The Directors hereby present their 28th Annual Report on the business andoperations of the Company together with the audited Financial Accounts for the year endedMarch 31 2016. The Management Discussion and Analysis has also been incorporated intothis report.
1. HIGHLIGHTS OF PERFORMANCE
The net sale for the year is Rs. 362.35 Crores as compared to Rs. 429.92 Croresof previous year.
The Net Loss for the year ended 31.03.2016 is Rs. 178.84 Crore as compare to NetLoss of Rs. 208.34 Crores for the previous year.
2. FINANCIAL RESULTS
Amount in Crores
|Particulars ||Year ending ||Year ending |
| ||31.03.2016 ||31.03.2015 |
|Net Turnover ||362.35 ||429.92 |
|Profit before Depreciation ||(108.42) ||(61.34) |
|Profit / Loss(-) before Tax ||(178.84) ||(208.34) |
|Less Provision for Tax (including deferred and fringe benefit tax) ||0 ||0 |
|Profit / Loss(-) after Taxes ||(178.84) ||(208.34) |
Due to losses in the current year the company has not transferred any amount in anyreserve.
In view of heavy losses company has decided not to declare any dividend.
5. SHARE CAPITAL
The paid up Equity Share Capital as on 31st March 2016 is Rs. 34.11 Crores.During the year under review the Company has not issued shares with differential votingrights or granted stock options or issued sweat equity or purchased its own shares.
Company s accumulated losses have exceeded its entire net worth as on 31.03.2016 andhas become Sick Industrial Company in accordance with the provisions of Sick IndustrialCompanies (Special Provisions) Act 1985.
Cash and Cash equivalent as at 31st March 2016 is Rs. 12.65 Crore. TheCompany continues to focus on judicious management of working capital. Working Capitalparameters are kept under strict check through continuous monitoring.
During the year Company has not accepted any deposit from the public falling withinthe ambit of Section 73 of Companies Act 2013 and the Companies (Acceptance of Deposits)Rules 2014.
6.2 PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
Detail of Loans Guarantees and Investments covered under the provisions of Section 186of the Companies Act 2013 are given in the notes of Financial Statements.
7. INDUSTRY AND ECONOMIC SCENARIO & OUTLOOK
As regards Indian economy after years of diminutive growth the reform momentum haspicked up in India..The Indian economy grew at 7.6 per cent in 2015-16 due to improvementin the performance of both services as well as manufacturing sectors. The governmentexpects it to expand at above 8% in 2016-17. India's overall textile exports had remainedalmost flat at $40 billion in 2015-16 from $41.6 billion in the previous financial year aresult of sluggish economic conditions Globally. It also fell short of the year's targetof $47.5 billion set by the government. With a host of incentives and a Rs 6000 crorepackage announced in the recent to boost textile and apparel exports the government hasset a higher target for year 2016-17.
8. FINANCIAL / OPERATIONAL PERFORMANCE
Supreme is manufacturer and exporter of cotton yarn synthetic yarn blended yarnknitted fabric (both grey and processed) and knitted garments. During the year underreview the Company's exports (FOB value) were to the tune of Rs. 65.69 crore and accountsfor about 18.13% of company s revenues. The company has identified two segments yarnsegment and garments segment. The yarn segment comprises production of various types ofyarn (from cotton manmade fibers and blend thereof) and yarn processing activities.Garment segment comprises of knitted garments.
9. CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES
As part of its initiatives under Corporate Social Responsibility (CSR) the Company hasformed requisite CSR Committee and CSR policy was also approved by the Board as per therequirement of Companies Act 2013. The details of the CSR Committee and CSR Policy isexplained in the Corporate Governance Report and also posted on the website of theCompany. The Report of the Corporate Social Responsibility (CSR) Activities is annexedherewith as Annexure A .
10. HUMAN RESOURCES
The Company recognizes people as its most valuable asset and it has built an opentransparent and meritocratic culture to nurture this asset. Talent Management is a keypeople planning tool that provides an integrated means of identifying selectingdeveloping and retaining top talent within our organization. STML has kept a sharp focuson Employee Engagement.
11. BUSINESS RISK MANAGEMENT
Pursuant to the requirement of clause 49 of listing agreement/SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Company has constituted a BusinessRisk Management Committee. The details of Committee and its terms of reference are set outin the Corporate Governance Report forming part of the Board s Report. The
Company has a robust Business Risk Management (BRM) framework to identify evaluatebusiness risks and opportunities. This framework seeks to create transparency minimizeadverse impact on the business objectives and enhance the Company s competitive advantage.The business risk framework defines the risk management approach across the enterprise atvarious levels including documentation and reporting. The key business risks identified bythe Company and its mitigation plans are as under.
