To the members of the Kallam Textiles Ltd. Your directors are pleased to present theirTwenty-Sixth Annual Report of the Company together with the Audited Financial Statementsfor the year ended 31st March 2018.
1. CORPORATE OVERVIEW :
W.e.f 09th April 2018 your company name has been changed from "KALLAMSPINNING MILLS LIMITED" To "KALLAM TEXTILES LIMITED ("YourCompany"). Your company is a leading Textile Company and has its corporate office atChowdavaram Guntur - 522019 Andhra Pradesh.
2. REVIEW OF OPERATIONS:
The financial results for the year ended 31st March 2018 are summarizedbelow :
|S. No. || ||2017-18 ||2016-17 |
| ||Particulars ||(Rs. in Lakhs) ||(Rs. in Lakhs) |
|01 ||Revenue from operations ||31264.27 ||28863.17 |
|02 ||Other income ||113.23 ||101.23 |
|03 ||Profit before Interest Depreciation & Tax ||5714.63 ||5681.57 |
|04 ||Depreciation ||(1419.46) ||(1364.89) |
|05 ||Interest ||(2188.33) ||(2198.67) |
|06 ||Profit before tax ||2106.84 ||2118.01 |
|07 ||Provision for income tax || || |
| ||i) Current year Tax ||460.26 ||500 |
| ||ii) Deferred Tax ||79.27 ||339.01 |
|08 ||Profit after tax ||1567.30 ||1278.99 |
|09 ||Earnings per share ('2/-) ||3.66 ||2.99 |
|Transfers & appropriations fron the profit are as detailed below || || || |
|10 ||Net Profit after tax ||1567.30 ||1278.99 |
|11 ||Balance brought forward from previous year || || |
|12 ||Profit for appropriations ||1567.30 ||1278.99 |
|APP ||ROPRIATIONS || || |
|13 ||Transfer to General Reserve ||0 ||0 |
|14 ||Proposed Equity Dividend ||85.63 ||68.51 |
|15 ||Tax on Proposed Equity Dividend ||17.43 ||13.95 |
|16 ||Balance carried forward ||0 ||0 |
3. FINANCIAL PERFORMANCE:
Your Company recorded net revenue from operations of '31071.21 Lakhs with a increaseof 8.33% over '28681.13 Lakhs of the last financial year. The Company recorded a netprofit after tax of '1567.30 Lakhs with a increase of 22.54% over net profit of '1278.99Lakhs of the last financial year.
4. DIVIDEND AND RESERVES:
Considering the profits for the year under review and also the capital expenditurerequirements of the Company Your Directors are pleased to recommend a dividend of 10%i.e. '0.20 per equity share of face value of '2/- each aggregating to '85.64 Lakhs for thefinancial year ended March 31 2018.
During the year under review no amount from profit was transferred to General Reserve.
The amount lying in the Unpaid Dividend Account of the company in respect of the lastfive years as on March 31 2018 is as follows :
|Dividend Year ||Date of Declaration of Dividend ||Due date for transfer to IEPF ||Amount in Rs. |
|2010-11 ||27-08-2011 ||01-10-2018 ||317865 |
|2013-14 ||27-09-2014 ||01-11-2021 ||313099 |
|2014-15 ||26-09-2015 ||31-10-2022 ||239365 |
|2015-16 ||28-09-2016 ||02-11-2023 ||253374 |
|2016-17 ||29-09-2017 ||03-11-2024 ||263827 |
During the year 2017-18 Unclaimed Dividend of Rs.332125/- for the year 2009-10 wastransferred to Investor Education and Protection Fund (IEPF). Pursuant to the provision ofrule 3 of the Investor Education and Protection Fund (Awareness and Protection ofInvestor) Rules 2001 necessary e-form (Form 1 INV) which contains the Statement ofamounts credited to IEPF was filed to Registrar of Companies (ROC).
5. MANAGEMENT DISCUSSION AND ANALYSIS:
The Management Discussion and Analysis forms an integral part of Annexure [I] tothis report and gives details of the overall industry structure economic developmentsperformance and state of affairs of your Company's various businesses viz. Textiles andpower business internal controls and their adequacy risk management systems and othermaterial developments during the financial year 2017-18.
6. BONUS ISSUE OF SHARES :
During the year under review the company has issued and allotted 8563875 fully paidnew equity shares of Rs.2/- each to the shareholders of the Company in the ratio of 1:4(i.e One Bonus Share for every Four (4) existing equity shares held.) Consequently theissued subscribed and paid up equity share capital of the Company after bonus issue ofEquity Shares has increased from '68511000 to '85638750 and number of sharesincreased from 34255500 to 42819375 of Rs.2/- each.
