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H P Cotton Textile Mills Ltd.

BSE: 502873 Sector: Industrials
NSE: N.A. ISIN Code: INE950C01014
BSE 09:23 | 22 Apr 41.10 0.15
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NSE 05:30 | 01 Jan H P Cotton Textile Mills Ltd
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P/E 4.50
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OPEN 45.00
CLOSE 40.95
VOLUME 4
52-Week high 51.20
52-Week low 12.61
P/E 4.50
Mkt Cap.(Rs cr) 16
Buy Price 41.10
Buy Qty 2.00
Sell Price 42.95
Sell Qty 98.00

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

Company director report

Dear Members

Your Directors are pleased to present the Thirty Ninth (39th) Annual Report togetherwith the Company's audited financial statements and the auditors' report thereon for thefinancial year ended March 31 2020.

FINANCIAL HIGHLIGHTS

A summary of the Company's financial performance in FY ended March 31 2020 is asfollows:

(Rs in lakhs)

Particulars March 31 2020 March 31 2019
Revenue from operations (net) 8175.13 9140.85
Add: Other Income 187.96 209.34
Total Income 8363.09 9350.19
Profit/(Loss) before Depreciation & Amortisation Exceptional items & Tax Expense 632.08 490.66
Less: Finance Cost 333.61 303.42
Less: Depreciation and Amortisation Expense 260.31 185.47
Profit before exceptional items & tax Expense 38.16 1.77
Less: Exceptional items - -
Profit/(Loss) before Tax Expense 38.16 1.77
Less: Taxation Expense 4.23 29.77
Profit/(Loss) for the year 33.93 (28.00)
Other Comprehensive Income/(Loss) 30.35 1.23
Total Comprehensive Income/(Loss) for the year 64.28 (26.77)
Earnings per Share (')
- Basic 0.90 (0.73)
- Diluted 0.90 (0.73)

RESULTS OF OPERATIONS AND STATE OF COMPANY AFFAIR'S Production and Sales Review:

The production was decreased by 17.17% over previous year taking to 1409144 kg ascompared to the previous year level of 1701331 kg.

During the year your Company has achieved a turnover of '8175.12 Lakhs as against Rs9140.85 Lakhs during the corresponding previous financial year. The exports of the Companyare slightly declined by 8.31 % over previous year taking total exports to Rs 6131.18Lakhs from '6687.10 Lakhs due to temporarily suspension of operations in the month ofMarch due to restrictions imposed by the Government Authorities in view of the COVID-19Pandemic which results in the loss of production.

Profitability:

The Company earned a profit before interest depreciation and tax for the year underreview was around '632.07 Lakhs as compared to '490.65 Lakhs in previous year. Afterproviding for depreciation of '260.31 Lakhs (Previous Year '185.47 Lakhs) finance cost of'333.61 Lakhs (Previous Year '303.42 Lakhs) tax expense of '4.23 Lakhs (Previous Year'29.77 Lakhs) the net profit from operations after comprehensive income worked out to'64.27 Lakhs as compared to loss of '26.77 Lakhs in the previous year.

Resource Utilisation:

1. Fixed Assets:

The Net Block as at March 31 2020 was '2001 Lakhs as compared to '2150 Lakhs in theprevious year.

2. Current Assets:

The current assets as at March 31 2020 were Rs 3647 Lakhs as against Rs 4689 Lakhsin the previous year. Inventory level was decreased by 14.31% over previous year taking toRs 2137 Lakhs as compared to the previous year level of Rs 2494 Lakhs.

RESERVES

Total reserves and surplus of the Company has been increased to '1519.13 Lakhs onMarch 31 2020 as against Rs 1444.70 Lakhs on March 31 2019.

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 2020.

SHARE CAPITAL

The Authorised Share Capital of the Company as on March 31 2020 remains unchanged at'42500000 divided into 4250000 Equity Shares of '10 each and Paid up Share Capital of'38100000 divided into 3810000 Equity Shares of '10 each.

