REPORT OF THE BOARD OF DIRECTORS AND MANAGEMENT DISCUSSION AND ANALYSIS
TO SHAREHOLDERS FOR THE YEAR ENDED 31ST MARCH 2017
Your Directors have pleasure in presenting their 23rd Annual Report and AuditedAccounts for the year ended
31st March 2017.
1. FINANCIAL RESULTS :
| ||2016-17 ||2015-16 |
| ||Rupees ||Rupees |
|Profit Before Taxation ||(1552518) ||(389145) |
|Taxation: || || |
|Current Tax - Current Year ||600000 || |
|- Previous Year || || |
|Deferred ||707586 ||(65830) |
|MAT Credit || || |
|Profit After Taxation ||244932 ||(323315) |
The Company has actively engaged in manufacturing of Socks and actively finding out thevenues of e-commerce in the Fashions Industry.
No Dividend Recommended for the financial year.
The total turnover of the Company was Rs. 38.34 crores (previous year - Rs. 35.20crores ). The profit before exceptional items and taxation was Rs1552518/-.
4. DIVISIONAL PERFORMANCE
The Company operates in only one Business Operations
The Company has not increased its Authorized Capital of the Company during thefinancial year and there is no change in the capital structure of the Company.
6.INTERNAL CONTROL SYSTEMS
Your Company has in place a robust Internal and Financial control systems which assiststhe Board and Management to fulfill business objectives safeguards the shareholders'interest financial transactions and company's assets. The primary objective of ourinternal control framework is to ensure that internal controls are established properlydocumented maintained and adhered to in each functional department for ensuring orderlyand efficient conduct of business which includes proper use and protection of theCompany's resources accuracy in financial reporting compliance with the statutes timelyfeedback on achievement of operational and strategic goals. The Company's internal controlsystem is driven by well defined policies and procedures across its business divisions.In addition the Company is ISO 9001:2008 compliant which provides added comfort to ourbusiness partners and regulatory bodies.
The Company has an Internal Audit function which provides the Audit Committee and theBoard of Directors an independent objective and assurance of the adequacy efficiency andeffectiveness of the Organization's risk management internal and financial control andcorporate governance processes. The Audit Committee / Board approved annual audit planprepared in consultation with business heads and inputs obtained from the Company'sstatutory auditors ensures coverage of significant areas of operations with a risk basedapproach in order to conduct the audit in an efficient and timely manner. Process reviewsfor critical functions at all locations are performed in accordance with the audit plan.The function also assesses opportunities for improvement in business processes systemsand controls; provides recommendations to the Senior Management.
The Audit Committee of the Board of Directors regularly meets to review the significantaudit findings action taken thereon adequacy of internal and financial controls andimplementation of various comprehensive policies. During the year the Audit Committee metsix times to review the reports submitted by the Internal Audit Department. The AuditCommittee also regularly meets the Company's Statutory Auditors to ascertain their viewson the business adequacy of the internal control systems in the Company and theirobservations on the financial reports.
7. PUBLIC DEPOSITS
There are no outstanding public deposits at the beginning of the year under review. TheCompany has not accepted any public deposits during the year under review. The Board ofDirectors of the Company will consider accepting fresh public deposits at the appropriatetime in view of the regulatory changes under the Companies Act 2013.
The Company has paid up to date the Tax Liabilities other than those explained at pointno. 8 of Annexure to Auditors report.
9. SUBSIDIARIES :
The Company has no subsidiaries during the Financial year.
10. HUMAN RESOURCES / INDUSTRIAL RELATIONS :
The Manufacturing unit has continued to maintain cordial industrial relations with lowabsenteeism while maintaining output levels. Programs were conducted to improve thecompetency levels of workmen.
The Unit has its commitment to recognizing employee performance by conducting employeeof the Month awards to recognize exceptional performances by employees and inculcating acommitment to perform beyond the regular roles and responsibilities.
Various programmes have been conducted during the year covering Safety AwarenessAlteration Authority Job Safety Analysis (JSA) Hazard Identification Risk AssessmentRisk Control (HIRARC). In addition Internal / External Safety Audits; Safety CommitteeMeetings on regular basis; Job Study Analysis; HIRA / HAAZOP studies SQC ; First AidTraining; Fire & Safety aspects and Emergency Rescue methods have helped tostrengthen the overall safety and disaster management processes in the Hyderabad Factory.
Preventive Health Check-ups
As part of preventive healthcare the Factory organized series of free medicalcheck-ups consisting of Diabetes Cardiology Orthopedic and General Medical Check up toall the employees.