7. EXTRAORDINARY GENERAL MEETING (EGM) :
The Board of Directors had sought approval of the Shareholders of the Company byprocess of Extraordinary General Meeting (EGM) in respect of the Special Resolutions setout in the EGM Notice dated on 12th February 2018. The detailed voting results are givenin the "Report on Corporate Governance" forming part of this Annual Report.
8. CORPORATE GOVERNANCE:
As per Regulation 34 (3) read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a separate section on corporate governancepractices followed by the Company together with a certificate from the Company'sStatutory Auditors confirming compliance forms an integral part of this Report.
9. NUMBER OF MEETINGS HELD OF THE BOARD:
During the year Seven Board Meetings were held with a gap between not exceeding theperiod of 120 days as prescribed under the Act. Details of the Board and Board Committeemeetings held during the year are given in the Corporate Governance Report.
10. PUBLIC DEPOSITS :
During the year under review your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read with the Companies(Acceptance of Deposits) Rules 2014 (including any statutory modification(s) or re-enactment(s) for the time being in force).
11. DIRECTORS AND KEY MANAGERIAL PERSONNEL
Retirement by rotation and subsequent re-appointment :
Pursuant to Section 196 197 203 and other applicable provisions of Companies Act2013 read with Schedule V to the said act the shareholders at their 23rd Annual GeneralMeeting held on 26th September 2015 appointed Sri P. Venkateswara Reddy as a ManagingDirector and Sri G.V. Krishna Reddy as a Joint Managing Director of the Company for aperiod of Three years with effect from 29th June 2015.The Term of their appointment wouldcome to an end on 28th June 2018. It is necessary to Re-appointment them for anotherperiod of Three years. Hence the Board at their meeting held on 28th May 2018decides to Re-appoint Sri P Venkateswara Reddy as a Managing Director and Sri G.V.KrishnaReddy as a Joint Managing Director & CEO of the Company for another period of Threeyears on the recommendations of the Nomination and Remuneration Committee.
Pursuant to Section 196 197 203 and other applicable provisions if any of CompaniesAct 2013 read with Schedule V to the said act and Subject to the approval of theshareholders in Annual General Meeting Sri P Venkateswara Reddy and Sri G.V.Krishna Reddybe proposed to re-appoint as a Managing Director and Joint Managing Director & CEO ofthe Company for a period of Three years with effect from and including 29th June2018.
Sri M.V.Subba Reddy Whole Time Director retire by rotation at the ensuing AGM pursuantto the provisions of Section 152 of the Companies Act 2013 read with the Companies(Appointment and Qualification of Directors) Rules 2014 and the Articles of Associationof your Company and being eligible has offered himself for reappointment. Appropriateresolution for his reappointment is being placed for your approval at the ensuing AGM.
Mr M.Prasanna Kumar (ACS: 49713) has appointed as a Company Secretary w.e.f 01st April2017 and he has resigned from the post of Company Secretary as well as Compliance Officerw.e.f 31st May 2017.
The Independent Directors Mr. S.Pulla Rao and Smt V.Bhargavi of your Company holdoffice upto 26th September 2019 and Mr Ajeya Kallam and V.Ramgopal of your Company holdoffice upto 28th September 2022 and they are not liable to retire by rotation.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16 (b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
During the year Pursuant to the Provisions of Section 149(1) of the Companies Act2013 read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules2014 and also as per Regulation 16(1)
(b) of the SEBI (LODR) Regulations 2015 the Company with the approval ofshareholders at AGM has appointed Mr. Ajeya Kallam and V.Ramgopal as IndependentDirectors of the company on 29th September 2017.
During the year Non-Executive and Independent Directors of the Company Mr M.R.Naikand Mr A.Krishna Murthy have submitted their resignations to the Board on the BoardMeeting held on 29th September 2017.
The Board has accepted their resignations and relieved them as Directors of the Companywith effect from the same Board Meeting where they submitted their resignations and Boardplaced on record its sincere appreciation of services rendered by them as Directors of theCompany during their tenure.
Pursuant to Regulation 30 of SEBI (LODR) Regulations 2015 of the Listing Agreement Weinformed the same to Bombay Stock Exchange where the shares of the company were listedand also as per Section 168 of the Companies Act 2013 the Board of Directors also tookthe note of their resignations and intimate to the Registrar of Companies Hyderabad forthe States of Andhra Pradesh and Telangana.
