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Surat Textile Mills Ltd.

BSE: 530185 Sector: Industrials
NSE: N.A. ISIN Code: INE936A01025
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VOLUME 13652
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P/E 5.44
Mkt Cap.(Rs cr) 82
Buy Price 3.70
Buy Qty 14.00
Sell Price 0.00
Sell Qty 0.00
OPEN 3.65
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VOLUME 13652
52-Week high 9.05
52-Week low 3.11
P/E 5.44
Mkt Cap.(Rs cr) 82
Buy Price 3.70
Buy Qty 14.00
Sell Price 0.00
Sell Qty 0.00

Surat Textile Mills Ltd. (SURATTEXTILE) - Director Report

Company director report

MANAGEMENT DISCUSSION AND ANALYSIS

Dear Members

Your Directors have pleasure of presenting the Seventieth Annual Report on the businessand operations of the Company together with the Audited Statements of Accounts for theyear ended 31st March 2016.

Summarised Financial Results

The Company's performance during the financial year ended 31st March 2016 as comparedto the previous financial year is summarized below.

(Rs. in crores)

2015-16 2014-15
Total Revenue from Operations (Net) 118.99 129.84
Earning Before Interest Depreciation and Tax (EBIDTA) 6.50 5.54
Less: Finance Costs 0.74 0.70
Depreciation 1.16 1.26
Profit before Tax 4.60 3.58
Less: Tax Expense /(Credit) (1.53) 1.02
Profit after Tax 6.13 2.56

Transfer to Reserve

It is not proposed to transfer any amount to reserves out of the profits earned duringthe financial year 2015-16.

Dividend

In order to strengthen the reserves of the Company and with a view to ensure sufficientliquidity to take advantage of the growth potential your directors consider it prudent toplough back the profits and not to recommend any dividend for the financial year 2015-16.

Share Capital

The Issued Subscribed and Paid-up equity share capital as on 31st March 2016 was Rs.2220.64 Lacs. There was no public issue rights issue bonus issue or preferential issueetc. during the year. The Company has not issued shares with differential voting rightssweat equity shares nor has it granted stock options. As on 31st March 2016 none of theDirectors of the Company hold instruments convertible into equity shares of the Company.

Disclosures in respect of voting rights not directly exercised by employees

There are no shares held by trustees for the benefit of employees and hence nodisclosure under Rule 16(4) of the Companies (Share Capital and Debentures) Rules 2014has been furnished.

Review of Operations

FY 2016 was extremely a challenging year for your Company. Poor demand-supplyconditions in polyester industries continued during the year due to large capacities ofChips and Yarns manufacturers became operational from FY 12 to FY 14 coupled with delayedrevival of the economy poor monsoon affecting rural consumption etc. The dumping ofChinese fabric imports into Indian markets also affected the demand for locally producedfabric and therefore Yarn and Chips as well. Under the circumstances Chips and Yarnmanufacturers have been compelled to price their products at very low margins to protectutilisation level of production.

The total revenue from operations for the year 2015-16 declined at Rs. 118.99 crore ascompared to Rs. 129.84 crore in the previous year. The decline in revenue was primarilydue to fall in Selling Prices in tandem with fall in crude oil prices

Our focus on operational efficiency with better working capital management and betternetwork helped us to remain competitive and improve our Earnings Before InterestDepreciation and Tax (EBIDTA).

EBIDTA for FY 16 was higher at Rs. 6.50 crore as compared to Rs. 5.54 crore in theprevious year registering a growth of about 17%. The profit after tax for the FY 2016also increased to Rs. 6.13 crore as compared to Rs. 2.56 crore in the previous year.

Despite challenging business environment your Company's total sales of chips in volumewas higher at 16094 MT for the year 2015-16 as compared to 9034 MT in the previous year.In value terms sale of chips for FY 16 was higher at Rs. 12861.15 Lacs as compared to Rs.8755.56 Lacs in the previous year. The overall production of Chips was higher at 16427 MTduring the year 2015-16 as compared to 10062 MT achieved in the previous year.

