We have pleasure in presenting the Twenty-Fifth Annual Report of the Company togetherwith the Audited Statement of Accounts for the year ended 31st March 2017.
|FINANCIAL RESULTS ||(Rs. in lakhs) |
| ||Standalone ||Consolidated |
|PARTICULARS ||For the year ended 31st March 2017 ||For the year ended 31st March 2016 ||For the year ended 31st March 2017 ||For the year ended 31st March 2016 |
|Gross Profit ||7860 ||8827 ||8005 ||8845 |
|Less : Finance Cost ||2603 ||3241 ||2751 ||3355 |
|Profit prior to Depreciation and write off ||5257 ||5586 ||5254 ||5490 |
|Less : Depreciation ||1378 ||2048 ||1452 ||2072 |
|Net Profit ||3879 ||3538 ||3802 ||3418 |
|Current Deferred & earlier year tax ||1461 ||1426 ||1529 ||1376 |
|Net Profit for the year ||2418 ||2112 ||2273 ||2042 |
|Balance Brought forward ||3436 ||1556 ||2957 ||1147 |
|Proposed Dividend & Tax thereon ||232 ||232 ||232 ||232 |
|Balance Carried Forward ||5623 ||3436 ||4999 ||2957 |
STATE OF THE COMPANY'S AFFAIRS
During the period under review the Company has earned revenue of Rs.62149 lakh and NetProfit of Rs.2418 lakh on standalone basis and Rs.69853 lakh and Rs.2273 lakh respectivelyon consolidated basis.
PERFORMANCE OF THE COMPANY
The Company has two main product segments viz. Denim Apparel Fabric and HomeTextiles.
During the year ended 31.03.2017 total Fabric production was 359 lakh meters as against361 lakh meters in 2015-16.
Sale of Fabric was 346 lakh meters as against 361 lakh meters in 2015-16.
The net profit has increased due to savings in power & fuel costs interest anddepreciation after absorbing increases in material costs and overheads.
The Board of Directors recommends a dividend of 7.50 % (i.e. Rs.0.75) per equity shareof the Company for the year 2016-17. The Dividend tax payable amounts to Rs.39 lakh.
INDUSTRY STRUCTURE AND DEVELOPMENTS
Textile Industry in India is rising upto the challenges posed by various governmentalpolicies like Demonetisation implementation of Goods and Services Tax Act (GST) andstrengthening of Rupee etc. Geo Political factors like devaluation of currencies byneighboring countries favorable import benefits to neighboring countries by Europeancountries and the recent African Growth and Opportunity Act (AGOA) which affordsfavorable imports benefits to USA from African countries are acting as deterrents in theexport market.
Company is making efforts to target high end and middle segment brands and retailers inIndia to augment domestic sales instead of depending on export segment which get affectedby governmental and extraneous factors.
The Company is also working on new developments moving towards Sustainability andfabrics are produced using Organic Cotton BCI Cotton and other rejected fibers.
OPPORTUNITIES AND THREATS
The recent governmental actions like Demonetisation GST etc though had met withtemporary slow down in sales are expected to bring discipline in domestic market andimproved sales. Export sales have to gear up for new challenges post-GST/strngethening ofRupee.
Good Monsoon forecast in the current year augurs well for the overall improvement inthe economy.
Company is making efforts to make business with new customers and countries to augmentsales.
Necessary forward covers are also made to insulate against foreign currencyfluctuations.
LISTING OF EQUITY SHARES
The Company's Equity shares are listed at the following Stock Exchange:
(I) BSE Limited Phiroze JeeJeebhoy Towers Dalal Street Mumbai-400 001.
The Company has paid the Annual Listing Fees to the said Stock Exchange for thefinancial year 2017-18.
PERFORMANCE AND FINANCIAL POSITION OF EACH OF THE SUBSIDIARIES
The Company's wholly owned subsidiary Trigger Apparels Limited is engaged in themanufacture and marketing of readymade garments.
During the year the gross turnover in Trigger Apparels Limited was Rs.11164.33 lakhagainst Rs.9302.03 lakh during the previous year. The Subsidiary Company has registered aloss of Rs.143.75 lakh as against a loss of Rs.69.65 lakh in the previous year.
