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Garden Silk Mills Ltd.

BSE: 500155 Sector: Industrials
NSE: GARDENSILK ISIN Code: INE526A01016
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VOLUME 6765
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OPEN 19.50
CLOSE 21.15
VOLUME 6765
52-Week high 53.60
52-Week low 18.00
P/E
Mkt Cap.(Rs cr) 89
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Garden Silk Mills Ltd. (GARDENSILK) - Director Report

Company director report

Dear Members

Your Directors present the 39th Annual Report together with the Audited FinancialStatements of the Company for the financial year ended 31st March 2018.The Management'sDiscussion and Analysis Report as required pursuant to Listing Regulations 2015 forms partof this Report.

Financial Results

The Company's financial performance during the year ended 31st March 2018 as comparedto the previous year is summarised below:

(Rs in Crore)

2017-18 2016-17 *
Sales / Revenue from Operations (Net of Excise Duty) ** 3033.40 2468.21
Earnings Before Interest Tax and Depreciation (EBITDA) 180.76 148.40
Less: Finance Costs 188.62 167.32
Profit / (Loss) before Depreciation and Tax (7.96) (18.92)
Less: Depreciation 66.25 64.47
Less: Impairment Losses 14.86 0.00
Profit / (Loss) before tax (88.97) (83.39)

* Previous year figures have been regrouped where necessary and have been re-stated asper Ind AS.

** Effective July 01 2017 sales are recorded net of GST whereas earlier sales wererecorded gross of excise duty which formed part of expenses. Hence revenue from operationsfor the year 2017-18 are not comparable with the previous year corresponding figures.

Indian Accounting Standard (Ind AS)

Your Company has adopted Indian Accounting Standards ('Ind AS') for the accountingperiod beginning on 1st April 2017 pursuant to Ministry of Corporate Affairs Notificationdated 16th February 2015 notifying the Companies (Indian Accounting Standard) Rules2015. Accordingly the Financial Statements for the year ended on 31st March 2018 havebeen prepared in accordance with Ind AS prescribed under Section 133 of the CompaniesAct 2013 ('the Act') read with the relevant rules issued thereunder and the otherrecognized accounting practices and policies to the extent applicable. The FinancialResults for all the periods of 2017-18 presented have been prepared in accordance with IndAS.

Review of Operations

In FY 18 Garden Silk Mills Ltd. has delivered strong volume growth and maintained aleadership position in the major segments of its business activities i.e. Polyester Chipsand POY / FDY (including processed yarn).

Improved domestic and export demand led to about 23% year-on-year growth in totalrevenue from operations at ' 3033.40 Crore as compared to ' 2468.21 Crore in the previousyear. Income from exports for FY 18 was higher by about 46% at ' 589.37 Crore compared to' 404.56 Crore in the previous year.

Despite a challenging and competitive business environment your Company achievedOperating EBITDA (earnings before interest tax and depreciation) of ' 180.76 Crore ascompared to ' 148.40 Crore in the previous year. On a consolidated basis EBITDA for FY 18increased by 23% to ' 187.44 Crore from ' 150.71 Crore in the previous year.

Total sale of chips in volume was higher at 160771 MT for the year 2017-18 as comparedto 142165 MT in the previous year. In value terms also your Company achieved higher saleof chips for FY18 at ' 1112.04 Crore as compared to ' 918.68 Crore in the previous year.Higher exports were a key contributor to this performance.

We achieved higher production of chips (including melt) during 2017-18 at 319979 MTas compared to 277714 MT in the previous year. In yarn segment your Company achievedhigher production of spun polyester filament yarn (POY/FDY) at 176630 MT for FY 18 ascompared to 155142 MT in FY 17. Equated (standardised) production for both POY and FDYreached record highs.

The volume of sales of polyester filament yarn (PFY) including processed yarn in FY 18also increased at 182429 MT as against 148427 MT in the previous year FY 17. Sale of PFY(including processed yarn) in value terms also increased in FY 18 at ' 1808.32 Crore ascompared to ' 1502.65 Crore in FY 17.

During the year the demand for Fabrics remained subdued mainly because of the impactof GST implementation on Textiles. The wholesale / retail trade took it's time to come toterms with the tax and procedures imposed on them for the first time.

The Company's improved EBITDA performance has been possible despite extremely tightworking capital conditions in the face of 30% increase in raw material costs and risingfuel prices.

