The Board of Directors hereby submit their Report and the Audited Financial Statementsof the Company for the Financial Year (FY) ended March 312017.
The Company's performance during the financial year under review is summarized asfollows:
(Rs. In Lakhs)
|Particulars || |
| ||FY 16-17 ||FY 15-16 (Six Months) ||FY 16-17 ||FY 15-16 (Six Months) |
|Revenue from Operations and Other Income (Total Revenues) ||9048.08 ||10532.00 ||9607.00 ||10584.00 |
|Earnings before Interest Depreciation & Taxation (EBIDT) ||-1313.00 ||-1021.00 ||-472.00 ||-858.00 |
|Profit / (Loss) after Interest and before Depreciation and Tax ||-2981.00 ||-1997.00 ||-3095.00 ||2366.00 |
|Depreciation ||711.00 ||355.00 ||815.00 ||407.00 |
|Profit / (Loss) after Depreciation before Tax ||-3692.00 ||-2352.00 ||-3910.00 ||-2773.00 |
|Profit before tax (PBT) ||-3692.00 ||-2352.00 ||-3910.00 ||-2773.00 |
|Profit after tax (PAT) ||-3383.00 ||-2434.00 ||-3050.00 ||-2458.00 |
|Other Comprehensive Income ||180.00 ||43.00 ||181.00 ||45.00 |
|Profit after tax (PAT) and after Minority Interest ||-3203.00 ||-2391.00 ||-2869.00 ||-2413.00 |
Note : The Company has adopted Indian Accounting Standards (IND AS) with effect fromApril 1 2016 and accordingly this financial results alongwith the comparatives have beenprepared in accordance with the recognition and measurement principles stated therein. Theabove figures are extracted from Standalone and Consolidated financial statements as per'IND AS'.
The consolidated financial statements for the FY 2016-17 of the Company and itssubsidiary company together with the Auditors Report thereon are attached.
The Financial Results for the FY 2015-16 were drawn for a period of 6 (six) monthsending March 31 2016 to align with the definition of financial year as per section 2(41)of the Companies Act 2013. The current year's figures are for a period of 12 (twelve)months commencing from April 12016 to March 312017 hence not directly comparable withthe previous year.
Management Discussion and Analysis Report Industry Structure and Development:
The Textiles industry currently contributes 5% to India's GDP and also 14% to theoverall index of Industrial Production. Over the years Home Textile and Apparel sectorhave registered a Compound Annual Growth Rate (CAGR) of 11% and Technical Textile sector12%. With the current government's special policy thrust on textile industry it will findencouraging trend and will increase CAGR. Textile sector will account for one of thehighest earning for the country but existing many of the spinning mills are struggling forsurvival due to higher input cost prevailing throughout the year
Textile industry is labour intensive also second largest employer of country next toagriculture. The Indian Textile Industry produces wide variety of products suitable todifferent markets both within India and across the globe hence the Government isproviding special incentives for cotton growing areas.
Among the various areas the man-made fibre industry is playing a key role in Indianexport contribution of 17% and further demand is increasing day-by-day.
At the global level this constitutes 70% of production while cotton accounts for only30%. However in our country the situation is reverse with 40% from man-made fibre and 60%contribution from cotton. However this year cotton cost remained higher compared toprevious years.
Opportunities and Threats:
The year 2016-17 turned out to be a mixed bag for textile industry as the Governmentunveiled reform to thrust the sector.
The Technical Textiles is new opportunity which the Company can explore.
Technical Textiles is a high technology sunrise sector which is steadily gaining groundin India. Technical textiles are functional fabrics that have applications across variousindustries including automobiles civil engineering and construction agriculturehealthcare industrial safety personal protection etc. Based on usage there are 12technical textile segments; Agrotech Meditech Buildtech Mobiltech Clothtech OekotechGeotech Packtech Hometech Protech Indutech and Sportech.
