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Cheviot Company Ltd.

BSE: 526817 Sector: Industrials
NSE: N.A. ISIN Code: INE974B01016
BSE 00:00 | 17 Jul 1330.00 3.25






NSE 05:30 | 01 Jan Cheviot Company Ltd
OPEN 1350.95
52-Week high 1735.00
52-Week low 1070.00
P/E 10.60
Mkt Cap.(Rs cr) 573
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 1350.95
CLOSE 1326.75
52-Week high 1735.00
52-Week low 1070.00
P/E 10.60
Mkt Cap.(Rs cr) 573
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Cheviot Company Ltd. (CHEVIOTCOMPANY) - Director Report

Company director report

Dear Members

(Rs. in Lakhs)

The directors have pleasure in presenting their Annual Report on the business andoperations of the Company together with the Audited Standalone Financial Statements forthe financial year ended 31st March 2017.


Particulars For the year ended 31st March 2017 For the year ended 31st March 2016
Operating results after charging depreciation and amortisation show a profit of 3760.07 3826.64
Add : Other income 2334.79 1271.66
Add: Exceptional item: Indirect taxes for earlier year 60.51 -
Profit before tax 6155.37 5098.30
From which have been deducted :
Current tax 1465.00 1453.00
Tax for earlier years (net) (0.06) (0.39)
Deferred tax 134.79 (1.78)
Profit after tax 4555.64 3647.47
Surplus as per last balance sheet 584.50 535.07
Making a total of 5140.14 4182.54
Which has been appropriated by the directors as under:
Interim dividend - 766.91
Tax on interim dividend - 156.13
Transferred to SEZ re-investment reserve account 300.00 25.00
Transferred to general reserve 4200.00 2650.00
Balance surplus carried to balance sheet 640.14 584.50
5140.14 4182.54


The Board of Directors have recommended a dividend of ' 1/- per ordinary share of facevalue of ' 10/- each (i.e. 10%) for the financial year ended 31st March 2017 aggregatingto ' 45.11. Proposed dividend will be recognised as liability after approval of themembers at the ensuing annual general meeting.


After considering several factors and benefits to the members the Board of directorshave approved the proposal to Buy Back of up to 200000 fully paid up ordinary shares of' 10/- each (representing 4.43% of the total number of ordinary share capital of theCompany as at 31st March 2017 at the Buy Back price of ' 1500/- per ordinary shareaggregating to ' 3000. The Board is of the view that Buy Back will help the Company toreturn surplus cash to the members of the Company holding shares broadly in proportion totheir shareholding thereby enhancing the overall return to the members.


Your directors propose to transfer an amount of ' 300 to the SEZ re-investment reserveaccount and ' 4200 to the general reserve out of the profit for the year.


Sales profitability and earnings per ordinary share show under noted position duringthe year under review as compared to previous year :

Particulars For the year ended 31st March 2017 For the year ended 31st March 2016
Gross sales 38532.74 33880.62
Export sales (C.I.F. value) 11519.41 10553.34
Operating profit 3760.07 3826.64
Other income 2334.79 1271.66
Profit before tax 6155.37 5098.30
Profit after tax 4555.64 3647.47
Earnings per ordinary share of face value of ' 10 (in ') 100.98 80.85

The overall performance of the Company during the year under review was satisfactory.The demand in domestic sector particularly from government was regular and Company wasable to run the plant on all working days. However due to non-availability of adequatelabour force the plant could not run at full capacity. The operating profit wasmarginally lower by ' 66.57 due to increase in cost of other inputs being ' 3760.07 ascompared to '3826.64 in the previous year. However profit after tax was higher at '4555.64 as compared to ' 3647.47 during the previous year mainly on account of increasein other income which was largely in the nature of ad-hoc income from sale of old bonds asalso income derived from few investments matured during the year. Such ad-hoc increase inother income may not be sustainable.