With the arrival of GST the company has achieved a level playing field with industryplayers having sales tax exemptions in Union Territories. This has materially helped ourperformance in the domestic market and polyester yarn margins generally improved for thecompany. Yet the local markets still remain weak as the fragmented and unorganiseddownstream textile sector has not fully adjusted to the requirements mandated by GST. Ourprofitable exports to quality customers have demonstrated Garden's adaptability and globalcompetitiveness and have reduced pressure of low margin sales in the domestic market.

The Company's spinning plants achieved record utilisation levels and CP throughput wasthe highest in last five years. All continuous plants (except for CP3 which remains shut)are running at close to 100% and steps are being taken to further improve output withstill better energy efficiencies. Overall spinning and CP efficiencies first-gradeproduction and efficiency were very high in the year under review. High energy costs are amatter of some concern and were a significant contributor to the increase in overallmanufacturing expenses for FY 17-18.

The Company is continuously working on increasing/modifying its supplier base to reducecost and lead time and ensure uninterrupted supply of raw materials and other inputs. TheCompany simultaneously reviews its policies and practices to adjust the inventory level ofboth raw materials and finished goods to reduce the impact of volatility in raw materialprices while ensuring availability of sufficient stock for optimum production plans andsupply of finished goods. Your Company maintains its focus on cost reduction at themanufacturing level via its continuous improvement program.

Your Company continues to have a clear price and product leadership in its keyspecialty yarn product segments: especially cationic fine-denier and spandex-coveredyarns. It is also an important player in mother-yarn and nylon yarns. It continues to beperceived in the market as a premium producer of quality chips yarn and fabric even forits commodity products.

Dividend

Considering the loss incurred by the Company your Directors do not recommend anydividend on equity shares for the financial year 2017-18.

Transfer to Reserves

In absence of distributable profits / earnings it is not proposed to transfer anyamount to reserves for the financial year 2017-18.

Change in the Nature of Business if any

Garden Silk Mills Ltd. is one of India's leading man-made-fibre based textilecompanies. It is a vertically integrated manufacturer of a wide range of Polyester ChipsPolyester Filament Yarns (PFY) Preparatory Yarns Woven (Grey) Fabric as well as Dyed andPrinted Sarees and Dress Materials. During the year under review there was no change inthe nature of business of the Company.

Going Concern Status

The Company has term loans working capital loans and other financing arrangements fromvarious banks and other lenders. These lenders have declared their arrangements with theCompany as non-performing asset since the Company has defaulted in repayment of principalinterest and other penal dues. The Company's net-worth as at the year-end is negativemainly due to accumulated losses. Although the Company has shown an improvement in itsoperating income for the year the Company continues to face significant pressure on itsfinancial resources. The Company is in discussions with its consortium of lenders forfinancial restructuring arrangement including identifying a suitable investor. The lendershave expressed optimism about the successful closure of above resolution in a time-boundmanner and the company has thus accordingly prepared financial results on a going-concernbasis.

Industry Scenario

The Indian textile sector is a major contributor to the Indian economy in terms ofgross domestic products (GDP) industrial production employment and the country's totalexport earnings. The polyester demand growth has picked up significantly in the last 2years. The Indian textile industry is currently passing through a turbulent phase in thepost-GST environment but the government is sensitive to the industry's needs and so weremain optimistic for strong growth in the years to come.

Increase in commodity prices such as those of coal oil chemicals and stores haveimpacted the economy as well as the polyester industry.

In polyester chips the domestic supply has increased and outstrips demandsignificantly. This puts considerable pressure on sale and margins. The raw materialprices are expected to go up and likely to put further pressure on margins. The Companyhopes to counter this effect by improved product mix and by exports.

In POY/FDY demand has been catching up with supply and margins so industry utilisationlevels are reasonably high. The domestic outlooks for this segment is expected improveover the next 2 years.

Raw material prices of PTA and MEG during FY18 reached lows at around USD 637 and USD690 per metric ton respectively and reached highs of around USD 806 and USD 1023 permetric ton. Raw material remains volatile but the industry has lately been able to pass onthe changes in RM prices to customers.

Overview of the economy

Gross domestic products rose a better than expected 7.7 per cent in the fourth quarterof FY18 retaining India's ranking as the world's fastest major economy outstrippingChina by nearly a percentage point.

