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Garden Silk Mills Ltd.

BSE: 500155 Sector: Industrials
NSE: GARDENSILK ISIN Code: INE526A01016
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VOLUME 450
52-Week high 19.85
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Mkt Cap.(Rs cr) 25
Buy Price 5.85
Buy Qty 1.00
Sell Price 6.09
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OPEN 6.05
CLOSE 5.95
VOLUME 450
52-Week high 19.85
52-Week low 4.75
P/E
Mkt Cap.(Rs cr) 25
Buy Price 5.85
Buy Qty 1.00
Sell Price 6.09
Sell Qty 399.00

Garden Silk Mills Ltd. (GARDENSILK) - Director Report

Company director report

MANAGEMENT'S DISCUSSION AND ANALYSIS

Dear Members

Your Directors present the 40th Annual Report together with the Audited FinancialStatements of the Company for the financial year ended 31st March 2019.

The Management's Discussion and Analysis Report as required under the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 is forming a part of this report.

Summarised Financial Results

The Company's performance during the financial year ended 31st March 2019 as comparedto the previous financial year is summarised below:

2018-19 2017-18
Sales / Revenue from Operations 3480.73 3033.40 *
Earnings Before Interest Tax Depreciation and Amortization (EBITDA) 190.63 180.76
Less: Finance Costs 204.10 188.62
Profit / (Loss) before Depreciation and Tax (13.47) (7.86)
Less: Depreciation & Impairment Losses 72.84 81.11
Less: Exceptional Items (Net) 3.46 0.00
Profit / (Loss) before tax (89.77) (88.97)

* Net of Excise Duty

Review of Operations

Your Company achieved 14.75% year-on-year (YoY) growth in gross operating revenue at '3480.73 Crore for FY 19 as compared to ' 3033.40 Crore (net of excise duty) in theprevious fiscal. The increase in turnover was primarily due to improved price realisationin chips and yarn segments coupled with higher sale volume in chips segment.

Despite the continuing challenging operating environment the Company achieved improvedoperating EBITDA (including other income) for FY 19 at ' 190.63 Crore against ' 180.76Crore in FY 18. Finance costs for FY 19 remained high at ' 204.10 Crore as compared with '188.62 Crore for FY 18 which resulted in negative PAT.

The overall production of chips and polyester melt was higher at 323360 MT during FY 19as compared to 319979 MT in FY 18. In volume terms sale of chips for FY 19 was higher at172398 MT compared to 169408 MT in the previous year. In value terms also sale of chipsfor FY 19 was higher at ' 1423.32 Crore as compared to ' 1112.04 Crore in the previousyear.

During FY 19 capacity utilisation level in our Polyester Filament Yarn (PFY) includingprocessed yarn declined slightly. The PFY production during FY 19 was at 172673 MT ascompared to 176630 MT in the previous year. Due to maintenance shutdowns taken during aperiod of significant price volatility the volume of sale of PFY including processed yarndeclined in FY 19 at 174193 MT as compared to 182847 MT in previous year.

Owing to higher prices in POY and processed yarn we achieved higher sales of ' 1897.91Crore in FY 19 as compared to ' 1808.32 Crore in previous year.

Your Company maintained its product leadership in Polyester Weaving Division. Sale ofgrey fabrics was ' 66.79 Crore in FY 19 as compared to ' 66.55 Crore in previous year.Finished fabric segment contributed ' 66.48 Crore in the total operating revenue in FY 19.

We achieved substantial growth in our income from export sales which contributed '1094.80 Crore to the operating income for FY 19 as compared to ' 589.37 Crore in previousyear. Exports were primarily that of chips which helped the Company improve its chipmargins over the previous year. Our global competitiveness and profitable exports toquality customers have reduced pressure of sales in the relatively weak domestic markets.

Introduction of GST helped our performance in the domestic chips and yarn market aslevel playing field has been finally created yet the local markets continued to be weakand demand for fabrics remained subdued.

Higher raw material prices in the year under review resulted into higher input cost andpressure on the operating margins across the board. However prudent inventory andproduction management has helped the Company protect margins against adverse impact of rawmaterial price volatility. The Company was able to secure its full raw material supplies(except in couple of months during the year).