Your Company continued its focus on margin improvement by optimum allocation of itsresources through cost reduction at manufacturing level. The operating margins howeverremained under pressure.

The manufacturing activity at its POY plant at Village Jolwa Taluka Palsana Dist.Surat remained suspended during the major part of the financial year 2015-16 as theoperations of the division had become unviable due to competitive market conditions.

Apart from investing surplus funds in business the Company is also pursuing relatedbusiness opportunities by building up its stock in trade of art and artifacts during theyear.

Nature of Business

The Company is engaged in the business of manufacturing polyester chips anddifferentiated partially oriented yarn (POY). During the year under review there was nochange in the nature of business of the Company.

Material changes and commitments

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year and the date ofthis Report.

Presentation of financial statements

Your Company prepares its financial statements in compliance with the requirements ofthe Companies Act 2013 and the

Generally Accepted Account! ng Principles (GAAP) in India. The financial statementshave been prepared on historical cost basis.

The estimates and judgments relating to the financial statements are made on a prudentbasis so as to reflect in a true and fair manner the form and substance of transactionsand reasonably present the Company's state of affairs profits and cash flows for the yearended 31st March 2016. The financial statements of the Company have been disclosed as perSchedule III of the Companies Act 2013. The Business Responsibility Reporting as requiredby Regulation 34(2) of the SEBI (Listing Obligations & Disclosure Requirements)Regulations 2015 is not applicable to your Company for the financial year ending 31stMarch 2016.

Finance

Your Company has repaid Secured Rupee Term Loan from banks to the tune of Rs. 51.16Lacs during the financial year 2015-16. No fresh Term Loan was availed by the Companyduring the year. The Company availed working capital facility from Bank of Baroda duringthe year.

Directors and Key Managerial Personnel

In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Shri M. R. Momaya (DIN: 00023993) Director retres byrotation at the forthcoming Annual General Meeting and being eligible offers himself forre-appointment. The Board recommends his re-appointment for the consideration of theMembers of the Company at the ensuing Annual General Meeting.

Shri M. R. Momaya Managing Director Shri Yogesh C. Papaiya Wholetme Director and CFOand Ms. Hanisha Arora Company Secretary and Compliance Officer were designated as"Key Managerial Personnel" of the Company pursuant to Section 2(51) and 203 ofthe Companies Act 2013 read with the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014. During the year under review there was no change inkey managerial personnel of the Company.

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(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. Duringthe year under review there is no change in the Board of Directors of the Company.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Information required pursuant to the provisions of Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 in respect ofConservation of Energy Technology Absorpt on Foreign Exchange Earnings and Outgo are setout in the Annexure A forming part of this Report.

Corporate Social Responsibility (CSR) Initiatives

As required under Section 135 of the Companies Act 2013 the CSR committee comprisingShri Ketan Jariwala Independent Director as the Chairman of the Committee ShriHarishchandra Bharucha Independent Director and Shri Yogesh C. Papaiya Whole-timeDirector as its members.

The CSR committee has laid down the policy which includes the activities covered underthe Companies (Corporate Social Responsibility Policy) Rules 2014.

The Company has been contributing in the development of the surrounding areas of itsplant. The Company supports and contributes in activities relating to promotion ofeducation sports medical and health care vocational skill development and livelihoodenhancement and programmes and activities relating to environment sustainability etc. Thedetails of amount spention CSR activity undertaken during the year by the Company aregiven in the Annexure B to this Report. The CSR policy of the Company is alsohosted on the website of the Company www.surattextlemillsltd.com.

Managerial Remuneration

Disclosures of the rat o of the remuneration of each director to the median employee'sremuneration and other details as required pursuant to Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are provided as Rs. Annexure C'.

The details of remuneration paid to the Directors including Executive Directors of theCompany are given in Form MGT-9 forming part of the Directors Report.

Audit Committee

The Audit Committee of Directors comprises of Mr. Harishchandra Bharucha (Chairman ofthe Committee) Mr. Sanjay S. Shah and Mr. Ketan Jariwala. All the recommendat ons made bythe Audit Committee during the year were accepted by the Board of Directors of theCompany. The terms of reference and other details of the Audit Committee are available inthe Corporate Governance Report forming part of this annual report.