The full year FY18 growth estimates was revised upward to 6.7 per cent. This is in linewith the 6.75 per cent growth forecast by the economic survey and down from 7.1 per centin FY17 with the slowdown being attributed to the lingering effect of demonetization andthe role out of the goods and service tax (GST) in July last year.

The constant increasing trend of quarterly GDP numbers in the four quarters of 2017-18at 5.6% 6.3% 7% and 7.7% indicates that the structural measures of reforms undertaken bygovernment is bringing rich dividends in the form of higher GDP growth rate.

The rupee touched its record level of 65.29 a dollar during the year. The immediateconcern for the rupee is the sharp spike in crude oil prices. The US-China trade war is arisk to India to the extent that it impacts China's growth disturbs supply chains that itdepends on and diverts China's exports to other countries including India.

According to Care Ratings the recent depreciation in the rupee maybe temporary and isnot alarming. The depreciation is essential to remain competitive with its tradingpartners most of whom also have depreciating currencies.

Opportunities Challenges Threats Risks and Concerns

A global slowdown driven say by a prolonged trade-war or unexpectedly quick interestrate increases in the US or simply a China led downturn may have adverse effect on globaldemand for polyester but is unlikely to have significant long-term effect on domesticdemand. However such a slowdown could affect the price of the company's raw materials andlead to a mini-crash in polyester sentiment. Yet we have seen falls in oil/raw materialprices from much higher levels and are more cautious with inventory levels so we see onlya short term impact of this.

The domestic demand for polyester is growing well and might even quicken given the lowbase and the trade adjusting to GST. A bigger worry is that if China slows significantlyit might start exporting more aggressively to other countries (including India) whichcould impact export and possibly even domestic margins.

While demand-supply has been gradually easing in the spinning industry a few plannedexpansions as well as expected restart of certain large idle capacities may temporarilyaffect margins adversely. The Company is facing a challenge of higher power cost comparedto competitors in Union Territories.

Working capital cost has gone up as the businesses have to wait for tax refunds to comethrough. Pending tax refunds have resulted into liquidity constraints in the industry. Onthe Customs front Anti-Dumping Duty on POY originating in China which expired in May2017 was not extended by Ministry of Commerce after due investigation.

The implementation of Goods and Service Tax (GST) with effect from July 2017 had amixed impact on trade & commerce during the last fiscal. The impact of GST isparticularly stark in the highly fragmented synthetic textile industry which attractsdifferent GST rates at different stages of production and sales.

The Company is exposed to risks attached to various statutes and regulations includingthe Competition Act 2002. The Company is mitigating these risks through regular reviewsof legal compliances through internal as well as external compliance audits.

Prices of raw material as well as energy costs the two major input costs aresignificantly dependant on crude oil prices. Changes in oil prices could lead to impact onmargins and profitability.

With the main input costs based on US$ fluctuations in the Indian Rupee / US$ exchangerate could impact the business and margin. Supply and price of cotton crop in India andglobally could have an impact on the demand of polyester.

Business Outlook

The outlook for the polyester industry over the medium term is optimistic supported byfavourable demand both domestically and internationally. Global and domestic GDP growthis strong and is looking strongly supportive of polyester demand.

The introduction of GST has for the first time led to a level-playing field for theCompany as it has ended CST exemptions (given to competitors in union territories) andGujarat-specific VAT reversals. This has meant that finally the Company is able to achieveamong the highest margins in its product segments once again despite a tough year for thetextile industry in which the largely unorganized downstream trade is yet to come to termswith GST - related compliances. The oversupply in the industry is also nearing its endwith most healthy competitors running at full capacity once again.

Beyond the current year the growth outlook will be influenced by several factors. GSTimplementation is stabilizing which augurs well for economic activity. GDP and incomegrowth is growing which would boost textile and polyester demand. The process ofrecapitalization of public sector banks has got underway which will boost credit to thetextile sector. Export growth is expected to improve further on account of improvingglobal demand.

The negatives for the industry are elevated commodity prices especially of oil whichmay act as a drag on aggregate demand and margins as well as the start-up of new andexisting idle capacities which would temporarily increase oversupply.

Financial Performance

Discussion on financial performance with reference to operational performance has beendealt with in this Report in the relevant para which should be treated as forming part ofthe Management Discussion and Analysis Report.

