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Surat Textile Mills Ltd.

BSE: 530185 Sector: Industrials
NSE: N.A. ISIN Code: INE936A01025
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VOLUME 40969
52-Week high 9.05
52-Week low 3.11
P/E 5.63
Mkt Cap.(Rs cr) 89
Buy Price 3.88
Buy Qty 4845.00
Sell Price 4.00
Sell Qty 9730.00
OPEN 4.18
CLOSE 3.99
VOLUME 40969
52-Week high 9.05
52-Week low 3.11
P/E 5.63
Mkt Cap.(Rs cr) 89
Buy Price 3.88
Buy Qty 4845.00
Sell Price 4.00
Sell Qty 9730.00

Surat Textile Mills Ltd. (SURATTEXTILE) - Director Report

Company director report

Dear Members

The Board of Directors hereby submit the report of the business and operations of yourCompany along with the audited financial statements for the year ended 31st March 2017.The Management Discussion and Analysis is also included in this Report.

Nature of Business

The Company is engaged in the business of manufacturing Polyester Chips and PartiallyOriented Yarn (POY). During the year under review there was no change in the nature ofbusiness of the Company.

Summarised Financial Results

(Rs. in Crore)

2016-17 2015-16
Net Sales / Income from Operations 138.72 117.22
Earnings Before Interest Tax and 15.63 6.50
Depreciation (EBITDA)
Less: Finance Costs 0.39 0.74
Depreciation 0.79 1.16
Profit before Tax 14.45 4.60
Less: Tax Expense /(Credit) (2.17) (1.53)
Profit after Tax 16.62 6.13

Review of Operations

At a standalone level net revenue from operations of your Company for the year 2016-17increased by about 18% at Rs.138.72 Crore as compared to Rs.117.22 Crore in the previousyear primarily on increase in sales volume and improved net sales realisation. EarningsBefore Interest Tax and Depreciation (EBITDA) was higher at Rs.15.63 Crore as compared toRs.6.50 Crore in the previous year.

Despite challenging business environment your Company's total sale of chips was higherat 18817 MT for the year 2016-17 as compared to 16094 MT in the previous year. In valueterms gross sale of chips was higher at Rs.156.14 Crore as compared to Rs. 128.61 Crorein the previous year.

The overall production of Chips during the year 2016-17 was higher at 18577 MT ascompared to 16427 MT achieved in the previous year.

Our focus on operational efficiency with better working capital management and betternetwork helped us to remain competitive and improve our bottom line.

During the year under review your Company continued its focus on margin improvement byoptimum allocation of its resources through cost reduction at manufacturing level. Theoperating margins however remained under pressure.

Your Company continued its efforts to reduce and optimise energy consumption at alllevels.

The manufacturing activity at its polyester spinning division plant at Village JolwaTaluka Palsana Dist. Surat remained suspended during the major part of the financial year2016-17 however with the improvement in the demand for polyester yarn the productionresumed from May 2017.

Dividend and Reserves

In order to strengthen the reserves of the your directors consider it prudent toplough back the profits and not to recommend any dividend for the financial year 2016-17.

During the year under review no amount from profit was transferred to General Reserve.

Going Concern Status

During the year under review there were no significant or material orders passed byregulators or court or tribunal which can impact the going concern status of the Companyand/or its future operations.

Industry Scenario

India's textiles sector is one of the oldest industries in Indian economy dating backseveral centuries. Even today textiles sector is one of the largest contributors toIndia's export. The textiles industry is also labour intensive and is one of the largestemployers.

India accounts for ~14% of the world's production of textile fibres and yarns (largestproducer of jute second largest producer of silk cotton and polyester and third largestin cellulosic fibre). India has the highest loom capacity (including hand looms) with 63per cent of the world's market share.

The Indian textiles industry currently estimated at around US$ 108 billion isexpected to reach US$ 223 billion by 2021. The industry is the second largest employerafter agriculture providing employment to over 45 million people directly contributes to10 per cent of manufacturing production 2 per cent of India's GDP and 13 per cent of thecountry's export earnings.

The domestic textile and apparel industry in India is estimated to reach US$ 141billion by 2021 from US$ 67 billion in 2014. Increased penetration of organised retailfavourable demographics and rising income levels are likely to drive demand for textiles.India is the world's second largest exporter of textiles and clothing.