On export front CIF value of export sales was higher by ' 966.07 being Rs. 11519.41during the year under review as against Rs. 10553.34 during previous year. The Company'sexport oriented unit at Falta SEZ has taken several initiatives to inter-alia exportconventional and diversified hessian fabrics and has been able to register growth both interms of quantity and value mainly by widening the customer base. Export of shopping bagis also showing signs of improvement and Company has been gettng repeat orders and makingefforts to penetrate all around in overseas markets.


a) Industry structure and developments

As per current norms under Jute Packaging Materials (Compulsory use in packingcommodities) Act 1987 (JPMA) 90% of total food grains and 20% of sugar are to be packedin Jute bags. Of late Jute Industry is surprised to note the recommendation made by theStanding Advisory Committee on jute to Government of India for dilution of compulsorypackaging norm for food grains from 90% to 85% in the 2017-18 procurement season. Industryearnestly pleads to the Government to consider continuation of existing norms of packagingwithout any dilution in the larger interest of Jute Industry which has been providinglivelihood to large number of farmers and workers.

In the wake of good weather conditions the availability of raw jute was comfortabledue to better crop in Jute Season 2016-17 and prices which were prevailing atunprecedented higher levels gradually settled down to reasonable level.

In order to promote the exports of Jute Goods from India Government is continuing therewards in the form of duty free scrips of 5% of realised FOB value in free foreigncurrency under Merchandise Exports from India Scheme (MEIS). Besides National Jute Boardis also continuing with various workers' welfare schemes. Incentive scheme for acquisitionof plant and machinery valid up to 31st March 2017 is expected to be further extended.

b) Opportunities and threats


• Jute products being environmental friendly and having bio-degradablecharacteristics of natural jute fiber have an edge over other packing materials;

• Use of Jute goods in floor coverings jute geo-textiles shopping bags willprovide ample opportunity to boost the demand.


• Attempt initiated for dilution of JPMA may lead to its phase out in future;

• Paucity of workers preventing optimum utilisation of capacity;

• Lack of incentive to farmers to take up jute cultivation on regular basisaffects the jute crop.

c) Segment-wise or product-wise performance

The Company is engaged in a single business segment i.e. manufacturing and sale of JuteGoods. Hence disclosure requirements as required by Accounting Standard -17 are notapplicable in respect of business segment. However the geographical segments consideredfor disclosure are as under :

Within India

Outside India


31st March 2017 31st March 2016 31st March 2017 31st March 2016 31st March 2017 31st March 2016
Sales 27013.33 23327.28 11519.41 10553.34 38532.74 33880.62
Carrying amount of segment assets 49574.75 45078.37 - - 49574.75 45078.37
Capital expenditure 1030.90 663.42 - - 1030.90 663.42

d) Outlook

Jute crop for the season 2017-18 is expected to be better mainly on account of goodweather conditions. Moreover the carryover from last season being comfortable wouldprovide more availability of raw jute. These positive factors are expected to keep theprices of raw jute under check and marginally lower than last year. However import of rawjute will depend mainly on export policy of Bangladesh Government and various other alliedfactors.

Demand of Jute Goods is likely to remain good. The efforts being made by the Company toincrease its customer base in overseas markets are expected to fetch reasonable exportorders.

The Company will continue its business strategy of catering to demand from bothdomestic and overseas markets and will strive to control costs with focus on all roundbusiness development. Barring unforeseen circumstances the outlook for the current yearappears to be promising.

e) Risks and concerns

We reiterate the key elements of business risks identified by the Company and itsmitigation measures taken by the Company :

• Competition risk and mitigation measures

Bangladesh jute manufacturers enjoy substantial cost advantage in the form of lowerwage and power cost vis a vis Indian manufacturers of jute products. Thus they continue toprovide strong competition in the international market. In order to survive and mitigatethe said risk the Company is making continuous efforts to improve operational efficiencyand reduce costs in all possible areas.