Foreign Exchange Risks:-
Around 20% of the Total Revenue of the Company is generated through Export sales. Inthis way the Company has to deal with foreign currency from time to time. The Company usesvarious types of foreign currency forward & option contracts to hedge the risksassociated with fluctuations in the foreign currency.
Risk related to Personnel:-
Our business is increasingly dependent on the skills and competencies of our employeesand management team. The general war for talent in our growing economy has created asubstantial risk related to the retention of key personnel both in manufacturing andmanagerial levels. This risk is mitigated through effective HR policies relating torecruitment and retention and a proactive remuneration and rewards policy that isperiodically reviewed at the highest management level. With excellent performance track aswell as best HR practices we are able to attract and retain people for growth of ourbusiness.
Risk related to Safety:-
The company has taken adequate insurance covers to indemnify the risks associated withthe safety of personnel building stock and other infrastructure of the Company. Theseinclude:
1. Fire Insurance Policies.
2. Marine/ Transit Insurance Policies.
3. Theft Insurance Policies.
4. Other Miscellaneous Policies.
The company has also taken steps to strengthen IT security system as well as physicalsecurity system at all our locations
Compliance Related Risks:-
The Company is committed to being a responsible corporate citizen and respects the lawsand regulations of the country. All the compliances under various laws applicable to theCompany including under Companies Act 1956/2013 Factories Act 1948 Income Tax Act 1961etc. are followed in Letter & Spirit.
12. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has designed and implemented a process driven framework for InternalFinancial Controls . For the year ended on March 31 2016 the Board is of the opinionthat the Company has sound Internal Financial Controls commensurate with the size scaleand complexity of its business operations. During the year such controls were testedandno material weakness in their operating effectiveness was observed. The Company has aprocess in place to continuously monitor the same and identify gaps if any and implementnew and/ or improved controls whenever the effect of such gaps would have a materialeffect on the Company s operations.
13. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a vigil mechanism named Fraud Risk Management Policy (FRM) to deal withinstance of fraud and mismanagement if any. The details of the FRM Policy is explained inthe Corporate Governance Report and also posted on the website of the Company.
14. SUBSIDIARY COMPANIES
Company does not have any Subsidiary Company.
15. EXPANSION PLAN
No expansion was done during the Financial Year 2015-16.
During the year Mr. Bhupinder Singh Mann (DIN No 01211549) was appointed on 12.08.2015as an additional Independent Director and his appointment as Independent director wasbeing regularized by shareholder in their Extra Ordinary General meeting dated 21.09.2015.Punjab State Industrial & Development Corporation Ltd. (PSIDC) withdrew the nominationof Mr. Lalit Kumar Singla (DIN No 03591398) w.e.f. 10.02.2016 from the Board of theCompany Mr. Daljit Singh Sandhu (DIN 06750304) and Ms. Shivali Gupta (DIN 07014359)Independent Director also resigned from the Directorship of the Company as on 17.07.2015and 31.10.2015 respectively. Mr. Sanjay Kumar Aggarwal (DIN 00085082) was appointed asadditional Independent Director of the Board of the Company as on 14.11.2015 and had alsoresigned on 16.02.2016 from the Directorship of the Company.
During the year Mr. Robin Vijan resigned from the Company Secretary post as well asfrom KMP of the Company as on 30.05.2015 and Ms. Manpreet Kaur appointed as CompanySecretary and KMP w.e.f. June 01 2015 Mr. Kuldip Singh (DIN No 05327381) and Mr. AjayGupta (DIN No 00842248) - Directors are liable to retire by rotation at the ensuing AnnualGeneral Meeting of the Company. In accordance with the provisions of Section 149 of theCompanies Act 2013 and the Rules made there under which came into effect from April 12014 approval of the Members will be sought at the ensuing Annual General Meeting of theCompany for formalizing the appointment of Ms. Kajal Rai (DIN 07366983) Director as anIndependent Director of the Company not liable to retire by rotation for a term of fiveyears.
The Board has carried out an annual evaluation of its own performance the directorsand also committees of the Board based on the guideline formulated by the Nomination &Remuneration Committee. Board composition quality and timely flow of informationfrequency of meetings and level of participation in discussions were some of theparameters considered during the evaluation process. A note on the familiarizing programmeadopted by the Company for the orientation and training of the Directors and the Boardevaluation process undertaken in compliance with the provisions of the Companies Act 2013and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is providedin the Corporate Governance Report which forms part of this Report. Further a SeparateMeeting of the Independent Directors of the Company was held once during the year on14.11.2015 which also reviewed the performance of the Non-executive directors Chairman ofthe Company and performance of the Board as a whole.