Disclosure Relating to Remuneration of Directors Key Managerial Personnel andparticulars of Employees:
The remuneration paid to the Directors is in accordance with the Nomination andRemuneration Policy formulated in accordance with Section 178 of the Companies Act 2013and Regulation 19 of the Listing Regulations (including any statutory modification(s) orre-enactment(s) for the time being in force). The salient aspects covered in theNomination and Remuneration Policy has been outlined in the Corporate Governance Reportwhich forms part of this report.
The information required under Section 197 of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofDirectors/ employees of your Company is set out in Annexure [II] to this report.
Directors Responsibility Statement:
Pursuant to Section 134(3)(c) of the Companies Act 2013 (including any statutorymodification(s) or re- enactment(s) for the time being in force) the Directors of yourCompany confirm that:
(a) in the preparation of the annual accounts for the financial year ended 31st March2018 the applicable Accounting Standards and Schedule III of the Companies Act 2013(including any statutory modification(s) or re-enactment(s) for the time being in force)have been followed and there are no material departures from the same;
(b) for the financial year ended 31st March 2018 the Directors have selected suchaccounting policies and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofyour Company as at 31st March 2018 and of the profit and loss of the Company for thefinancial year ended 31st March 2018;
(c) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 (includingany statutory modification(s) or re- enactment(s) for the time being in force) forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;
(d) financial statements have been prepared on a "going concern" basis;
(e) proper internal financial controls laid down by the Directors were followed by yourCompany and that such internal financial controls are adequate and operating effectively;and
(f) proper systems to ensure compliance with the provisions of all applicable laws werein place and that such systems were adequate and operating effectively.
12. EXTRACT OF THE ANNUAL RETURN:
The details forming part of the extract of the Annual Return as on 31stMarch 2018 in Form MGT - 9 in accordance with Section 92(3) of the Companies Act 2013read with Companies (Management and Administration) Rules 2014 are set out herewith as Annexure[III] to this report. This Annexure is also posted on the website of the Company(www.ksml.in).
13. A STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS:
During the year under review one meeting of Independent Directors was held on 12thFebruary 2018 in compliance with the requirements of Schedule IV of the Companies Act2013.
All the Independent Directors of the Company have declared that they meet the criteriaof Independence in terms of Section 149(6) of the Companies Act 2013 and that there is nochange in the status of Independence.
14. EVALUATION OF BOARD'S PERFORMANCE:
Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (including any statutory modification(s) or re-enactment(s) for the time being inforce) the process for evaluation of the annual performance of the Directors/ Board/Committees was carried out. The criteria applied in the evaluation process are detailed inthe Corporate Governance Report which forms part of this report.
i. Observations of board evaluation carried out for the year - NIL
ii. Previous year's observations and actions taken - NIL
iii. Proposed actions based on current year observations- NIL
15. COMMITTEES OF THE BOARD:
The Board of Directors has the following Committees:
1. Audit Committee
2. Nomination and Remuneration Committee
3. Stakeholders' Relationship Committee
4. Corporate Social Responsibility Committee.
5. Share Transfer Committee
The details of the Committees along with their composition number of meetings andattendance at the meetings are provided in the Corporate Governance Report.
16. DISCLOSURE UNDER SECRETARIAL STANDARDS ON MEETING OF BOARD OF DIRECTORS (SS-1):
During the year under review the company has complied with all the applicableSecretarial Standards.
17. STATUTORY AUDITORS AND AUDITORS' REPORT:
M/s. Chevuturi Associates. Chartered Accountants (Firm Reg No : 000632S) wereappointed as the statutory auditors at the Annual General Meeting held on September 292017 for a term of five (5) years from the conclusion of the 25th annual general meetingtill the conclusion of 30th annual general meeting. As per the provisions of Section 139of the Companies Act 2013 the appointment of Auditors is required to be ratified byMembers at every Annual General Meeting.
But in accordance with the Companies Amendment Act 2017 enforced on 7thMay 2018 by the Ministry of Corporate Affairs the appointment of Statutory Auditors isnot required to be ratified at every Annual General Meeting.
The Statutory Auditors of the Company have not reported any fraud as specified underthe second proviso of Section 143(12) of the Companies Act 2013 (including any statutorymodification(s) or reenactments) for the time being in force). The Auditors' Report forthe financial year ended 31st March 2018 does not contain any qualification reservationor adverse remark.