Overview of the economy

Economic performance across emerging market and developing economies has remainedmixed. Whereas China's growth remained strong reflecting continued policy supportactivity has slowed in India because of the impact of the demonetization as well as inBrazil which has been mired in a deep recession. Activity remained weak in fuel andnonfuel commodity exporters more generally while geopolitical factors held back growth inparts of the Middle East and Turkey.

The last few years have also witnessed a slowdown in global trade and investmentsflows. Although India has not been particularly affected by this slowdown lower growthin foreign portfolio investment cannot be ruled out partly on account of the fact thatthe interest rates in the United States have begun to increase.

The Economic Survey 2016-17 (January 2017) forecasts a growth rate of 6.75 to 7.5 percent for FY 18 as compared to the expected growth rate of 6.5 per cent in FY 17. Over themedium run the implementation of the Goods and Service Tax (GST) and enacting otherstructural reforms should take the economy towards its potential real GDP growth of 8%.

India remains the world's fastest – growing major economy and looks set forfurther expansion over the next five years. India grew by approximately 7.5 per cent in2016 continuing a 3 years streak of growth above 7 per cent. Some of this strength is dueto a favourable external environment (for example lower prices for imported commoditieslike oil) with India's current account deficit falling to a seven – year low of $300 million. Indian inflation has also dropped closer to the Reserve Bank of India'starget of 4 per cent.

The timely action by the government of demonetisation resulted in pumping more money tothe banking sector has resulted in appreciation of the Rupee. In spite of lot ofchallenges faced in international scenario in terms of trade and the policy changes ofmany countries India is still in a position to retain the stability of the currency thisshows that the Economy is becoming stronger and vibrant to take the challenges whatevermay come in future.

A comprehensive tax reform would promote inclusive growth. Timely and effectiveimplementation of the Goods and Services Tax would support competitiveness investment andeconomic growth. Government's plans to reduce the corporate income tax rate and broadenthe base will serve the same objectives. These two ongoing reforms have been designed tobe revenue-neutral while India needs to raise additional tax revenue to meet social andphysical infrastructure needs.

Opportunities Challenges Threats Risks and Concerns

An economic slowdown- both domestic and global – may have adverse effect on thegrowth of the PFY industry. Raw material prices fluctuate in line with internationalprices and will continue to have an impact on the company's performance as raw materialsconstitute significant component of net sales. Increased differentiated products as wellas a reduced working capital facility will help reduce risks.

Government has also passed a national goods-and-service tax (GST) that will create acommon market in the country and is expected to increase economic growth in the mediumterm. These and other efforts to liberalise the economy and reduce burdensome taxes andregulations will likely lead to increased investment by both domestic and foreign firmsand make Indian industry more competitive.

But India still faces a number of challenges that may negatively impact its growthoutlook.

High incidence of taxes and duties is a matter of concern for the industry.

The Company is exposed to the risk of price fluctuation of raw materials as well asfinished goods. The Company proactively manages these risks through inventory managementand a proactive relationship with suppliers and customers.

Indian textile industry is a less attractive destination for investments due to thetariff barriers it faces in major international markets high input costs low marginsetc. In order to achieve the desired growth in our textile and apparel industries it isimperative to get large scale investment both foreign and domestic.

Business Outlook

The outlook for the domestic textile industry over the medium term is stable supportedby favourable demand both domestically and internationally.

Domestic manufacturers of polyester yarn and chips have invested significantly inrecent years in new capacities however with uncertain inputs price trends the industryis now looking to consolidate operations by optimally utilising installed capacities.

The implementation of Goods and Services Tax (GST) to replace a myriad of consumptiontaxes could be a game-changer over the medium-term: it will help make India a commonmarket and promote investment productivity and competitiveness.

The future for the Indian textile industry looks promising buoyed by both strongdomestic consumption as well as export demand.

The Goods and Service Tax (GST) and Demonetisation

The GST will replace various taxes on goods and services levied by the centralgovernment and states by a single tax on value added. It will thus reduce tax cascadingfacilitate a common national market encourage voluntary tax compliance reduced taxcollection costs support investment and improve competitiveness.

