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H P Cotton Textile Mills Ltd.

BSE: 502873 Sector: Industrials
NSE: N.A. ISIN Code: INE950C01014
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NSE 05:30 | 01 Jan H P Cotton Textile Mills Ltd
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OPEN 17.95
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VOLUME 100
52-Week high 39.50
52-Week low 16.15
P/E
Mkt Cap.(Rs cr) 7
Buy Price 17.10
Buy Qty 3.00
Sell Price 17.95
Sell Qty 100.00

H P Cotton Textile Mills Ltd. (HPCOTTONTEX) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 38th Annual Report on the business andoperations together with the Company’s audited financial statements and theauditors’ report thereon for the financial year ended March 31 2019. The financialhighlights for the year are given below:

Financial Results

(Rs. In lacs)

Particulars March 31 2019 March 31 2018
Revenue from operations (net) 9140.85 10742.88
Other Income 209.34 80.07
Total Income 9350.19 10822.95
Profit/(Loss) Before Interest Depreciation & Tax(EBITDA) 490.66 431.28
Finance Cost 303.42 249.66
Depreciation 185.47 161.49
Profit/(Loss) before Tax (PBT) 1.77 354.33
Current Tax (including earlier years) 0.36 72.29
Deferred Tax 29.41 46.83
Profit/(Loss) after Tax (PAT) (28) 235.41
Basic EPS (Rs.) * (0.73) 6.18
Cash EPS (Rs)* (0.73) 6.18

*Face value Rs..10 per share

Business Performance

During the year your Company has achieved a turnover of Rs.9140.85 Lacs as againstRs.10742.88 Lacs during the corresponding previous financial year. The Earning beforeinterest depreciation and tax (EBIDTA) for the year under review was around Rs.490.66Lacs as compared to earning before interest depreciation and tax of around Rs.431.28 Lacsduring the previous financial year The profit before tax for the year wasRs.1.77 Lacs ascompared to Profit Rs.354.33 Lacs during the previous financial year. The exports of theCompany are slightly declined by 14.58% over previous year taking total exports toRs.6687.10 Lacs from Rs.7828 Lacs due to devaluation of home currencies against the USDin the companies Export Market which led to expensive imports from those countries andhence resulting in reduction of revenue.

Appropriations

Reserves

Total reserves and surplus of the Company has been reduced to Rs.1444.69 Lacs on 31stMarch 2019 as against Rs.1517.39 Lacs on 31st March 2018 on account of payment ofdividend and dividend distribution tax during the year 2018-19.

Dividend

The Board has not recommended any Dividend for the current financial year in view ofinadequate profits for the Financial Year ended on March 31 2019. and material ordersimpacting the going concern status and Company’s operations Detailsofsignificant infuture

During the year under review no significant and material orders were passed by anyregulator or court or tribunal which may impact the going concern status and yourCompany’s operations in future.

Share Capital and Net Worth

The Authorised Share Capital of the Company as on March 31 2019 remains unchanged atRs.42500000 divided into 4250000 Equity Shares of Rs.10 each and Paid up sharecapital of Rs.38100000 divided into 3810000 Equity Shares of Rs.10 each.

During the year under review the Company had not issued any equity shares withdifferential rights/sweat equity shares under Rule 4 & Rule 8 of the Companies (ShareCapital and Debentures) Rules 2014.

As at the end of year under review the net worth of the Company calculated as persetion 2(57) of the Companies Act 2013 ("the Act") stood at Rs.1825.69Lacs as compared to Rs. 1898.39. Lacs at the end of the previous financial year.

Management Discussion & Analysis Report

a) Industry Structure & Competitive Position:

GLOBAL TEXTILE INDUSTRY

The global textile industry is continuously evolving. Over the years it has witnessedmultiple shifts in consumption and production patterns including shifts in geographicalmanufacturing hubs as the industry is driven by availability of cheap labour.

The textile & apparel trade is predicted to be grow at a CAGR of 3.7% during theperiod 2018-28. During this period the increase in apparel trade is expected to be at aCAGR of 4.5% and textile at a CAGR of 2.5%.

INDIAN TEXTILE INDUSTRY

The domestic textile industry in India is estimated to reach US$ 223 billion by 2021from US$ 150 billion in November 2017 while cotton production in India is have reached36.1 million bales in FY19. In FY19 growth in private consumption is expected to createstrong domestic demand for textiles.

Increased penetration of organised retail favourable demographics and rising incomelevels are likely to drive demand for textiles. Cloth production stood at 58.1 billionsquare metres (provisional) in FY19 (up to Jan 19). India is the world’s secondlargest exporter of textiles and clothing.

Textile and apparel exports from India are expected to increase to US$ 82 billion by2021. Exports of textiles and apparels from India reached US$ 31.65 billion in FY19 (up toJan 19). Manmade garments remain the largest contributor to total textile and apparelexports from India.

b) Outlook Risks and Concerns:

This section lists forward looking statements that involve risks and uncertainties. Ouractual result could differ materially from those anticipated in these statements as aresult of certain factors. Our outlook risks and concerns are as follows;

• The economic environment and pricing pressures could negatively impact ourrevenues and operating results.

• Since the Company derives significant portion of revenues from overseas anyrupee poses a threat to earnings estimates. fluctuations Currency and declining interestrates may favourably affect the result of our operation.