Resource and Liquidity

During FY 18 your Company repaid ' 86.09 Crore towards principal component of termloans from banks and financial institutions. No fresh term loans were availed from banksand financial institutions during the year under review.

The total outflow towards debt servicing including interest and other financial chargesduring the year 2017-18 amounted to ' 171.61 Crore.

The working capital requirements of the Company are being funded through workingcapital limits in consortium arrangement headed by Bank of Baroda.

The Company continues to be engaged with the lenders to work out a long-term debtrework solution.

Information Technology

Information Technology is a driving force of the business. The Company is continuouslyadopting and utilizing various information technology tools and is in process to implementtechnologies such as Industrial Internet of Things (IOT) among others to improvebusiness process efficiencies.

As a part of its Digital Transformation journey your Company has implemented aproduction planning and execution system which was otherwise a manual process.

The system for adopting GST in Oracle EBS12 has been successfully implemented by theCompany. This project has been carried out entirely in-house.

Internal Control System and their Adequacy

The Company has an adequate internal control system commensurate with the size andscale of its business operations.

Internal audit plays a key role in providing an assurance to the Board of Directorswith respect to the Company having adequate Internal Financial Control Systems. TheInternal Financial Control Systems provide among other things reasonable assurance ofrecording the transactions of its operations in all material respects and of providingprotection against significant misuse or loss of Company's assets.

Internal Auditors monitor and evaluate the efficacy and adequacy of internal controlsystems in the Company its compliance with operating systems accounting procedures andpolicies at all locations of the Company.

The Audit Committee takes due cognizance of the observations made by the auditors andgives their suggestions for improvement. The suggestions of the Audit Committee are alsotaken into account for further strengthening of the control systems.

Health safety and environment

The Company gives foremost importance to Safety Health and Environment and strivesrelentlessly on cultivating and improving safe work culture health awareness andenvironment protection.

Your Company recognizes protection and management of environment as one of its highestpriority and every effort is made to conserve and protect the environment. During theyear your Company continued its focus in creating an aesthetic environment-friendlyindustrial habitat in its factory units mobilizing support and generating interest amongstaff and labour for maintaining hygienic and green surrounding.

Periodical health check-up are conducted for the employees at the work place. Moreemphasis is given to cleanliness workplace hygiene and good house-keeping.

The Company obtained necessary approvals from concerned Government Department /Pollution Control Board and all required environment clearances / safety clearances /stipulations are complied with at Plant facilities of the Company. The Company continuesto focus on maintenance and performance improvement of related pollution control facilityat its manufacturing locations. The Company is continuously working on possibility ofusing appropriate technology to reduce the hazardous waste generation.

Industrial Relations / Human Resources

Your Company maintained healthy cordial and harmonious industrial relations at alllevels during the year under review.

The Company continuously works to nurture this environment to keep its employees highlymotivated result oriented and adaptable to changing business environment. Your Company'svalue proposition is based on providing value to our customer through innovation and byconsistently improving efficiency at all levels.

The Company continues to strengthen its people capabilities in its quest to build agrowing and sustainable business. An increased focus is being maintained to further buildemployee retention at all levels in the Company.

Your Directors wish to place on record their appreciation for the dedicated andcommendable services rendered by the employees of the Company. The strength of permanentemployees as on 31st March 2018 was 4759 Nos.

Consolidated Financial Statements

As stipulated by Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ('Listing Regulations 2015') the Company has preparedConsolidated Financial Statements in accordance with the applicable accounting standardsas prescribed under the Companies (Accounts) Rules 2014 of the Companies Act 2013 ('theAct'). The Consolidated Financial Statements reflects the results of the Company and thatof its subsidiary. As required under Regulation 34 of the Listing Regulations 2015 theAudited Consolidated Financial Statements together with the Independent Auditors' Reportthereon is annexed and forms part of this Report.

Share Capital

The Paid-up Equity Share Capital of the Company as on 31st March 2018 was ' 42.08Crore. There was no public issue rights issue bonus issue or preferential issue etc.during the year. The Company has not issued shares with differential voting rights sweatequity shares nor has it granted stock options. As on 31st March 2018 none of thedirectors of the Company hold instruments convertible into equity shares of the Company.