KG Denim (USA) Inc. has commenced operation from July 2016 and is marketing made-upfabrics supplied by the holding company K G Denim Ltd. KG Denim (USA) Inc. has achieved aturnover of Rs.34.93 lakh and a loss of Rs.1.26 lakh in the first year of operation.
As per the provisions of Section 129 of the Companies Act 2013 read with Companies(Accounts) Rules 2014 a separate statement containing the salient features of thefinancial statements of the Subsidiary companies is prepared in Form AOC-1 and same isenclosed to this report as Annexure-1.
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated financial statements have been prepared by the Company's Management inaccordance with the requirements of Accounting Standards 21 issued by The Institute ofChartered Accountants of India (ICAI) and as per the provisions of Companies Act 2013.
As per the provisions of Section 136 of the Companies Act 2013 the Company has placedseparate audited accounts of its subsidiaries on its website www.kgdenim.com and copy ofseparate audited financial statements of its subsidiaries will be provided to theshareholders
at their request.
The Managing Director and Chief Financial Officer of the Company have submitted aCertificate to the Board as required under Clause 49 of the Listing Agreement for the yearended 31st March 2017.
MEETINGS OF THE BOARD OF DIRECTORS
During the year ended 31st March 2017 four Board Meetings were held.
The dates on which the Board meetings were held are 26th May 2016 25thJuly 2016 04th November 2016 and 09th February 2017. A meeting ofthe Independent Directors of the Board was held on 08th February 2017.
Details of meetings of the Board and its Committees are disclosed in the report onCorporate Governance.
DIRECTORS' RESPONSIBILITY STATEMENT AS REQUIRED UNDER SECTION 134 OF THE COMPANIES ACT2013
Pursuant to the requirement under Section 134 of the Companies Act 2013 with respectto the Directors' Responsibility Statement the Board of Directors of the Company herebyconfirms:
i) that in the preparation of the Annual Accounts the applicable accounting standardshave been followed;
ii) that the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31stMarch 2017 and Statement of Profit and Loss Account of the Company for that period;
iii) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
iv) that the Directors have prepared the Annual Accounts for the Financial Year ended31st March 2017 on a going concern basis;
v) that the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
vi) that the Directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS UNDER SUB-SECTION (7) OFSECTION 149 OF THE COMPANIES ACT 2013
The independent directors have submitted the declarations of independence as requiredpursuant to Section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in sub-section(6).
NOMINATION AND REMUNERATION COMMITTEE
The Nomination and Remuneration Committee consists of the following members namely ShriK N V Ramani Chairman with Shri G V S Desikan and Shri V Jagadisan as members.
Brief description of terms of reference:
1. 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 Boardfor their appointment and removal;
2. carry on the evaluation of every director's performance;
3. formulation of the criteria for determining qualifications positive attributes andindependence of a director;
4. recommend to the Board a policy relating to the remuneration of the directors keymanagerial personnel and other employees;
5. formulation of criteria for evaluation of Independent Directors and the Board;
6. devising a policy on Board diversity; and
7. any other matter as the Board may decide from time to time.
NOMINATION AND REMUNERATION POLICY
THE OBJECTIVES OF THE POLICY
1. To lay down criteria and terms and conditions with regard to identifying persons whoare qualified to become Directors (Executive and Non-Executive) and persons who may beappointed in Senior Management and Key Managerial positions and to determine theirremuneration.
2. To determine remuneration based on the Company's size and financial position andtrends and practices on remuneration prevailing in peer companies.
3. To carry out evaluation of the performance of Directors.
4. To provide them reward linked directly to their effort performance dedication andachievement relating to the Company's operations.
5. To retain motivate and promote talent and to ensure long term sustainability oftalented managerial persons and create competitive advantage.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS UNDER SECTION 186 OF COMPANIES ACT2013
The details of Loans Guarantees given and Investments made during the Financial Yearended on 31st March 2017 are given in the notes to Financial Statements incompliance with the provisions of Section 186 of the Companies Act 2013 read withCompanies (Meetings of Board and its Powers) Rules 2014.