• Wage pressure in India and the hiring of employee in other countries may preventus from sustaining some of our competitive advantage and may reduce our profit margins.

• The Company endeavors to focus on sustainable development comprising ofenvironmental protection social justice and equity and economic development whilerecognizing simultaneous growth of the corporate and profitability in the long run.

• The Company has developed and implemented a policy focussed on multi skilldevelopment by giving incentives to its workforce thereby encouraging participation andtraining and give certification in multi-skilling.

c) Opportunities and Threats:

We believe our strength give us the competitive advantage to position ourselves as theglobal Textile Industry. We have long standing relationship with our clients and our trackrecords in delivering high quality product across the entire Textile industry help us tosolidify these relationships and gain increased business from existing clients. Thecustomer base of the Company spread across many countries and regions which reducesdependability on specific country and regions.

The Indian government has come up with a number of export promotion policies for thetextiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector underthe automatic route.

Some of initiatives taken by the government to further promote the industry are asunder:

• Rising government focus and favourable policies is leading to growth in thetextiles and clothing industry. The Government of India announced a Special Package toboost exports by US$ 31 billion create one crore job opportunities and attractinvestments worth Rs 800.00 billion (US$ 11.93 billion) during 2018-2020. As of August2018 it generated additional investments worth Rs 253.45 billion (US$ 3.78 billion) andexports worth Rs 57.28 billion (US$ 854.42 million).

• The Government of India has taken several measures including Amended TechnologyUp-gradation Fund Scheme (ATUFS). The scheme is estimated to create employment for 3.5million people and enable investments worth Rs 950.00 billion (US$ 14.17 billion) by 2022.

• To boost exports from India’s handicraft sector the Government of India isin process of identifying 25 export oriented clusters as of September 2018.

• Integrated Wool Development Programme (IWDP) approved by Government of India toprovide support to the wool sector starting from wool rearer to end consumer which aims toenhance the quality and increase the production during 2017-18 and 2019-20

• Under Union Budget 2019-20 Government of India allocated around Rs 5831.48crore (US$ 808.24 million) for the Ministry of Textiles.

d) Material development in Human Resources/Industrial relation including number ofPeople Employed:

During the year under review the total number of employees on the rolls of the Companywere 1614. Our culture and reputation as Leader in Textile industries enable us to attractand retain some of the best talent in India. Our Professionals/Employees/Workers are ourmost important assets. We are committed to remaining among the industries leading’sEmployers.

Our culture and reputation in the Textile Industry enable us to recruit and retain someof the best available talent in India. The key elements that define our culture includerecruitment training and development and compensation. Company takes adequate steps formaintaining safety and healthy environment for the workers. During the year under reviewIndustrial relations continued to be cordial and satisfactory. Company has enjoyed cordialrelationship with workers and employees at all levels.

Segment wise or Product Wise Performance

The Company operate in one segment i.e. manufacturing of Threads

The Company has produced two types of threads i.e. sewing threads and Hosiery Yarn. Ascompare to previous year the production of Hosiery Yarn and that of sewing Threads havebeen increased. Total production during the financial year 2018-19 is down by 21.9% overthe last year’s production.

Detail of product wise performance in the year 2018-19 is as follows:

2018-19 Sale Realisations (Rs. in Lakhs)
Type Production (Kg) (%)
Hosiery yarn 481713 28 875.25
Sewing Thread 1219618 72 7654.47
Total 1701331 100.00 8529.72

e) Ratio Analysis

IND-AS
S. No Ratios Units FY 2019 FY 2018
1. Debtors Turnover Ratio Times 11.11 12.05
2. Inventory Turnover Ratio Times 3.06 4.06
3. Interest Coverage Ratio Times 1.56 4.10
4. Debt-Equity Ratio Times 0.44 0.48
5. Operating Profit Margin % 2.83 5.17
6. Net Profit Margin % -0.29 2.25
7. Earning Per Share Rs. -0.73 6.18

f) Internal Control System and their adequacy

The Company has adequate Internal Control systems in all areas of operationscommensurate with the size of the operation. Your Company has an adequate and effectiveinternal control system to ensure that assets and interests of the Company are safeguardedand reliability of accounting data and accuracy are ensured with proper checks andbalances. The scope and authority of internal audit function is defined in the internalaudit manual.

The internal controls have been developed and implemented at each business processlevel across the Company. Checks & balances and control systems have been establishedto ensure that assets are safeguarded utilized with proper authorization and recorded inthe books of account. There is a proper definition of roles and responsibilities acrossthe organization to ensure information flow and monitoring. Internal audits are conductedperiodically by independent Chartered Accountant. The Audit Committee comprising ofindependent directors actively reviews the adequacy and effectiveness of internalcontrols internal audit systems and advises improvements as may be required. Post auditfollow-ups are carried out to ensure identified risks are addressed and recommendations ofthe Audit Committee are implemented. The Company has established and maintained adequateand effective internal Financial controls over Financial reporting in accordance with theframework which includes policies and procedures adopted by the Company for ensuring theorderly and efficient conduct of its business including adherence to the Company’spolicies safeguarding of its assets the prevention and detection of fraud and errorsthe accuracy and completeness of the accounting records and timely preparation ofreliable Financial information. continuously to meet the changes in business Conditions

The Internal Control system is improved and modified statutory and accountingrequirements. The Audit Committee of the Board of Directors Statutory Auditors and thebusiness heads are periodically appraised of the internal audit findings and thecorrective actions taken. The Audit Committee of the Board of Directors actively reviewsthe adequacy and effectiveness of internal controls systems and suggests improvements forstrengthening them.