MANAGEMENT DISCUSSION & ANALYSIS REPORT

The Management Discussion and Analysis Report for the year under review in terms ofRegulation 34 of the Listing Regulations is presented in a separate Section formingintegral part of the Annual Report.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Directors

During the year under review on the recommendation of Nomination and RemunerationCommittee the Board of Directors at its meeting held on May 30 2019 appointed Mr.Raghavkumar Agarwal (DIN 02836610) as an additional Director & Whole Time Director(Executive Director) Mr. Surendra Kumar Agarwal (DIN 01309527) and Mr. Ravindrra Agarwaal(DIN 01309558) as Additional Directors w.e.f. May 30 2019. Pursuant to Section 161 Mr.Raghavkumar Agarwal Mr. Surendra Kumar Agarwal and Ravindrra Agarwaal held office up tothe date of 38th AGM duly held on November 08 2019.

Thereafter members of the Company had duly approved the appointment of Mr. RaghavKumarAgarwal as a Whole-Time Director in the 38th AGM. However the resolutions for theappointment of Mr. Surendra Kumar Agarwal and Mr. Ravindrra Agarwaal as Directors of theCompany have not been passed by the members by requisite majority in the 38th AGM.Therefore Mr. Surendra Kumar Agarwal and Mr. Ravindrra Agarwal ceased from the post ofDirectorship of the Company w.e.f. November 8 2019. Further the members havere-appointed Mr. Parshotam Dass Agarwal (DIN: 00063017) and Mr. Mohan Lal Jain (DIN:00063240) for a further period of 5(five) years w.e.f. September 26 2019 in the 38th AGMheld during the FY 2019-20

Mr. Bibhuti Charan Talukdar Independent Director ceased to be a Director of theCompany due to his sudden and sad Demise on September 15 2019.

On the recommendation of Nomination and Remuneration Committee and with her dueconsent the Board of Directors at its meeting held on September 01 2020 changed thedesignation of Mrs. Ritu Bansal (DIN: 03619069) from Independent Director to AdditionalDirector (Non-Executive) w.e.f. September 02 2020. Pursuant to Section 161 Mrs. RituBansal hold office as an additional director upto the date of forthcoming Annual GeneralMeeting. Further in terms of Section 152 of the Act read with the Companies (Appointmentand Qualification of Directors) Rules 2014 the Board has on the recommendation of theNomination and Remuneration Committee proposed to the Shareholders for the appointment of

Mrs. Ritu Bansal as a Director of the Company liable to retire by rotation.

A brief profile expertise of Director and other details as required under the ActSecretarial Standard-2 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 (‘Listing Regulations') relating to the director proposed to beappointed is annexed to the notice convening the AGM.

During the year under consideration the shareholders of the Company through postalballot through remote e-Voting on August 30 2020 approved the waiver of excessremuneration paid to the following Directors/erstwhile Directors pursuant to Section197(10 of the Companies Act 2013:

(i) . Waiver of recovery of excess managerial remuneration paid to Mr. Kailash KumarAgarwal Managing Director for the financial year ended March 31 2019;

(ii) . Waiver of recovery of excess managerial remuneration paid to Mr. Raj KumarAgarwal erstwhile Whole Time Director for the financial year ended March 31 2019;

(iii) . Waiver of recovery of excess managerial remuneration paid to Mr. Ashok KumarAgarwal erstwhile Joint Managing Director for the financial year ended March 31 2019;

(iv) . Waiver of recovery of excess managerial remuneration paid to Mr. Kailash KumarAgarwal Managing Director for the financial year ended March 31 2020;

(v) . Waiver of recovery of excess managerial remuneration paid to Mr. RaghavKumarAgarwal Whole-Time Director designated as Executive Director CEO & CFO for thefinancial year ended March 31 2020;

(vi) . Re-Appointment of Mr. Kailash Kumar Agarwal as Managing Director designated asChairman and Managing Director of the Company & Revision in terms of his Remuneration;and

(vii) . Approval of revision in Remuneration of Mr. Raghavkumar Agarwal Whole-TimeDirector designated as Executive Director CEO & CFO.