Subsidiary Joint Venture and Associate Companies

The Company has one wholly owned overseas subsidiary namely GAIA International FZEU.A.E.. GAIA International FZE is a free zone establishment and is registered with theAjman Free Zone Ajman U.A.E. The Company is registered to carry out the business oftrading in textile and ready-made garments including import and export.

Pursuant to Section 129(3) of the Companies Act 2013 read with Rule 5 of the Companies(Accounts) Rules 2014 the statement in Form AOC-1 containing salient features of thefinancial statement of the Company's subsidiary is forming part of the ConsolidatedFinancial Statements.

Directors and Key Managerial Personnel

The Board of Directors consists of 10 (ten) members of which 5 (five) are IndependentDirectors. The Board also comprises of one woman Independent Director.

As per the provisions of Section 152(6) of the Companies Act 2013 and the Company'sArticles of Association Shri Alok P. Shah (DIN: 00218180) shall retire from the Board byrotation at the ensuing Annual General Meeting and being eligible has offered himself forre-appointment as a Director of the Company. The Board recommends his re-appointment.

The term of office of Shri Yatish C. Parekh as an Independent Director will expire on31st March 2019. The Board of Directors on recommendation of the Nomination andRemuneration Committee has recommended re-appointment of Shri Yatish C. Parekh as anIndependent Director of the Company for a second term of 5 (five) consecutive years on theexpiry of his current term of office. The members are requested to approve his appointmentin the ensuing annual general meeting.

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence prescribed under the Act and theListing Regulation.

During the year the non-executive directors of the Company had no pecuniaryrelationship or transactions with the Company other than sitting fees and reimbursementof expenses incurred by them for the purpose of attending meetings of the Company.

The information as required to be disclosed under regulation 36(3) of SEBI ListingRegulations 2015 in case of re-appointment of the directors is provided in the Notice ofthe ensuing annual general meeting.

There was no other change in the directors and KMP during the year under review.Detailed information on the directors is provided in the Corporate Governance Report.

Managerial Remuneration

The remuneration paid to the Directors is in accordance with the Remuneration Policyformulated in accordance with Section 178 of the Companies Act 2013.

Disclosures of the ratio of the remuneration of each director to the median employee'sremuneration and other details as required pursuant to Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are provided as Annexure C.

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

Corporate Governance

Your Company reaffirms its commitment to Corporate Governance and is fully compliantwith the conditions of Corporate Governance stipulated in Clause 'C' of Schedule V onAnnual Report pursuant to Regulation 34(3) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015. A separate section of disclosure on Corporate Governanceand a certificate from M/s Sharp and Tannan Chartered Accountants Statutory Auditors ofthe Company in this regard are annexed hereto and forms part of the Report. The auditor'scertificate for the year 2017-18 does not contain any qualification reservation adverseremark or disclaimer.

All Board members and Senior Management personnel have affirmed compliance with theCode of Conduct for the year 2017-18. A declaration to this effect signed by the ManagingDirector of the Company is contained in this Annual Report. The Managing Director and CFOhave certified to the Board with regard to the financial statements and other matters asrequired under regulation 17(8) of the SEBI Listing Regulations 2015.

Audit Committee

The Audit Committee of the Company comprises of three Independent Directors. Thecomposition of directors and other details are provided in the Corporate Governance Reportof the Company.

All the recommendations made by the Audit Committee during the year were accepted bythe Board. During the year under review neither the statutory auditors nor thesecretarial auditors has reported to the Audit Committee under Section 143(12) of theCompanies Act 2013 any instances of fraud committed against the Company by its officersor employees the details of which would need to be mentioned in the Directors' Report.

Pursuant to the provisions of Section 177 of the Companies Act 2013 and ListingRegulations 2015 the Company has established a vigil mechanism through the Committeewherein the genuine concerns can be expressed by the employees and directors. The Companyhas also provided adequate safeguards against victimization of employees who expressedtheir concern. The Company has provided the details of the vigil mechanism in the WhistleBlower Policy in their Corporate Governance Report and also posted these on the website ofthe Company.

Corporate Social Responsibility Committee

The Company has constituted a Corporate Social Responsibility (CSR) Committee inaccordance with Section 135 of the Companies Act 2013 comprising of three Directorsincluding Independent Director.

