Arvind Fashions Limited.
Your Directors are pleased to present the Directors Report of theCompany together with the audited accounts for the financial year ended March 31 2021.
1. Financial Highlights
The Company's financial performances for the year under reviewalong with previous year's figures are given hereunder:
| || || || ||[ Rs.in Crores] |
|Particulars ||Standalone ||Consolidated |
| ||2020-21 ||2019-20 ||2020-21 ||2019-20 |
|Revenue from operations (Net) ||298.30 ||854.11 ||2201.18 ||3613.57 |
|Profit/(Loss) Before Interest Depreciation Tax & Exceptional Items ||35.01 ||62.29 ||121.33 ||317.57 |
|Less: Finance Cost ||31.43 ||37.32 ||224.90 ||273.55 |
|Profit/(Loss) Before Depreciation Tax & Exceptional Items ||3.58 ||24.97 ||-103.57 ||44.02 |
|Less: Depreciation/Amortization ||17.54 ||13.04 ||302.69 ||420.66 |
|Profit/(Loss) before exceptional items & tax ||-13.96 ||11.93 ||-406.26 ||-376.64 |
|Less: Exceptional items ||45.73 ||19.26 ||45.2 ||60.69 |
|Profit/(Loss) before tax ||-59.69 ||-7.33 ||-451.46 ||-437.33 |
|Less: Current tax/Deferred tax ||-0.28 ||-2.44 ||41.86 ||-77.43 |
|Profit/(Loss) after Tax from Continuing Operations ||-59.41 ||-4.89 ||-493.32 ||-359.90 |
|Profit/(Loss) Before Tax for the period from Discontinuing Operations ||- ||- ||-102.67 ||-59.09 |
|Tax Expense/(Credit) on Discontinuing Operations ||- ||- ||- ||-19.80 |
|Profit/(Loss) after Tax from Discontinuing Operations ||- ||- ||-102.67 ||-39.29 |
|Net Profit/(Loss) for the period from Continuing Operations and Discontinuing Operations ||-59.41 ||-4.89 ||-595.99 ||-399.19 |
|Add: Other Comprehensive Income ||0.01 ||-0.17 ||-2.68 ||6.62 |
|Profit/(Loss) after Tax and OCI ||-59.40 ||-5.06 ||-598.67 ||-392.57 |
|Profit /(Loss) after tax carried over to Balance Sheet ||-59.40 ||-5.06 ||-598.67 ||-392.57 |
|Proposed Dividend ||- ||- ||- ||- |
|Transfer to General Reserve ||- ||- ||- ||- |
2. Review of Business Operations
Your Company has posted Revenue from operations (Net) for the currentyear Consolidated at Rs. 2201.18 Crores which was at Rs. 3613.57 Crores during theprevious year. The Profit before interest depreciation tax and exceptional items for thecurrent year Consolidated stands at Rs.121.33 crores which were at Rs. 317.57 Croresduring the previous year.
3. Material Events during the year under review Rights Issue ofEquity Shares
During the year under review the Company had raised funds through tworights issue by the issue of equity shares;
First Rights issue of Equity Shares
The Company had issued and allotted 39979347 Equity Shares of Rs. 4each of the Company on rights basis in the ratio of 62 equity shares for every 91 equityshares held to eligible equity shareholders of the Company at an issue price of Rs. 100/-per Equity Share (including premium of Rs. 96 per Rights Equity Share) for an aggregateamount up to Rs. 399.79 crores and the same were allotted on July 24 2020. The fundsraised by the Company through Rights Issue have been utilised for the objects stated inthe Letter of Offer dated May 18 2020 read with the Addendum to Letter of Offer datedJune 23 2020 and other addenda issued in connection with the Rights Issue towardsrepayment of certain borrowings of the Company and its wholly-owned subsidiary and forGeneral Corporate purpose
Second Rights issue of Equity Shares
The Company had issued 14802856 Equity Shares and allotted14801776 Equity Shares of Rs. 4 each of the Company on rights basis in the ratio of 3equity share for every 20 equity shares held to eligible equity shareholders of theCompany at an issue price of Rs. 135/- per Equity Share (including premium of Rs. 131 perRights Equity Share) for an aggregate amount up to Rs. 199.84 crores. An amount equivalentto 51.85% of the issue price viz. Rs. 70 per equity share was received on application andan amount equivalent to 58.15% of the issue price viz. Rs. 65 per equity share is pendingto be raised as the first and final call. The funds raised by the Company throughaforesaid Rights Issue have been utilised for the objects stated in the Letter of Offerdated February 19 2021 towards repayment of certain borrowings of the Company and itswholly-owned subsidiary and for General Corporate purpose
Strengthen Partnership with Flipkart Group
The Company had entered into a Strengthen Partnership with FlipkartGroup on July 09 2020 wherein Flipkart had purchased a significant minority stake for anamount of Rs. 260 Crores in Arvind Youth Brands Private Limited a step-down subsidiary ofthe Company which owns and operates Flying Machine Brand.