18. COST AUDITOR:
The Board of Directors of your Company on the recommendations made by the AuditCommittee at its meeting held on 28th May 2018 has approved the appointment of Mr.PSrinivas Cost Accountant (Membership No. 21170) as the Cost Auditor of your Company forFY 2018-19 and recommends ratification of his remuneration by the Members at the ensuingAnnual General Meeting. The Company has maintained the cost records and there are noqualifications in the report of the cost auditor for the financial year 2017-18.
19. SECRETARIAL AUDITORS:
The Company has appointed M/s. K. Srinivasa Rao & Co a firm of Company Secretariesin Practice Guntur to conduct the Secretarial Audit for the financial year ended March31 2019 as required by Section 204 of the Companies Act 2013 and rules made thereunder.
The Secretarial Audit Report furnished by M/s. K. Srinivasa Rao & Co for thefinancial year ended March 31 2018 is annexed to this report as Annexure [IV].
Board reply on the Qualification of Secretarial Auditor :
The Board has made an utmost effort for the appointment of the Company Secretary as KMPbut unable to appoint a Company Secretary due to lack of suitability of the Candidate tothe profile of the Company in terms of work location job profile and remuneration.
20. INTERNAL AUDITORS:
The Board of Directors has appointed M/s Mastanaiah & Co.(Firm Reg No: 002039S)Chartered Accountants Guntur as Internal Auditors for the period of 1 (one) year up to31st March 2019 under Section 138 of the Companies Act 2013 and they have completed theinternal audit as per the scope defined by the Audit Committee.
21. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY
During the year there were no Loans Guarantees Investments and securitiesgiven/made/provided by the Company under the provisions of Section 186 of the CompaniesAct 2013.
22. RELATED PARTY TRANSACTIONS:
During the financial year 2017-18 your Company has entered into transactions withrelated parties as defined under Section 2(76) of the Companies Act 2013 read withCompanies (Specification of Definitions Details) Rules 2014 all of which were in theordinary course of business and on arm's length basis and in accordance with theprovisions of Section 188 of the Companies Act 2013 read with the Rules issuedthereunder and the Listing Regulations. Further there were no transactions with relatedparties which qualify as material transactions under the Listing Regulations. All RelatedParty Transactions are placed before the Audit Committee as also to the Board forapproval. Prior omnibus approvals are granted by the Audit Committee for related partytransactions which are of repetitive nature entered in the ordinary course of businessand are on arm's length basis in accordance with the provisions of Companies Act 2013read with the Rules issued thereunder and the Listing Regulations. The policy on RelatedParty Transactions as approved by the Board of Directors has been uploaded on the websiteof the Company. The web-link of the same has been provided in the Corporate GovernanceReport.
The details of the related party transactions as per Accounting Standard 18 are set outin point 35 of the Notes on Accounts to the Financial Statements forming part of thisreport. The Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act 2013 readwith Rule 8(2) of the Companies (Accounts) Rules 2014 is set out as Annexure [V].
23. VIGIL MECHANISM/WHISTLE BLOWER POLICY:
The Company has adopted Vigil Mechanism/Whistle Blower Policy as per the provisions ofSection 177 of the Companies Act 2013 and Regulation 22 of the Listing Regulations.Employees can raise concerns regarding any discrimination harassment victimization anyother unfair practice being adopted against them or any instances of fraud by or againstyour Company. Any incidents that are reported are investigated and the suitable actiontaken in line with the whistle blower policy. The details of the Vigil Mechanism isexplained in the Report on Corporate Governance and also posted on the website of theCompany (www.ksml.in).
24. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the Regulators/Courts that wouldimpact the going concern status of the Company and its future operations.
25. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO:
The information on the conservation of energy technology absorption and foreignexchange earnings and outgo as stipulated under Section 134 of the Companies Act 2013read with Rule 8 (3) of the Companies (Accounts) Rules 2014 is set out herewith as Annexure[VI] to this report.
26. UNSECURED LOANS RECEIVED FROM DIRECTORS DURING THE YEAR 2017-18:
During the year 2017-18 The Company has received Loans from Three Executive Directors.
|S. No ||Name of the Director ||Amount Received During the year (in Rs.) |
|1) ||Sri.P. Venkateswara Reddy ||8350000 |
|2) ||Sri G.V. Krishna Reddy ||2000000 |
|3) ||Sri M.V.Subba Reddy ||200000 |
All the Directors were at the time of giving the money furnished their declaration inwriting to the effect that the amount is not being given out of funds acquired by them byborrowing or accepting loans or deposits from others.
