risk management policy forthe Company including identification therein of elements of risk if any that in theopinion of the Board may threaten the existence of the company as given separately in theCorporate Governance Report.

Extract of Annual Return:

As required pursuant to section 92(3) of the Companies Act 2013 and rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of annual return in MGT9 forms part of this Annual Report as ANNEXURE III.

Material changes and commitments if any to report affecting the financial position ofthe company which have occurred between the end of the financial year of the company towhich the financial statements relate and the date of the report:

There are no such material changes and commitments to report under this head other thanthe association with "YouWeCan" which is explained in detail in the report underthe head New Licentiate Rights.

Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company’s operations in future:

There are no such significant and material orders passed by any regulators to reportunder this head.

Details in respect of adequacy of internal financial controls with reference to theFinancial Statements:

The company has set up vigilant internal control mechanism to ensure that the financialstatements prepared are true fair and transparent. The company has set up strong internalaudit department apart from Management committee to ensure that all the financialtransactions executed are in compliance with applicable laws and regulations and in linewith the budget plans. Any variations or deviations are appropriately dealt with by theinternal Audit department as well as by the Audit committee. The Company has appointed anindependent Chartered Accountant Firm to improve and strengthen further the existingstandard operating procedures and same is implemented in stages. According to themanagement the present mechanism followed in the company is adequate and effective. Thedetails are also stated in the Management discussion and analysis report annexed herewithand form part of this report.

Particulars of loans guarantees or investments under section 186 of the companies Act:

There are no loans/guarantee or security provided during the year under review. Thedetails of investments made are as follows:-Details of Investments:-

Sl No Date of investment Details of Investee Amount Purpose for which the proceeds from investment is proposed to be utilized by the recipient Date of BR Date of SR (if reqd) Expected rate of return
1 01/04/15 Suditi Sports Apparel Ltd. 4 lakhs Business activities 16/01/2015 NA 1 0 %
2 01/04/15 Suditi Design Studio Ltd. 4 lakhs Business activity 16/01/2015 NA
14/03/16 do 82 Lakhs Development of Business activity 11/02/2016 NA

Particulars of contracts or arrangements with related parties:

The particulars of contract or arrangements entered into by the Company with relatedparties at arm’s length basis referred to in sub-section (1) of section 188 of theCompanies Act 2013 is disclosed in Form No. AOC-2 as Annexure IV

Obligation of company under the "Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013:

In order to prevent sexual harassment of women at work place the company has set up aseparate internal compliance committee under the "Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013." Under the said Act theInternal Complaints Committee is empowered to look into complaints relating to sexualharassment at work place of any women employee. Accordingly the Company has adopted apolicy for prevention of Sexual Harassment of Women at workplace and the Committee isauthorized to implement the said policy all over the company. During the year Company hasnot received any complaint of harassment.

Corporate Social Responsibility (CSR):

The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy)Rules 2014 is not applicable to the company.

Transfer of amounts to Investor Education and Protection Fund:

The Company does not have any funds lying unpaid or unclaimed for a period of sevenyears in respect of unclaimed/unpaid dividends. Therefore there are no funds on thisaccount which are required to be transferred to Investor Education and Protection Fund(IEPF). Pursuant to the provisions of the Investor Education Protection Fund (Uploading ofinformation regarding unpaid and unclaimed amounts lying with companies) Rules 2012 theCompany has already filed the necessary form and uploaded the details of unpaid andunclaimed amounts lying with the Company as on the date of last AGM with the Ministry ofCorporate Affairs.

Listing with Stock Exchange:

The Company confirms that it has paid the Annual Listing Fees for the year 2016-2017 tothe Bombay Stock Exchange limited where the Company’s Shares are listed.

Appreciation:

Your Company and its Directors wish to place on record their sincere appreciation forthe support and assistance extended by different Central and State Government Departmentsand Agencies Banks and Financial Institutions Insurance companies Customers andVendors. Your Directors are thankful to the esteemed shareholders for their continuedsupport and confidence reposed in the company and its management. Your Directors also wishto place on record their deep sense of appreciation to all the employees of the Companyfor their outstanding contribution towards the operations of the Company.

For and on behalf of the Board of Directors
Place: Mumbai PAWAN AGARWAL
Date: 08.08.2016 CHAIRMAN & MANAGING DIRECTOR