Key Managerial Personnel (KMP)

In compliance with provisions of Section 203 of the Companies Act 2013 following arethe KMPs of the Company as on March 31 2020:

S. No. Name Designation
1. Kailash Kumar Agarwal Chairman and Managing Director
2. RaghavKumar Agarwal Whole-Time Director Chief Executive Officer & CFO
3. Shubham Jain Company Secretary

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.

Re-Appointment of Managing Director

Since the term of Mr. Kailash Kumar Agarwal (DIN: 00063470) Managing Director of theCompany was due to expire on August 05 2020 the Board of Directors in its meeting heldon July 06 2020 re-appointed him as a Managing Director of the Company for furtherperiod of five (5) years not liable to retire by rotation in accordance with Nominationand Remuneration Policy and Article of Association of the Company and based on therecommendations of Nomination & Remuneration Committee with effect from August 062020 subject to approval of the members. Therefore the Board recommended his appointmentfor the consideration of the members of the Company. Thereafter his appointment wasapproved by the shareholders of the Company on August 30 2020 through Postal BallotNotice dated July 29 2020.

Retire by Rotation

In accordance with the provisions of Section 152 of the Act and Articles of Associationof the Company Mr. RaghavKumar Agarwal (DIN: (DIN 02836610) Whole-Time Director of theCompany retires by rotation at the conclusion of the forthcoming Annual General Meetingand being eligible offers himself for reappointment. The Board recommends his appointmentfor the consideration of the members of the Company at the ensuing Annual General Meeting.

A brief profile expertise of Director and other details as required under the ActSecretarial Standard-2 and Listing Regulations relating to the director proposed to bere-appointed is annexed to the notice convening the AGM.

Declaration 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 there has been no change in the circumstances which may affect theirstatus as Independent Director during the year under review.

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

In terms of Section 150 of the Companies Act 2013 read with Rule 6 of the Companies(Appointment and Qualification of Directors) Rules 2014 Independent Directors of theCompany have confirmed that they have registered themselves with the databank maintainedby the Indian Institute of Corporate Affairs Manesar (‘IICA'). The IndependentDirectors are also required to undertake online proficiency self-assessment test conductedby the IICA within a period of 1 (one) year from the date of inclusion of their names inthe data bank unless they meet the criteria specified for exemption.

Mr. Parshottam Dass Agarwal and Mr. Mohan Lal Jain Independent Directors of theCompany meets the criteria specified for exemption and hence both the IndependentDirectors are not required to undergo the online proficiency self assessment test asconducted by IICA. Further Mrs. Ritu Bansal registered herself with the databankmaintained by the IICA on February 28 2020 accordingly she has to undertake onlineproficiency self-assessment test on or before February 27 2021. However with her dueconsent the Board of Directors at its meeting held on September 01 2020 changed herdesignation from Independent Director to Additional Director (Non-Executive) w.e.f.September 02 2020. Therefore requirement to undertake online proficiency self-assessmenttest conducted by the IICA is no more required for Mrs. Bansal as regards her directorshipof the Company.

In the opinion of the Board the independent directors possess the requisite integrityexperience expertise and proficiency required under all applicable laws and the policiesof the Bank.

BOARD MEETINGS

During the year under review six (6) Board Meetings were held on May 30 2019 August13 2019 September 29 2019 October 05 2019 November 13 2019 and February 11 2020.The intervening gap between two Board Meetings was less than the maximum period prescribedunder the Act and Listing Regulations.