PARTICULARS OF CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES REFERRED TO INSUB-SECTION (1) OF SECTION 188 OF COMPANIES ACT 2013
The Company adopted a Related Party Transaction Policy in terms of SEBI regulations forcompliance with Corporate Governance and Clause 49 of the Listing Agreement. The policyhas also been hosted on the Company's website. All transactions entered into with RelatedParties for the year 2016-17 were on Arm's length basis.
There were no material related party transactions in terms of the Related PartyTransaction Policy adopted.
Thus disclosures in Form AOC-2 as per Companies Act 2013 and Rule 8 of Companies(Account) Rules 2014 are not required.
Further there were no material related party transaction with the Promoters Directorsor Key Managerial Personnel during the year.
All related party transaction are placed before the Audit Committee as also to theBoard for approval on a quarterly basis. Omnibus approval was obtained for transaction ofrepetitive nature.
TRANSFER OF AMOUNT TO RESERVES
The Company does not propose to transfer any amount to the general reserve for theFinancial Year ended 31st March 2017.
EXTRACT OF ANNUAL RETURN
The extract of Annual Return is prepared in Form MGT-9 as per the provisions of theCompanies Act 2013 and Rule 12 of Companies (Management and Administration) Rules 2014and the same is enclosed as Annexure - 2 to this Report.
THE CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGOPURSUANT TO PROVISIONS OF SECTION 134(3)(m) OF THE COMPANIES ACT 2013 READ WITH THECOMPANIES (ACCOUNTS) RULES 2014
Information with respect to conservation of energy technology absorption foreignexchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Companies(Accounts) Rules 2014 is prepared and the same is enclosed as Annexure - 3 to thisReport.
RISK MANAGEMENT COMMITTEE
Risk Management Committee consists of the following persons namely Shri B Sriramulu asChairman Shri S Muthuswamy and Shri M Balaji as members.
The Committee had formulated a Risk Management Policy for dealing with different kindsof risks which it faces in day to day operations of the Company. Risk Management Policy ofthe Company outlines different kinds of risks and risk mitigating measures to be adoptedby the Board. The Company has adequate internal control systems and procedures to combatthe risk. The Risk management procedure is reviewed by the Audit Committee and Board ofDirectors on a Quarterly basis at the time of review of Quarterly Financial Results of theCompany.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
Corporate Social Responsibility is commitment of the Company to improve the quality oflife of the workforce and their families and also the community and society at large. TheCompany believes in undertaking business in such a way that it leads to overalldevelopment of all stakeholders and Society.
The Board of Directors of the Company has constituted Corporate Social ResponsibilityCommittee consisting of following persons namely Shri KG Baalakrishnan Chairman Shri G VS Desikan Member and Shri A Velusamy Member and adopted policy for Corporate SocialResponsibility.
Corporate Social Responsibility policy was adopted by the Board of Directors on therecommendation of Corporate Social Responsibility Committee.
The Report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is annexed as Annexure - 4.
EVALUATION OF BOARD
Evaluation of all Board members is done on an annual basis. The evaluation is done bythe Board Nomination and Remuneration Committee and Independent Directors with specificfocus on the performance and effective functioning of the Board and Individual Directors.
The manner in which the evaluation has been done is explained in the report onCorporate Governance.
In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association No.34 Shri B Srihari retires by rotation at theforthcoming Annual General Meeting and being eligible offers himself for re-appointment.
KEY MANAGERIAL PERSONNEL
The following are the Key Managerial Personnel of the Company :
|1. Shri B Sriramulu ||- Managing Director |
|2. Shri B Srihari ||- Managing Director |
|3. Shri S Muthuswamy ||- Company Secretary |
|4. Shri M Balaji ||- Chief Financial Officer |
The Board at its meeting held on 23rd May 2017 has approved there-designation of Shri S Muthuswamy as Chief Financial Officer and Shri M Balaji asCompany Secretary with effect from 01st June 2017.
The Company has not accepted any deposits from the public in terms of Section 73 of theCompanies Act 2013.