The two largest denomination notes Rs 500 and Rs 1000—together comprising 86 percent of all the cash in circulation—were "demonetised" with immediateeffect ceasing to be legal tender except for a few specified purposes on November 82016.

Demonetisation has had short-term costs in the form of slow growth but holds thepotential for long-term benefits. Long-term benefits include reduced corruption greaterdigitalisation of the economy increased flows of financial savings and greaterformalisation of the economy all of which could eventually lead to higher GDP growthbetter tax compliance and greater tax revenues.

Share Capital

The Paid-up Equity Share Capital of the Company as at 31st March 2017 stood atRs.2220.64 Lacs. There was no public issue rights issue bonus issue or preferentialissue etc. during the year. The Company has not issued shares with differential votingrights sweat equity shares nor has it granted stock options. As on 31st March 2017none of the directors of the Company hold instruments convertible into equity shares ofthe 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.

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.

Indian Accounting Standards (IND AS) IFRS Converged Standards

The Ministry of Corporate Affairs (MCA) vide its notification in the Official Gazettedated 16th February 2015 notified the Indian Accounting Standards (Ind AS) applicable tocertain classes of Companies. Ind AS has replaced the existing Indian GAAP prescribedunder Section 133 of the Companies Act 2013 read with Rule 7 of the Companies (Accounts)Rules 2014. For your Company Ind AS is applicable from 1st April 2017 with atransition date of 1st April 2016.

Subsidiaries and associates

During the year the Board of Directors reviewed the affairs of its associate IshaEnterprises a partnership firm. In accordance with Section 129(3) of the Companies Act2013 we have prepared the Consolidated Financial Statement of the Company which formspart of this Annual Report.

Pursuant to Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 a statement containing salient features of the financialstatements of Subsidiaries / associates is given in Form AOC-1 and forms an integral partof this Report marked as Annexure E.

Consolidated Financial Statements

The Company has prepared Consolidated Financial Statements (CFS) in accordance with theapplicable Accounting Standards as prescribed under the Companies (Accounts) Rules 2014of the Companies Act 2013. The Consolidated Financial Results reflects the results of theCompany and its associate. As required under Regulation 34 of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Audited CFS together withthe Independent Auditors' Report thereon are annexed and forms part of this Report.

The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is not applicable toyour Company for the financial year ended 31st March 2017.

Finance

Your Company has repaid Secured Rupee Term Loan from banks to the tune of Rs.39.06 Lacsduring the financial year 2016-17. No fresh Term Loan was availed by the Company duringthe year. The Company availed working capital facility from Bank of Baroda during theyear.

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 Yogesh C. Papaiya (DIN: 00023985) Directorretires by rotation at the forthcoming Annual General Meeting and being eligible offershimself for re-appointment. The Board recommends his re-appointment for the considerationof the Members of the Company at the ensuing Annual General Meeting.

Shri Sanjay S. ShahDirector of the Company submitted his resignation as member of theBoard with effect from 1st July 2016. While accepting Shri Sanjay S. Shah's resignationthe Members of the Board placed on record their sincere appreciation of the valuableservices rendered by him during his tenure as a Director of the Company.

Shri M. R. Momaya Managing Director Shri Yogesh C. Papaiya Wholetime Director andCFO and Ms. Hanisha Arora Company Secretary and Compliance Officer were designated as"Key Managerial Personnel" of the Company pursuant to Section 2(51) and Section203 of the 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.

Managerial Remuneration

Disclosures of the ratio 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 in Annexure C.

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

Report on Corporate Governance

All Board members and Senior Management personnel have affirmed compliance with theCode of Conduct for the year 2016-17. A declaration to this effect signed by the ManagingDirector (CEO) of the Company is contained in this Annual Report. The Managing Directorand CFO have certified to the Board with regard to the financial statements and othermatters as required under regulation 17(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 as Annexure H. Theauditors certificate for the year 2016-17 does not contain any qualification reservationor adverse remark.

Audit Committee

The Audit Committee of Directors comprises of Shri Harishchandra Bharucha (Chairman ofthe Committee) Shri Ketan Jariwala and Shri Yogesh Papaiya as member of the Committee.All the recommendations made by the Audit Committee during the year were accepted by theBoard of Directors of the Company. The terms of reference and other details of the AuditCommittee are available in the Corporate Governance Report forming part of this annualreport.