The details of composition of the Board and the attendance record of the Directors atthe Board Meetings and AGM held during the financial year ended on March 31 2020 is asunder:

Name Designation Category No. of meetings held during tenure No. of Meetings Attended Last AGM Attended
Kailash Kumar Agarwal Chairman and Managing Director Executive Director 6 6 Yes
Bibhuti Charan Talukdar@ Director Non-Executive Independent Director 2 0 NA
Parshotam Dass Agarwal Director Non-Executive Independent Director 6 6 Yes
Name Designation Category No. of meetings held during tenure No. of Meetings Attended Last AGM Attended
Mohan Lal Jain Director Non-Executive Independent Director 6 5 No
Ritu Bansal Director Non-Executive Independent Director 6 5 Yes
RaghavKumar Agarwal# Whole-Time Director CEO & CFO Executive Director 5 5 Yes
Surendra Kumar Agarwal* Additional Director Non-Executive NonIndependent Director 3 1 Yes
Ravindrra Agarwaal* Additional Director Non-Executive NonIndependent Director 3 2 Yes

@ Ceased to be a Director w.e.f September 15 2019

• Appointed as a Whole-Time Director w.e.f May 30 2019

• Ceased to be a Director w.e.f November 08 2019

AUDIT COMMITTEE

The Audit Committee (‘AC') of the Company had been constituted and functions inaccordance with provisions of Section 177 of the Act and Listing Regulations. The CompanySecretary is acting as the Secretary to the Audit Committee. All the recommendations madeby the Audit Committee were accepted by the Board of Directors of the Company.

Some of the key functions and responsibilities of the AC is enumerated as below:

• Reviewing the procedures of financial reporting

• Reviewing the quarterly half yearly annual financial results of the Company

• Review the adequacy of internal audit function coverage and frequency ofinternal audit appointment removal performance and terms of remuneration of theInternal Auditor.

• Discuss with the internal auditor and senior management significant internalaudit findings and follow-up thereon.

During the year under review four (4) AC Meetings were held on May 30 2019 August13 2019 November 13 2019 and February 11 2020.

The details of composition of the Committee and the attendance record of the Directorsat the AC Meetings held during the financial year ended on March 31 2020 is as under:

Name Designation in Committee Category No. of meetings held during tenure No. of Meetings Attended
Parshotam Dass Agarwal Chairman Non-Executive Independent Director 4 4
Bibhuti Charan Talukdar* Chairman Non-Executive Independent Director 2 0
Kailash Kumar Agarwal Member Executive Director 4 4
Mohan Lal Jain Member Non-Executive Independent Director 4 3
Ritu Bansal Member Non-Executive Independent Director 4 4

*Ceased to be a Director w.e.f September 15 2019

NOMINATION AND REMUNERATION COMMITTEE

The Nomination and Remuneration Committee (‘NRC') of the Company had beenconstituted and functions in accordance with provisions of Section 178 of the Act andListing Regulations. The Company Secretary is acting as the Secretary to the Nominationand Remuneration Committee.

Some of the key functions and responsibilities of the NRC is enumerated as below:

• 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;

• Formulation of criteria for evaluation of performance of independent directorsand the board of directors;

• Identifying persons who are qualified to become directors and who may beappointed in senior management in accordance with the criteria laid down and recommend tothe Board of Directors their appointment and removal.

• Recommending to the Board whether to extend or continue the term of appointmentof appointment of the independent director on the basis of report of performanceevaluation of independent directors.

During the year under review three (3) NRC Meetings were held on May 30 2019 August13 2019 and November 13 2019.

The details of composition of the Committee and the attendance record of the Directorsat the Audit Committee Meetings held during the financial year ended on March 31 2020 isas under:

Name Designation in Committee Category No. of meetings held during tenure No. of Meetings Attended
Parshotam Dass Agarwal Chairman Non-Executive Independent Director 3 3
Bibhuti Charan Talukdar* Chairman Non-Executive Independent Director 2 0
Kailash Kumar Agarwal Member Executive Director 2 1
Mohan Lal Jain Member Non-Executive Independent Director 3 2
Ritu Bansal Member Non-Executive Independent Director 3 3

*Ceased to be a Director w.e.f September 15 2019

Company's Policy relating to Directors appointment payment of remuneration anddischarge of their duties