• Economic environment and market conditions risk and mitigation measures

Alternate packaging materials like HDPE/Polypropylene being cost effective are used assubstitute in the packaging market. To mitigate this risk the Company is making effortsto develop light products of jute goods with less jute content manufacture diversifiedjute products including shopping bags.

• Fluctuations in foreign exchange risk and mitigation measures

Fluctuation in currency does impact margins of the Company. Recent rupee appreciationhas impacted the exports adversely. To mitigate this risk foreign exchange exposureagainst exports and imports are hedged by entering into forward contract.

• Business operation risk and mitigation measures

Few business operation risks and their mitigation plan are stated below :

Revenue concentration : The Company generates revenue from domestic as well as exportsales. Demand in domestic market is largely dependent on government orders. In exportmarket India face severe competition from Bangladesh. To overcome this risk the Companyis making efforts to increase its customer base by establishing contacts and visitingforeign buyers focussing on manufacture of value added and diversified jute productsincluding shopping bags.

Raw Materials : Availability of raw jute depends on crop size which in turn largelydepends on weather conditions. The Company follows a policy of regular procurement of rawjute in a planned manner linked with production and order position to mitigate the risk ofshortage of raw jute if any.

Manpower : Shortage of workers and the rate of absenteeism continue to providechallenge leading to idle capacity. To mitigate such risk the Company is continuouslyproviding required in-house training to freshers and suitably incentivising goodperformers from time to time. Besides the Company also carry out modernisation andautomation of manufacturing process wherever possible.

f) Internal control systems and their adequacy

The Company has implemented adequate procedures and internal controls which providereasonable assurance for reliability of financial reporting. The audit committeeperiodically reviews such procedures and controls and ensures that internal controlsoperate effectively.

The internal auditor of the Company carries out necessary checking in accordance withthe aforesaid procedures and controls and submits their reports. The observations of theinternal auditor are circulated to the senior managerial personnel for their perusal andtaking corrective measures wherever required. The audit committee reviews the findings ofthe internal auditor and statutory auditors and monitors the action taken report.

g) Discussion on financial performance with respect to operational performance

The following are the significant areas of financial performance during the year underreview :

• Revenue from sale of jute goods was at Rs. 38532.74 during the year as comparedto Rs. 33880.62 during previous year;

• Operating profit of the Company have marginally decreased by Rs. 66.57 due toincrease in cost of other inputs being Rs. 3760.07 during the year under review asagainst Rs. 3826.64 in previous year;

• Finance cost was Rs. 61.85 during the year under review as against Rs. 81.63 inprevious year;

• Inventories were valued at Rs. 6004.57 as at 31st March 2017 as against Rs.5928.92 as at 31st March 2016. Increase in inventories is mainly due to higher stock ofraw material;

• The Company has invested Rs. 1030.90 in fixed assets inclusive of capitaladvances given during the year.

h) Material developments in Human Resource / Industrial Relations front includingnumber of people employed

Industrial relations remained cordial during the year under review. Shortage of labourand absenteeism continue to remain areas of concern.

The Company's efforts to impart training to workers employed at new scale of pay tobring about all round development in their working knowledge continues as per plannedprogrammes and policies. The Company also provides benefits and facilities to deservingstaffs under its various staff welfare schemes.

As on 31st March 2017 the Company had 3883 employees on its rolls.

The Company's policy on prevention prohibition and redressal of complaints /grievances on the sexual harassment of women at work places is being monitored by acommittee constituted by the Company for the said purpose. During the year under reviewno complaint of sexual harassment has been received by the Company.

i) Cautionary statement

Statement made in this section of the report is based on the prevailing position in thejute industry and market conditions. Actual results might differ from what we perceivewith respect to Company's outlook and performance.


The Company has complied with the corporate governance requirements as stipulated inSchedule V to the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. Corporate Governance Report and a certificate received from the statutory auditorsM/s. Jain & Co. Chartered Accountants confirming compliance is given in Annexure-Iforming part of this report.


