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Suryalakshmi Cotton Mills Ltd.

BSE: 521200 Sector: Industrials
NSE: SURYALAXMI ISIN Code: INE713B01026
BSE LIVE 15:40 | 17 Aug 100.25 -1.45
(-1.43%)
OPEN

102.80

HIGH

102.80

LOW

99.85

NSE 15:58 | 17 Aug 100.00 -1.40
(-1.38%)
OPEN

101.00

HIGH

101.95

LOW

99.35

OPEN 102.80
PREVIOUS CLOSE 101.70
VOLUME 8838
52-Week high 151.70
52-Week low 95.65
P/E 8.17
Mkt Cap.(Rs cr) 167
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 102.80
CLOSE 101.70
VOLUME 8838
52-Week high 151.70
52-Week low 95.65
P/E 8.17
Mkt Cap.(Rs cr) 167
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Suryalakshmi Cotton Mills Ltd. (SURYALAXMI) - Director Report

Company director report

To

The Members

Your Directors are pleased to present their Fifty Third Annual Report on the businessand operations of the Company and the financial results for the year ended 31st March2016.

Financial Results

Particulars 2015-2016 2014-2015
Gross Profit before Interest & Depreciation 11051.98 8389.98
Less : Interest 3431.36 3367.15
: Depreciation &Amortisation expense 3132.07 3179.59
6563.43 6546.74
Profit/(Loss) before prior year Adjustment 4488.55 1843.24
Exceptional Items * (44.40) (12.07)
Profit before tax for the year 4444.15 1831.17
LESS : Provision for Income Tax for the year 949.00 382.00
LESS : Deferred tax liability 490.00 232.36
Profit/(Loss) after tax 3005.15 1216.81
ADD : Profit brought forward from last year 9055.62 8595.67
LESS : Carrying value of Assets whose useful life achieved - 366.77
TOTAL 12060.77 9445.71
Dividend on Preference Share Capital 60.00 40.96
Dividend on Equity Share Capital 300.10 200.07
Corporate Dividend Tax 73.31 49.06
Transferred to General Reserve 350.00 100.00
Profit transferred to Balance Sheet 11277.36 9055.62
TOTAL 12060.77 9445.71

• Exceptional item of the current year includes Workers Agreement Arrears(Expenses) of H (7.80) Lakhs & Gram Panchayat Tax of H (36.60) Lakhs.

Operations

The year 2015-16 was another year of significant achievements for the Company. TheCompany showcased its operational excellence with strong bottom line performance. The netsales for the year ended 31st March 2016 stood at H760 Crores registering a growth of 8%over the previous year. However the net profit after tax surged by more than 146% ascompared to previous year. This was primarily due to two reasons: 1) Higher per unitrealisations and 2) Enhanced operational efficiencies.

During the year the Company's new spinning unit at Amravati got commercialized towardsend of the first half. The production of value-added fancy yarns from this unit is alreadyunder captive consumption for production of denim fabric at our Denim division. Ourproduction of denim fabric also increased by 11%. The operations of the power division arealso satisfactory with the Amravati unit also drawing power from the Company's captivepower plant.

While our fabric and garment divisions posted higher realisations the realization fromthe yarn division has been subdued (both in domestic and export markets) by around 9%. Thesales of Denim division increased by 11% and our per meter Denim fabric realizationimproved to H153.06 from H142.34 achieved in the previous year. Our focus on expanding thequantum of exports had started yielding results as our fabric exports nearly doubled fromH64 crs. to H125 crs in 2015-16. The garment realization in both domestic and exportsmarket have been higher increasing by around 14%. Our external (third party) power saleshave also improved despite the rate per unit being lower.

On the input costs side the raw material prices have been favourable except in ViscoseStaple Fibre. Cotton prices have been cheaper by around 9% while coal was available atbase price but at slightly better prices than last year.

Dividend

The Directors are pleased to recommend a Dividend of 18% i.e. H1.80 per share (previousyear H1.20 per share).

Capital Expenditure

During the year under review the Company incurred capital expenditure of H108.28Crores.