The Nomination & Remuneration Committee of the Company has formulated theNomination & Remuneration Policy on Director's appointment and remuneration whichincludes the criteria for determining qualifications positive attributes independence ofa director and process of appointment and removal as well as components of remuneration ofDirector(s) Key Managerial Personnel (‘KMP') and Senior Management of the Companyand other matters as provided under Section 178(3) of the Companies Act 2013. During theyear there were no changes made in the Nomination & Remuneration Policy of DirectorsKey Managerial Personnel (‘KMP') and Senior Management of the Company. The Policy maybe accessed on the Company's website at the Weblink:http://hpthreads.com/corporate-information.php.

PERFORMANCE EVALUATION AND ITS CRITERIA

In terms of the provisions of the Section 178(2) of the Act the Board has adopted aformal mechanism for evaluating its performance as well as that of its Committees andindividual directors including the Chairman of the Board. A structured questionnaire wasprepared and circulated to the Directors for each of the evaluation.

Performance of the Board was evaluated by each Director on the parameters such asComposition of Board Vision and Strategy Adequate representation of IndependentDirectors Board Participation Treasury Monitoring Review of Business Risks andFrequency of Board Meetings Compliances etc.

Board Committees were evaluated on the parameters such as Structure and Composition ofCommittees Business Risks Financial Reporting Process effectiveness of Committeeseffectiveness of communication by the Committee with the Board Senior Management and KeyManagerial Personnel etc.

Performance of the Chairman was evaluated on the parameters such as engagement inmeetings Conducting of Meetings Leadership Skills guiding on strategic issuesimplementation of Board approved decisions accessibility and informal contact with BoardMembers etc.

Directors were also evaluated individually by all other Directors (except the Directorhimself) on the parameters such as engagement in meetings Knowledge of businesscommunication with other Board Members participation in meetings etc.

Meeting of Independent Directors without the attendance of Non-Independent Directorsand members of the management of the Company was held on March 21 2020. The IndependentDirectors inter-alia evaluated performance of NonIndependent Directors the Chairman ofthe Company and the Board as a whole for FY 2020. They also assessed the quality contentand timeliness of flow of information between the Management and the Board that isnecessary for the Board to effectively and reasonably perform its duties.

Outcome of the evaluation was submitted to the Chairman of the Company. The Directorsdiscussed and expressed their satisfaction with the entire evaluation process.

CORPORATE SOCIAL RESPONSIBILITY

The provisions of Section 135 of the Act and rules made thereunder regarding CorporateSocial Responsibility(‘CSR') are not attracted to the Company as the Company does notfall under the threshold limit of net worth of '500 crore or turnover of '1000 crores ora net profit of '5 Crore during the financial year. In view of this the Board ofDirectors in their meeting held on July 06 2020 has dissolved the CSR Committee w.e.f.July 06 2020.

INTERNAL FINANCIAL CONTROLS

A well-established independent multi-disciplinary Internal Audit team operates inline with governance best practices. It reviews and reports to management and the AuditCommittee about compliance with internal controls and the efficiency and effectiveness ofoperations as well as the key process risks.

The Company has in place adequate internal financial controls with reference toFinancial Statements and such controls were operating effectively as at March 31 2020.These controls have been designed to provide a reasonable assurance with regard tomaintaining of proper accounting controls for ensuring reliability of financial reportingmonitoring of operations. During the year such controls were tested and no reportableweaknesses in the design or operations were observed.

WEBLINK OF ANNUAL RETURN

Pursuant to sub-section 3(a) of section 134 and sub-section (3) of section 92 of theCompanies Act 2013 read with rule 12 of the Companies (Management and Administration)Rules 2014 as amended vide MCA notification dated August 28 2020 a copy of the AnnualReturn is available on the link https://www.hpthreads.com/corporate-information.php.

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 annexed herewith as Annexure I forming integral partof this 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.