On account of losses incurred for the year under review and keeping inmind the need to conserve resources your Directors did not recommend any dividend onEquity Shares for the year ended March 31 2021. In terms of the provisions of Regulation43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 yourCompany has formulated a Dividend Distribution Policy and the same is available on theCompany's Website athttps://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Dividend-Distribution-Policy.pdf
5. Board Meetings held during the year
The Company had held seven Board meetings during the financial yearunder review on 22/05/2020 21/06/2020 03/07/2020 09/07/2020 02/09/2020 12/11/2020 and03/02/2021.
6. Directors' Responsibility Statement
The Directors hereby make the following Responsibility Statement asrequired by Section 134(3)(c) of the Companies Act 2013:
a) In the preparation of the annual accounts the applicable accountingstandards have been followed along with proper explanation relating to materialdepartures.
b) The Directors have selected such accounting policies and appliedthem consistently and made judgments and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the company at the end of thefinancial year and of the profit and loss account of the company for that period.
c) The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the company and for preventing and detecting fraud and other irregularities.
d) The Directors have prepared the annual accounts on a going concern basis.
e) They have laid down internal financial controls which are adequate and areoperating effectively.
f) The Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
7. Explanation or Comments on Qualifications Reservations orAdverse Remarks or Disclaimers made by the Auditors and the Practicing Company Secretaryin their Reports
There were no qualifications reservations or adverse remarks made bythe Statutory Auditors or the Secretarial Auditor of the Company.
8. Particulars of Loans guarantees or investments under Section186 of the Companies Act 2013
Details of loans guarantees and investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in the Notes to thefinancial statements.
9. Related Party Transactions under Section 188 of the CompaniesAct 2013
All the related party transactions are entered on an arm's lengthbasis in the ordinary course of business and are in compliance with the applicableprovisions of the Companies Act 2013 and the SEBI (LODR) Regulations. There are nomaterially significant related party transactions made by the Company with PromotersDirectors or Key Managerial Personnel etc. which may have potential conflict with theinterest of the Company at large or which warrants the approval of the shareholders.Accordingly no transactions are being reported in Form AOC-2 in terms of Section 134 ofthe Act read with Rule 8 of the Companies (Accounts) Rules 2014. However the details ofthe transactions with Related Party are provided in the Company's financialstatements in accordance with the Accounting Standards.
All Related Party Transactions are presented to the Audit Committee andthe Board. Omnibus approval is obtained for the transactions which are foreseen andrepetitive in nature. A statement of all related party transactions is presented beforethe Audit Committee on a quarterly basis specifying the nature value and terms andconditions of the transactions.
The Policy on Related Party Transactions as approved by the Board isavailable on Company's website athttps://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-RPT-Policy.pdf
10. Extract of Annual Return
The details forming part of the extract of the Annual Return isavailable on Company's website at:https://www.arvindfashions.com/corporate-governance/
11. Material changes and commitments affecting the financial positionof the Company which have occurred between March 31 2021 and June 03 2021 (date of theReport).