The Company continued its efforts to expand its customer base and develop new products.Your Company maintains its focus on cost reduction at the manufacturing level via itscontinuous improvement program.

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 planning andsupply of finished goods.

Your Company continues to have price and product leadership in its key specialty yarnproduct segments: especially cationic fine-denier and spandex-covered yarns. It is alsoan important player in mother-yarn and nylon yarns. It continues to be perceived in themarket as a premium producer of quality chips yarn and fabric even for its commodityproducts.

The overall performance of the Company for FY19 can be considered satisfactory giventhe financial constraints facing the Company and despite steep decline in raw materialprices in the second half of the year.

Dividend

Considering the loss incurred by the Company your Directors do not recommend anydividend on equity shares for the financial year 2018-19.

Transfer to Reserves

In absence of distributable profits / earnings it is not proposed to transfer anyamount to reserves for the financial year 2018-19.

Nature of Business

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 for financialrestructuring arrangement including identifying a suitable investor. The lenders haveexpressed optimism about the successful closure of above resolution in a time-bound mannerand the company has thus accordingly prepared financial results on a going-concern basis.

Overview of the economy

India continued to remain the fastest growing major economy in the world in 2018-19despite a moderation in its GDP growth from 7.2% in 2017-18 to 6.8% in 2018-19. Worldoutput growth also declined from 3.8% in 2017 to 3.6% in 2018 and has slowed further sofar in 2019.

Indian's economy grew at the average of 7.4% during the last five years (2014-19). Theaverage growth rate of India was not only higher than China's between 2014-15 and 2017-18but was much higher than that of other major economies as well.

The global economy is facing major headwinds owing to the US-China trade war and thevarious geopolitical risks which has impacted global demand for manufactured productsseverely. Polyester demand is relatively inelastic and is less affected so far.

India's rupee is likely to be affected by China's economic slowdown leading tocompetitive devaluation. Rupee may come under stress due to global factors. The Indianrupee was at ' 69.17 to a US$ as on 31st March 2019 as compared to ' 65.17 to a US$ as on31st March 2018. A weakening rupee increases the price of polyester however the lowprice of crude (a consequence of global weakness) should more than compensate to keepprices in check.

A weak global economy primarily hurts Indian polyester by worsening export prospectsand increasing chances of dumping of textiles and garments from countries like China andBangladesh.

The Indian economy while relatively strong so far is showing signs of weakness whichmay impact polyester demand to some extent.

Industry Scenario

During the year under review the market of Polyester Filament Yarn remained subdued.While demand continued to grow briskly the supply overhang remains and yarn margins wereweaker than in the previous year. Industry polyester chip margins were stable but theCompany was able to improve its margins owing to a better customer profile.

The average price of crude in FY19 was about $70 per barrel much higher than in FY18($ 58). This resulted in much higher raw material and thus finished goods prices whichimpacted demand to some extent. Yet the global slowdown has led to fall in crude and rawmaterial prices which should have a favourable effect going forward.

The current slowdown hinges around the shortage of liquidity and incomes in the ruraland the informal sectors. This has impacted the production of intermediate and finishedgoods such as yarn and fabrics.

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.

Opportunities Challenges Threats Risks and Concerns

Global fibre consumption is dominated by man-made fibres having 70 per cent of sharewhile natural fibre constitutes only 30 per cent. Contrary to the global trend fibreconsumption in India is skewed towards natural fibres especially cotton. The growth ofcotton is limited owing to less availability of agricultural land high prices and lowerversatility. Man-made fibres are dominated by polyester and increasingly fast growingpolyester filament yarn.

In future Indian polyester filament yarn manufacturers might get a larger pie of theglobal market at a time as China the world's largest producer of these products isexpected to reduce its share owing to rising labour costs.

Yet the polyester market is competitive and continuous efforts are necessary to remainahead though innovative and better products and fast adaptation to market trends.