For the current financial year 2017-18 as the average profits for the last three yearsis negative the requirements for spending based on average profits is not applicable.However the Company has voluntarily spent an amount of ' 0.91 Lacs towards variouseducation promotion and social welfare related programs during the year.

The CSR Committee will further continue to identify the project which can be coveredunder the CSR guidelines in compliance with the CSR objectives and policy of the Company.

The report as per Section 135 of the Companies Act 2013 read with Companies (CorporateSocial Responsibility Policy) Rules 2014 is attached as Annexure B to this Report.

Auditors and Auditors' Report

Pursuant to the provisions of section 139 of the Companies Act 2013 the members ofthe Company at the 38th Annual General Meeting held on 20th September 2017 appointed M/s.Sharp & Tannan Associates Chartered Accountants (Firm Registration No.109983W) asstatutory auditors of the Company from the conclusion of 38th Annual General Meeting tillthe conclusion of 43rd Annual General Meeting covering one term of five consecutiveyears subject to ratification by the members at each intervening Annual General Meeting.

In view of the amendment to the said section 139 through the Companies (Amendment) Act2017 notified on 7th May 2018 ratification of auditor's appointment is no longerrequired. However as required under section 142 of the Companies Act 2013 resolution atitem No.3 of the Notice of AGM is proposed for approval of members for authorising theBoard of Directors of the Company to fix Auditors' remuneration for the year 2018-19. Themembers are requested to approve the same.

The Notes on financial statement referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Statutory Auditors' Reportfor the year 2017-18 does not contain any qualification reservation adverse remark ordisclaimer made by Statutory Auditor. There is no incident of fraud requiring reporting bythe auditors under Section 143(12) of the Companies Act 2013.

Cost Auditors

Pursuant to Section 148 of the Companies Act 2013 read with the Rule 14 of theCompanies (Cost Records and Audit) Amendment Rules 2014 the cost audit records of theCompany are required to be audited. The Directors on the recommendation of the AuditCommittee appointed M/s Smit Manubhai & Associates Cost Accountants (FirmRegistration Number 2502) to audit the cost accounts of the Company for the financialyear ending 31st March 2019 on a remuneration of ' 1.75 Lacs plus out of pocket expensesand applicable taxes. The remuneration payable to the Cost Auditor is required to beratified by the shareholders at the ensuing AGM.

Secretarial Auditor and Secretarial Audit Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company has appointed Shri Kunjal Dalal of K. Dalal & Co. Practicing CompanySecretaries (CP No.3863) Surat to conduct the Secretarial Audit of the Company.Secretarial Audit Report for the year 2017-18 issued by him in the prescribed form MR-3 isannexed to this Report. The said secretarial audit report does not contain anyqualification reservations or adverse remark or disclaimer made by the SecretarialAuditor.

Internal Auditors

Pursuant to the provisions of Section 138 of the Companies Act 2013 the Board ofDirectors of the Company have appointed Shri Piyush Patel Chartered Accountant (ICAIMembership NNo.116769) as Internal Auditor of the Company for the financial year 2018-19.

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

Directors' Responsibility Statement

Pursuant to the requirements of Section 134(3)(c) read with Section 134(5) of theCompanies Act 2013 the Board of Directors to the best of their knowledge and abilityconfirm that:

a) in the preparation of the annual accounts for the year ended 31st March 2018 theapplicable accounting standards read with requirements set out under Schedule III to theAct have been followed and there are no material departures from the same;

b) they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as at 31st March 2018 and of the loss of theCompany for the year ended on that date;

c) they have 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) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and are operating effectively; and

f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems are adequate and operating effectively.

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory costand secretarial auditors and external consultant(s) and the reviews performed byManagement and the relevant Board Committees including the Audit Committee the Board isof the opinion that the Company's internal financial controls were adequate and effectiveduring FY 18.

Number of meetings of the Board

Five Board Meetings were duly convened and held during the year. The Directors activelyparticipated in the meetings and contributed valuable inputs on the matters brought beforethe Board from time to time. The intervening gap between the Meetings was within theperiod prescribed under the Companies Act 2013 and Listing Regulations. Detailedinformation is given in the Corporate Governance Report.