Technical Textile products derive their demand from development and industrializationin a country. Given the large scale at which emerging nations are industrialising themarket for technical textiles can only be expected to grow in tandem with industrialgrowth in different parts of the world. Based on past trends of growth and estimated enduser segment growth the Working Group on Technical Textiles for 12th Five Year Plan (FYP)projected the market size to reach Rs. 158540 crore by 2016-17 at a year-on-year growthrate of 20% during the 12th Five Year Plan. Technical Textiles provides new opportunity tothe Indian textile industry to have long term sustainable future. Despite of achievinghigh growth rate the per capita consumption oftechnical textiles in India is1.7perkgvis-avis 10-12 kg in developed countries. Globally the technical textilescontribute to about 27 percent of textile industry in some of the western countries itsshare is even 50 percent while in India it is ameagre 11 percent.
The biggest challenge facing the Indian Textile industry is competition from the otherlow cost neighbouring countries which attract more business from the international marketbecause of lower production cost ease in doing business and low currency rate.
The competition from Bangladesh Vietnam Indonesia and Pakistan poses a significantchallenge to Indian exports. In the last few years these countries have given a specialimpetus to their textile industry and been able to build new capabilities with latesttechnology.
Segment-wise product-wise performance:
During the period the Company has developed several new products. Compact hosiery yamand weaving yam for export purpose and speciality products in Slub category fancy yam andmelange yam. During the period under review the Company exported yam to many countrieslike Bangladesh Pakistan Portugal Chile China Sri Lanka Egypt Mexico and UnitedKingdom. Sale of dyed yam remains challenging due to scarcity of water.
The Government of India introduced two major economic reforms during the year underreview. The first is the Goods and Service Tax (GST) a destination based tax that willreplace the existing Central and State indirect taxes which is to come in force from July12017 and the benefits of which would be visible by the end of FY 2017-18. The secondreform was the demonetization of all the existing 500 and 1000 rupee notes as legal tenderand introduction of new 500 and 2000 rupee denomination notes. This in the long run isexpected to result in significant benefits in the form of transition towards a cashlesseconomy expansion of digital financial systems and extension of the tax net.
According to ICRA (formerly Investment Information and Credit Rating Agency of IndiaLtd) the impact of the Goods and Services Tax (GST) is likely to be neutral to positiveacross segments in the Textile industry compared to the current tax regime.
The financial year 2017-18 is expected to be a good year for the Indian economy. Thebenefits of the important reforms to be implemented during 2017-18 will be seen during theyear.
Since Company has main focus for the supply of cotton grey and dyed yam hence allefforts were on the production and marketing of these product mix for domestic as well asInternational market. The Company has also focused to sell more Terry Towels productswhich have been accepted by the market and proposes to introduce various varieties whichwould cater to different segments of the market. During the year the Company suffered dueto industrial unrest till May 13 2016 and for an intermittent period till January' 2017which created significant impact on operations of the Mill it took time to stabilize theproduction and capacity utilization. Inspite of all the odd challenges the Mill has wasable to utilize more than 55% of its capacity and has also exported its products.
The Company is in the process of revamping the business aspects and accordingly theCompany is approaching its old and new customers. Management is optimistic that it will dogood business this year. The Company has developed new products such as Yoga Mat CottonMelange Blanket Acrylic Wool Blanket Multi-Purpose Cotton Shopping Bags Floor MatsViscose Melange Coloured Ladies Knit Tops & Pants Woven Bermuda Men's Polo V neckand Round neck Tee Kids Undergarments Kids Vests Kids Woven Half pants School UniformMelange Track Pants Cotton and Bamboo Towels & Napkins. The Company expects itsproducts to do well in the market in near future and the response to new products wasgood.
Risks and Concerns:
The Company has a robust Enterprise Risk Management framework which enables it to takecertain risks to remain competitive and achieve higher growth and at the same timemitigate other risks to maintain sustainable results.