High crude oil prices in FY19 worsened demand however the recent fall in has come as arelief for polyester yarn manufacturers still reeling from the demand shocks ofdemonetization and the Goods and Service Tax (GST) that impacted the downstreamunorganised wholesale and retail markets.

While currency risk and volatility has increased the Company covers its foreigncurrency exposures in forward market to minimise the impact of currency fluctuation.

Working capital cost has gone up as the businesses have to wait for tax refunds to comethrough. Pending tax refunds have resulted in liquidity constraints in the industry.

The current slowdown in consumer demand owing to weakness in Indian economy hasaffected near term demand however polyester demand being relatively inelastic it isexpected that this would be temporary in nature.

The key risk facing the Company is that despite its relatively strong EBITDA lendersare seeking to cut their exposure and have reduced working capital availability which isresulting in financial constraints which has already impacted performance and continues todo so.

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.

Business Outlook

The year FY19 was a challenging year that saw oil and raw material price volatilityresulting in fluctuations in finished goods prices and weak market sentiments. Despitethis our emphasis on increased products differentiation along with improved operationalefficiencies and careful working capital management helped us to deliver a reasonably goodperformance.

In the coming year it is expected that oil and raw material prices will be much lowerthan in FY19 which will result in more competitive prices for the end-consumer who hasbeen somewhat affected by the economic slowdown.

Competitive pressures are expected to continue to impact the profitability of theCompany and the industry in FY20 as well. While exports are somewhat subdued at presentthese markets are expected to get a boost in the coming months owing to downstreamexpansions by existing customers.

As the downstream industry gets accustomed to and embraces GST growth should pick upfurther.

The oversupply in the industry appears to be nearing its end with most healthycompetitors running at near full capacity once again. Very few expansions are nowanticipated in the spinning industry while the demand growth should ensure that marginsstart to improve again in the years to come.

Financial Performance

Discussion on financial performance with preference 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 the year under review volatility in raw material prices affected the workingcapital cycle as well as inventory management for the Company.

As the Company's accounts is a "non-performing asset" (NPA) with all theconsortium lenders it is facing financial constraints from its lenders who havesignificantly curtailed working capital availability.

Despite these challenges your Company during FY19 repaid ' 2.72 Crore towardsprincipal component of term loans from banks and financial institutions. Moreover thetotal outflow towards debt servicing including interest and other financial charges duringthe year 2018-19 amounted to ' 99.68 Crore. No fresh term loans were availed from banksand financial institutions during the year under review.

The Company's lenders are making efforts for a resolution through assignment of debtsor one-time settlement.

Share Capital

The Paid-up Equity Share Capital of the Company as on 31st March 2019 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 2019 none of thedirectors of the Company hold instruments convertible into equity shares of the Company.

Disclosures in respect of voting rights not directly exercised by employees

No disclosure is required under Section 67(3)(c) of the Companies Act 2013 read withRule 16(4) of Companies (Share Capital and Debentures) Rules 2014 in respect of votingrights not exercised directly by the employees of the Company as the provisions of thesaid section are not applicable.

Subsidiary Joint Venture and Associate Companies

The business activities of GAIA International - FZE a wholly owned subsidiary at AjmanFree Zone has been voluntarily closed down. Further in response to the Company'sapplication the Licensing Authorities i.e. Director General Ajman Free Zone has issuedthe cancellation certificate with effect from 9th August 2018.

Indian Accounting Standard (Ind AS)

As mandated by the Ministry of Corporate Affairs the Company has adopted IndianAccounting Standards ('Ind AS') from 1st April 2017 with a transition date of 1st April2016. The financial results for the year 2018-19 have been prepared in accordance with IndAS prescribed under Section 133 of the Companies Act 2013 read with the relevant rulesissued thereunder and the other recognized accounting practices and policies to the extentapplicable.

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 2018-19 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 2018-19. 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.

Directors and Key Managerial Personnel

The Board of Directors consists of nine members of which five are IndependentDirectors. The Board also comprises of one woman Director.

As per the provisions of Section 152(6) of the Companies Act 2013 and the Company'sArticles of Association Shri Suhail P. Shah (DIN: 00719002) Retire by Rotation at theensuing 40th Annual General Meeting and being eligible offers himself for re-appointmentas a Director of the Company.

