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K G Denim Ltd.

BSE: 500239 Sector: Industrials
NSE: KGDENIM ISIN Code: INE104A01012
BSE 00:00 | 14 Dec 38.45 0.25
(0.65%)
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NSE 05:30 | 01 Jan K G Denim Ltd
OPEN 39.60
PREVIOUS CLOSE 38.20
VOLUME 12156
52-Week high 84.90
52-Week low 24.00
P/E 7.21
Mkt Cap.(Rs cr) 99
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 39.60
CLOSE 38.20
VOLUME 12156
52-Week high 84.90
52-Week low 24.00
P/E 7.21
Mkt Cap.(Rs cr) 99
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

K G Denim Ltd. (KGDENIM) - Director Report

Company director report

MANAGEMENT DISCUSSION AND ANALYSIS

Dear Shareholders

We have pleasure in presenting the Twenty-Sixth Annual Report of the Company togetherwith the Audited Statement of Accounts for the year ended 31st March 2018.

FINANCIAL RESULTS

Standalone

Consolidated

PARTICULARS For the year ended 31st March 2018 For the year ended 31st March 2017 For the year ended 31st March 2018 For the year ended 31st March 2017
Gross Profit 4702 7901 4201 8068
Less : Finance Cost 2435 2603 2582 2751
Profit prior to Depreciation and write off 2267 5298 1619 5317
Less : Depreciation 1391 1378 1445 1452
Profit before Tax 876 3920 174 3865
Current Deferred & earlier year tax 293 1462 83 1529
Add : Other Comprehensive Income 48 (39) 32 (62)
Net Profit for the year 631 2419 123 2274
Balance Brought forward 5832 3667 4873 3188
Ind AS adjustments for Depreciation/ Receivables - (22) - (357)
Equity Dividend & Tax thereon 232 232 232 232
Balance Carried Forward 6231 5832 4765 4873

The Company has adopted Ind AS from 01.04.2017 for the first time.

STATE OF THE COMPANY'S AFFAIRS

During the period under review the Company has earned revenue of Rs.63867 lakh and NetProfit of Rs.631 lakh on standalone basis and Rs.71985 lakh and Rs.123 lakh respectivelyon consolidated basis.

PERFORMANCE OF THE COMPANY

The Company has two main product segments viz. Fabric (Denim / Apparel) and HomeTextiles.

During the year ended 31.03.2018 total Fabric production was 371 lakh meters as against359 lakh meters in 2016-17.

Sale of Fabric was 355 lakh meters in 2017-18 as against 346 lakh meters in 2016-17.

The Net Profit had decreased due to increase in raw material cost and cost of fuel withno corresponding increase in sale price. DIVIDEND

The Board of Directors recommends a dividend of 7.50 % (i.e. Rs.0.75) per equity shareof the Company for the year 2017-18. The Dividend tax payable amounts to Rs.39 lakh.

INDUSTRY STRUCTURE AND DEVELOPMENT

Textile Industry in India had witnessed downword trend both in the domestic as well asexport markets. Certain Government policies like Demonitisation Implementation of GST hadresulted in reduced off take in the domestic markets. Competition from neighboringcountries reduction of export incentives and strengthening Indian Rupee had adverseimpact on export realisation.

Inspite of the above company has been able to marginally improve the turnover mainlyby export sales of denim fabric and home textiles.

Company is making efforts to focus on new markets new segments and other countries inthe Far East and Middle East. OPPORTUNITIES AND THREATS

With the stabilisation after the initial glitches in the implementation of GSTimprovements are seen in the demand.

Good monsoon forecast in the current year augurs well for the overall improvement inthe economy.

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:

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 2018-19.

PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES

The Company has two wholly owned subsidiaries Trigger Apparels Limited and KG Denim(USA) Inc.

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.11500 lakhagainst Rs. 11164 lakh during the previous year. The Subsidiary Company has registered aloss of Rs.504 lakh as against a loss of Rs.144 lakh in the previous year. The increase inlosses is due to liquidation of old stocks. The subsidiary is reorganising its productsand marketing channels.

KG Denim (USA) Inc. had achieved a turnover of Rs.29 lakh and registered a loss of Rs.5lakh during the year.

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.

CEO/CFO CERTIFICATION

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 2018.

MEETINGS OF THE BOARD OF DIRECTORS

During the year ended 31st March 2018 six Board Meetings were held.

The dates on which the Board meetings were held are 23rd May 2017 28thJuly 2017 02nd September 2017 17th November 2017 14th February2018 and 24th March 2018.