CAUTIONARY STATEMENT:

Statements in the Management Discussion & Analysis Report describing theprojections estimates expectations may be "forward looking statements" withinthe meaning of applicable securities laws and regulations. Actual results could differmaterially from those expressed or implied. Important factors that could make a differenceto the Company’s operations includes among others economic conditions affectingdemand/supply and price conditions in the domestic and overseas markets in which theCompany operates changes in the Government regulations tax laws and other statutes andincidental factors.

Statement on Declaration given by Independent directors under section 149(7)

Your Company has received declarations from all the Independent Directors of theCompany confirming that they meet with the criteria of independence provided in Section149(6) of the Act and Regulation 25 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 {SEBI (LODR) Regulations} and there has been nochange in the circumstances which may affect their status as Independent Director duringthe year under review.

The terms and conditions of appointment of Independent Directors are as per Schedule IVof the Act.

Information about the Subsidiaries / Associates/ Joint Ventures

As on the date of this report your Company has no Subsidiaries Associates and jointVentures.

Listing of Equity Shares

The Equity Shares of the Company continued to be listed on BSE Limited("BSE").The requisite annual listing fee has been paid to the Exchange.

Public Deposits

During the year under review your Company has not invited or accepted any depositsfrom the public/members pursuant to the provisions of Section 73 and 76 of the Act.

Directors and Key Managerial Personnel

A. Directors

During the year under review Mr. Ashok Kumar Agarwal Joint Managing Director and Mr.Raj Kumar Agarwal Whole-time Director of the Company resigned w.e.f. February 5 2019 dueto personal reasons. The Board expressed its sincere appreciation for the valuablecontribution made by Mr. Ashok Kumar Agarwal and Mr. Raj Kumar Agarwal during theirtenure and for the valuable advices they made to the Board from time to time.

Further on the recommendation of Nomination and Remuneration Committee the Board ofDirectors at its meeting held on May 30 2019 Appointed Mr. Raghavkumar Agarwal (DIN02836610) as an additional Director & Whole Time Director (Executive Director) Mr.Surendra Agarwal (DIN 01309527) and Mr. Ravindrra Agarwaal (DIN 01309558) as AdditionalDirectors w.e.f. May 30 2019. Pursuant to Section 161 Mr. Raghavkumar Agarwal Mr.Surendra Agarwal and Ravindrra Agarwaal hold office upto the date of forthcoming AnnualGeneral Meeting. Further in terms of Section 152 of the Act read with the Companies(Appointment and Qualification of Directors) Rules 2014 the Board has on therecommendation of the Nomination and Remuneration Committee proposed to the Shareholdersappointment of Mr. Raghavkumar Agarwal Mr. Surendra Agarwal and Ravindrra Agarwaal asDirectors of the Company liable to retire by rotation.

Appointment of Mr. Raghavkumar Agarwal as Whole Time Director (Executive Director) inaddition to his existing designation of CEO and CFO in the Company effective May 30 2019and his remuneration as per the recommendation of the Nomination and RemunerationCommittee is being put up for the approval of the shareholders at the forthcoming AnnualGeneral Meeting of the Company.

B. Key Managerial Personnel (KMP)

As on March 31 2019 details of Key Managerial Personnel under the Act are givenbelow:

Sr. No. Name of the Person Designation
1 Mr. Kailash Kumar Agarwal Managing Director
2 Mr. Shashi Ranjan Company Secretary
3 Mr. RaghavKumar Agarwal Chief Financial Officer & CEO

Mr. Shashi Ranjan Kumar Company Secretary and Compliance officer has resigned from thepost of Company Secretary of the Company w.e.f. May 28 2019.

Further Mr. Shubham Jain has been appointed as Company Secretary and Compliance Officerof the Company and designated as Key Managerial Personnel of the Company w.e.f. August 132019 pursuant to section 203 of the Act and Regulation 6(1) of the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015.

C. Retire by Rotation

As per the provisions of Section 152 of the Companies Act 2013 at least 1/3rd of totalDirectors whose office is liable to retire by rotation shall retire at every AnnualGeneral Meeting ("AGM") of the Company. Other than

Mr. Kailash Kumar Agarwal all other non-executive non-independent directors(retriable) resigned/ceased to be directors and there are no retirable directors for theensuing annual general meeting. Therefore Mr. Kailash Kumar Agarwal though appointed bythe members as a non-retirable director shall be liable to retire by rotation at theensuing Annual General Meeting (AGM) and the Nomination and Remuneration Committee andBoard has recommended the re-appointment of Mr. Agarwal as a Director of the Company. Mr.Kailash Kumar Agarwal being eligible has offered himself for re-appointment.