LOANS GUARANTEES AND INVESTMENTS

Particulars of loans guarantees and investments made under the provisions of Section186 of the Act have been disclosed in Note No. 4 to the Financial Statements formingintegral part of the Annual Report.

RELATED PARTY TRANSACTIONS

All Related Party Transactions are placed before the Audit Committee for review andapproval. Wherever applicable prior approval is obtained for related party transactionson a quarterly basis for transactions which are of repetitive nature and / or entered inthe ordinary course of business and are at arm's length basis.

The Company had entered into certain related party transactions which were entered intoin the ordinary course of business of the Company and were otherwise than on an arm'slength basis and the Company has complied with all the applicable provisions of theCompanies Act 2013 and rules framed thereunder in respect of such transactions. Furtheryour Company has not entered into any arrangement / transaction with related parties whichcould be considered material in accordance with the Listing Regulations and accordinglythe disclosure of Related Party Transactions in Form AOC - 2 is annexed herewith asAnnexure II forming integral part of this report. However names of Related Parties anddetails of transactions with them have been included in Notes to the financial statementsprovided in the Annual Report under Indian Accounting Standards 18.

AUDITORS AND AUDITOR'S REPORT

Statutory Auditor

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.

The Auditors' Report read together with Annexure referred to in the Auditors' Report donot contain any qualification reservation adverse remark or disclaimers except a commentas stated below:

As required by section 197(16) of the Act we report that the Company has paidremuneration to its managing director and whole-time director in excess of the limits laiddown under the provisions of section 197 to the Act by Rs 29.81 lacs for the year ended 31March 2020. As disclosed in note 50 to the accompanying financial statements the Companyis in process of regularising the default by obtaining the approval of the shareholders.

Board's Explanation:

Your directors' wish to respond/state in this regard that Shareholders had approved theremuneration of Managerial Personnel under Section 197 read with Schedule V of theCompanies Act 2013 and the overall remuneration paid thereunder was within the limitsapproved by the members. However the limits specified therein could not be availed as thenotice calling the respective annual general meetings at which the resolutions w.r.t.appointment/re-appointment of respective Managing/Whole Time/Executive were passed didnot include a statement as required under paragraph (iv) of the second proviso afterparagraph B of Section II of Part II of the aforesaid Schedule V and hence the limitsspecified therein could not be availed. Accordingly the Company has regularized the sameby obtaining shareholders waiver/approval by special resolutions passed by postal ballotthrough remote e-Voting on August 30 2020 wherein the shareholders have approved thewaiver of the excess remuneration to respective Managing/Whole Time/Executive Directorspursuant to Section 197(10) of the Companies Act 2013.

Cost Auditors

As per the provisions with the Rule 4(2) of the Companies (Cost Records and Audit)Rules 2014 as amended thereto textile companies shall get its Cost record audited inaccordance with these rules if the overall annual turnover of the company from all itsproducts and services during the immediately preceding financial year is '100 Crore ormore and the aggregate turnover of the individual product or products or service orservices for which cost record required to be maintained under Rule 3 is '35 Crore ormore.

However in accordance with the provisions with the Rule 4(3) of the Companies (CostRecords and Audit) Rules 2014 as amended thereto the requirement for Cost Audit underthe Rules shall not apply to a company whose revenue from export in foreign exchangeexceeds 75% of its total revenue or which is operating from a SEZ or which is engaged ingeneration of electricity for captive consumption through Captive Generating PIant."

Your company's turnover is below '100 crore during the year under review and more than75% of the Company's turnover is earned from exports in foreign exchange by the Company.Therefore the Company is exempt from the said requirement of cost audit.

Therefore Company has not appointed any Cost Auditor for auditing the cost records ofthe Company.

Secretarial Auditor

M/s Tarun Jain & Associates Company Secretaries were appointed as SecretarialAuditors of the Company by the Board of Directors of the Company in its meeting held onAugust 13 2019 for the financial year 2019-20.