In accordance with the terms of the Letter of Offer dated February 192021 the Board of Directors in its meeting held on April 07 2021 made the First andFinal call on partly paid equity shares of Rs. 65 per share (comprising Rs. 2 towards facevalue and Rs. 63 towards securities premium) payable during the period from May 10 2021to May 24 2021 both days inclusive and converted the partly paid-up shares to fullypaid-up with effect from June 01 2021.
12. Information on Conservation of Energy Absorption of technology andForeign Exchange Earnings and Outgo. i) Conservation of Energy
The Company is making efforts to achieve energy efficiency and increasethe mix of renewable energy within the operations
a) Energy Efficiency
The Company strives to shift conventional lighting fixtures atthe end of their life with LEDs in entire operations thereby reducing the overall energydemand
The company is evaluating the potential of Internet of Things(loT) for energy management within its store operations. Two different pilots wereundertaken in FY 20 and FY 21 that indicated a potential reduction of 5%-8% in the energydemand. The same is being evaluated for commercial ramp up for few store operations
The company is also working on SOPs to achieve behavioural basedenergy efficiency within the operations
b) Renewable energy
We signed an agreement to wheel solar power from an independentpower producer in FY 19 expected to cover 80-95% of the energy demand at AFL'scorporate office. We have the potential of mitigating ~1030 tons of carbon dioxide on anannual basis
The Company is exploring the potential of shifting itswarehouses to renewable energy in the near future. The same was planned in FY21 but waspostponed due to the Covid-19 pandemic
The Company is also engaging with its vendor partners to enabletheir transition to renewable energy thereby reducing the overall carbon footprint of itsproducts
ii) Absorption of technology
The Company has not absorbed any technology.
iii) Foreign Exchange Earnings and Outgo
|Particulars ||2020-2021 ||2019-2020 |
|Earning in Foreign Currency ||4.24 ||13.53 |
|Expenditure in Foreign Currency ||9.9 ||29.10 |
13. Nomination & Remuneration Policy of the Company
The Board has on the recommendation of the Nomination and RemunerationCommittee framed a policy for selection and appointment of Directors Key ManagerialPersonnel and Senior Management and their remuneration. The Remuneration Policy isavailable on the Company's website athttps://www.arvindfashions.com/wp-content/uploads/2019/05/Nomination-and-Remuneration-Policy.pdf
14. Statement concerning development and implementation of RiskManagement policy of the company
The Board has framed a policy to identify assess monitor and mitigatevarious risks to key business objectives. Major risks identified by the businesses andfunctions are systematically addressed through mitigating actions on a continuing basis.The Risk Management Policy is available on the Company's website athttps://www.arvindfashions.com/wp-content/uploads/2019/03/Risk-Management-Policy.pdf
15. Corporate Social Responsibility (CSR)
The Company's initiatives for social advancement has beenundertaken through Strategic Help Alliance to Relief to Distressed Areas (SHARDA) Trust.In addition the skills of the vast majority of Employee Talents that the company has willbe utilised in the accomplishment of its CSR vision.
We have supported and will continue to fund the ongoing projectsmentioned below:
1. Supporting Government School Children
2. Providing Scholarships for higher education
3. Projects around Company's Area of Operations
During the year the company has spent Rs. 178 Lakhs on CSR projectsthrough Strategic Help Alliance to Relief to Distressed Areas (SHARDA) Trust.
The Annual Report on CSR Activities in prescribed format includingdetails of Corporate Social Responsibility Initiatives is enclosed as an Annexure-A.
16. Board Evaluation
Pursuant to the provisions of the Companies Act 2013 and Regulation17(10) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the Board of Directors ("Board") has carried out an annual evaluation of its ownperformance and that of its Committees and individual Directors. The manner in which theevaluation has been carried out has been explained in the Corporate Governance Report.
17. Change In the nature of the Business
There was no change in the nature of the business during the year underreview
18. Directors & Key Managerial Personnel
The Board of Directors consists of 12 (Twelve) members comprising of 1Managing Director 5 Non-Executive Directors and 6 Non-Executive Independent Directors.