As part of enhanced security of the Unit and other assets of the compound walls havebeen reinforced height raised and fencing of barbed wire & concertina coils provided.Other measures include CC TV monitoring at Key areas especially magazines relaying ofpatrolling route erection of watch towers and construction of additional Security Checkposts installation of tower flood lights for better night illumination installation ofguard monitoring systems for effective patrolling checks. Communication systems frommagazines watch towers through land lines have been streamlined. As such over the yearsconsiderable additions and precautions have been added to strengthen the Security of theFactory.
The Company believes in fair employment practices and is committed to provide anenvironment that ensures that every employee is treated with dignity and respect andafforded equitable treatment. The Company has a large proportion of women on the workforceand has adopted a Policy in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules there under. TheCompany has not received complaints in this regard during the year.
11.PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Company has not provided any Loans Guarantees or Investments during the Financialyear
12. OUTLOOK FOR THE CURRENT YEAR OPPORTUNITIES AND THREATS Overview of the Economy:
The merchandise exports from India have remained stagnant between US $ 302 to US $ 314billion in the last three financial years. India's share is a mere 2% in Global tradewhere as that of China is around 11.7% (2013). The Foreign Trade Policy 2015-2020announced in April 2015 has set a target of 3.5% by 2020-21 for India.
In the last two/three years the exporting units were big beneficiaries of Indian rupeedepreciation. The rupee has been strengthening against Several Currencies resulting inerosion of both realisation and profit for exporters. This is one cause for thedeceleration in exports In Foreign Trade Policy 2015-2020 announced in April 2015 a newscheme named MEIS (Merchandise Exports From India Scheme) has been introduced where by theexporters will get incentive of 2% of FOB value in respect of merchandise falling underITC (HS) code 61 - Knitted Apparels (including socks) exported to United Kingdom andUnited States of America etc (but not Switzerland and Gulf countries). This scheme is insubstitution of earlier MLFP scheme (market linked focal product) which was off and onintroduced and withdrawn.
Industry Structure and Development
The Indian textile industry including hosiery and clothing is one of the leadingsectors of the Indian economy and contributes significantly to the country's industrialoutput (14%). It employs 35 million people in direct employment and earns much neededforeign currency with 17% of India's exports coming from Textiles and Garments. Overallit contributes around 5% to India's GDP. Textiles and apparel exported from India consumemainly indigenous inputs and are therefore big earners of net foreign exchange. Thishelps the country reduce its current account deficit.
Value of socks manufactured in India is estimated around 3000 crores per annum. Manymajor socks manufacturers in India are supplying their socks in the domestic market aslicensees of international brands. Only a few supply under their own brand name.
Your Company is well poised to seize opportunities available in the sock knittingindustry on account of its state-of-the-art production facilities technical expertisegood quality culture and emphasis on product innovation and growth potential.
Your Company is meeting international quality norms of comfort stretch sizing skincare and other parameters essential for inner wear intimate apparel. They also meet thefashion demands in terms of design different knits and multiple shades. The socksmanufactured by your Company are sold in Supermarket Chains and upper end Retail Stores.
The growing young middle-class population is a source of great potential and providesimmense opportunities to spurt growth in the sock industry in the future. For dutydrawback on export shipments "cap per unit" was raised upwards (more thandouble say 2.25-2.50 Your Company is knitting super sophisticated design socks for areputed international brand selling socks in big outlets at high prices. This gives greatgoodwill to your Company as the name of your Company is mentioned on the band rolls ofthe socks of that brand.
All major overseas customers of your Company insist on social audits to be carried outin the factory at least once in two years by the internationally acclaimed "BusinessSocial Compliance Initiative Agencies". Such audits cover compensation to employeeshealth safety environment and management practices. New customers also insist on suchaudits to be conducted before they start the business. The compliance of such audits toInternational Standards brings healthy and ethical culture in working and createsgoodwill of the Company among its clients. Your Company has successfully complied withmany such audits and has thus ensured continuance of business with major clients for longperiods.
Your Company derives about 91% of its revenue from the export market. Economic slowdownor decline in demand in the country of buyer of your Company's products will have adverseimpact on the working of the Company.
In the international market countries like Turkey have developed an edge over theIndian manufacturers due to reduced freight cost and much reduced delivery time. BesidesTurkey enjoys exemption of 10.6% custom duty in relation with EU countries. This has poseda threat to the Indian socks suppliers and may pressurise them to reduce prices andthereby squeeze their margins. Even Bangladesh enjoys exemption in import duty by virtueof its being a less developed country and exports goods at prices which Indian sockssuppliers cannot compete.