Declarations by Independent Directors
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under section 149(6) of the Companies Act 2013 and Regulation16(1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015
The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The Remuneration Policy is stated in the Corporate Governance Report.
A calendar of Meetings is prepared and circulated in advance to the Directors.
During the year Six (6) Board Meetings and Four (4) Audit Committee Meetings wereconvened and held. The details of which are given in the Corporate Governance Report. Theintervening gap between the Meetings was within the period prescribed under the CompaniesAct 2013.
Key Managerial Personnel
During the year 2015-16 the Company had three Key Managerial Personnel viz. Mr. AjayGupta Managing Director & Mr. Inder Pal Singh Chief Financial Officer and Mr. RobinVijan Company Secretary (upto 30.05.2015). On 30th May 2015 Mr. Robin Vijanresigned and Ms. Manpreet Kaur was appointed as Company Secretary of the Company in place.In compliance with Regulation 36(3) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 brief resume of all the Directors proposed to beappointed / re-appointed are attached along with the Notice to the ensuing Annual GeneralMeeting.
17. DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013.
I) that in the preparation of the annual accounts the applicable Accounting Standardshave been followed and that there are no material departures;
II) that they have in the selection of the Accounting Policies consulted theStatutory Auditors and have applied them consistently and made judgments and estimatesthat are reasonable and prudent so as to give a true and fair view of the state of affairsof the Company at the end of the financial year viz. 31.03.2016 and of the profit of theCompany for that period;
III) that they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 1956/ Companies Act 2013 for safeguarding the assets ofthe Company and for preventing and detecting fraud and other irregularities;
IV) that they have prepared the annual accounts on a going concern basis.
V) that proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively.
VI) that systems to ensure compliance with the provisions of all applicable laws werein place and were adequate and operating effectively.
18. RELATED PARTY TRANSACTIONS
All related party transactions that were entered into during the financial year were onan arm s length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors KeyManagerial Personnel or other designated persons which may have a potential conflict withthe interest of the Company at large. Hence the Company is not required to disclosedetails of the related party transactions in Form AOC 2 pursuant to clause (h) ofsub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules2014. All Related Party Transactions are placed before the Audit Committee as also theBoard for approval. Prior omnibus approval of the Audit Committee is obtained on aquarterly basis for the transactions which are of a foreseen and repetitive nature. Thetransactions entered into pursuant to the omnibus approval so granted are audited and astatement giving details of all related party transactions is placed before the AuditCommittee and the Board of Directors for their approval on a quarterly basis. Thestatement is supported by a Certificate from MD and CFO. The Company has developed aRelated Party Transactions Manual Standard Operating Procedures for purpose ofidentification and monitoring of such transactions.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany s website. None of the Independent Directors has any pecuniary relationships ortransactions vis--vis the Company.
19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
During the year under review there are not any significant and material orders passedby the Regulators or Courts to the Company.
20. AUDITORS a. Statutory Auditors:-
M/s. Nanda & Bhatia (FRN : 004342N) Chartered Accountants Ludhiana had beenappointed as Statutory Auditors of the Company period in Extra Ordinary general meetingheld on 21.09.2015 till the conculsion of next Annual Genral Meeting. Now the auditorssubmitted their resignation as on 26th August 2016 as they are unable to continue withthe company and not offer themselves as Statutory Auditor of the company. The Boardrecommended the appointment M/s Datta Singla & Co. Chartered Accountants MandiGobindgarh (Firm Reg. No S06185N) be appointed as the Statutory Auditors of the Companyfor a period of 5 years subject to ratification of their appointment by the members atevery annual general meeting. The shareholders at the ensuing annual general meeting willconsider the appointment of the Statutory Auditors. The Auditors have confirmed that theyhold a valid certificate issued by the Peer Review Board of the Institute of CharteredAccountants of India. M/s. Datta Singla & Co. Chartered Accountants MandiGobindgarh have conveyed their consent to be appointed as the Statutory Auditors of theCompany along with a confirmation that their appointment if made by the members wouldbe within the limits prescribed under the Companies Act 2013.
Members attention is invited to the observation made by the Auditors under Emphasis ofmatter appearing in Auditors Reports. The observation made by auditor s in their reportalongwith the management replies on it are as follows:
1. Remark of company in reference of auditor Qualification in their report inPoint No. 5 (i) is that as the banks classified the accounts of the company asNon-performing Assets so the Company has not provided for the interest on borrowings.
2. Remark of company in reference of auditor Qualification in their report inPoint No. 5 (ii) is that the Company has not provided interest of Rs. 3535.28 lacson borrowings as the lenders have categorized the account as NPA. In case the Companywould book this expenses of Rs. 3535.28 lacs the Earning per share (EPS) would have beenRs. (31.38).