As per the provisions of Section 152 (6) of the Companies Act 2013Mr. Punit Lalbhai (DIN 05125502) and Mr. Sanjay S. Lalbhai (DIN: 00008329) will retire byrotation at the ensuing Annual General Meeting and being eligible offered themself forreappointment as the Directors of the Company.
The Independent Directors have submitted a declaration that each ofthem meets the criteria for independence as provided in Section 149 (6) of the CompaniesAct 2013 and Regulation 16(1)(b) of the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 and there has been no change inthe circumstances which may affect their status as an Independent Director during theyear.
During the year under review Mr. Jayesh Kantilal Shah (DIN 00008349)has resigned as the Director of the Company w.e.f. November 12 2020.
During the year under review Mr. Shailesh Shyam Chaturvedi(DIN:03023079) was appointed as an Additional Director of the Company w.e.f. November 122020 to hold office up to the date of the Annual General Meeting of the Company to beheld thereafter and subject to the approval of shareholders in the ensuing annual generalmeeting During the year under review Mr. Suresh Jayaraman (DIN 03033110) has resigned asthe Managing Director and Chief Executive Officer of the Company w.e.f. February 01 2021.
During the year under review Mr. Shailesh Shyam Chaturvedi(DIN:03023079) was elevated to the position of the Managing Director and Chief ExecutiveOfficer of the Company w.e.f. February 01 2021 subject to the approval of the members inthe ensuing General Meeting During the year under review Mr. Suresh Jayaraman (DIN03033110) was appointed as a Non-Executive Additional Director of the Company w.e.f.February 02 2021 to hold office up to the date of the Annual General Meeting of theCompany to be held thereafter and subject to the approval of shareholders in the ensuingannual general meeting.
As per the provisions of Section 203 of the Companies Act 2013 Mr.Shailesh Shyam Chaturvedi Managing Director & CEO Mr. Pramod Kumar Gupta ChiefFinancial Officer and Mr. Vijay Kumar B S Company Secretary are the Key ManagerialPersonnel of the Company.
19. Disclosure under Section 67(3)(c) of the Companies Act 2013
No disclosure is required under section 67(3)(c) of the Companies Act2013 read with Rule 16(4) of the Companies (Share Capital and Debentures) Rules 2014 inrespect of voting rights not exercised directly by the employees of the Company as theprovisions of the said section are not applicable.
M/s. Sorab S. Engineer & Co Chartered Accountants (ICAI FirmRegistration No. 110417W) were appointed as the statutory auditors of your Company at theAnnual General Meeting ("AGM") held on August 04 2017 for a period of fiveconsecutive years. The Report given by the Auditors on the financial statements of theCompany is part of the Annual Report.
Pursuant to provisions of Section 204 of the Companies Act 2013 readwith Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 your Company engaged the services of M/s. N. V. Kathiria & Associates CompanySecretary in Practice Ahmedabad to conduct the Secretarial Audit of the Company for thefinancial year ended March 31 2021. The Secretarial Audit Report (in Form MR-3) of theCompany and its material Subsidiary Company is enclosed as an Annexure-B to thisReport.
21. Subsidiaries /Joint Ventures / Associates
As on March 31 2021 the Company has 4 subsidiary companies and 1Joint Venture Companies.
Pursuant to the provisions of Section 129(3) of the Companies Act 2013read with the Companies (Accounts) Rules 2014 a statement containing salient features offinancial statements of subsidiaries associates and joint venture companies in Form AOC-1is attached to the Financial Statements. The separate audited financial statements inrespect of each of the subsidiaries shall be kept open for inspection at the RegisteredOffice of the Company. The Company will also make available these documents upon requestby any Member of the Company interested in obtaining the same. The separate auditedfinancial statements in respect of each of the subsidiaries are also available on thewebsite of the Company at www.arvindfashions.com The Company has framed a policy fordetermining material subsidiaries which has been uploaded on the company's websiteathttps://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Policy-on-Material-Subsidiaries.pdf
22. Consolidated Financial Statements
The Consolidated Financial Statements of the Company are prepared inaccordance with relevant Indian Accounting Standards issued by the Institute of CharteredAccountants of India and form part of this Annual Report.