Exports

Exports registered a healthy growth of 68% to H139 Crores up from H83 Crores inprevious year. Denim Exports have shown handsome gains in volume terms.

Continuing our focus on the export markets we efficiently retained our existingbusiness & at the same time diligently worked towards entering new markets andacquiring new customers.

This year we have successfully ventured into new markets like Iran China Hong Kongetc. and have also managed to get business from new key customers like One Jeans NextSainsbury and Matalan.

For us product development & innovation has been a key driver to boost exportbusiness. We have increased the strength of our product development team and brought inexperienced as well as new talented people. This product development team is now led by anItalian Designer. We have introduced host of new fabrics finishes & concepts in thisyear. Some of the new products developed are prints recycle yarn peach finishes waterrepellent finishes fleece denim etc. We have launched a complete range of Invista dual fx& Lycra beauty fabrics which has been well accepted by our customers.

In order to reach out to different customers we have been showcasing our collectionsat various international exhibitions and trade fairs likeKingpins Show (New York USA)ColombiaTex Colombia Iran Tex (Tehran Iran) and Denim and Jeans show Bangladesh Dhaka.

Future Outlook

As per market reports and current trends denim industry is expected to grow at a veryhealthy pace in the near future. Understanding the core competencies that the Companypossesses it has plans to expand its capacities in denim and garment facilities in theimmediate future. This shall be complimented by strategic investments in R&D enablingit to understand the latest fast fashion trends in collaboration with leading designersfrom Europe and Asia. This would help the Company climb-up the value-chain ensure abetter customer experience and strengthen its market leadership. The Company intends tofurther penetrate into niche products segment and increase its exports. With higheroperating efficiencies and further upgradation of Amanagallu and Ramtek units the companylooks forward to another stellar performance in the coming fiscal.

Directors

Smt. Padmini Agarwal (DIN:01652449) will retire at the ensuing Annual General Meetingand being eligible offers herself for reappointment.

During the year Sri A. Mallikarjun (DIN : 02599532) has been appointed as NomineeDirector by IDBI in the place of Smt. Sharada Sundaram (DIN: 07067040). The Board wishesto place on record its appreciation for the valuable services rendered by Smt. SharadaSundaram.

The tenure of Sri H.L.Ralhan (DIN : 00018362) as Director & Chief Executive (DenimDivision) comes to an end on 29th January 2016 and has been reappointed as Director &Chief Executive (Denim Division) liable to retire by rotation for a period of five yearsby the Board subject to the approval of the members in the ensuing General Meeting

In accordance with the provisions of the Companies Act 2013 and SEBI guidelines SriDhruv Vijai Singh (DIN : 07180749) and Dr.G.Vivekanand (DIN: 00011684) who retire byrotation in this meeting are being appointed as Independent Directors for a term of 5years who shall not be liable to retire by rotation under the provisions of the CompaniesAct 2013 and the relevant rules thereunder.

The above Independent Directors have submitted the Declaration of Independence asrequired pursuant to section 149 (7) of the Companies Act 2013 stating that they meetthe criteria of independence as provided in sub-section (6). The profile of theIndependent Directors forms part of the Corporate Governance Report.

Further details about the above Directors are given in the Corporate Governance Reportas well as in the Notice of the ensuing Annual General Meeting being sent to theshareholders along with the Annual Report.

Evaluation Of The Board's Performance

In compliance with the Companies Act 2013 and as per the latest Listing Regulationsthe performance evaluation of the Board and of its Committees was carried out during theyear under review. More details on the same are given in the Corporate Governance Report.

Familiarization Program For Independent Directors

The Company has formulated a familiarization program for the Independent Directors toprovide insights into the Company to enable the Independent Directors to understand itsbusiness in depth and contribute significantly to the Company. The details of such programare available in the Company's website www. suryalakshmi.com

Nomination & Remuneration Policy

The company follows a policy on remuneration of Directors and Senior ManagementEmployees. The policy is approved by the Nomination & Remuneration Committee and theBoard. More details on the same is given in the Corporate Governance Report.