A meeting of the Independent Directors of the Board was held on 14thFebruary 2018.

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 2018 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 2018 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 consisted of Shri K N V Ramani Chairman withShri G V S Desikan and Shri V Jagadisan as members.

Consequent upon the demise of Shri V Jagadisan in March 2018 his vacancy was filled upby appointing Shri G P Muniappan as member in March 2018.

The Board of Directors appointed Shri G P Muniappan as member of the said Committee on24.03.2018 who fulfills the criteria specified under Section 178(1).

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 2018 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 2017-18 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 partytransaction with the Promoters Directors or Key Managerial Personnel during the year.

All related party transactions 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 2018. 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 Shri B Sriramulu as Chairman with Shri SMuthuswamy 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 Shri KG Baalakrishnan as Chairman with Shri G V S Desikan and ShriA Velusamy as Members and adopted policy for Corporate Social Responsibility.

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.

DIRECTORS

Shri V Jagadisan Independent Director of the Company had expired on 16.03.2018. TheBoard placed on record the invaluable contributions of Shri V Jagadisan towards theprogress of the Company.

In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association No.34 Shri A Velusamy retires by rotation at theforthcoming Annual General Meeting and being eligible offers himself for re-appointment.Due to amendments in SEBI (Listing Obligations and Disclosure Requirements) Regulations2018 Messrs K N V Ramani Shri G V S Desikan and Shri G P Muniappan who are Non-ExecutiveDirectors and have attained 75 years of age are proposed to be appointed as Directors for3 years from 01.04.2019 at the forthcoming Annual General Meeting.

Shri KG Baalakrishnan Executive Chairman Shri B Sriramulu Managing Director and ShriB Srihari Managing Director are being reappointed from 03.11.2018 for a period of 5years.

The Board proposes to appoint Shri M B N Rao an acclaimed Banking Professional as anIndependent Director at the forthcoming Annual General Meeting of the Company to fill inthe vacancy caused due to the demise of Shri V Jagadisan.

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 - Chief Financial Officer
4. Shri M Balaji - Company Secretary

DEPOSITS

The Company has not accepted any deposits from the public in terms of Section 73 of theCompanies Act 2013.

STATUTORY AUDITORS

M/s. Mohan & Venkataraman were appointed as Auditors of the Company at the AGM heldon 16.09.2017 to hold office as Auditors for a term of five Financial Years commencingfrom 2017-18 to 2021-22 till conclusion of AGM to be held for financial year 2021-22.

AUDITORS REPORT

M/s. Mohan & Venkataraman Chartered Accountants (ICAI Regn. No.007321S) haveissued Auditors Report for the Financial Year ended 31st March 2018.

There are no qualifications in Auditors' Report.

INTERNAL AUDITORS

The Board of Directors of the Company had appointed Mr K Panneerselvam CharteredAccountant (Membership No.220574) to conduct Internal Audit of the Company.

COST AUDITORS

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 2018-19. 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

Audit Committee consisted of Shri V Jagadisan as Chairman with Shri K N V Ramani andShri G V S Desikan as members.

All the members of the Audit Committee are Independent Directors.

Consequent upon the demise of Shri V Jagadisan Chairman of Audit Committee vacancyhad arisen in the Company's Audit Committee.

The Board of Directors appointed Shri G P Muniappan as member of the said Committee on24.03.2018 who fulfills the criteria specified under Section 177(2).

There is no such incidence where Board has not accepted the recommendation of the AuditCommittee during the year under review.

CORPORATE GOVERNANCE

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.

VIGIL MECHANISM

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 2018.

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 no qualifications 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.

ENVIRONMENT

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 2018 theCompany has not received any complaints pertaining to sexual harassment.

LEGAL REQUIREMENTS

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.

SOCIAL RESPONSIBILITIES

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.

INSURANCE

All properties and insurable interests of the Company including building plant andmachinery and stocks have been fully insured. FINANCE

Your Directors acknowledge with gratitude the valuable assistance and support extendedby our Bankers for Term Loans and Working Capital ie. Indian Bank Andhra Bank StateBank of India The South Indian Bank Limited and Allahabad Bank.

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.41 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 2018 to the date of signing of theDirector's Report.

ACKNOWLEDGMENT

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.

PERSONNEL

The Directors wish to place on record their appreciation for the co-operation extendedby all sections of the employees. CAUTIONARY STATEMENT

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 the continuedprosperity of the Company.

On behalf of the Board
KG Baalakrishnan
Coimbatore Executive Chairman
01.08.2018 DIN: 00002174