Board evaluation

Pursuant to the provisions of the Companies Act 2013 and Regulation 17(10) of ListingRegulations 2015 the Board has carried out an annual performance evaluation of its ownperformance and that of its statutory committees viz. Audit Committee StakeholderRelationship Committee Nomination and Remuneration Committee and Corporate SocialResponsibility Committee and that of the individual Directors. The evaluation of each ofthe directors was done inter-alia on the basis of their advisory role and contributionin the decision making.

The Nomination and Remuneration Committee has defined the evaluation criteria for thePerformance Evaluation of the Board its Committees and individual Directors. The mannerin which the evaluation has been carried out has been explained in the CorporateGovernance Report.

Independent Directors' Meeting

In compliance with the requirements of Schedule IV of the Companies Act 2013 ameeting of the Independent Directors was held on 20th February 2018 without theparticipation of the Executive Directors or Management personnel.

The Independent Directors carried out performance evaluation of Non-IndependentDirectors and the Board of Directors as a whole performance of Chairman of the Companythe quality contents and timelines of flow of information between the Management andBoard based on the performance evaluation framework of the Company.

Declaration of Independent Directors

All the Independent Directors have given a declaration that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015and there is no change in their status of independence. As required under Section 149(7)of the Companies Act 2013 the said declaration was placed in the Board Meeting held on30th May 2018.

Familiarisation Programme

The Company has put in place an induction and familiarisation programme for all itsDirectors including the Independent Directors so as to associate themselves with thenature of the industry in which the Company operates. Directors are periodically advisedabout the changes effected in the Corporate Laws Listing Regulations with regard to theirroles rights and responsibilities as Director of the Company. The familiarisationprogramme for Independent Directors in terms of the provisions of Regulation 46(2)(i) ofListing Regulations is uploaded on the website of the Company.

Contracts or Arrangement with Related Parties

All contracts / arrangements / transactions entered by the Company during the financialyear with Related Parties were in its Ordinary Course of Business and on arms' lengthbasis.

Pursuant to section 177 of the Companies Act 2013 and regulation 23 of SEBI ListingRegulations 2015 all Related Party Transactions were placed before the Audit Committeefor its approval.

There were no materially significant transactions with related parties during thefinancial year under review which were in conflict with the interest of the Company.

Pursuant to Section 134 of the Companies Act 2013 and Rules made thereunderparticulars of transactions with related parties as required under section 188(1) of theCompanies Act 2013 read with Rule 8(2) of Companies (Accounts) Rules 2014 is annexedwith this Report in Form AOC-2 as Annexure E.

Your Directors draw attention of the members to Note No.31 to the financial statementswhich sets out related party disclosures.

As required under Regulation 23 of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated a policy on Related PartyTransactions which has been put up on the website of the Company. The Company's managementensures total adherence to the approved Policy on Related Party Transactions to establishArm's Length Basis without any compromise.

Secretarial Standards

Pursuant to the approval given on 10th April 2015 by the Central Government to theSecretarial Standards specified by the Institute of Company Secretaries of India theSecretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings(SS-2) came into effect from 1st July 2015. The said standards were further amendedw.e.f. 1st October 2017. The Company is in compliance with the same.

Significant or Material Orders

During the year under review there were no significant and material orders passed bythe regulators or court or tribunals which may impact the going concern status and itsoperations in future.

Material changes and commitments

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year and the date ofthis Report.

Prevention of Sexual Harassment of women at workplace

The Company has formulated a policy in respect of Sexual Harassment of women atworkplace as per the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition & Redressal) Act 2013. There was no complaint received bythe Company during the financial year 2017-18 under the aforesaid Act.

Risk Management

Your Company recognizes that risk is an integral part of business and is committed tomanaging the risks in proactive and efficient manner. Your Company periodically assessesthe risks in the internal and external environment along with treating the risks andincorporates risk management plans in its strategy business and operational plans.

The Audit Committee and the Board are appraised of the significant risks andmitigations efforts made by the Management in its quarterly meetings.

The business plan for the future are devised and approved by the Board keeping in mindthe risk factors which can significantly impact the performance of the particularbusiness. All major capital expenditures commitments are subject to scrutiny by the Boardand investments are permitted only on being satisfied about its returns or utility to theCompany. There are no risks which in the opinion of the Board threaten the existence ofthe Company.

Insurance

The Company has taken all the necessary steps to insure its properties and insurableinterests as deemed appropriate and also as required under the various legislativeenactments.