Directors' Responsibility Statement

Your Directors state that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed along with proper explanation relating to material departures;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgements 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 and loss of the Company for that period;

(c) the Directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) the Directors had prepared the annual accounts on a going concern basis; and

(e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively.

(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

Disclosures Under The Companies Act 2013

i) Extract of Annual Return:

The details forming part of the extract of the annual return is enclosed in Annexure -1.

ii) Number of Board Meetings:

The Board of Directors met four times during the year 20152016. The details of theboard meetings and the attendance of the Directors are provided in the CorporateGovernance Report.

iii) Changes in Share Capital:

There is no change in the share capital.

iv) Composition of Audit Committee:

The Board has constituted the Audit Committee which comprises of Sri R.Surender Reddyas the Chairman and Sri R.S.Agarwal Sri Navrang Lal Tibrewal and Sri A.Mallikarjun as themembers. More details on the committee are given in the Corporate Governance Report.

v) Related Party Transactions:

All the related party transactions are entered on arm's length basis and are incompliance with the applicable provisions of the Act and the Listing Regulations.

There are no materially significant related party transactions made by the company withPromoters Directors or Key Managerial Personnel etc. which may have potential conflictwith the interest of the company at large. Thus disclosure in Form AOC-2 is not required.

All Related Party Transactions are presented to the Audit Committee and the Board.Omnibus approval is obtained for the transactions which are foreseeable and repetitive innature. A statement of all related party transactions is presented before the AuditCommittee on a quarterly basis specifying the nature value and terms and conditions ofthe transactions.The Related Party Transactions Policy as approved by the Board isuploaded on the company's website at the web link:

http://www.suryalakshmi.com/policyonrelated.html

vi) No Loans/Guarantees / Investments under Section 186 of the Companies Act 2013have been made during the year.

Corporate Governance

As per the latest Listing Regulations on Corporate Governance Management Discussionand Analysis Report forms part of the Annual Report (Annexure - 6).

The company has complied with the corporate governance requirements under the CompaniesAct 2013 and as stipulated under the Listing Regulations. A separate section on corporategovernance under the Listing Regulations along with a certificate from the auditorsconfirming the compliance is annexed and forms part of the Annual Report (Annexure - 2).

Corporate Social Responsibility Policy

At Suryalakshmi a major concern has been the sincere effort by the Company torecognize the role played by the Society at large the environment and its human resourcesin its sustainability and growth and to strive to discharge its social responsility as acorporate citizen. To this end the Company has always tried to strike a fine balance ofeconomic environmental and social commitments.

The sustainable stewardship mantra is not limited to philanthropy but encompassesholistic community development and other initiatives to strengthen businesssustainability.

The core areas for Suryalakshmi's Corporate Social Responsibility (CSR) Programmes forthis year have been health care environment and education. Details of the projects /activities implemented by the Company are furnished in a separate Annexure-3 to thisreport.

The Company constituted a Committee of CSR consisting of Sri L.N.Agarwal Sri ParitoshK. Agarwal and Sri R.Surender Reddy with Sri L.N.Agarwal as Chairman.

The Company could not spend the planned amounts on the CSR activities in view ofcertain pending approvals from the local authorities. Steps are being taken to obtain thesame at the earliest and complete the commitments.

Risk Management

The Company has instituted a proper mechanism for identifying and establishing controlsto effectively manage different kinds of risks viz. Trend Related Risks Raw MaterialRisks Brand / Technology Risks Operational Quality Risks Quality Risks Human ResourcesRisks Regulatory Risks and Financial Risks.

A Committee headed by Sri Paritosh Agarwal Managing Director periodically reviews therisks and take steps to mitigate identified risks.

Whistle Blower Policy

The Company has in place a Whistle Blower policy for vigil mechanism for Directors andemployees to report to the management about unethical behavior fraud violation ofCompany's Code of Conduct. None of the Personnel has been denied access to the auditcommittee.

Declaration About Compliance With The Code Of Conduct By Members Of The Board And Sr.Management Personnel.