D. Re-appointment of Independent Directors for a Second Term

The Nomination and Remuneration Committee on the basis of performance evaluation ofIndependent Directors and taking into account the external business environment thebusiness knowledge acumenexperienceandthesubstantialcontributionmadebyMr.BibhutiCharanTalukdarMr.ParshotamDassAgarwaland Mr. Mohan Lal Jain during their tenure has recommended to the Board that continuedassociation of Mr. Bibhuti Charan Talukdar Mr. Parshotam Dass Agarwal and Mr. Mohan LalJain as Independent Directors would be beneficial to the Company. Based on the above andthe performance evaluation of Independent Directors the Board recommends re-appointmentof:

i) Mr. Bibhuti Charan Talukdar for a further period from 26th September 2019 to 25thSeptember 2024;

ii) Mr. Parshotam Dass Agarwal for a further period from 26th September 2019 to 25thSeptember 2024; and

iii) Mr. Mohan Lal Jain for a further period from 26th September 2019 to 25thSeptember 2024;

to hold office as Non-Executive Independent Directors of the Company not liable toretire by rotation on the Board of the Company. The Company has received the requisiteNotices from Director themselves in writing proposing their re-appointment as IndependentDirectors. The Company has received declarations from all the Independent Directors of theCompany confirming that they meet the criteria of independence as prescribed both underthe Act and SEBI (LODR) Regulations.

Board Meetings

During the year under review five (5) Board Meetings were held on May 30 2018 August07 2018 August 23 2018

November 13 2018 and February 13 2019. The intervening gap between two Board Meetingswas less than the maximum period prescribed under the Act and SEBI (LODR) Regulations.

Audit Committee

The details of present constitution/composition is given hereunder:

Name Designation Category
Mr. Parshotam Dass Agarwal Chairman of the Committee Independent Director
Mr. Bibhuti Charan Talukdar Member of the Committee Independent Director
Mr. Mohan Lal Jain Member of the Committee Independent Director
Ms. Ritu Bansal Member of the Committee Independent Director
Mr. Kailash Kumar Agarwal Member of the Committee Managing Director

During the year under review five (5) Audit Committee Meetings were held on May 302018 August 07 2018 August 23 2018 November 13 2018 and February 13 2019. Theattendance of members of the Audit Committee at these meetings was as follows:

Name of the member Designation Category of Directorship No. of meetings held No. of meetings attended
Mr. Bibhuti Charan Talukdar Chairman Independent 5 1
Mr. Parshotam Dass Agarwal Member Independent 5 5
Mr. Mohan Lal Jain Member Independent 5 4
Ms. Ritu Bansal Member Independent 5 4
Mr. Kailash Kumar Agarwal Member Managing Director 5 5

The management is responsible for the Company’s internal controls and thefinancial reporting process while the statutory auditors are responsible for performingindependent audits of the Company’s financial statements in accordance with generallyaccepted auditing practices and for issuing reports based on such audits. The Board ofDirectors has entrusted the Audit Committee to supervise these processes and thus ensureaccurate and timely disclosures that maintain the transparency integrity and quality offinancial control and reporting.

The terms of reference and scope of the Audit Committee include the following:

To oversight the Company’s financial reporting process and thedisclosure of its financial information to ensure that the financial statements arecorrect sufficient and credible

Recommending to the Board the appointment remuneration and terms ofappointment of auditors of the Company.

Approval of payment to statutory auditors for any other services rendered bythe statutory auditors.

Reviewing with management the annual financial statements and auditor’sreport thereon before submissions to the Board for approval with particular reference to:

- Matters required to be included in the Directors’ Responsibility Statement to beincluded in the Board’s Report in terms of section 134(3)(c) of the Act;

- Any changes in accounting policies and practices and reasons for the same;

- Major accounting entries based on exercise of judgment by management;

- Qualifications in draft audit report;

- Significant adjustments made in the financial statements arising out of audit;

- Compliance with listing and other legal requirements relating to financialstatements;

- Disclosures of any related party transactions; and

- Modified opinion(s) in the draft audit reports.

Reviewing with the management the quarterly financial statements beforesubmission to the Board for approval;

• Reviewing with the management the statement of uses / application of fundsraised through an issue (public issue rights issue preferential issue etc.) thestatement of funds utilized for purposes other than those stated in the offer document /prospectus / notice and the report submitted by the monitoring agency monitoring theutilization of proceeds of a public or rights issue and making appropriaterecommendations to the Board to take up steps in this matter;

Review and monitoring the auditors’ independence and performance andeffectiveness of audit process;

Approval or any subsequent modification of transactions of the Company withrelated parties;

Scrutiny of inter-corporate loans and investments;

Valuation of undertakings or assets of the Company wherever it isnecessary;

Evaluation of internal financial controls and risk management systems;

Reviewing with the management performance of statutory and internalauditors the adequacy of internal control systems; Reviewing the adequacy ofinternal audit function if any including the structure of internal audit departmentstaffing and seniority of the official heading the department reporting structurecoverage and frequency of internal audit;

Discussions with internal auditors any significant findings and follow upthereon;

Reviewing the findings of any internal investigations by the internalauditors into matters where there is suspected fraud • or irregularity or a failureof internal control systems of a material nature and reporting the matter to the Board;

Discussion with statutory auditors before the audit commences about thenature and scope of audit as well as have post-audit discussion to ascertain any area ofconcern;

To look into the reasons for substantial defaults in the payment to thedepositors debenture holders shareholders (in case of non-payment of declared dividends)and creditors;

To review the functioning of the Whistle Blower Mechanism;

Approval of appointment of chief financial officer after assessing thequalifications experience and background etc. of the candidate; To carry out any otherfunction as is mentioned in the terms of reference of the Audit Committee; and

Any other duties/terms of reference which are incidental/necessary for thefulfillment terms of reference.