During the year under review your Company has neither accepted norrenewed any deposits within the meaning of provisions of Chapter V Acceptance ofDeposits by Companies of the Companies Act 2013 read with the Companies (Acceptance ofDeposits) Rules 2014.
24. Significant and Material Orders Passed by the Regulators or Courtsor Tribunals impacting the Going Concern status of the Company
There are no significant and material orders passed by the Regulatorsor Courts or Tribunals which would impact the going concern status of the Company
25. Internal financial Controls
The Company has in place adequate internal financial controls withreference to financial statements and a dedicated Internal Audit team to ensure itsadequacy. The scope and authority of the Internal Audit function are well defined in theorganisation. To maintain its objectivity and independence the Internal Audit functionreports to the Chairman of the Audit Committee of the Board. The Internal Audit Departmentmonitors and evaluates the efficacy and adequacy of internal control systems in theCompany its compliance with operating systems accounting procedures and policies of theCompany. Based on the report of the Internal Audit function process owners undertakecorrective action in their respective areas and thereby strengthen the controls.
Significant audit observations and corrective actions suggested arepresented to the Audit Committee of the Board. The Statutory Auditor of the Company hasalso given an opinion that the Internal Financial Controls over Financial Reporting areadequate and are operating effectively at the end of the financial year.
26. Disclosure of composition of Audit Committee
The Audit Committee consists of the following Members;
i) Mr. Nagesh Pinge Independent Director
ii) Mr. Nilesh Shah Independent Director
iii) Ms. Abanti Sankaranarayanan Independent Director
iv) Ms. Nithya Easwaran Non-Executive Director
27. Transfer of Unclaimed Dividend to Investor Education and ProtectionFund
The Provisions of Section 125(2) of the Companies Act 2013 do notapply as there was no dividend declared and paid since the incorporation of the Company.
28. Share Capital
During the year under review the Company has increased its paid upcapital from Rs 234717456/- to Rs 424346396/- by allotting 39979347 fully paid-upEquity shares 14801776 partly paid-up Equity shares of and 27000 shares on exercise ofEmployee Stock Options by the employees.
A. Issue of Equity Shares with differential rights No such issue and accordinglyno compliance
B. Issue of Sweat Equity Shares - No such issue and accordingly no compliance
29. Employee Stock Option Schemes (ESOS)
The Company has instituted the Employees Stock Option Scheme (ESOS)2016 and 2018 to grant equity based incentives to certain eligible employees anddirectors of the Company and its subsidiary and holding companies. During the year underreview the Company has granted stock options to eligible employees. Disclosures incompliance with Section 62 of the Companies Act 2013 and Rule 12 of Companies (ShareCapital and Debentures) Rules 2014 and the Securities and Exchange Board of India (Sharebased Employee Benefits) Regulations 2014 are set out in Annexure -C to thisreport.
30. Vigil Mechanism
The Company has a vigil mechanism named Whistle Blower Policy to dealwith instances of unethical behaviour actual or suspected fraud or violation of theCompany's Code of Conduct or ethics policy. The details of the Whistle Blower Policy areexplained in the Corporate Governance Report and also posted on the website of the Companyat https://www.arvindfashions.com/wp-content/uploads/2019/04/Whistleblower-Policy.pdf
31. Familiarization programme for the independent directors
In compliance with the requirements of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company has put in place a familiarizationprogramme for the Independent Directors to familiarize them with their role rights andresponsibility as Directors the working of the Company nature of the industry in whichthe Company operates business model etc. The details of the familiarization programme areexplained in the Corporate Governance Report and is also available on the Company'swebsite athttps://www.arvindfashions.com/wp-content/uploads/2018/11/AFL-Familiarisation-Programs-of-Independent-Directors.pdf
32. Corporate Governance Report and Management Discussion &Analysis
The Corporate Governance Report and Management Discussion &Analysis which form part of this Report together with the Certificate from the auditorsof the Company regarding compliance of conditions of Corporate Governance as stipulated inSchedule V of Regulation 34(3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
33. Business Responsibility Report
The Business Responsibility Report for the year ended March 31 2021 asstipulated under Regulation 34 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is annexed which forms part of this Annual Report.