M/s.Gopalaiyer and Subramanian Chartered Accountants (ICAI Regn. No.000960S) haveissued Auditors Report for the Financial Year ended 31st March 2017 and thereare no qualifications in Auditors' Report.
The Board of Directors of the Company had appointed M/s Mohan & VenkataramanChartered Accountants (ICAI Regn. No.007321S) to conduct Internal Audit of the Companytill 31.03.2017.
As per the requirement of Central Government and pursuant to Section 148 of theCompanies Act 2013 read with the Companies (Cost Records and Audit) Rules 2014 asamended from time to time your Company has been carrying out audit of cost recordsrelating to Textile Division every year.
The Board of Directors on the recommendation of Audit Committee has appointed MessrsM Nagarajan Cost Accountants (Firm Registration Number 6384) as Cost Auditor to auditthe cost accounts of the Company for the financial year 2017-18. As required under theCompanies Act 2013 a resolution seeking member's approval for the remuneration payableto the Cost Auditor forms part of the Notice convening the Annual General Meeting fortheir ratification.
Audit Committee consists of the following Directors namely Shri V Jagadisan ChairmanShri K N V Ramani and Shri G V S Desikan as members. All the members of the AuditCommittee are Independent Directors.
There is no such incidence where Board has not accepted the recommendation of the AuditCommittee during the year under review.
A separate section on Corporate Governance and a Certificate from the Auditors of theCompany regarding compliance of conditions of Corporate Governance as stipulated underClause 49 of the Listing Agreement with the Stock Exchange forms part of the AnnualReport - Annexure - 5.
The Board of Directors have adopted a Whistle Blower Policy which is hosted on theCompany's website. The Whistle Blower Policy aims for conducting the affairs in a fair andtransparent manner by adopting highest standards of professionalism honesty integrityand ethical behaviour. All permanent employees of the Company are covered under theWhistle Blower Policy.
A mechanism has been established for employees to report concerns about unethicalbehavior actual or suspected fraud or violation of Code of Conduct and Ethics. It alsoprovides for adequate safeguards against the victimization of employees who avail of themechanism and allows direct access to the Chairperson of the Audit Committee inexceptional cases.
SECRETARIAL AUDITORS REPORT
As per the provisions of Section 204 of the Companies Act 2013 the Board of Directorshave appointed Shri M.R.L.Narasimha Practising Company Secretary (C.P.No:799) asSecretarial Auditor to conduct Secretarial audit of the Company for the Financial Yearended on 31st March 2017.
Secretarial Audit Report issued by Shri M.R.L.Narasimha Practising Company Secretaryin form MR-3 is enclosed as Annexure - 6 to this Annual Report. There are noqualifications in Secretarial Audit Report.
STATEMENT OF PARTICULARS OF APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL
The Statement of particulars of Appointment and Remuneration of Managerial personnel asper Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is enclosed as Annexure - 7 to this Annual Report.
The Company holds due certification under ISO 14001 : 2004 which is primarily focusedon environmental management system. It ensures that the manufacturing of products iscarried on without affecting the environment in the working area and surroundings.
The Company is a member of Sustainable Apparel Coalition (SAC). SAC provides crediblepractical and industry wide guidelines and provides tools to define measure and evaluateindustry's product environmental and social performance support.
The Company has achieved one of the best scores in the apparel industry as verified bya leading brand assessor.
During the current year the Company has implemented various environmental measures andreduction program like Green House Gas inventory measurement replacement of freon gas airconditioners increasing the area of plantation etc.
The Company has improved effluent water treatment system conforming to the PollutionControl Board parameters. A new plant has been added which has increased the Biologicaltreatment capacity by 60%. An advanced technology of Biological Diffuser Aeration systemhas been introduced which has resulted in reduction in chemicals usage. Consequentlyreduction in sludge improvement in outlet water quality and consistence and improvementin RO recovery were achieved. The highlights of our sustainability effort can be seen inthe link https://youtu.be/uZGhiwq6XSM
HEALTH AND SAFETY
The Company has obtained certification under OHSAS 18001 : 2007 (Occupational Healthand Safety Management Assessment Standard) which is an Integrated Management Systemfocusing on an organization's occupational health and safety management system. Thisstandard guides us to identify and control the conditions and factors that affect thewell-being of employees contractors visitors and any other person in the work place.