Risk management process includes identification of risks its assessment mitigationmeasures monitoring and reporting. While the Company through its employees and ExecutiveManagement continuously assess the identified Risks and its mitigation measures annually.
The Company has identified Regulatory risks Human resource risks Commodity pricerisks.
Key Risks include fluctuation in raw materials prices labour unrest increased globaland local competition sales channel disruption. Major Human Resource risks includeretaining the existing talent pool and attracting new talent. Regulatory Risks includechanges in taxation regime government policies with respect to textiles pollutioncontrol Karnataka Electricity Board and regulatory compliances.
Details of Subsidiary/Joint Ventures/Associate Companies
Gokak Power & Energy Limited (GPEL)
GPEL is engaged in generation transmission distribution trading of hydro power andother renewal and non-renewal sources of energy. The significant portion of powergeneration is used for captive consumption of Holding Company.
During the year under review GPEL has recorded gross income of Rs.l 128.98 lakhs(previousperiodRs. 337.68 lakhs) and net loss after tax of Rs. 15.02 lakhs (previousperiod Rs. 279.10 lakhs). The Financial Results for the FY 2015-16 were drawn for a periodof 6 (six) months ending March 31 2016 to align with the definition of financial year asper section 2(41) of the Companies Act 2013. The current year's figures are for a periodof 12 (twelve) months ending March 312017 hence not directly comparable with theprevious year. The Regulatory Authorities have made several changes to the Renewal EnergyCertificate (REC) mechanism as applicable to GPEL. This has meant that despite a highergeneration of electricity during the year on account of the non-availability of RECduring the year though the Company has been able to reduce the loss the results have notbeen positive. GEPL is making all efforts to qualify for the REC as may be allowed.During the year under review overall flow of water from various sources (dams rivers andcanal) was significantly better as compared to previous period as a result of whichgeneration of electricity has slightly improved.
Details of GPEL are set out in the statement in Form AOC-1 pursuant to section 129 ofthe Companies Act 2013 and is attached herewith as Annexure I to this Report.
The Company does not have anyjoint ventures/associate companies. Share Capital andPreference Shares
During the year under review the Company has increased Authorised Share Capital fromRs. 7700 lakhs to Rs.l 1200 lakhs.
The Paid up Share Capital of the Company during the year under review has beenincreased from Rs. 4649.93 lakhs to Rs.11149.93 lakhs pursuant to allotment of65000000 Non-cumulative Non-convertible Redeemable Preference Shares of Rs.10 eachaggregating to Rs.65 crores on private placement basis to Shapoorji Pallonji and CompanyPrivate Limited Promoters of the Company. During the year under review the Company hasnot issued any shares with differential voting rights or 'sweat equity shares' and has notgranted any stock options.
As at March 31 2017 none of the Directors of the Company hold shares or convertiblesecurities in the Company.
Dividend and Transfer to Reserves
In view of the losses during the current year the Board of Directors regret theirinability to declare dividend.
No amount was transferred to the reserves during the year.
Material changes and commitments
There were no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of the Company to whichthe financial statements relate and the date ofthe Report.
Internal Control Systems and their adequacy:
The Company has an Internal Control system which ensures that all transactions aresatisfactorily recorded and reported and all assets are protected against loss from anunauthorized use or otherwise. The internal control systems are supplemented by aninternal audit system carried out by independent firm of Chartered Accountants and aperiodical review by the management. The findings of such Internal Audits are addressedthrough suitable corrective measures. The Audit Committee of the Board meets at regularintervals and advises on significant issues raised by both the Internal Auditors and theStatutory Auditors. The process of internal control systems statutory compliance riskanalysis information technology and its management are woven together to provide ameaningful support to the management of the business. The system adopted especiallyrelating to internal control systems are adequate and commensurate with the nature of itsbusiness and size of its operations though continues efforts are being made to improvethe same.