Risk Management

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.

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.

Statutory Auditors & Audit Report

Messrs. Natvarlal Vepari & Co. Chartered Accountants were appointed Auditors fora period of 3 (three) years from the conclusion of the 68th Annual General Meeting (AGM)till the conclusion of the 71st AGM. As such Messrs Natvarlal Vepari & Co. retire atthe conclusion of the 71st AGM.

Under Section 139 of the Companies Act 2013 and the Rules made thereunder it ismandatory to rotate the statutory auditors on completion of the maximum term permittedunder the said Section. The audit committee of the Company has proposed and on 29th May2017 the Board of Directors of the Company has recommended the appointment of Sharp &Tannan Associates Chartered Accountants (Firm registration number 109983W) as thestatutory auditors of the Company. Sharp & Tannan Associates will hold office for aperiod of 5 (five) consecutive years from the conclusion of the 71st Annual GeneralMeeting of the Company scheduled to be held on 2nd August 2017 till the conclusion ofthe 76th Annual General Meeting to be held in the year 2022 subject to the approval ofthe shareholders of the Company.

The auditors' report for the year ended 31st March 2017 does not contain anyqualification reservation or adverse remark. The Auditors' Report is enclosed with thefinancial statements in this Annual Report.

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 000012) as Cost Auditors to audit the cost accountsof the Company for the Financial Year 2017-18.

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 Board hasappointed Jigar Vyas of Jigar Vyas & Associates Practicing Company Secretaries (CPNo.8019) Surat as secretarial auditor of the Company for the year 2017-18.

The Secretarial Auditors' Report for the year 2016-17 does not contain anyqualification reservation or adverse remark. The Secretarial Auditors' Report is enclosedas Annexure D to the Board's report in this Annual Report.

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 2017-18.

The audit committee of the Board of Directors in consultation with the Internal Auditorformulates the scope functioning periodicity and methodology for conducting the internalaudit.

Committees of the Board

The Board of Directors has the following Committees:

1. Audit Committee

2. Remuneration and Nomination Committee

3. Stakeholders' Relationship Committee

4. Corporate Social Responsibility Committee

The details of the committees along with their composition number of meetings andattendance at the meetings are provided in the Corporate Governance Report.

Directors' Responsibility Statement

The Board of Directors acknowledge the responsibility for ensuring compliance with theprovisions of Section 134(3)(c) read with Section 134(5) of the Companies Act 2013 in thepreparation of the annual accounts for the year ended on 31st March 2017 and state that:

a) in the preparation of the annual accounts applicable accounting standards read withrequirements set out under Schedule III to the Act have been followed along with properexplanation relating to material departures;

b) the directors have 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 at the end of the Financial Year and ofthe profit of the Company for that period; c) the directors have taken proper andsufficient care towards maintenance of adequate accounting records in accordance with theprovisions of this Act for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;

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

e) the directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.

Number of meetings of the Board

During the year 6 Board Meetings were convened and held. The details thereof are givenin the Corporate Governance Report. The Directors actively participated in the meetingsand contributed valuable inputs on the matters brought before the Board of Directors fromtime to time. The intervening gap between the Meetings was within the period prescribedunder 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 8th February 2017 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

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 2015and there is no change in their status of independence. As required under Section 149(7)of the Companies Act 2013 the said declaration was placed in the Board Meeting held on29th May 2017.

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.

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 and office. The Company supports and contributes in activities relating to promotionof education sports medical and healthcare vocational skill development and livelihoodenhancement and programmes and activities relating to environment sustainability etc. Thedetails of amount spent on 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.surattextilemillsltd.com.

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 initiated 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.

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 2016-17 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 Annexure F.

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.

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

Particulars of Employees and Related disclosure

During the financial year 2016-17 none of the employee of the Company was 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 67 permanent employees as on 31st March2017.

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(3) of the Companies (Accounts) Rules 2014 in respect ofConservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo are setout in the Annexure A forming part of this Report.