Statutory Auditors & Audit Report

M/s Natvarlal Vepari & Co. Chartered Accountants (Firm Registration No.123626W)the auditors of your Company hold office upto the conclusion of the forthcoming AnnualGeneral Meeting (AGM) of the Company. Pursuant to provisions of Section 139(2) of theCompanies Act 2013 read with Companies (Audit and Auditors) Rules 2014 M/s NatvarlalVepari & Co. are eligible for appointment as Auditors. Your Company has received awritten confirmation from M/s Natvarlal Vepari & Co. Chartered Accountants to theeffect that their appointment if made would sat sfy the criteria provided in Section 141of the Companies Act 2013 for their appointment. The Board recommends the appointment ofM/s Natvarlal Vepari & Co. Chartered Accountants as the Auditors of the Company fromthe conclusion of the ensuing AGM to the conclusion of the next AGM.

As regards the comments in the Auditors' Report the relevant notes to the Accounts areself explanatory and may be treated as information / explanation submitted by the Board ascontemplated under provisions of the Companies Act 2013.

The report of the Statutory Auditor does not contain any adverse observation orqualification requiring explanation or comments from the Board under Section 134(3) of theCompanies Act 2013.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 as amended by notifications / circularsissued by the Ministry of Corporate Affairs from time to time and on recommendation of theAudit Committee the Board of Directors appointed M/s P. M. Nanabhoy & Co. CostAccountants (Firm Registration Number 7464) as Cost Auditors to audit the cost accountsof the Company for the Financial Year 2016-17.

The Cost Auditor have given a Certificate to the effect that the appointment if madewill be within the prescribed limits specified under Section 141 of the Companies Act2013. The Audit Committee has obtained a certificate from the Cost Auditor certifyingtheir independence and arm's length relationship with the Company.

As required under the Companies Act 2013 the remuneration payable to the Cost Auditoris required to be placed before the Members in a general meeting for their ratification.Accordingly a resolution seeking member's approval for the remuneration payable to theCost Auditor forming part of the Notice convening the Annual General Meeting for theirratification.

Secretarial Auditor & Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Jigar Vyas proprietor of Jigar Vyas & Associates Practicing CompanySecretary (CP No.8019) Surat to undertake the Secretarial Audit of the Company for theFinancial Year 201516. The Secretarial Audit Report is annexed as Rs. Annexure D' andforms an integral part of this Report. The report of the Secretarial Auditor does notcontain any adverse observation or qualification requiring explanation or comments fromthe Board under Section 134(3) of the Companies Act 2013.

Internal Auditors

Pursuant to the provisions of Section 138 of the Companies Act 2013 the Board ofDirectors of the Company have appointed M/s Aadil Aibada & Associates CharteredAccountant as Internal Auditors of the Company for the financial year 2016-17.

Directors' Responsibility Statement

As required under Clause (c) of sub-section (3) of Section 134 of the Companies Act2013 the directors to the best of their knowledge and belief state that:

i. in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanations relating to material departures if any;

ii. they have in the selection of the accounting policies consulted the StatutoryAuditors and these have been applied consistently and reasonable and prudent judgmentsand estimates have been made so as to give a true and fair view of the state of affairs ofthe Company as at 31st March 2016 and of the profit of the Company for the year ended onthat date;

iii. proper and sufficient care had been taken for the maintenance of adequateaccounting records in accordance

with the provisions of the Companies Act 2013 for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

iv. the annual accounts have been prepared on a going concern basis;

v. they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively;

vi. the proper systems to ensure compliance with the provisions of all applicable lawsare in place and are adequate and operating effectively.

Number of meetings of the Board

During the year 4 Board Meetings and 4 Audit Committee Meetings were convened andheld. The details thereof are given in the Corporate Governance Report. The Directorsactively participated in the meetings and contributed valuable inputs on the mattersbrought before the Board of Directors from time to time. The intervening gap between theMeetings was within the period prescribed under the Companies Act 2013.