Kalyaniwalla & Mistry LLP Chartered Accountants the statutory auditors of theCompany have audited the financial statements included in this annual report and haveissued report inter alia on the internal financial reporting as defined under section143 of the Companies Act 2013.
During the year under review the Company has not accepted any deposits from Publicfalling within the meaning of Section 73 of the Companies Act 2013 and The Companies(Acceptance of Deposits) Rules 2014.
Particulars of loans guarantees or investments under section 186
Particulars of Loans Guarantees or Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to the Financial Statements.
Directors and Key Managerial Personnel
As per the provisions of Section 152(6) ofthe Companies Act 2013. Mr. Vasant N.Sanzgiri is due to retire by rotation at the ensuing Annual General Meeting and beingeligible seeks re-appointment. The Board of Directors recommend his re-appointment asDirector of the Company.
Mr. Mohan Ketkar was appointed Company Secretary and Compliance Officer ofthe Companywith effect from July 82016. He resigned with effect from January 22017.
Mr. Rakesh M. Nanwani was appointed Company Secretary and Compliance Officer of theCompany with effect from May 262017. The Company has received declarations from all theIndependent Directors of the Company confirming that they meet with the criteria ofIndependence as prescribed both under the Companies Act 2013
and Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) 2015 [ (SEBI(LODR2015 ]. Independent Directors are familiarized with theirroles rights and responsibilities in the Company through presentation made to them fromtime to time. The disclosures required pursuant to Regulation 36 (3) of the SEBI(LODR)2015 are given in the Notice of the Annual General Meeting forming part of the AnnualReport and and Schedule V of SEBI(LODR) 2015 forms part ofthe report.
Audit Committee of the Board of Directors
The details pertaining to the composition of the Audit Committee of the Board ofDirectors are included in the Corporate Governance Report which forms part of this report.
Meetings of the Board
The Board met at least once in each quarter and 8 (eight) meetings of Board were heldduring the year and the maximum time gap between two Board meetings did not exceed thetime limit prescribed under the Companies Act 2013. The details have been provided in theCorporate Governance Report.
Pursuant to the provisions of the Companies Act 2013 and SEBI (LODR) 2015 the Boardhas carried out an annual performance evaluation of its own performance the directorsindividually as well as the evaluation of the working of its Audit Committee Nominationand Remuneration Committee and Stakeholders' Relationship Committee. In a separate meetingof Independent Directors performance of Non-Independent Directors of the Board as a wholeand the performance ofthe Chairman were evaluated.
The Board has on the recommendation of the Nomination and Remuneration Committeeframed and adopted a policy for selection and appointment of Director Senior Managementand their remuneration. Remuneration Policy of the Company acts as a guideline fordetermining inter alia qualifications positive attributes and independence of aDirector matters relating to the remuneration appointment removal and evaluation ofthe performance of the Directors Key Managerial Personnel and Senior Managerialpersonnel.
Nomination & Remuneration Policy is annexed as Annexure II to this Report.
Disclosure as required under section 197(12) ofthe Companies Act 2013 read with Rule 5of The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 areannexed as Annexure III to this ReportA
Auditors and Auditors Report Statutory Auditors
The existing statutory auditors Kalyaniwalla & Mistry LLP Chartered Accountantswill retire upon the conclusion of the forthcoming Annual General Meeting ofthe Companyin compliance with the provisions relating to mandatory rotation of Auditors under theCompanies Act 2013.
The Audit Report of the retiring auditors Kalyaniwalla & Mistry LLP CharteredAccountants forms part of the Annual Report
The Auditors' Report does not contain any qualification. The Auditors have referred toin their Report certain matter which read with Note 52 of the notes forming part of theaccounts is self explanatory.
The Board of Directors of the Company at their meeting held on May 26 2017 havesubject to the approval of the shareholders of the Company recommended the appointment ofBatliboi & Purohit Chartered Accountants (Firm Registration No. 101048W) as thestatutory auditors of the Company to hold office from the conclusion of Eleventh AnnualGeneral Meeting till the conclusion of Sixteenth Annual General Meeting of the Company.