Further consequent to the resignation of Mr. H. C. Mishra vide letter dated 12th July2018 LIC of India intimated to the Company vide its letter dated 29th August 2018 forwithdrawal of nomination of Shri H. C. Mishra on the Board of Directors of your Company.

Smt. Anita Mandrekar (DIN: 00623327) a Non-Executive Independent Director on the Boardresigned from the directorship of the Company with effect from 31st March 2019 due to heradvanced age and other personal commitments. The Directors places on record the valuablecontributions made by Smt. Mandrekar during her tenure with the Company. The Company is inprocess to identify and appoint an appropriate woman director on the Board.

The Board of Directors of the Company at its meeting held on 4th February 2019 onrecommendation of Nomination and Remuneration Committee re-appointed Shri Alok P. Shah asWholetime Director designated as Executive Director (ED) Chief Financial Officer (CFO)and Chief Operating Officer (COO) of the Company for a period of three years with effectfrom 1st June 2019 subject to approval of shareholders at the ensuing annual generalmeeting.

The Board also re-appointed Shri Praful A. Shah as Chairman and Managing Director ofthe Company for a period of three years with effect from 1st September 2019 subject toapproval of shareholders at the ensuing annual general meeting. The necessary resolutionshave been proposed in the notice of 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.

As per the provisions of Section 203 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 Shri Praful A. ShahManaging Director Shri Alok P. Shah as Wholetime Director and CFO and Mr. Kamlesh B.Vyas Company Secretary and Compliance Officer are the key managerial personnel of theCompany.

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.

Disclosure Relating to Remuneration of Directors and Key Managerial Personnel

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.

Consolidated Financial Results

During the year under review the business activities of GAIA International - FZE awholly owned subsidiary at Ajman Free Zone has been voluntarily closed down. Further inresponse to the Company's application the Licensing Authorities i.e. Director GeneralAjman Free Zone has issued the cancellation certificate with effect from 9th August 2018.Accordingly preparation of consolidation of financial results as stipulated by Regulation33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015('Listing Regulations 2015') is not applicable.

Directors' Responsibility Statement

Pursuant to the requirements of Section 134(1)(c) read with Section 134(5) of theCompanies Act 2013 and on the basis of explanation and compliance certificate given bythe executives of the Company and subject to disclosures in the Annual Accounts and alsoon the basis of discussions with the Statutory Auditors of the Company from time to timewe state as under:

a) that in the preparation of the annual accounts for the year ended 31st March 2019the applicable accounting standards read with requirements set out under Schedule III tothe Act have been followed and there are no material departures from the same;

b) that the directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31st March 2019and of the profit of the Company for the year ended on that date;

c) that the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

d) that the directors have prepared the annual accounts on a going concern basis;

e) that the Board has laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

f) that the directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

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 19.

Number of meetings of the Board

Four meetings of the Board of Directors of the Company were held during the year. TheDirectors actively participated in the meetings and contributed valuable inputs on thematters brought before the Board from time to time. The intervening gap between theMeetings was within the period prescribed under the Companies Act 2013. For furtherdetails please refer to Corporate Governance section of this Annual Report.

Board evaluation

Pursuant to the provisions of the Companies Act 2013 and Regulation 17(10) the Boardhas devised a policy on evaluation of performance of Board of Directors Committees andIndividual directors. The policy is also in compliance to Regulation 19 read with ScheduleII Part D of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.

The Nomination and Remuneration Committee has defined the evaluation criteria for thePerformance Evaluation of the Board its Committees and individual Directors.

The Board has carried out the annual evaluation of its own performance and that of itsCommittees and individual Directors for the year pursuant to the provisions of theCompanies Act 2013 and the corporate governance requirements prescribed under the ListingRegulations.

The performance of the Board and individual Directors was evaluated by the Board afterseeking inputs from all the Directors. The criteria for performance evaluation of theBoard was based on the Guidance Note issued by SEBI on Board Evaluation which includedaspects such as Board composition and structure effectiveness of Board processescontribution in the long term strategic planning etc. The result of the evaluation issatisfactory and adequate and meets the requirements of the Company.