The major challenge that the textile apparel and hosiery industry faces is of everincreasing production costs arising out of rising wages power and other overheads.
Rupee has become strong against several foreign currencies from mid 2014. This hasalready adversely impacted the topline and bottom line of the exporting units whencompared with their last two/three years' performances.
13 . DIRECTORS
In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Sangeeta Sethia retires by rotation at the 22nd AnnualGeneral Meeting of the Company and is eligible for reappointment. The number and detailsof the meetings of the Board and other Committees are furnished in the CorporateGovernance Report.
The Independent Directors have furnished declaration of independence under Section 149of the
Companies Act 2013.
Familiarization Programme for Independent Directors
The Company familiarizes its Independent Directors with the Company their rolesrights responsibilities in the Company nature of the industry in which the Companyoperates business model of the Company etc. through various programmes on a continuingbasis. The Familiarisation programme for Independent Directors is disclosed on theCompany's website.
Separate Meeting of Independent Directors
A separate meeting of Independent Directors of the Company without the attendance ofNon-Independent Directors and members of management was held on 13th Feb 2015 asrequired under Schedule IV to the Companies Act 2013 (Code for Independent Directors) andClause 49 of the Listing Agreement. At the Meeting the Independent Directors:
- Reviewed the performance of Non-Independent Directors and the Board as a whole;
- Reviewed the performance of the Chairman of the Company taking into account theviews of Executive Director and Non-Executive Directors; and
- Assessed the quality quantity and timeliness of flow of information between theCompany management and the Board that is necessary for the Board to effectively andreasonably perform their duties.
All the Independent Directors attended the Meeting of Independent Directors
Board & Directors' Evaluation
Pursuant to the provisions of the Companies Act 2013 and SEBI (LODR) Regulations 2015of the Listing Agreement the Board its Committees and the Directors have carried outannual evaluation / annual performance evaluation covering various aspects of the Board'sfunctioning such as adequacy of the composition of the Board and its Committees Boardculture execution and performance of specific duties obligations and governance Theperformance evaluation of the Independent Directors was carried out by the entire Board.The Criteria for performance evaluation are follows: Role & Accountability -Understanding the nature and role of Independent Directors' position.
- Understanding of risks associated with the business.
- Application of knowledge for rendering advice to management for resolution ofbusiness issues.
- Offer constructive challenge to management strategies and proposals.
- Active engagement with the management and attentiveness to progress of decisionstaken.
- Non-partisan appraisal of issues.
- Own recommendations given professionally without tending to majority or popularviews.
Leadership & Initiative
- Heading Board Sub-committees.
- Driving any function or identified initiative based on domain knowledge andexperience.
- Commitment to role & fiduciary responsibilities as a Board member.
- Attendance and active participation.
- Proactive strategic and lateral thinking.
Directors' Appointment and Remuneration Policy
The Nomination and Remuneration Committee is responsible for developing competencyrequirements for the Board based on the industry and strategy of the Company andformulates the criteria for etermining qualifications positive attributes andindependence of Directors in terms of provisions of Section 178 (3) of the Act and Clause49 of the Listing Agreement. The Board has on the recommendations of the Nomination &Remuneration Committee framed a policy for remuneration of the Directors and KeyManagerial Personnel. The objective of the Company's remuneration policy is to attractmotivate and retain qualified and expert individuals that the company needs in order toachieve its strategic and operational objectives whilst acknowledging the societalcontext around remuneration and recognizing the interests of Company's stakeholders.
The Non-Executive Directors (NED) no sitting fee is paid to non-executive directors.NEDs are reimbursed any out of pocket expenses incurred by them in connection with theattendance of the Company's Meetings.
PARTICULARS OF EMPLOYEES AND REMUNERATION
There are no employees in the company calling the information required under Section197 (12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 The information required under Rule 5 (2) and (3) ofThe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014.
14. ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as 'Annexure tothe Directors Report'.
15. INFORMATION ON STOCK EXCHANGES
The Equity shares of the Company are listed on BSE Limited and the Listing Fees havebeen paid to them up- to-date.
16. CORPORATE GOVERNANCE
A detailed report on the subject forms part of this report. The Statutory Auditors ofthe Company have examined the Company's compliance and have certified the same as requiredunder the SEBI Guidelines. Such certificate is reproduced in this Annual Report.
17. DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134 of the Companies Act 2013:
(a) that in the preparation of the annual accounts/financial statements for thefinancial year ended 31st March 2015 the applicable accounting standards had beenfollowed along with proper explanation relating to material departures if any;
(b) that the accounting policies as mentioned in the financial statements were selectedand applied consistently and reasonable and prudent judgments and estimates were made soas to 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 of the company for that period;
(c) that proper and sufficient care had been taken 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) that the annual accounts were prepared on a going concern basis;
(e) that proper internal financial controls were in place and that such internalfinancial controls are adequate and were operating effectively; and
(f) that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively.
Statutory / Financial Audit
M/s N G Rao and Associates Chartered Accountants retire at the ensuing Annual GeneralMeeting and are eligible for re-appointment. The Company has received confirmation thattheir appointment will be within the limits prescribed under Section 141 of the CompaniesAct 1956.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Vinod Sakaram a Company Secretaries in Practice to undertake theSecretarial Audit of the Company. The Report of the Secretarial Audit Report is annexedherewith as 'Annexure to the Directors Report'.
19. CORPORATE SOCIAL RESPONSIBILITY (CSR)
In compliance with Section 135 of the Companies Act 2013 and other applicableprovisions the Company has constituted Corporate Social Responsibility Committeeconsisting of Mr. Sanjay I Bora Chairman of the Committee (Independent Director) Mr.Prabhat Sethia (Executive Director and Chairman of the Company) and Mr. D.P. Kelkar(Independent Director) as the Members of the Committee. The Committee met once during theyear and laid down the policy on Corporate Social Responsibility stating therein theobjectives implementation and other issues pertaining to the achievement of the CSRobjectives of the Company.
The businesses of the Company do not have eligible profit on aggregate basis during thelast three financial years. The CSR Policy of the Company is displayed on the website ofthe Company.
20. VIGIL MECHANISM / WHISTLE BLOWER POLICY
In terms of the requirements of the Companies Act 2013 and Clause 49 of the ListingAgreement the Company has a vigil mechanism to deal with instance of fraud andmismanagement if any. The details of the vigil mechanism are displayed on the website ofthe Company. The Audit Committee reviews the functioning of the vigil / whistle blowermechanism from time to time. There were no allegations / disclosures / concerns receivedduring the year under review in terms of the vigil mechanism established by the Company
21.RELATED PARTY TRANSACTIONS
All related party transactions / arrangements that were entered into during thefinancial year were on an arm's length basis and were in the ordinary course of business.There are no materially significant related party transactions made by the Company withPromoters Directors Key Managerial Personnel which may have a potential conflict withthe interest of the Company at large.
All related party transactions / arrangements are placed before the Audit Committee forprior approval supported by a statement from the Management as to the adherence of arm'slength basis and being the ordinary course of business.
The policy on Related Party Transactions as approved by the Board is displayed on theCompany's website.
None of the Directors has any pecuniary relationships or transactions vis-a-vis theCompany.
22. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators / Courts which wouldimpact the going
concern status of the Company and its future operations
23. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedherewith as
'Annexure to the Directors Report'.
Your Directors would like to express their appreciation for the assistance andco-operation received from the financial institutions banks Government of India andvarious State Government authorities and agencies customers vendors and members duringthe year under review. Your Directors also wish to place on record their deep sense ofappreciation for the committed services of all employees of the Company.
For and on behalf of the Board of Directors
|Place : Hyderabad ||Prabhat Sethia |
|Date :September 1 2017 ||Managing Director |
Statement in this Management Discussion and Analysis describing the Company'sobjectives projections estimates expectations or predictions may be "forwardlooking statements" within the meaning of applicable securities laws and regulations.Actual results could differ materially from those expressed or implied. Important factorsthat could make a difference to the Company's operations include global and Indian demandsupply conditions finished goods prices raw material availability and prices cyclicaldemand and pricing in the Company's principal markets changes in Government regulationstax regimes economic developments within India and the countries within which the Companyconducts businesses and other factors such as litigation and labour negotiations. TheCompany assumes no responsibility to publicly amend modify or revise any forward lookingstatements on the basis of any subsequent development information or events orotherwise.