The Company Secretary is acting as the Secretary to the Audit Committee. The Chairmanof the Committee Mr. Parshotam Dass Agarwal was present at the AGM of the Company held onSeptember 22 2018

Review of information by Audit Committee

Apart from other matters as per Regulation 18(3) of SEBI (LODR) Regulations the AuditCommittee reviews to the extent applicable the following information:

• Management discussion and analysis of financial condition and results ofoperations; related party transactions (as defined by the audit committee) submitted bythe Statement of significant Management;

• Management letters/letters of internal control weaknesses if any issued bystatutory auditors;

• Internal Audit Reports relating to internal control weaknesses; and

• Appointment removal and terms of remuneration of the internal auditors;

• Statement of Deviations;

a) Quarterly statement of deviation(s) including report of monitoring agency ifapplicable submitted to stock exchange(s) in terms of Regulation 32(1) of SEBI (LODR)Regulations.

b) Annual statements of funds utilized for purposes other than those sated in the offerdocuments/ prospectus/notice in terms of Regulation 32(7) of SEBI (LODR) Regulations.

The Audit Committee is also vested with the following powers:

To investigate into any matter in relation to the items specified in Section177 of the Act or referred to it by the Board and for this purpose shall have full accessto the information contained in the records of the Company and external professionaladvice if necessary;

• To seek information from any employee;

• To obtain outside legal or other professional advice; and

To secure attendance of outsiders with relevant expertise if it considersnecessary During the year all recommendation made by the Audit Committee were acceptedby the Board.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee of the Board of Directors of the Company hadbeen constituted as per Section 178 of the Act and Regulation 19 of SEBI (LODR)Regulations.

The details of present constitution/composition is given hereunder:

Name Designation Category
Mr. Bibhuti Charan Talukdar Chairman of the Committee Independent Director
Mr. Parshotam Dass Agarwal Member of the Committee Independent Director
Mr. Mohan Lal Jain Member of the Committee Independent Director
Ms. Ritu Bansal Member of the Committee Independent Director
Mr. Kailash Kumar Agrawal Member of the Committee Managing Director

During the year under review 2 meeting of the Nomination and Remuneration Committeewere held on August 07 2018 and February 13 2019. The attendance of members of theNomination and Remuneration Committee at these meeting was as follows:

Name of the member Designation Category of Directorship No. of meetings held No. of meetings attended
Mr. Bibhuti Charan Talukdar Chairman Independent 2 1
Mr. Parshotam Dass Agarwal Member Independent 2 2
Mr. Mohan Lal Jain Member Independent 2 2
Mr. Kailash Kumar Agarwal Member Managing Director 2 2
Ms. Ritu Bansal Member Independent 2 2

Role & Terms of Reference of Committee

The role of the Nomination and Remuneration Committee inert-alia includes thefollowing:

i. Formulate criteria for determining qualifications positive attributes andindependence of a director and recommend to the Board a Policy relating to theremuneration for the directors key managerial personnel (KMPs) and other employees;

ii. Formulation of criteria for evaluation of performance of independent directors andthe board of directors;

iii. Devising a policy on diversity of the Board of Directors;

iv. Identifying persons who are qualified to become directors and who may be appointedin senior management in accordance with the criteria laid down and recommend to the Boardof Directors their appointment and removal.

v. Recommending to the Board whether to extend or continue the term of appointment ofappointment of the independent director on the basis of report of performance evaluationof independent directors.

The Company Secretary is acting as the Secretary to the Nomination and RemunerationCommittee. The Chairman of the Committee Mr. Bibhuti Charan Talukdar was present at theAGM of the Company held on September 22 2018.

Nomination and Remuneration Policy

The Company’s remuneration strategy is market-driven and aims at attracting andretaining high caliber talent. The strategy is in consonance with the existing industrypractice and is directed towards rewarding performance based on review of achievementson a periodical basis.

The key components of the Company’s Nomination & Remuneration Policy are:

• Compensation will be a major driver of performance.

• Compensation will be competitive and benchmarked with a select group ofcompanies from the pharmaceutical sector.

• Compensation will be fully transparent and tax compliant.

The details of this policy are available on the Company’s website viz.www.hpthreads.com

Policy on Directors’ appointment & remuneration

Pursuant to the provisions of Section 178(3) of the Act and Regulation 19(4) of SEBI(LODR) Regulations and as per the recommendations of the Nomination and RemunerationCommittee the Board has adopted a policy for selection

& appointment of Directors and Key Managerial Personnel of the Company and theirremuneration including criteria for determining qualification positive attributes and allother matters as provided under the said section of the Act and allappointments/re-appointments of Directors/KMPs during the financial year has been doneaccording to the said policy.

Board Evaluation

In terms of the provisions of the Section 178(2) of The Companies Act 2013 the Boardhas adopted a formal mechanism for evaluating its performance as well as that of itsCommittees and individual directors including the Chairman of the Board. The exercise wascarried out through a structured evaluation process covering various aspects such as Boardcomposition & quality strategic & risk management board functioning etc.

Performance evaluation of independent directors was conducted by the Board of Directorsexcluding the director being evaluated on the criteria such as ethics and valuesknowledge and proficiency behavioral traits etc.