In compliance with Section 92(3) of the Companies Act 2013 the extract of the annualreturn in Form MGT-9 is given in Annexure-II forming part of this report.


Particulars of investments made by the Company have been disclosed in Note 12 and Note15 to the financial statements for the financial year ended 31st March 2017.


All transactions with related parties were carried out in the ordinary course ofbusiness and on arm's length basis and are in compliance with the applicable provisions ofthe Act and the Listing Regulations. There are no materially significant related partytransaction made by the Company with promoters directors or key managerial personnel etc.which may have potential conflict with the interest of the Company at large or whichwarrants the approval of the shareholders. All related party transactions are placedbefore the Audit Committee. Omnibus approval is obtained for the transactions which arerepetitive 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.

There was no material contract or arrangement or transaction at arm's length basis witha related party during the year under review. Therefore disclosure in Form AOC-2 is notrequired.


Information on conservation of energy technology absorption foreign exchange earningsand outgo as required in terms of Section 134(3)(m) of the Companies Act 2013 and theRules framed thereunder are provided in Annexure- III forming part of this Report.


The Board has formulated a risk management policy identifying therein the elements ofrisk and concern that may threaten the existence of the Company. Audit Committee and theBoard review the risk elements including business risks and mitigation proceduresperiodically. Areas relating to risks/concern/threat have been disclosed in this reportunder the head 'management discussion and analysis report'.


The Company has undertaken activities in accordance with CSR Policy (available onCompany's website: ) directlyand through eligible trusts having established track records. The annual report on CSRactivities and expenditure particulars as required under Sections 134 and 135 of theCompanies Act 2013 read with Rule 8 of the Companies (Corporate Social ResponsibilityPolicy) Rules 2014 and Rule 9 of the Companies (Accounts) Rules 2014 are given inAnnexure IV forming part of this report.


Vigil mechanism / whistle blower policy as formulated by the Company allows intimationby the affected person in good faith of concern or misconduct through a writtencommunication. Audit Committee reviews the vigil mechanism for redressal of the complaintand also allows direct access to the Chairman of the Audit Committee in exceptional cases.The Whistle Blower Policy is available on the Company's website ( ).


There was no change in the composition of the Board of directors during the year underreview.

Mrs. Malati Kanoria (holding DIN 00253241) retires from the Board by rotation at theforthcoming AGM and being eligible offers herself for re-appointment.

Mr. Utkarsh Kanoria (holding DIN 06950837) who has been associated with the Companysince 8th August 2014 in the position of President was appointed by the Board as anadditional director on 24th May 2017 whose term of office expires at the ensuing annualgeneral meeting. His candidature has been proposed by a member for the position of aDirector of the Company whose period of office shall be liable to determination byretirement of directors by rotation. Moreover the Board has also appointed Mr. UtkarshKanoria as Wholetime Director of the Company with effect from 24th May 2017.

The appointment of Mr. Utkarsh Kanoria is subject to approval of the members at theensuing annual general meeting for which appropriate resolutions have been included atItem No 5 and 6 of the Notice convening the annual general meeting. The Board recommendspassing of the same.

Brief details of said directors seeking appointment/re-appointment have been given inthe notice convening AGM.

The Company has received necessary declarations from each independent director underSection 149(7) of the Companies Act 2013 (the Act) and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("Listing Regulations") confirmingthat they meet the criteria of independence laid down in the Act and Listing Regulations.

In terms of the provisions of the Act and Listing Regulations and the Guidance Note onthe Board Evaluation issued by SEBI vide circular dated 5th January 2017 the performanceevaluation of the members of the Board the Board level committees and Board as a wholewere carried out at the meeting of the Independent Directors and the Board. The criteriafor said evaluation has been stated in the corporate governance report annexed hereto.