ANNEXURE TO THE BOARD'S REPORT
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO [Section 134(3)(m) of The Companies Act 2013 readwith Rule 8(3) of The Companies (Accounts) Rules 2014]
A. CONSERVATION OF ENERGY a) Steps taken or impact on conservation of energy: Nilb) Steps taken by the company for utilising alternate sources of energy: Nil c) Thecapital investment on energy conservation equipments: Nil
|B. TECHNOLOGY ABSORPTION: Nil || |
|(a) the details of technology imported; || |
|(b) the year of import; || |
|(c) whether the technology been fully absorbed; ||Not Applicable as there was no import of technology during the last three years. |
|(d) if not fully absorbed areas where absorption has not taken place and the reasons thereof; and || |
|C) Expenditure on R&D || || |
| || ||(Rs. in lakhs) |
| ||2016-17 ||2015-16 |
|(a) Capital Expenditure || || |
| ||-- ||-- |
|(b) Recurring Expenditure || || |
| ||-- ||-- |
|(c) Total Expenditure || || |
| ||-- ||-- |
|(d) Total Expenditure on R&D as a percentage of total turnover ||-- ||-- |
|D) FOREIGN EXCHANGE EARNINGS & OUTGO: || || |
| ||2016-17 ||2015-16 |
|Total Foreign Exchange used and earned in terms of actual inflows and actual outflow: || || |
|Used / Outflow ||Nil ||Nil |
|Earned / Inflow ||Nill ||Nil |
ANNEXURE TO THE DIRECTOR'S REPORT
[Pursuant to Rule 5 of The Companies (Appointment and Remuneration of Managerial
Personnel) Rules 2014]
1. The ratio of the remuneration of each Director to the median remuneration of theEmployees of the Company for the financial year: (Explanation: (i) the expression"median" means the numerical value separating the higher half of a populationfrom the lower half and the median of a finite list of numbers may be found by arrangingall the observations from lowest value to highest value and picking the middle one; (ii)if there is an even number of observations the median shall be the average of the twomiddle values).
2. The percentage increase in remuneration of each Director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year: Theratio of remuneration of each Director to the Median Remuneration of all employees whowere on the payroll of the Company and the percentage increase in remuneration of theDirectors during the financial year 2016-17 are given below:
|Managing Director ||Percentage Increase in Remuneration |
|Mr. Prabhat Sethia ||Nil |
The current Chief Financial Officer is appointed in the Company during currentfinancial year. Hence increase of CFO remuneration is not applicable. 3. The percentageincrease in the median remuneration of employees in the financial year: 2% 4. The numberof permanent employees on the rolls of Company: 10.
5. The explanation on the relationship between average increase in remuneration andCompany performance: Remuneration of employees has a close linkage with the performance ofthe Company. The Variable Pay (VP) component in the remuneration for all the managementstaff has a direct correlation with the Company's performance. VP is calculated based onboth individual and Company performance. Component of VP has a higher weightage for seniorpositions and lower weightage for junior positions.
6. Variations in the market capitalization of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year and percentageincrease over decrease in the market quotations of the shares of the Company in comparisonto the rate at which the Company came out with the last public offer in case of listedcompanies: 7. Average percentile increase already made in the salaries of employees otherthan the managerial personnel in the last financial year and its comparison with thepercentile increase in the managerial remuneration and justification thereof and point outif there are any exceptional circumstances for increase in the managerial remuneration:The percentage increase in the salaries of employees other than the managerial personnelin the last financial year is Nil as against an increase of Nil in the salary of theManaging Director (managerial personnel as defined under the Act). The increment given toeach individual employee is based on the employees' potential experience as also theirperformance and contribution to the Company's progress over a period of time. 11. Theratio of the remuneration of the highest paid Director to that of the employees who arenot Directors but receive remuneration in excess of the highest paid Director during theyear: The highest paid Director is the Managing Director. No employee has receivedremuneration in excess of the Managing Director during the year.
12. Affirmation that the remuneration is as per the Remuneration Policy of the Company:It is affirmed that the remuneration paid is as per the Remuneration Policy for DirectorsKey Managerial Personnel and other employees adopted by the Company.
Statement of particulars of employees pursuant to Rule 5(2) and (5(3) of the Companies(Appointment and Remuneration of Managerial Personnel)
Rules 2014 and forming part of Directors' Report for the financial year ended 31stMarch 2017
|Name of the Employee ||Age (years) ||Nature of Designation/ Duties ||Qualification ||Experience (years of employment) ||Date of Commence- ment ||Remuneration (Rs. in lakhs) ||Last Employment / Position held ||% of equity shares held in the Company |
|EMPLOYED THROUGHOUT THE YEAR || || || || || || || || |
|1. Prabhat Sethia ||53 ||Managing Director ||B.Com ||26 ||Since Inc ||9.00 || ||3.99% |
1. Nature of employment is contractual or as per Agreement wherever applicable. Otherterms and conditions applicable to them are as per Company's rules. 2. None of theemployees is a relative of any Director of the Company.
3. Shares held by Mr.Prabhat Sethia - - 1159700