Independent Directors' Meeting

In compliance with the requirements of Schedule IV of the Companies Act 2013 ameeting of the Independent Directors was held on 23rd March 2019 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 Independent Directors have given declarations 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 2019.

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.

Nomination and Remuneration Policy

On recommendation of Nomination and Remuneration Committee the Board of Directors haveapproved a Nomination and Remuneration Policy for the appointment and remuneration of thedirector key managerial personnel (KMP) and other employees.

The key objectives of the Policy are to lay down the criteria for appointment andremuneration of Directors Key Managerial Personnel and Executives at Senior Managementlevel and recommend to the Board their appointment and also to formulate criteria forevaluation of performance of Independent Directors and the Board and to devise a policy onBoard diversity.

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. TheNomination and Remuneration Policy is available on the company's website.

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 also given in the Corporate Governance Report.

Auditors and Auditors' Report

In accordance with the provisions of the Companies Act 2013 M/s. Sharp & TannanAssociates Chartered Accountants (Firm Registration No.109983W) have been appointed asthe statutory auditors of the Company for a period of five years i.e. up to the conclusionof 43rd Annual General Meeting to be held for the adoption of the accounts for the yearending 31st March 2022. In view of the amendment to the said section 139 through theCompanies (Amendment) Act 2017 notified on 7th May 2018 ratification of auditor'sappointment is no longer required. The Notes on financial statement referred to in theAuditors' Report are self-explanatory and do not call for any further comments.

Cost Auditor and Cost Audit Report

M/s Smit Manubhai & Associates Cost Accountants (Firm Registration Number 2502)were appointed as the Cost Auditor for the financial year 2018-19 to conduct the audit ofthe cost records of the Company. During the year the Directors on the recommendation ofthe Audit Committee appointed M/s Smit Desai & Associates Cost Accountants (FirmRegistration Number 001876) as the Cost Auditor for the financial year 2019-20 on aremuneration of ' 2.00 Lacs plus out of pocket expenses and applicable taxes.

In terms of the provisions of Section 148(3) of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 as amended the remuneration payable tothe Cost Auditors has to be ratified by the Members of the Company. Accordingly at theensuing AGM the Board seeks ratification of the remuneration payable to the Cost Auditorsfor the financial year 2019-20.

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 have re-appointed Shri Kunjal Dalal of K. Dalal & Co. PracticingCompany Secretaries (CP No.3863) Surat to conduct the Secretarial Audit of the Company.The Report of the Secretarial Auditor for the year 2018-19 in the prescribed form MR-3 isattached as 'Annexure E'. As mentioned therein the delay of 18 days in filingquarterly Corporate Governance Compliance Report was inadvertent and unintentional. Exceptthe aforesaid remark there was no other qualification reservations o\r adverse remark ordisclaimer made by the Secretarial Auditor.

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 No.116769) as Internal Auditor of the Company for the financial year 2019-20.

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

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 2018-19 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 ' 1.25 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 thisReport.

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 partiesduring the financial year under review which were in conflict with the interest of theCompany.

The policy on related party transactions as approved by the Board is uploaded on theCompany's website. The Company's management ensures total adherence to the approved Policyon Related Party Transactions to establish Arm's Length Basis without any compromise.

Disclosure of related party transactions with the promoter(s) / promoter(s) group whichindividually hold 10% or more shareholding of the Company as per Indian AccountingStandards are set out in Note No.32 of the Financial Statements of the company. Theweblink for the Policy for Related Party Transaction is placed on the Company's websitehttp://www . gardenvareli.com/policies.aspx.

Your Directors draw attention of the members to Note No.32 to the financial statementswhich sets out related party disclosures.

Whistleblower Policy and Vigil Mechanism

Your Company has adopted a Whistleblower Policy and Vigil Mechanism to provide a formalmechanism to the Directors employees and its Stakeholders to report their concern aboutunethical behavior actual or suspected fraud or violation of the Company's Code ofConduct. Protected disclosures can be made by a whistleblower through several channels.