Board evaluation

Pursuant to the provisions of the Companies Act 2013 the Board has devised a policyon evaluation of performance of Board of Directors Committees and Individual directors.The policy is also in compliance to Regulation 19 read with Schedule II Part D of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

The Nomination and Remuneration Committee has defined the evaluation criteria for thePerformance Evaluation of the Board its Committees and individual Directors.

Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board has carried out a formal annualevaluation of its performance and that of its Committees and individual Directors. Theevaluation of each of the directors was done inter-alia on the basis of their advisoryrole and contribution in the decision making. Further the evaluation of the Board as awhole and all the Committees of the Directors was done inter-alia on the basis of theoverall directions and guidance provided to the senior executives and supervision overtheir performance.

Independent Directors' Meeting

In compliance with the requirements of Schedule IV of the Companies Act 2013 ameeting of the Independent Directors was held on 3rd February 2016 without theparticipation of the Executive Directors or management personnel.

The Independent Directors carried out performance evaluation of Non-IndependentDirectors and the Board of Directors as a whole performance of Chairman of the Companythe quality contents and timelines of flow of information between the Management andBoard based on the performance evaluation framework of the Company.

The criteria for performance evaluation have been detailed in the Corporate GovernanceReport forming part of this report.

Declaration of Independent Directors

As required under Section 149(7) of the Companies Act 2013 the Independent Directorshave placed the necessary declaration in terms of the conditions laid down under Section149(6) of the Companies Act 2013 in the Board Meeting held on 25th May 2016.

Familiarisation Programme to Independent Directors

The Company provides suitable familiarisation programme to Independent Directors so asto associate themselves with the nature of the industry in which the Company operates.Directors are periodically advised about the changes effected in the Corporate LawsListing Regulations with regard to their roles rights and responsibilities as Director ofthe Company. The details of the familiarisation programme have been disclosed and updatedfrom time to time on the Company's website.

Related Party Transactions

All transactions entered by the Company with Related Parties were in the OrdinaryCourse of Business and at Arm's Length pricing basis. There are no materially significantrelated party transactions made by the Company with Promoters Directors Key ManagerialPersonnel or other designated persons which may have a conflict with the interest of theCompany at large. During the year 2015-16 pursuant to section 177 of the Companies At2013 and regulation 23 of SEBI Listing Regulations 2015 all Related Party Transactionswere placed before the Audit Committee for its approval.

Pursuant to section 134 of the Companies Act 2013 and Rules made thereunderparticulars of transactions with related parties as required under section 188(1) of theCompanies Act 2013 read with Rule 8(2) of Companies (Accounts) Rules 2014 is annexedwith this Report in Form AOC-2 as Rs. Annexure E'.

During the year under review the Board of Directors have revised the existing RelatedParty Transaction policy in line with the recently introduced SEBI (LODR) Regulations2015 and Companies (Meetings of Board and its Powers) Second Amendment Rules 2015.

The policy on related party transactions as approved by the Board is uploaded on theCompany's website. The Company's management ensures total adherence to the approved Policyon Related Party Transactions to establish Arm's Length Basis without any compromise.

Your Directors draw attention to the members to Note No.29 to the financial statementwhich sets out related party disclosures.

Suitable disclosures as required under AS-18 have been made in Note 29 of the Notes tothe financial statements.

Risk Management

Pursuant to the provisions of Section 134(3)(m) of the Companies Act 2013 andRegulation 21 of SEBI (LODR) Regulations 2015 your Company has voluntarily const tuted aRisk Management Committee to formulate a policy for risk management for implementing andmonitoring the risk management plan of the Company. This framework seeks to createtransparency minimize adverse impaction the business objectives and enhance the Company'scompetitive advantage.

Your Company recognizes that the risk is an integral part of business and is committedto managing the risks in proactive and efficient manner. Your Company periodicallyassesses the risks in the internal and external environment along with treating the risksand incorporates risk management plans in its strategy business and operational plans.

The business plan for the future are devised and approved by the Board keeping in mindthe risk factors which can significantly impact the performance of the particularbusiness. All major capital expenditures commitments are subject to scrutiny by the Boardand investments are permitted only on being satisfied about its returns or utility to theCompany. There are no risks which in the opinion of the Board threaten the existence ofthe Company.