The Secretarial Audit Report for the financial year ended March 31 2020 received fromM/s Tarun Jain & Associates Company Secretaries Secretarial Auditors of the Companyis annexed herewith as Annexure III forming integral part of this report.

The said report is self-explanatory and does not contain any qualificationreservation adverse remark or disclaimers except a comment as stated below:

"During the period under review the remuneration paid to the (I) ManagingDirector and (II) Executive Director (ED CEO & CFO) exceeds the limits specifiedunder section 197 of the Companies Act 2013.

The limits of remuneration specified under Schedule V are not applicable as the Companyhas not complied with clause (iv) of second proviso after part B of Section II of Part IIof Schedule V of Companies Act 2013"

Board's Explanation:

Your directors' wish to respond/state in this regard that Shareholders had approved theremuneration of Managerial Personnel under Section 197 read with Schedule V of theCompanies Act 2013 and the overall remuneration paid thereunder was within the limitsapproved by the members. However the limits specified therein could not be availed as thenotice calling the respective annual general meetings at which the resolutions w.r.t.appointment/re-appointment of respective Managing/Whole Time/Executive were passed didnot include a statement as required under paragraph (iv) of the second proviso afterparagraph B of Section II of Part II of the aforesaid Schedule V and hence the limitsspecified therein could not be availed. Accordingly the Company has regularized the sameby obtaining shareholders waiver/approval by special resolutions passed by postal ballotthrough remote e-Voting on August 30 2020 wherein the shareholders have approved thewaiver of the excess remuneration to respective Managing/Whole Time/Executive Directorspursuant to Section 197(10) of the Companies Act 2013.

SUBSIDIARIES ASSOCIATES AND JOINT VENTURES

Your Company does not have any Subsidiaries Associates and Joint Ventures.

MATERIAL CHANGES AFFECTING THE COMPANY

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 report.

ENERGY CONSERVATION TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND 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:

i. The Company ensures that the manufacturing operations are conducted in theSustainable manner whereby optimum utilization and maximum possible savings of energy isachieved. Energy conservation continues to be an area of major emphasis in our Company.Efforts are made to optimize the energy cost while carrying out the manufacturingoperations.

ii. As the impact of measures taken for conservation and optimum utilization of energyare not quantitative its impact on cost cannot be stated accurately.

iii. No specific investment has been made in reduction in energy consumption.

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 lakhs)
Particulars 2019-20 2018-19
Foreign Exchange earned (FOB value of exports) 6131.18 6687.10
Foreign Exchange used (CIF value of imports and expenditure in foreign currency) 55.80 137.78

Environment and pollution Control

The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy is to conduct all operations in a manner to ensure safetyof all concerned compliance of statutory and industrial requirements for environmentprotection and conservation of natural resources to the extent possible. The Company hastaken drastic steps and measures in procuring and consuming eco-friendly sustainable dyesand chemicals for promoting eco-logically sustainable technologies and promoting recyclingand re-use and the Company has reputed certification including OEKOTEX and GOTS to itscredentials.

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 or 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.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors hereby 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 as mentioned in the Notes to thefinancial statements have been applied consistently and judgments and estimates that arereasonable and prudent have been made so as to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profit of the Companyfor that period;

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 controls are adequate and were operating effectively; and

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

RISK MANAGEMENT

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 stocks andinsurable assets like building plant & machinery computer equipment officeequipment furniture & fixtures lease hold improvements and upcoming projects havebeen adequately insured against major risks.

Pursuant to Section 134(3)(n) of Act and Listing Regulations the Company hasconstituted a Risk Management Committee. The Board of Directors of the company has alsoformulated Risk Management Policy in accordance with the Act and Listing Regulations. Theaim of risk management policy is to maximize opportunities in all activities and tominimize adversity. The policy includes identifying types of risks and its assessmentrisk handling monitoring and reporting which in the opinion of the Board may threatenthe existence of the Company.

The Risk Management policy may be accessed on the Company's website at the Weblink:http://hpthreads.com/corporate- information.php.

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.