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)Regulations 2015 has framed ‘Whistle Blower Policy' for Directors and employees ofthe Company for reporting 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 the Policy are to lay down the criteria for appointment andremuneration of Directors Key Managerial Personnel and Executives at Senior Managementlevel and recommend to the Board their appointment and also to formulate criteria forevaluation of performance of Independent Directors and the Board and to devise a policy onBoard diversity.

The Policy inter-alia includes criteria for determining qualifications positiveattributes independence of a director and expertise and experience required forappointment of Directors KMP and Senior Management.

As per the Policy the remuneration / compensation to the Whole-time Directors shall berecommended by the Nomination and Remuneration Committee to the Board for its approval.However the remuneration compensation to Whole-time Directors shall be subject to theapproval of the shareholders of the Company and Central Government wherever required.Further the Non-Executive Directors shall be entitled to the fees for attending meetingsof Board and Committees within the limits prescribed in the Companies Act 2013. TheNomination and Remuneration 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 2017 made under the provisions of Section 92(3) of the Act isattached as Annexure G which forms part of this Report.

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 Anti Sexual 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. No complaint wasreceived from any employee during the financial year 2016-17 and hence no complaint isoutstanding as on 31st March 2017 for redressal. Your Company has laid down Anti SexualHarassment policy and it is made available on the website of the Company.

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.

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 initiated tostrengthen the control and effectiveness of the system. Concerns if any are reported tothe Board.

Financial Performance

Discussion on financial performance with preference to operational performance has beendealt with in this Report in the relevant para which may be treated as forming part of theManagement Discussion and Analysis Report.

Health safety and environment

Your Company recognizes protection and management of environment as one of its highestpriority and every effort is made to conserve and protect the environment. During theyear 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 obtained necessary approvals from concerned Government Department /Pollution Control Board and all required environment clearances / safety clearances /stipulations are complied with at Plant facilities of the Company. The Company continuesto focus on maintenance and performance improvement of related pollution control facilityat its manufacturing locations.

Industrial Relations / 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.

CAUTONARY STATEMENTS

Statements in this Directors' Report and Management Discussion and Analysis describingthe Company's objectives projections estimates expectations or predictions may be‘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'sprinciple markets changes in Government regulations Tax regimes economic developmentswithin India and the countries in which the Company conducts business and other ancillaryfactors.

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 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
M. R. Momaya
Surat 29th May 2017 Managing Director

Annexure – A TO THE DIRECTORS' REPORT

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The information under Section 134(3)(m) of the Companies Act 2013 read with Rule 8 (3)of the Companies (Accounts) Rules 2014 for the year ended March 31 2016 is given belowand forms part of the Directors' Report.

A. CONSERVATION OF ENERGY

I. Steps taken or impact on conservation of energy.

- The Company makes an ongoing study to identify and implement energy saving system toreduce energy consumption and cost of production.

- Energy conservation is an ongoing process in our organisation. Continuous monitoringplanning development and modifications for energy conservation are done at the plants.

- The Company continued efforts for improving energy efficiency through innovativemeasures to reduce wastage and optimize consumption.

- Replacement of inefficient motors with energy efficient motors.

- Energy Audit is also being carried out by external agencies.

- Maintenance of the machines as per schedule.

II. The steps taken by the company for utilising alternate sources of energy.

The Company is exploring options for utilizing alternate sources of energy in order toreduce the electricity cost with consequent reduction in the cost of production.

III. The Capital investment on energy conservation equipment.

The Company has not incurred major capital investment on energy conservation equipmentsbut focused on optimum utilisation of available resources.

B. TECHNOLOGY ABSORPTION

I. The efforts made by the Company towards technology absorption

The Company made required efforts for productivity enhancement and development of newproducts in polyester chips segment.

II. The benefits derived like product improvement cost reduction product developmentor import substitution.

The Company was able to reduce maintenance and operating cost at manufacturing levelmore particularly the conversion cost in chips segment. There was an improvement inquality customer satisfaction and enlargement of market base.

III. In case of imported technology (imported during the last three years reckoned fromthe beginning of the financial year) – NOT APPLICABLE.

IV. The expenditure incurred on Research and Development.

During the year under review there were no major expenses pertaining to Research andDevelopment incurred by the Company.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

Particulars 2016-17 2015-16
Foreign Exchange Earned Nil Nil
Foreign Exchange Used Nil Nil