Particulars of Employees and Related disclosure

During the financial year 2015-16 none of the employees of the Company are in receiptof remuneration prescribed in terms of the provision of Section 197(12) of the CompaniesAct 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rule 2014. There were 69 permanent employees as on 31st March2016.

Personnel

The relations during the year between the employees and the management of yourCompany contnued to be cordial.

Your Directors wish to thank all the employees for their contnued support andco-operation during the year under review.

Adequacy of Internal Financial Control

The Company has in place adequate internal financial controls with reference tofinancial statements. Periodic audits are undertaken on continuous basis covering all themajor operations. Reports of internal auditors are reviewed by management from time totime and desired actions are initated to strengthen the control and effectiveness of thesystem. During the year such controls were tested and no reportable material weaknessesin the design or operation were observed.

The Internal Financial Control with reference to financial statements as designed andimplemented by the Company are adequate. During the year under review no material orserious observation has been received from the Internal Auditors of the Company forinefficiency of such controls.

Insurance

The Company has taken all the necessary steps to insure its properties and insurableinterests as deemed appropriate and also as required under the various legislativeenactments.

Vigil Mechanism / Whistle Blower Policy

Your Company believes in promoting a fair transparent ethical and professional workenvironment. The Board of Directors of the Company pursuant to the provisions of Section177 of the Companies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulat ons 2015 has framed Rs. Whistle Blower Policy' for Directors and employees ofthe Company for report ng the genuine concerns or grievances or cases of actual orsuspected fraud or violation of the Company's code of conduct and ethics policy. TheWhistle Blower Policy of the Company has been posted on the website of the Company.

Nomination and Remuneration Policy

On recommendation of Nomination and Remuneration Committee the Board of Directors haveapproved a Nomination and Remuneration Policy for the appointment and remuneration of thedirector key managerial personnel (KMP) and other employees. The key objectives of thePolicy are to lay down the criteria for appointment and remuneration of Directors KeyManagerial Personnel and Executives at Senior Management level and recommend to the Boardtheir appointment and also to formulate criteria for evaluation of performance ofIndependent Directors and the Board and to devise a policy on Board diversity. The Policyinter-alia includes criteria for determining qualifications positive attributesindependence of a director and expertise and experience required for appointment ofDirectors KMP and Senior Management.

As per the Policy the remuneration / compensation to the Whole-time Director isrecommended by the Nomination and Remuneration Committee to the Board for its approval.However the remuneration compensation to Whole-time Directors is subject to the approvalof the shareholders of the Company and Central Government wherever required. Further theNon-Executive Directors are entitled to the fees for attending meetings of Board andCommittees within the limits prescribed in the Companies Act 2013. The Nomination andRemuneration Policy is available on the company's website.

Deposits

During the year the Company has not accepted any deposits within the meaning ofSection 73 of the Companies Act 2013 read with the Companies (Acceptance of Deposits)Rules 2014 and as such there are no outstanding deposits in terms of the Companies(Acceptance of Deposits) Rules 2014.

Extract of Annual Return and other disclosures

Pursuant to the provisions of Section 134(3)(a) of the Companies Act 2013 read withRule 8 of Companies (Accounts) Rules 2014 and Rule 12 of Companies (Management andAdministration) Rules 2014 Extract of Annual Return in Form MGT-9 for the financialyear ended 31st March 2016 made under the provisions of Section 92(3) of the Act isattached as Rs. Annexure F' which forms part of this Report.

Report on Corporate Governance

Pursuant to SEBI Listing Regulations 2015 a separate chapter titled Rs. CorporateGovernance' has been included in this Annual Report along with the general shareholdersinformation annexed as Rs. Annexure G'. All Board members and Senior Managementpersonnel have affirmed compliance with the Code of Conduct for the year 2015-16. Adeclaration to this effect signed by the Managing Director (CEO) of the Company iscontained in this Annual Report. The Managing Director and CFO have certified to the Boardwith regard to the financial statements and other matters as required under regulation17(8) of the SEBI Listing Regulations 2015.