Particulars of Employees and Related Disclosures

The details of remuneration of directors KMPs and employees as required under Section197 of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 forms part of this Report as Annexure I.However as per the provisions of Section 136(1) of the Companies Act 2013 the AnnualReport is being sent to the Members and others entitled thereto excluding the informationon employees remuneration particulars as required under Rule 5(2) and (3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 which is available forinspection by the Members at the Registered Office of the Company during business hours onworking days of the Company up to the date of the ensuing Annual General Meeting. If anyMember is interested in obtaining a copy thereof such Members may write to the Company inthis regard.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Particulars in respect of conservation of energy technology absorption foreignexchange earnings and outgo as required under Section 134(3)(m) of the Companies Act2013 read with Rule 8 of the Companies (Accounts) Rules 2014 are set out in a separatestatement Annexure A attached hereto and forms part of the Report.

Nomination and Remuneration Policy

The Board has adopted on recommendation of the Nomination and Remuneration Committeea policy for selection and appointment of Directors Senior Management and theirremuneration.

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

As per the Policy the remuneration / compensation to the Whole-time Directors shall berecommended by the Nomination and Remuneration Committee to the Board for its approval.However the remuneration compensation to Whole-time Directors shall be subject to theapproval of the shareholders of the Company and Central Government wherever required.Further the Non-Executive Directors shall be entitled to the fees for attending meetingsof Board and Committees within the limits prescribed in the Companies Act 2013.

Particulars of the Company's Remuneration Policy and information required under Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule 2014 asset out in Annexure D forms part of this Report. A brief detail of the Policy is alsogiven in the Corporate Governance Report.

Fixed Deposits

During the year under review your Company has not accepted or renewed any Depositwithin the meaning of Section 73 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 and as such there are no outstanding deposits interms of the Companies (Acceptance of Deposits) Rules 2014. Hence the requirement offurnishing details of deposits which are not in compliance of Chapter V of the Act is notapplicable.

Annual Return

An extract of Annual Return pursuant to the provisions of Section 192 of the CompaniesAct 2013 read with Rule 12 of the Companies (Management and Administration) Rules 2014is furnished in form MGT-9 in Annexure G of this Report.

Loans Investments and Guarantees by the Company

Details of Loans Guarantees and Investments covered under the provision of Section 186of the Companies Act 2013 are given in the Notes to the Financial Statement.

Green Initiative

Electronic copy of the Annual Report 2017-18 and the Notice of the 39th Annual GeneralMeeting are sent to all members whose email addresses are registered with the Company /depository participant(s). For members who have not registered their email addressesphysical copies are sent in the permitted mode.

Your Directors would like to draw your attention to Section 20 of the Companies Act2013 read with the Companies (Management and Administration) Rules 2014 as may beamended from time to time which permits paperless compliances and also service of notice /documents (including annual report) through electronic mode to its members. To supportthis green initiative we hereby once again appeal to all those members who have notregistered their e-mail addresses so far are requested to register their e-mail address inrespect of electronic holding with their concerned Depository Participants and/ or withthe Company.

Business Responsibility Report

The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is not applicable toyour Company for the financial year ended 31st March 2018.

CAUTONARY STATEMENTS

Statements in this Directors' Report and Management Discussion and Analysis describingthe Company's objectives projections estimates expectations or predictions may be'forward-looking statements' within the meaning of applicable securities laws andregulations. Actual results could differ materially from those express or implied.Important factors that could make a difference to the Company's operations include rawmaterial availability and its prices cyclical demand and pricing in the Company'sprinciple markets changes in Government regulations Tax regimes economic developmentswithin India and the countries in which the Company conducts business and other ancillaryfactors. . The Company assumes no responsibility to publicly amend modify or revise anysuch statements on the basis of subsequent developments information or events.

Appreciation

Your Directors wish to acknowledge the co-operation and assistance extended to theCompany by the Company's Bankers and State & Central Government agencies. YourDirectors also wish to place on record their appreciation of the contribution made byemployees at all levels.

Your Directors also acknowledge with gratitude the support of the shareholders otherinvestors customers dealers agents and suppliers for their continued faith and supportwhich has helped the Company to sustain its growth even during these challenging times.

For and on behalf of the Board of Directors
Praful A. Shah
Chairman & Managing Director
Mumbai 30th May 2018 DIN: 00218143