Auditors

M/s Walker Chandiok & Co LLP Chartered Accountants (ICAI Firm Registration Number001076N/N500013) were appointed as the Statutory Auditors of the Company to hold officefor a term of 5 years from the conclusion of the 37th Annual General Meeting (AGM) held on22nd September 2018 until the conclusion of the 42nd AGM of the Company. TheAuditors’ Report is unmodified i.e. it does not contain any qualificationreservation or adverse remark or disclaimer.

The requirement to place the matter relating to ratification of their appointment bymembers at every AGM has been removed by the Companies (Amendment) Act 2017 with effectfrom May 7 2018. Accordingly no resolution is being proposed for ratification ofappointment of statutory auditors at the forthcoming AGM.

As required under the provisions of Section 139(1) and 141 of the Act read with theCompanies (Accounts and Auditors) Rules 2014 the Company has received a writtenconsentandcertificatefrom the auditors to the effect that they are eligible to continue asStatutory Auditor of the Company.

Auditors’ Report

The Notes on financial statement referred to in the Auditors’ Report areself-explanatory and do not call for any further comments. The Auditors’ Report doesnot contain any qualification reservation adverse remark or disclaimer

Cost Auditors

The Company has not appointed any Cost Auditor for auditing the cost records of theCompany.

Ministry of Corporate Affairs has issued a notification dated 31.12.2014 to makeamendment in the Companies (Cost Records and Audit) Rules 2014 that -

"Textile Company shall get its Cost record audited in accordance with these rulesif the overall annual turnover of the company from all its products and services duringthe immediately preceding financial year is Rs..100 Crore or more and the aggregateturnover of the individual product or products or service or services for which costrecord required to be maintained under Rule 3 is Rs.35 Crore or more however therequirement for cost audit under Companies (Cost Records and Audit) Rules 2014 shall notapply to a company whose revenue from export in foreign exchange exceeds 75% of itstotal revenue or which is operating from a SEZ".

The Company’s turnover is below Rs.100 crore during the year under review and morethan 75% of the Company’s turnover is earned from exports in foreign exchange by theCompany. Therefore the Company is exempt from the said requirement of cost audit.

Secretarial Auditor

Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 your Company engagedthe services of Mr. Neelesh Kumar Jain M/s NKJ & Associates Company Secretaries (COPNo. 5233) Pandav Nagar Delhi to conduct the Secretarial Audit of the Company for thefinancial year ended March 31 2019. Further the Board of Directors in its meeting heldon August 13 2019 appointed Mr. Tarun Jain M/s Tarun Jain & Associates CompanySecretaries to act as Secretarial Auditor of the Company for the financial year 2019-20.

Secretarial Audit

The Secretarial Audit Report for the financial year ended March 31 2019 (in Form MR-3)is attached as Annexure-A to this Report which is Self-explanatory and needs nocomments.

Extract of Annual Return

In accordance with the provisions of section 134(3)(a) and section 92(3) of the Actread with Rule 12(1) of the Companies (Management and Administration) Rules 2014 anextract of Annual Return as on 31st March 2019 in Form MGT-9 is attached as Annexure Bhereto and forms a part of this Report.

The Annual Return referred to subsection (3) of Section 92 of the Act shall also beplaced on the website of the company at http://hpthreads.com/corporate-information.php.

Reporting of Frauds by Auditors

During the year under review the Statutory Auditors and Secretarial Auditor have notreported any instances of frauds committed in the Company by its Officers or Employees tothe Audit Committee undersection 143(12) of the Act details of which needs to bementioned in this Report.

Particulars of Contracts or Arrangements with Related Parties and Related Partydisclosure

As per the provisions of the Act and the SEBI (LODR) Regulations your Company hasformulated a Policy on Related Party Transactions. The Policy intends to ensure thatproper reporting approval and disclosure processes are in place for all transactionsbetween the Company and Related Parties.

This Policy specifically deals with the review and approval of Material Related PartyTransactions keeping in mind the potential or actual conflicts of interest that may arisebecause of entering into these transactions. All Related Transactions are placed beforethe Audit Committee for review and approval. Wherever applicable prior approval isobtained for related party transactions on a quarterly basis for transactions which are ofrepetitive nature and / or entered in the ordinary course of business and are atarm’s length basis. During the year all the related party transactions entered intowere on an arm’s length basis.

The Company has not entered into any arrangement / transaction with related partieswhich could be considered material in accordance with the Company’s Policy on RelatedParty Transactions read with the Listing Regulations and accordingly the disclosure ofRelated Party Transactions in Form AOC - 2 is not applicable. However names of RelatedParties and details of transactions with them have been included in Notes to the financialstatements provided in the Annual Report under Indian Accounting Standards 18.

The Policy on the Related Party Transactions is available on the Company’s websiteat http://hpthreads.com/ corporate-information.php.

Material changes and commitments affecting the financial position of the Company whichhave occurred between March 31 2019 and date of the Report

Except as disclosed elsewhere in the Annual Report there have been no material changesand commitments which can affect the financial position of the Company between the end ofthe financial year and the date of

Energy Conservation Technology Absorption and Foreign Exchange Earnings/ Outgo

The information required under Section 134(3) (m) of the Act read with the Companies(Accounts) Rules 2014 is provided as follows and forms part of this report.