The policy provides for adequate safeguards against victimization of employees whoavail of the mechanism and also provides for direct access to the Chairman of the AuditCommittee.

It is affiirmed that no personnel of the Company has been denied access to the AuditCommittee. The details of the Policy are given in the Corporate Governance Report and thePolicy is also posted on the website of the Company athttp://www.gardenvareli.com/policies.aspx.

Prevention of Sexual Harassment ('POSH')

The Company is an equal opportunity employer and consciously strives to build a workculture that promotes the dignity of all employees. The Company has zero tolerance forsexual harassment at workplace and has adopted a Policy on prevention prohibition andredressal of sexual harassment at workplace. This is in line with the provisions of theSexual Harassment of Women at workplace (Prevention Prohibition and Redressal) Act 2013and the Rules made thereunder. There was no complaint of sexual harassment was received bythe Company during the financial year 2018-19 under the aforesaid Act.

Risk Management

Your Company recognizes that the risk is an integral part of business and is committedto managing the risks in proactive and efficient manner. Your Company periodicallyassesses the risks in the internal and external environment along with treating the risksand incorporates 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.

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 systemfor adopting GST in Oracle EBS12 has been successfully implemented by the Company. Thisproject has been carried out entirely in-house.

Internal Financial Control System and their Adequacy

The Company is having in place Internal Financial Control System. The InternalFinancial Control Systems with reference to the financial statements were adequate andoperating effectively. The Company has an adequate internal control system commensuratewith the size and scale of its business operations.

The Company has appointed Internal Auditors who periodically audit the adequacy andeffectiveness of the internal controls laid down by the management and suggestimprovements. Internal Auditors monitor and evaluate the efficacy and adequacy of internalcontrol systems in the Company its compliance with operating systems accountingprocedures and policies at all locations of the Company.

The Audit Committee of the Board of Directors approves the annual internal audit planperiodically reviews the progress of audits as per approved audit plans critical internalaudit findings presented by internal auditors status of implementation of auditrecommendations if any and adequacy of internal controls.

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 healthcheck-up are conducted for the employees at the work place. More emphasis is given tocleanliness workplace hygiene and good house-keeping.

The Company is continuously working on possibility of using appropriate technology toreduce the hazardous waste generation.

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.

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 thisenvironment to keep its employees highly motivated result oriented and adaptable tochanging business environment. Your Company's value proposition is based on providingvalue to our customer through innovation and by consistently improving efficiency at alllevels.

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 2019 was 4572 Nos.

Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of CompanySecretaries of India on Meetings of the Board of Directors and General Meetings.

Significant / Material Orders passed by the Regulators

There are no significant / material orders passed by the Regulators or Courts orTribunals impacting the going concern status of the Company and its operation 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 financial year and the date of thisReport.

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 'AnnexureH'. However as per the provisions of Section 136(1) of the Companies Act 2013 theAnnual Report is being sent to the Members and others entitled thereto excluding theinformation on employees remuneration particulars as required under Rule 5(2) and (3) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 which isavailable for inspection by the Members at the Registered Office of the Company duringbusiness hours on working days of the Company up to the date of the ensuing Annual GeneralMeeting. If any Member is interested in obtaining a copy thereof such Members may writeto the Company in this 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 attached hereto and forms part of the Report as 'Annexure A'.

Fixed Deposits

Your Company has not accepted any fixed deposits from the public during the financialyear ended 31st March 2019 and there are no outstanding deposits in terms of theCompanies (Acceptance of Deposits) Rules 2014.

Annual Return

Pursuant to Section 134(3)(s) of the Companies Act 2013 read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of the Annual Return isannexed herewith and forming part of the report 'Annexure F'. The weblink for theAnnual Return placed on the Company's website is http://www.gardenvareli.com/policies.aspx.

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 2018-19 and the Notice of the 40th 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 2019.

Cautionary Statement

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 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. TheCompany disclaims any obligation to update these forward-looking statements except as maybe required by law.

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
Mumbai 30th May 2019 Chairman & Managing Director
DIN:00218143