3. Remark of company in reference of auditor Qualification in their report inPoint No. 5 (iii) is that in the absence of valuation by Actuarial Company hasmade the Valuation of Gratuity on estimated basis on the same guidelines which theActuarial would have followed.
4. Remark of the company in reference of Auditor s Qualification regardingverification of Fixed Assets under Annexure to Auditor s Report in Clause (i) is that thefixed assets of the company are being physically verified regularly. The machinery of thecompany is consisting of big machines which are very easy to verify and company does notneed any specialist to physically verify.
5. The company does not have adequate internal control system commensurate withthe size of the company and the nature of its business for the purchase of inventory andfixed assets and for the sale of goods and services under
Clause (i) & (ii) of the Annexure to Auditor s Report.
Company s Remarks: Company has adequate internal control system commensurate withthe size of the company and the nature of its business for the purchase of inventory andfixed assets and for the sale of goods and services. These systems are in place since theinception of the company.
It is pertinent to note that all the inadequacy of systems referred by the StatutoryAuditors were perfect till the last financial year as per their Report of the previousyears. b. Cost Auditors:-
The Board of Directors has on the recommendation of Audit Committee approved theappointment of M/s S.K. Verma and Associates Cost Accountants Khanna (Firm RegistrationNo. 101072) as the Cost Auditors of the company for the year 2016-2017 at a remunerationof Rs. 60000/- plus out of pocket expenses. The proposed remuneration of the Cost Auditorswould be approved by the members in the ensuing AGM. For the year 2015-16 the Cost Auditreport shall be duly filed within prescribed time. c. Secretarial Audit:-
Pursuant to the provisions of Section 204 of the Companies Act 2013 and TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. Rajeev Bhambri & Associates (Membership No 4327) a firm of CompanySecretaries in Practice to undertake the Secretarial Audit of the Company for Financialyear 2015-16. The Report of the Secretarial Audit Report is annexed herewith as Annexure B.
The Board on the recommendation of Audit Committee appointed M/s. Rajeev Bhambri &Associates as Secretarial Auditors for the Financial Year 2016-17.
21. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANYWHICH
HAVE OCCURRED BETWEEN MARCH 31 2015 AND DATE OF THE REPORT
There were no material changes and commitments affecting the financial position of theCompany between the end of financial year (March 31 2015) and the date of the Report.
22. CORPORATE GOVERNANCE
The report on Corporate Governance as stipulated under the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 forms an integral part of this Report.. Therequisite certificate from the Practicing Company Secretary of the Company confirmingcompliance with the conditions of corporate governance is attached to the report onCorporate Governance.
23. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION
AND REDRESSAL) ACT 2013
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.
24. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3) (m) of the Companies Act 2013 readwith Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith as Annexure C .
25. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as Annexure D .
Shares of the company are listed on National Stock Exchange of India Limited (NSE) andBombay Stock Exchange Limited (BSE).
27. PARTICULARS OF EMPLOYEES
The table containing the names and other particulars of employees in accordance withthe provisions of Section 197(12) of the Companies Act 2013 read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedtothe Board's report. Since there is no employee receiving remuneration of Rs.1.20 Crore or more or employed for part of the year and in receipt of Rs. 5 lakh or morea month there is no information requires to be given under Rule 5(2) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014
28. APPRECIATION AND ACKNOWLEDGEMENTS
Your Directors take this opportunity to express gratitude for valuable assistance andco-operation extended to the Company by Financial Institutions Employees CommercialBanks and other authorities.
29. CAUTIONARY STATEMENT
Statement in this Management Discussion and Analysis describing the Company sobjectives projections estimates expectations or predictions may be forward lookingstatements within the meaning of applicable securities laws and regulations. Actualresults could differ materially from those expressed or implied. Important factors thatcould make a difference to the Company s operations include global and Indian demandsupply conditions finished goods prices feedstock availability and prices cyclicaldemand and pricing in the Company s principal markets changes in
Government regulations tax regimes economic developments within India and thecountries within which the Company conducts businesses and other factors such aslitigation and labour negotiations. The Company assumes no responsibility to publiclyamend modify or revise any forward looking statements on the basis of any subsequentdevelopment information or events or otherwise.
| ||For and on behalf of the Board || |
| ||Sd/- ||Sd/- |
|Place: Ludhiana ||(AJAY GUPTA) ||(GAUTAM GUPTA) |
|Dated: 31.08.2016 ||Managing Director ||Jt. Managing Director |
| ||00842248 ||02642545 |