Batliboi & Purohit Chartered Accountants have confirmed their eligibility underSection 141 of the Act and the Rules framed thereunder for appointment as Auditors of theCompany. As required under Regulation 33 (d) of the SEBI (LODR) 2015 the auditors havealso confirmed that they hold a valid certificate issued by the Peer Review Board of theInstitute of Chartered Accountants of India.
As per the requirements of section 148 of the Companies Act 2013 read with TheCompanies (Cost Records and Audit) Rules 2014 the cost accounts of the Company arerequired to be audited by a Cost Accountant. The Board of Directors of the Company haveon the recommendation of the Audit Committee appointed Messrs. A G Anikhindi & Co.Cost Accountants as CostAuditors for the financial year 2017-18 on a remuneration of Rs.3.00 lakhs and the Cost Auditor plus out of pocket expenses. As required under theCompanies Act 2013 necessary resolution seeking Shareholders ratification for theremuneration to Cost Auditor is included in the Notice convening the ll*11 Annual GeneralMeeting ofthe Company.
Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Kiran Desai & Associates Company Secretaries to conduct Secretarial Auditofthe Company. The Report of the Secretarial Auditor is annexed herewith as Annexure IV tothis Report.
Corporate Social Responsibility
The provisions of the Companies Act 2013 relating to Corporate Social Responsibilitywere not applicable to the Company for the FY 2016-17. The Board of Directors of theCompany has however voluntarily constituted a Corporate Social Responsibility Committeeincompliance with Section 135 ofthe Act.
The Company is spending on afforestation schools and hospitals and continued tosupport causes of public utility both directly and indirectly in the field of educationmedical relief relief of poverty.
The Company is committed to its stakeholders to conduct business in an economicallysocially and environmentally sustainable manner that is transparent and ethical.
Vigil Mechanism/ Whistle Blower Policy
The Company has Whistle Blower Policy/Vigil Mechanism to deal with instances of fraudand mismanagement if any. The policy is also available on the website ofthe Company.
Extract ofAnnual Return
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as Annexure V to this Report.
Related Party Transactions
All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of business. There were no materiallysignificant related party transactions made by the Company with the Promoter DirectorsKey Managerial Personnel or the designated persons which may have a potential conflictwith the interest of Company at large except power purchase from the subsidiary companyfor captive consumption and sale.
All related party transactions are placed before the Audit Committee for approval.Prior omnibus approval of the Audit Committee is obtained for transactions which are of aforeseen and repetitive nature. The transactions entered pursuant to the omnibus approvalso granted are placed before the Audit Committee on a quarterly basis.
Form AOC-2 is annexed as Annexure VI to this report pursuant to section 188 oftheCompanies Act 2013. The policy on Related Party Transactions as approved by the Board isuploaded on the Company's website.
The guiding principle of the Code of Corporate Governance is 'harmony' i.e balancingthe need for transparency with need to protect the interest of the Company balancing theneed for empowerment at all levels with the need for accountability and interaction withall stakeholders including shareholders employees lenders and regulatory authorities. Adetailed report on Corporate Governance is annexed as a part of this Annual Report and theManagement Discussion and Analysis report forms part of this report.
A Certificate on compliance of conditions of Corporate Governance issued by Kiran Desai& Associates Company Secretaries is annexed to the Report on Corporate Governance.
Significant and Material Orders passed by the Regulators or Courts
There are no significant and material orders passed by the Regulators /Courts whichwould impact the going concern status and Company's operations in future.
The Company ensures compliances of applicable laws.
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013
The Company has zero tolerance for sexual harassment at workplace and has adopted apolicy on prevention prohibition and redressal of sexual harassment at workplace as perthe provisions of Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 and Rules made there under for prevention prohibition and redressalof complaints of sexual harassment at workplace.