A) Conservation of Energy:

a) Company ensures that the manufacturing operations are conducted in the mannerwhereby optimum utilization and maximum possible savings of energy is achieved.

b) No specific investment has been made in reduction in energy consumption. c) As theimpact of measures taken for conservation and optimum utilization of energy are notquantitative its impact on cost cannot be stated accurately.

B) Technology Absorption:

The Company is focused on developing in-house technology to develop new productsbesides striving to continually improve and absorb latest technology suitable to itsproduct mix with an objective to achieve lower cost of production. Therefore notechnology absorption is required. The Company also constantly strives for maintenance andimprovement in its equipment quality of its products and Research & Developmentactivities are directed to achieve the aforesaid goal.

C) Foreign Exchange Earning and Out-Go (Rs. In Lacs):

2018-19 2017-18
Foreign Exchange earned (FOB value of exports) 6687.10 7828.95
Foreign Exchange used (CIF value of imports and expenditure in foreign currency) 137.78 184.31

Environment and pollution Control

The Company is conscious of the importance of environmentally clean and safeoperations. The Company’s policy is to conduct of all operations in a manner toensure safety of all concerned compliance of statutory and industrial requirements forenvironment protection and conservation of natural resources to the extent possible. TheCompany has taken drastic steps and measures in procuring and consuming eco-friendlysustainable dyes and chemicals for promoting eco-logically sustainable technologies andpromoting recycling and re-use and the Company has reputed certification including OEKOTEXand GOTS to its credentials.

The Company has effectively come out with implementation of Zero Liquid DischargeProject ("ZLD") for effluent water management as per the guidelines issued byHaryana state pollution Control Board. It is used to eliminate the hard fluids and topurify the water slowly and steadily. This process is used to make the water drinkablereusable to recycle.

Quality Management System

The Company continues to lay emphasis on excellence in quality and services andcertified ISO 9001:2008 QMS certification and is also committed to total customersatisfaction. The high quality of the Company products is reflected in the Company abilityto export its product in quality conscious world markets. The company continues to be on amission to provide customers with products that can match with international standards andwill surpass their expectations.

Significant and Material Orders Passed by the Regulators/ Courts If Any

There are no significant material orders passed by the regulators/ courts which wouldimpact the going concern status of your Company and its future operations.

Directors’ Responsibility Statement

The Directors hereby confirm:

a) that in the preparation of the annual financial statements for the financial yearended March 31 2019 the applicable Accounting Standards had been followed along withproper explanation relating to material departures;

b) that for the financial year ended March 31 2019 such accounting policies asmentioned in the Notes to the financial statements have been applied consistently andjudgments and estimates that are reasonable and prudent have been made so as to give atrue and fair view of the state of affairs of the Company and of the profit and loss ofthe Company for the year ended March 31 2019;

c) that proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

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

e) that proper internal financial controls were followed by the Company and that suchinternal financial are adequate and were operating effectively; and

f) that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively.

Particulars of loans guarantees or investments under Section 186 of the Act

Details of loans guarantees and investments covered under the provisions of Section186 of the Act are given in the notes to the financial statements.

Business Risk Management

Pursuant to Section 134 (3) (n) of Act and SEBI (LODR) Regulations the Company hasconstituted a Business Risk Management committee.

Risk mitigation continues to be a key area of concern for the Company which hasregularly invested in insuring itself against unforeseen risks. The Company’s stocksand insurable assets like building plant & machinery computer equipment officeequipment furniture & fixtures lease hold improvements and upcoming projects havebeen adequately insured against major risks.

At present the Company has not identified any element of risk which may threaten theexistence of Company

Vigil Mechanism

Your Company has adopted a Vigil Mechanism with a view to provide its employees anavenue to raise any sensitive concerns regarding any unethical behavior or wrongfulconduct and to provide adequate safeguard for protection from any victimization.

Further the Act and Regulation 22 of SEBI (LODR) Regulations has mandated every listedCompany to establish a vigil mechanism. Accordingly the Company has framed the policy toalign the same with the provisions of Section 177(9) of the Act read with Rule 7 of theCompanies (Meetings of Board and its Powers) Rules 2014 and Regulation 22 of SEBI (LODR)Regulations and the same is available on the website of the Company. This Policyinter-alia provides a direct access to the Chairman of the Audit Committee.

Your Company hereby affirms that no Director/employee have been denied access to theChairman of the Audit Committee and that no complaints were received during the year.

Corporate Social Responsibility

The provisions of Section 135 of the Act regarding Corporate Social Responsibility("CSR") are not attracted to the Company as the Company does not fall under thethreshold limit of net worth of Rs.500 crore or turnover of Rs.1000 crores or a netprofit of Rs.5 Crore during the financial year. However the Company has constituted CSRCommittee of the Board of Directors of the Company.

The details of present constitution/composition is given hereunder:

Name Designation Category
Mr. Parshotam Dass Agarwal Chairman of the Committee Independent Director
Mr. Bibhuti Charan Talukdar Member of the Committee Independent Director
Mr. Mohan Lal Jain Member of the Committee Independent Director
Ms. Ritu Bansal Member of the Committee Independent Director
Mr. Kailash Kumar Agrawal Member of the Committee Managing Director

Particulars of Employees and Related disclosures

Disclosures pertaining to remuneration and other details as required under Section197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in the Annexure C forming part ofthis Report.