The Company is implementing various health and safety practices in continuous manner asper OHSAS-18001 standards and legal requirements.
POLICY ON SEXUAL HARASSMENT
The Company has adopted policy on Prevention of Sexual Harassment of Women at Workplacein accordance with The Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013. During the financial year ended 31st March 2017 theCompany has not received any complaints pertaining to sexual harassment.
The Company is conscious of improving the occupational and personal health of itsemployees. In addition to free medical camps the Company also organizes employees' healthcheck up in outside hospitals on annual basis.
The Company provides a safer work environment for its employees. Basic equipments areprovided to ensure safety from fire. Awareness classes are being conducted periodicallywith the help of external agencies about the basic safety fire fighting mock drillsmass evacuation first aid etc.
The Company is maintaining a hospital for serving the community including supply ofmedicines at subsidised costs. As a part of social environmental protection agro forestryhas been developed with a demo plant with the technical support of Forest CollegeCoimbatore.
All properties and insurable interests of the Company including building plant andmachinery and stocks have been fully insured.
Your Directors acknowledge with gratitude the valuable assistance and support extendedby our Bankers for term loans and working capital ie. Indian Bank Bank of IndiaAllahabad Bank State Bank of India and The South Indian Bank Limited.
DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS
1. The Company maintains all its records in ERP System and the work flow and approvalsare routed through ERP System;
2. The Company has appointed Internal Auditors to observe the Internal Controlswhether the work flow of organization is being done through the approved policies of theCompany. In every Quarter during the approval of Financial Statements Internal Auditorswill present the Internal Audit Report and Management Comments on the Internal Auditobservations; and
3. The Board of Directors of the Company have adopted various policies like RelatedParty Transactions Policy Whistle Blower Policy Policy to determine MaterialSubsidiaries and such other procedures for ensuring the orderly and efficient conduct ofits business for safeguarding of its assets the prevention and detection of frauds anderrors the accuracy and completeness of the accounting records and the timely preparationof reliable financial information.
CHANGE IN THE NATURE OF BUSINESS
There is no change in the nature of business of the Company.
THE DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE.
No Significant and material orders passed by the regulators or courts or tribunalsimpacting the going concern status and company's operations in future.
Details of pending legal cases are furnished in Note No.29 to the accounts.
MATERIAL CHANGES AND COMMITMENTS
There are no Material changes and commitments in the business operations of the Companyfrom the Financial Year ended 31st March 2017 to the date of signing of theDirector's Report.
The Directors take this opportunity to place on record their sincere thanks to theBanks and Financial Institutions Insurance Companies Central and State GovernmentDepartments and the shareholders for their support and co-operation extended to theCompany from time to time.
The Directors wish to place on record their appreciation for the co-operation extendedby all sections of the employees.
The statement in this Directors' Report & Management Discussion and Analysiscontain forward looking statements regarding Company's projections & expectations andthe actual results could differ materially from those expressed on account of variousfactors like raw material prices change in demand government regulation etc. and thereaders are cautioned against placing undue reliance on the same.
PARTICULARS OF EMPLOYEES
Information pursuant to Section 197(12) of the Companies Act 2013 read with Rule 5 (1)of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 isgiven in Annexure - 7 to this report.
The particulars in respect of employees in receipt of remuneration exceeding Rs.60lakhs per annum as per Section 197(12) read with Rule 5(2) of The Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 is given in Annexure-8.
The Company has presented in this Report the consolidated financial statements of theholding company and all its subsidiaries duly audited by the Statutory Auditors. TheCompany will make available the audited annual accounts and related information of itssubsidiaries upon request by any of its shareholders. The annual accounts of thesubsidiary companies will also be kept for inspection by any member at the RegisteredOffice of the Company and its subsidiary companies.
Our humble prayers to Sri Venkateswaraswamy Vari of Then Thirumalai for thecontinued prosperity of the Company.
| ||On behalf of the Board |
| ||KG Baalakrishnan |
|Coimbatore ||Executive Chairman |
|23.05.2017 ||DIN: 00002174 |