The Company has complied with the requirements about Code of Conduct for Board membersand Sr. Management Personnel.

Disclosure Under The Sexual Harassment Of Woman At Workplace (Prevention ProhibitionAnd Redressal) Act 2013.

The Company has in place an Anti Sexual Harrasment Policy in line with the requirementsof the Sexual Harrassment of Woman at Workplace (Prevention Prohibition and Redressal)Act 2013. Internal Complaints Committee has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary and trained)are covered under the Policy.

The following is a summary of sexual harassment complaints received and disposed offduring each Calender year:

a) No. of Complaints received - NIL

b) No. of Complaints disposed off - NIL

Auditors

The Auditors M/s. Brahmayya & Co retire at the ensuing Annual General Meeting andare eligible for reappointment.

I. Auditors And Their Report:-

M/s.Brahmayya & Co. Chartered Accountants (ICAI Firm Registration No.000513S) theStatutory Auditors of the company will hold office until the conclusion of the ensuingAnnual General Meeting and are eligible for re-appointment as per Section 139 of theCompanies Act 2013.

M/s.Brahmayya & Co. have expressed their willingness to get reappointed as theStatutory Auditors of the company and furnished the certificate of their eligibility andconsent for the same under Section 141 of the Companies Act 2013 and the rules framedthereunder. In terms of the Listing Regulations the Auditors have confirmed that theyhold a valid certificate issued by the Peer Review Board of the ICAI. The Board based onthe recommendation of the Audit Committee recommends the appointment of M/s. Brahmayya& Company as the Statutory Auditors of the company.

The Auditors' Report to the Shareholders for the year under review does not contain anyqualification.

II. Cost Auditor And Cost Audit Report

Pursuant to section 148 of the Companies Act 2013 the Board of Directors on therecommendation of the Audit Committee appointed Ms.Aruna Prasad Cost Accountant (M.No.11816) as the Cost Auditors of the Company for the FY 16-17 and has recommended herremuneration to the Shareholders for their ratification at the ensuing Annual GeneralMeeting. Ms.Aruna Prasad has confirmed that her appointment is within the prescribedlimits and also certified that they are free from any disqualifications.

III. Secretarial Auditor And Secretarial Audit Report

The Board had appointed Mr.K.V.Chalama Reddy Company Secretary (M.No. 13951) inWhole-time Practice to carry out Secretarial Audit under the provisions of Section 204 ofthe Companies Act 2013 for the financial year 2016-17. The report of the SecretarialAuditor is annexed to this report as Annexure -4.

Conservation Of Energy Technology Absorption Foreign Exchange Earnings And Outgo

Information on conservation of energy technology absorption foreign exchange earningsand out go is required to be given pursuant to provision of Section 134 of the CompaniesAct 2013 read with the Companies (Accounts) Rules 2014 is annexed here to markedAnnexure 5 and forms part of this report.

Deposits

The Company has not accepted any deposits from the public during the year under review.

Employees

Periodic Training programmes for developing a skilled workforce personalitydevelopment programmes yoga camps etc. encouragement of employee participation indistrict / state level sports events are regularly undertaken.

An integrated woman focused program trains unskilled women to undertake skilled jobs atits units.

The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of theemployees of the Company will be provided upon request. In terms of Section 136 of theAct the Report and Accounts are being sent to the members and others entitled theretoexcluding the information on employees' particulars which is available for inspection bythe members at the Registered Office of the Company during business hours on working daysof the Company upto the date of the ensuing Annual General Meeting. If any member isinterested in obtaining a copy thereof such member may write to the Company Secretary inthis regard.

Acknowledgements

The Board of Directors are pleased to place on record their appreci-ation of thecooperation and support extended by All India Financial Institutions Banks and variousState and Central Government Agencies.

The Board also wishes to place on record its appreciation of the valuable servicesrendered by the employees of the Company.

for and on behalf of the Board
Date : 25th May 2016 L.N.Agarwal
Place : Secunderabad Chairman & Managing Director