In terms of the provisions of Section 197(12) of the Act read with Rules 5(2) and 5(3)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014during the year under review none of the employee drawing remuneration in excess of thelimits set out in the said Rules.

As per Rule 5 (2) of Companies (Appointment and Remuneration of Managerial Personnel)Amendment Rule 2016 the details of top ten employees with regards to their salary in theFinancial Year 2018-19 is as follow:

Sl No. Name Designation Gross Salary Plus Perks (2018-19) (Amount in Rs.)
1 Mr. Kailash Kumar Agarwal Managing Director 2400000
2 Mr. Shashi Kant Shah Vice- President 1924064
3 Mr. Avinash Pratap Singh GM-HR 1842688
4 Mr. RaghavKumar Agarwal CEO/CFO 1800000
5 Mr. Ashok Kumar Agarwal* Joint Director 1775000
6 Mr. Raj Kumar Agarwal# Whole Time Director 1622857
7 Mr. P.C Kesharwani DGM-COSTING & MIS 1347823
8 Mr. Shashi Ranjan Kumar^ Company Secretary 1295890
9 Mr. Surender Kumar Agarwal President Commercial 1293888
10 Mr. Ravindrra Agarwaal President Export 1293888

* Resigned w.e.f February 05 2019

# Resigned w.e.f February 05 2019

^ Resigned w.e.f May 28 2019

Prevention of Sexual Harassment at Workplace

The Company has in place an anti-sexual harassment policy in line with the requirementsof The Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal)Act 2013. During the year the Board of Directors has re-constituted the InternalComplaint Committee (ICC) for the Company’s Corporate Office at Delhi under the saidsAct. All the employees (permanent contractual temporary trainees) are covered underthis policy.

During the year under review there was no case filed or registered pursuant to thisAct.

Corporate Governance

As per clause (2) of Regulation 15 of SEBI (LODR) Regulations:

"The compliance with the corporate governance provision as specified inregulations 17 to 27 and Clause (b) to (i) of Sub regulation (2) of Regulation 46 and paraC D E of SCHEDULE V shall not apply in respect of a listed entity having paid up EquityShare Capital not exceeding rupees ten crore and Net Worth not exceeding rupeestwenty-five crore as on the last day of the previous financial year."

As both the paid-up Equity Share Capital as well as the Net worth of the Company do notexceed the above-mentioned limits the provisions of Corporate governance are notapplicable on the Company. Hence Corporate Governance report does not form part of thisAnnual Report.

Investor Services

The Company has engaged the services of M/s Alankit Assignments Limited New Delhi asRegistrar and Share Transfer Agent (RTA). No complaint / query from any of theshareholders are pending to be resolved by the Company or RTA.

Publication of Financial Results

In conformity with the provisions of Regulation 47 of the SEBI (LODR) Regulations theCompany has published unaudited financial results for the quarter ended 30th June 2018;30th September 2018; 31st December 2018 and audited financial results for the quarter/year ended on 31st March 2019. The summarized results are published in Business Standard(English) Delhi &Mumbai and Aaj Samaj (Hindi) Hisar.

Code of Conduct

The Board of Directors has approved a Code of Conduct which is applicable to theMembers of the Board and all employees in the course of day to day business operations ofthe Company. The Company believes in "Zero Tolerance" against briberycorruption and unethical dealings / behaviors of any form and the Board has laid down thedirectives to counter such acts.

The code laid down by the Board is known as "Code of Business Conduct. The codelays down the standard procedure of business conduct which is expected to be followed bythe Directors and the designated employees in their business dealings and in particular onmatters relating to integrity in the work place in the business practices and in dealingwith stakeholders.

The code also lays down that Board Members and Senior Managers of the Company shallensure compliance with SEBI (Prohibition of Insider Trading) regulations 2015 as alsoother regulations as may be applicable to them from time to time.

All the Boards Members and the Senior Management personnel have confirmed compliancewith the Code for the Financial Year ended 31st March 2019. All Management Staff weregiven appropriate training in this regard.

Website of the Company

The Company maintains a website www.hpthreads.com where detailed information of theCompany & its products is provided.

Compliance with the provisions of Secretarial Standard 1 and Secretarial Standard 2

The applicable Secretarial Standards i.e. SS-1 and SS-2 relating to ‘Meetings ofthe Board of Directors’ and ‘General Meetings’ respectively have beenduly complied by your Company.

The Institute of Company Secretaries of India had revised the Secretarial Standards onMeetings of the Board of Directors (SS-1) and Secretarial Standards on General Meetings(SS-2) with effect from October 1 2017. The Company has devised proper systems to ensurecompliance with its provisions and is in compliance with the same.

Acknowledgements

Your Directors acknowledge with gratitude the co-operation and assistance received fromthe Central Government State Governments and all other Government agencies andencouragement they have extended to the Company. Your Directors also thank theshareholders financial institutions banks/ other lenders customers vendors and otherbusiness associates for their confidence in the Company and its management and lookforward for their continuous support. The Board wishes to place on record its appreciationfor the dedication and commitment of your Company’s employees at all levels which hascontinued to be our major strength.

For and on behalf of the Board
Mr. Kailash Kumar Agarwal Mr. RaghavKumar Agarwal
Place: New Delhi Managing Director Executive Director CEO & CFO
Date: August 13 2019 DIN:00063470 DIN: 02836610