As per Regulation 34(3) read with Schedule V(c) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a separate section on corporate governancepractice followed by the Company together with a certificate from the Company's Auditorsconfirming compliance forms an integral part of this Report.

Significant and material orders passed by the regulators or courts

During the year under review there were no significant and material orders passed bythe Regulators or Court or Tribunal which can impact the going concern status of theCompany and its operations in future.

Particulars of Loans Guarantees and Investments

During the year under review your Company has not directly or indirectly -

a) Given any loan to any person or other body corporate other than usual advancesenvisaged in a contract of supply of materials if any;

b) Given any guarantee or provided security in connection with a loan to any other bodycorporate or person; and

c) Acquired by way of subscription purchase or otherwise the securities of any otherbody corporate.

Anti-Sexual Harassment Policy

The Company has in place an AntiSexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. The Company has zero tolerance on Sexual Harassment at workplace. Nocomplaint was received from any employee during the financial year 2015-16 and hence nocomplaint is outstanding as on 31st March 2016 for redressal. Your Company has laid downAntiSexual Harassment policy and it is made available on the website of the Company.

Indian Accounting Standards (IND AS) IFRS Converged Standards

The Ministry of Corporate Affairs vide its notification dated 16/02/2015 has notifiedthe Companies (Indian Accounting Standard) Rules 2015. In pursuance of this notificationthe Company is required to adopt IND AS with effect from 1st April 2017 with thecomparatives for the year ended 31st March 2017.

Green Initiative

Your Directors would like to draw your attention to Section 20 of the Companies Act2013 read with the Companies (Management and Administration) Rules 2014 as may beamended from time to time which permits paperless compliances and also service of notice /documents (including annual report) through electronic mode to its members. To supportthis green initiative we hereby once again appeal to all those members who have notregistered their e-mail addresses so far are requested to register their e-mail address inrespect of electronic holding with their concerned Depository Participants and/or with theCompany.

Indian Economy & Industry Scenario

The Indian economy exhibited significant resilience during the year in contrast to mostother countries China in particular. According to most forecasts India's GDP growth isexpected to be in the region of 7.5% for the year 2015-16. Your Company expects a betteropportunity to grow its volume and improve its capacity utilisation during the currentyear 2016-17.

Textile industry has experienced widespread oversupply in the face of weak demand overlast 5 years. Economy slow down poor monsoon high interest rates have hurt demand justas large new capacities came on-stream. The demand for both cotton and synthetic fabricsremained sluggish throughout the year. The problem has been aggravated due tounprecedented fluctuations in Raw Materials prices consequent to fluctuations ininternational crude oil prices.

The Indian textile sector is a major contributor to the Indian economy in terms ofgross domestic products (GDP) industrial production and the country's total exportearnings. The Indian textile industry is currently passing through a turbulent phase. Withthe global downturn ravaging economies the textile sector is one of the worst hit.

The prospects of synthetic yarn industry in short term is linked with the movement ofcrude oil prices in international market however the long term prospects seems good withthe growing Indian economy and demand growth in end-use products.

In polyester chips the domestic supply has increased and outstrips demand largely.This has put considerable pressure on sale and margins. The raw material prices areexpected to go up and likely to put further pressure on margins. The Company hopes tocounter this effect by improved product mix

Prices of Polyester products declined during the year as buyers turned cautious giventhe slow downstream demand and opted to cut losses by controlling inventory.

Opportunities and Challenges

There are several challenges ahead for the textile industry for enhancing itscompetitive strength and global positioning in terms of inflexible labour laws poorinfrastructure competition from low cost neighboring countries which will have to beaddressed to sustain the growth momentum of the industry.

In the medium term volafility in prices of key raw materials is a major concern. Theindustry is dependention the international price of crude oil which directly impacts theprice of both our key raw materials PTA and MEG. Any crude supply shock could have anadverse impaction the performance of the Company.

Slowing down of Indian economy in general and the lower demand growth may furtherreduce the growth of the industry. Price realisation of PFY is partly dependention cottonyarn prices. If demand of finished products stagnates margins in the Company's producti.e. chips and PFY will be affected given the large capacifies in place. A substantialincrease in the cotton crop and the consequent reduction in cotton yarn prices wouldcurtail growth in the industry.