In compliance with the requirements of the Companies Act 2013 and SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the nomination andremuneration committee (NRC) evaluate the composition and diversity of the Board andidentify persons who are qualified to become directors in accordance with the criterialaid down by the Board of directors of the Company. NRC recommend to the Board about theappointment/re- appointment of eligible candidates including their terms of appointmentand remuneration. The remuneration policy including criteria for determiningqualifications positive attributes independence of a director have been disclosed inAnnexure-V forming part of this Report.


During the year under review there is no significant and material order passed by theregulators or courts impacting the going concern status of the Company and its futureoperations.


In terms of Section 134(5) of the Companies Act 2013 it is hereby stated to the bestof our knowledge and belief 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 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 Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

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

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


The Board of directors met 5 (five) times during the year under review. More detailsare available in the corporate governance report.


The Board has constituted the audit committee with three independent directors. Moredetails on the audit committee are given in the corporate governance report.


There was no change in the Key Managerial Personnel during the year under review. Mr.Utkarsh Kanoria was appointed as Wholetime Director of the Company w.e.f. 24th May 2017.


The ratio of the remuneration of each director to the median employee's remunerationand other details as required under Section 197(12) of the Companies Act 2013 read withRules framed thereunder have been disclosed in Annexure-VI forming part of this Report.


The Company has not accepted deposits from Public under Section 73 of the CompaniesAct 2013 read with Rules framed thereunder.


Following disclosures are made under the Companies (Accounts) Rules 2014 :

(i) The financial summary or highlights are discussed at the beginning of this report;

(ii) There is no change in the nature of business;

(iii) There is no company which has become or ceased to be the Company's subsidiaryjoint venture or associate company during the year;

(iv) No significant and material order was passed by the regulators or courts ortribunals which impact the going concern status and its future operations.


The term of office of M/s Jain & Co. Chartered Accountants (Firm Registration No.302023E) as statutory auditors of the Company will complete at the conclusion of theensuing annual general meeting of the Company.

Accordingly the Board of directors of the Company have recommended the appointment ofM/s Singhi & Co Chartered Accountants (Firm Registration No. 302049E) as thestatutory auditors of the Company subject to approval of the members for which aresolution has been included at Item No 4 of the Notice convening the annual generalmeeting. The Board recommends passing of the same.

A certificate from M/s Singhi & Co. has been received to the effect that they meetthe criteria laid down under Section 141 of the Companies Act 2013 and are willing to beappointed as statutory auditors of the Company. Moreover they have also confirmed thatthey hold a valid certificate issued by the Peer Review Board of the Institute ofChartered Accountants of India.

The Board places on record its appreciation to the services rendered by M/s Jain &Co. during their tenure as the statutory auditors of the Company.


The cost accounting records maintained by the Company for the current financial yearending on 31st March 2018 are required to be audited pursuant to Section 148 of theCompanies Act 2013 read with Rules framed thereunder. In this regard the Board ofdirectors on the recommendation of audit committee had re-appointed M/s D. Radhakrishnan& Co. Cost Accountants (Registration No. 000018) to carry out the cost audit at aremuneration of Rs. 40000/- plus applicable taxes and re-imbursement of out of pocketexpenses incurred by them.

The resolution included at Item No. 7 of the Notice convening the annual generalmeeting seek members' ratification to the remuneration payable to the cost auditor.


Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Rulesframed thereunder the Company has appointed M/s MR & Associates a firm of practicingcompany secretaries (CoP 2551) as the secretarial auditor for the year ended 31st March2017. The secretarial audit report dated 24th May 2017 is attached as Annexure-VII tothis report.


The directors place on record their appreciation for the valued contribution made bythe employees at all levels. The Directors also sincerely thank its customers suppliersfinancial institutions banks government authorities business associates and allstakeholders for their continued co-operation and support and faith reposed in theCompany.

For and on behalf of the Board

Harsh Vardhan Kanoria

Chairman and Managing Director

Chief Executive Officer

DIN :00060259

Kolkata 24th May 2017