During the year under review no complaints on sexual harassment were received.
Directors' Responsibility Statement
Pursuant to the provisions of Section 134(3)(c) and 134 (5) of the Companies Act 2013and based on the representations received from the operating management the Directorshereby confirm
a. that in the preparation of the annual accounts the applicable Accounting Standardshad been followed along with proper explanation relating to material departures;
b. that they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit or loss of the Company for that period;
c. that they have taken proper and sufficient care to the best of their knowledge andability for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities;
d. that they have prepared the annual accounts on a 'going concern' basis
e. that they have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectively and
f. that they have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
Human Resources / Industrial Relations
Developments in Human Resources / Industrial Relations front:
The challenge before the Company is to retain employees and work in a competitiveenvironment of hiring and benchmark. The previous year was marred by industrial unrest andthe Company is trying to stabilise its operations and improve productivity and efficiency.In this situation hiring talent particularly for spinning mill is challenging. TheCompany in order to retain talent has initiated the process of providing opportunities forupward career growth and provides training wherever necessary to enable the employee toassume higher responsibilities.
The workers went on illegal strike on 09.03.2016 and even after discussion no solutioncould come out and workers sat inside the mills from 09.03.2016 to 16.03.2016 withoutperforming any work. In order to save life and property due to tense situation when largenumber of workers were illegally occupying company premises company declared lockout witheffect from 17.03.2016 to 12.05.2016.The lockout was lifted with effect from 13.05.2016.
Again on 22.05.2016 majority of workers have all of a sudden and without anyprovocation left the work place and did not come back and indulged in illegal strike.During June 2016 to December 2016 only minuscule operations were going as very few workersreported and majority of workers were not ready to report for work on account of threatand intimidation. The situation was tense during this period and section 144 ofThe Code ofCriminal Procedure 1973 was in force.
Only after January 2017 the situation improved and more and more number of workersstarted reporting for work that were allowed only after signing the undertaking. Thesituation at mill premises is peaceful and we are trying to improve in each area ofproductivity and efficiency to reduce the operational cost.
Particulars of Employees and Energy Conservation Technology Absorption and ForeignExchange Earnings and Outgo
a. The information required pursuant to Section 197 of the Act read with Rule 5 ofTheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees of the Company will be provided upon request. In terms of Section 136 of theCompanies Act 2013 the Report and Accounts are being sent to the Members excluding theinformation on employees' particulars which is available for inspection by the Members atthe Registered Office of the Company during the business hours on working days of theCompany. Any member interested in obtaining such particulars may write to the CompanySecretary at the Registered Office of the Company.
b. Information relating to the Conservation of Energy Technology Absorption andForeign Exchange Earnings and Outgo stipulated under Section 134(3)(m) of the CompaniesAct 2013 read with Rule 8 ofThe Companies (Accounts) Rules 2014 is annexed herewith asAnnexure VII to this report.
Statements in the Board's Report and Management Discussion and Analysis describing theCompany's objectives estimates expectations or projections outlook etc. may be'forward looking statements' within the meaning of the applicable securities laws andregulations. Actual results may differ materially from those expressed or implied due tofactors beyond control. Important factors that could make a difference to the Company'soperations include economic conditions affecting demand/supply and price conditions in thedomestic and overseas markets in which the Company operates changes in the governmentregulations tax laws and other statutes and other factors such as litigations andindustrial relations.
Yours Directors acknowledge and thank all stakeholders of the Company viz. customersmembers employees dealers vendors banks and other business partners for their valuablesustained support and encouragement. Your Directors look forward to receiving similarsupport and encouragement from all stakeholders in the years ahead.
For and on behalf of the Board of Directors
|Ramesh R. Patil ||Vasant N. Sanzgiri |
|Chief Executive Officer & Managing Director ||Director |
Place: Mumbai Date : May 26 2017