The Company is facing challenge in terms of higher production cost due to high powercost and other inputs. It is expected that with the better working capital management theCompany would be able to generate better cash flows. The Company perceives threat fromimports and consequent pressure on domestic prices.

The substanfial expansion in production capacity of PFY by the major producers and withthe rationalization of import duty structure the PFY prices are expected to remain underpressure.

Business Outlook:

We expect the business conditions to remain stable for your Company with a moderategrowth in volume in the year 201617. However the world markets are uncertain at presentand majority countries are facing economic issues affecting their growth in the year2016-17.

The key drivers to growth in today's scenario would be higher operating efficiencysustainability customer satisfaction improving capabilities expanding product mix andexploring newer markets. Your Company is making efforts to capture the potential forgrowth in the coming years.

While there are near-term concerns around slowing market growth and inflationarypressures on consumers we are confident of the medium-to-long term growth prospects oftextile sector and remain focused on delivering consistent and competitive growth withsustainable operating margin improvement.

In our opinion in the absence of a severe slowdown in the economy the sluggishnesswould be temporary especially for the POY industry for which the global economicforecast for the next couple of years is healthy.

Your Company is pursuing cost control measures increased productivity improvingefficiencies in manufacturing areas and a thrust in sales and better price realisationwith better product mix. However the performance of the Company would be largelydependention the overall industrial scenario.

Internal Control System and their Adequacy

The Internal Control System provides for well documented policies / guidelinesauthorizations and approval procedures. Considering the nature of its business and size ofoperations your Company through its Internal Auditors carries out periodic audit based onthe plan approved by the Audit Committee.

The summary of the Internal Audit observations and status of implementation aresubmitted to the Audit Committee. The status of implementation of the recommendations isreviewed by the Audit Committee on a regular basis and desired actions are inifiated tostrengthen the control and effecfiveness of the system. Concerns if any are reported tothe Board.

On a periodical basis the Board also engages the services of professional experts inthe said field in order to ensure that adequate financial controls and systems are inplace.

Health safety and environment

Your Company continued its focus in creating an aesthetic environment-friendlyindustrial habitat in its factory units mobilizing support and generating interest amongstaff and labour for maintaining hygienic and green surrounding.

The Company continues to focus on maintenance and performance improvement of relatedpollution control facility at its manufacturing locations. Your Company recognizesprotection and management of environment as one of its highest priority and every effortis made to conserve and protect the environment.

Industrial Relation / Human Resources

Your Company maintained healthy cordial and harmonious industrial relations at alllevels during the year under review.

The Company continuously works to nurture this environment to keep its employees highlymotivated result oriented and adaptable to changing business environment. Your Company'svalue proposition is based on providing value to our customer through innovation and byconsistently improving efficiency at all levels.

Your Directors wish to place on record their appreciation for the dedicated andcommendable services rendered by the employees of the Company. There were 69 permanentemployees as on 31st March 2016.

CAUTIONARY STATEMENTS

Statements in this Directors' Report and Management Discussion and Analysis describingthe Company's objectives projections estimates expectations or predictions may be Rs.forward-looking statements' within the meaning of applicable securities laws andregulations. Actual results could differ materially from those express or implied.Important factors that could make difference to the Company's operations include rawmaterial availability and

its prices cyclical demand and pricing in the Company's principle markets changes inGovernment regulations Tax regimes economic developments within India and the countriesin which the Company conducts business and other ancillary factors.

Appreciation

Your Directors wish to acknowledge the co-operation and assistance extended to theCompany by the Company's Bankers and State & Central Government agencies. YourDirectors also wish to place on record their appreciation of the contribution made byemployees at all levels towards the growth of the Company.

Your Directors also acknowledge with gratitude the support of the shareholders otherinvestors customers dealers agents and suppliers for their continued faith and supportin the Company and its management.

For and on behalf of the Board of Directors
M. R. Momaya
Managing Director
Surat 25th May 2016 DIN :00023993