34. Particulars of Employees
The information required pursuant to Section 197(12) of the CompaniesAct 2013 read with Rule 5(2) and 5(3) of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 in respect of employees of the Company will be providedupon request. In terms of Section 136(1) of the Companies Act 2013 the Annual Report andAccounts are being sent to the Members and others entitled thereto excluding theinformation on employees' particulars which is available for inspection by theMembers at the Registered Office of the Company during business hours on working days ofthe Company up to 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.
Disclosures pertaining to remuneration and other details as requiredunder Section 197(12) of the Companies Act 2013 read with Rule 5(1) of the (Appointmentand Remuneration of Managerial Personnel) Rules 2014 are given in Annexure-D tothis report.
35. Disclosure as per sexual harassment of women at Workplace(prevention prohibition and Redressal) Act 2013
The Company has zero tolerance for sexual harassment at workplace andhas adopted a policy against sexual harassment in line with the provisions of SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013 and therules framed thereunder. The Company has also formed Internal Complaint Committee in whichthe Committee members are experts on handling the investigations and proceedings asdefined in the policy.
During the financial year 2020-21 the Company has not received anycomplaints on sexual harassment.
36. Human Resources
At Arvind Fashions we believe that our people are our biggest asset.Our Organizational Values Service Innovation Living the Brand Collaborate andCare along with a strong will do' culture have helped instil a sense ofpassion commitment and performance among our employees.
At Arvind Fashions We provide an environment that encouragescollaboration and teamwork along with recognition. Demonstrating the values and leadershipbehaviours along with recognizing good performance has been the key to Arvind Fashionssuccess. Our various platforms events and engagement initiatives like SMILES Ourcomprehensive employee engagement program for our retail staff provides instant support onsalaries learning and development career progression and performance with the click ofbutton Fundo - the sports Olympiad event consisting of various high adrenalineactivities Family Day - a corporate organized function blending fun family andactivities in one well-planned occasion and through reach-outs employee town hallswhere leaders talk about the achievements of the quarter gone by and the way forwardplans. Through such events our employees get an opportunity to bond with their largercross functional teams and understand the bigger picture they are contributing towards. AtArvind Fashions we focus on the holistic growth and wellness of our people. The ArvindYoHGA framework is developed to focus on the overall wellness of our employees and delivera differentiated employee experience. Our progressive policies and practices such asflexi-time policy Travel and accommodation benefits Maternity & Adoption policyCrche' services and Paternity policy along with our Professional Developmentinitiatives and Internal Career Mobility Platform ensures that an environment ofempowerment is created for all employees. Our focus has been on development of our talentacross job roles and our branded development initiatives like Arvind University - ourlearning and development centre of excellence where we fashion possibilities inlearning'. Our purpose is to foster a learning environment where our employeesdevelop skills they need to achieve high business performance for progressive growth. AtArvind University we provide business specific learning interventions for retailfunctional and leadership development which help acquire skills & competencies thathave direct business impact and individual growth. It is our vision to maximise theseofferings to learn contribute & grow. Arvind Express - our career progressioninitiative that provides employees a transparent and structured process to help take onlarger roles within the company. Our assessment process has a holistic approach whichblends both Machine Learning and Human Intervention to strategically evaluate employeeperformance and strengths to provide critical developmental feedback.
Our EVP (Employee Value Proposition) of FashioningPossibilities' offers employees opportunity to impact beyond their job description.This along with our Will Do' culture and cutting-edge HR practices have helpedus attract and retain the best talent. This has also made our company a preferred employerfor professionals in the industry.
The Directors wish to express their appreciation for the continuedsupport of bankers financial institutions customers and various Government agencies.The Directors also wish to thank all the employees for their contribution support andcontinued co-operation throughout the year.