27. RISK MANAGEMENT:
The Company has implemented an integrated risk management approach through which itreviews and assesses significant risks on a regular basis to help ensure that there is arobust system of internal controls in place. Your Company believes that managing riskshelps in maximizing returns. The Company's approach to addressing business risks iscomprehensive and includes periodic review of such risks and a framework for mitigatingcontrols and reporting mechanism of such risks. The risk management framework is reviewedperiodically by the Board and the Audit Committee. The company has put in place responsemechanisms that mitigate environmental operational and business risks and minimise theimpact on business.
28. CORPORATE SOCIAL RESPONSIBILITY (CSR)
The CSR expenditure incurred by your Company during the financial year 2017-18 wasRs.29.36 Lakhs which was higher than the statutory requirement of 2% of the average netprofits for the last three financial years. (Which amounted to Rs.28.18 Lakhs)
The CSR initiative of your Company was under the area(s) Development of ruralareas/Social Business Projects.
Your Company's CSR Policy statement and annual report on the CSR activities undertakenduring the financial year ended 31st March 2018 in accordance with Section 135 of theCompanies Act 2013 and Companies (Corporate Social Responsibility Policy) Rules 2014 isannexed to this report as Annexure [VII].
29. DETAILS ON INTERNAL FINANCIAL CONTROLS RELATED TO FINANCIAL STATEMENTS
Your Company has put in place adequate internal financial controls with reference tothe financial statements and the Company has effective risk- mitigation system. YourCompany has adopted accounting policies which are in line with the Accounting Standardsprescribed in the Companies (Accounting Standards) Rules 2006 that continue to applyunder Section 133 and other applicable provisions if any of the Companies Act 2013 readwith Rule 7 of the Companies (Accounts) Rules 2014 and relevant provisions of theCompanies Act 1956 to the extent applicable. These are in accordance with generallyaccepted accounting principles in India. Changes in policies if any are approved by theAudit Committee in consultation with the Statutory Auditors.
The main thrust of internal audit is to test and review controls appraisal of risksand business processes besides benchmarking controls with best practices in the industry.The Internal Audit is entrusted to M/s Mastanaiah & Co. Chartered AccountantsGuntur who submit their reports to the Joint Managing Director & CEO and has directaccess to the Audit Committee and they participated in the meetings of the Audit Committeeof the Board of Directors of your Company.
The Audit Committee of the Board of Directors actively reviews the adequacy andeffectiveness of the internal control systems and suggests improvements to strengthen thesame. The Audit Committee of the Board of Directors and Statutory Auditors areperiodically apprised of the internal audit findings and corrective actions taken. Auditplays a key role in providing assurance to the Board of Directors. Significant auditobservations and corrective actions taken by the management are presented to the AuditCommittee of the Board. To maintain its objectivity and independence the Internal Auditfunction reports to the Chairman of the Audit Committee.
30. ENVIRONMENT AND SAFETY:
The Company is conscious of the importance of environmentally clean and safeoperations. The Company's policy requires the conduct of operations in such a manner soas to ensure the safety of all concerned compliances of environmental regulations andpreservation of natural resources for future Generations.
31. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE :
As per the requirement of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 ('Act') and Rules made there under the Company hasformulated and implemented a policy on prevention of sexual harassment at workplace with amechanism of lodging complaints. For that purpose Company has constituted InternalComplaints Committees (ICC). During the year under review no complaints were received inthis regard.
32. REGISTRARS AND SHARE TRANSFER AGENTS:
Your Registrar and Share Transfer Agents of the Company M/s Big share Services PrivateLimited 306 3rd Floor Right Wing Amrutha Ville Opp. Yashodha Hospital Raj BhavanRoad Somajiguda Hyderabad - 500 082.
33. APPRECIATIONS AND ACKNOWLEDGEMENTS:
Your Directors sincerely convey their appreciation for the unbelievable commitmentsupport dedication hard work enthusiasm and significant contribution made by employeesin ensuring sustained growth of the Company. The Directors also take this opportunity tothank all shareholders Clients Vendors Bankers Government and Regulatory Authoritiesand Stock Exchanges for their continued support.
| ||For and on behalf of Board of Directors |
| ||P Venkateswara Reddy |
| ||Managing Director |
| ||DIN : 00018677 |
| ||G.V. Krishna Reddy |
| ||Joint Managing Director |
| ||DIN :00018713 |
|Place : Chowdavaram Guntur || |
|Date : 09-08-2018 || |