In accordance with the provisions of Section 177(9) of the Act every listed companyshall establish a vigil mechanism for directors and employees to report genuine concernsof unethical behavior actual or suspected fraud or violation of the codes of conduct.

Accordingly the Company has framed the policy to align the same with the provisions ofSection 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and itsPowers) Rules 2014 and Regulation 22 of SEBI (LODR) Regulations and may be accessed onthe Company's website at the Weblink: http://hpthreads.com/corporate-information.php.

This Policy inter-alia provides a direct access to the Chairman of the Audit Committeeand affirms that no Director/employee have been denied access to the Chairman of the AuditCommittee and that no complaints were received during the year.

PREVENTION OF SEXUAL HARASSMENT

The Company has adopted a policy on sexual harassment at workplace in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. During the year the Board of Directors has re-constituted theInternal Complaint Committee (ICC) at the Company's Registered Office under the said Act.All the employees (permanent contractual temporary trainees) are covered under thispolicy.

During the year under review there was no complaints filed or registered pursuant tothis Act.

CORPORATE GOVERNANCE

In terms of provision of regulation 15(2) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 compliance with the Corporate Governance provisions asspecified under regulations 17 to 27 and clause (b) to (i) of subregulation (2) ofregulation 46 and para C D and E of Schedule V is not applicable to the Company aspaid-up share capital

of the Company is less than Rs. 10 crore and net-worth of the Company is less than Rs.25 crores as on the financial year ended on March 31 2020. Hence Corporate Governancereport does not form part of this Annual Report.

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 lays down the standard procedure of business conduct which is expected to befollowed by the Directors and the designated employees in their business dealings and inparticular on matters relating to integrity in the work place in the business practicesand in dealing with 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.

The Code may be accessed on the Company's website at the Weblink:http://hpthreads.com/corporate-information.php.

All the Boards Members and the Senior Management personnel have confirmed compliancewith the Code for the Financial Year ended March 31 2020. The declaration to this effectsigned by CEO and Managing Director is annexed herewith as Annexure IV forming integralpart of this report.

OTHER STATUTORY DISCLOSURES

During the year under review:

1. No significant and material orders were passed by the Regulators/ Courts/ Tribunalswhich impact the going concern status and Company's operations in future.

2. No equity shares were issued with differential rights as to dividend voting orotherwise.

3. No Sweat Equity shares were issued.

4. The Company does not have any scheme of provision of money for the purchase of itsown shares by employees or by trustees for the benefit of employees.

5. No deposits have been accepted by the Company from the public. The Company had nooutstanding unpaid or unclaimed public deposits at the beginning and end of FY 2019-20.

6. Neither the Managing Director nor the Whole-time Directors of the Company receiveany remuneration or commission from any of its subsidiaries as your company don't haveany subsidiary company.

7. Maintenance of cost records under sub-section (1) of Section 148 of the Act is notapplicable to the Company.

8. No Change in nature of Business of Company.

9. No fraud has been reported by the Statutory Auditors and Secretarial Auditors to theAudit Committee or the Board.

10. No Corporate Insolvency Resolution Process initiated under the Insolvency andBankruptcy Code 2016.

The Company has complied with the applicable Secretarial Standards on Meetings of theBoard of Directors and on General Meetings issued by the Institute of Company Secretariesof India.

ACKNOWLEDGEMENTS

Your Directors take this opportunity to thank and acknowledge with gratitude thecontribution cooperation and assistance received from the Government and RegulatoryAuthorities Business Partners Bankers Members Vendors and other Stakeholders

Your Directors would also like to appreciate the confidence and loyalty displayed bythe Customers and Shareholders for their confidence in the Company and its management andlook forward for their continuous support. The Board wishes to place on record itsappreciation for the dedication and commitment of your Company's employees at all levelswhich has continued to be our major strength.

For and on behalf of the Board

Sd/-

Kailash Kumar Agarwal

Chairman and Managing Director DIN:00063470

New Delhi

September 01 2020

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