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Kandagiri Spinning Mills Ltd.

BSE: 521242 Sector: Industrials
NSE: KANDAGIRI ISIN Code: INE292D01019
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NSE 05:30 | 01 Jan Kandagiri Spinning Mills Ltd
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OPEN 17.10
CLOSE 17.10
VOLUME 10
52-Week high 18.50
52-Week low 5.90
P/E
Mkt Cap.(Rs cr) 7
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Kandagiri Spinning Mills Ltd. (KANDAGIRI) - Director Report

Company director report

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Your directors hereunder submit their 44 Annual Report together withthe audited accounts for the year ended March 31 2020 (the year).

Performance Highlights 2019-20 2018-19

(Rupees in Lakhs)

Export - Direct
- Merchandise
Domestic 2657 6939
Other Operating income 16
Total Turnover 2657 6955
Gross profit/(Loss) (i.e. Profit/(Loss) before interest and depreciation) (217) (622)
Cash profit/(Loss) (i.e. Profit / (Loss) before depreciation) (719) (1262)
Profit/(Loss) before exceptional Item and tax (989) (1583)
Exceptional Item:
Impairment loss on assets (276)
Impairment loss on capital advances (49)
Profit/(Loss) after exceptional Item (before tax) – PBT (1038) (1859)
Tax Expense:
Current Tax - Current year 40
- MAT credit utilised 632
Deferred tax (474)
Profit/(Loss) after exceptional Item and tax – PAT (1236) (1859)
Earnings per share - basic and diluted Rs. (32.10) (48.31)

Dividend

In view of the loss incurred during the year no dividend isrecommended by your Board of Directors for the financial year 2019-20.

Retained Earnings

The aggregate of current year loss of Rs 1235.61 lakhs and othercomprehensive income of Rs 79.61 lakhs works out to Rs 1156.00 lakhs and had been added tothe negative retaining earnings as at the beginning of the year of Rs 2563.60 lakhs andthe negative retained earnings aggregates to Rs 3719.60 lakhs as at the end of the year.

Financial Performance with respect to Operational Performance:

During the financial year 2019-20 your Company's turnover was Rs 2657lakhs as against the previous year turnover of Rs 6955 lakhs. The Company has incurredloss of Rs 989 lakhs in the financial year 2019-20 as against the previous year loss of Rs1583 lakhs in the financial year 2018-19.

The impairment loss on capital advances of Rs 49 lakhs is added to thecurrent year loss of Rs 989 lakhs and the loss before tax is Rs 1038 lakhs and loss aftertax is Rs 1236 lakhs.

Because of continuous cash loss incurred over the past periods andadverse market situation of fluctuating and abnormal increase in cotton prices coupledwith sluggish demand for yarn with lower sale prices the Company had been incurringsubstantial operating losses from the past three to four years. The cash flow of theCompany is affected and the working capital of the Company had been eroded and madedifficult for funding the operations of the Company. Necessary funds for retirement ofdues and settlement of liabilities have been provided by the Directors/Promoters. Boardtried at its best to find out the ways to overcome the financial strain and to pay backthe bank loans. To overcome the financial crisis situation and to reduce nearly 50% of thebank debts pursuant to approval earlier obtained from shareholders for authorizing theBoard for sale of some of the assets of the Company vide postal Ballot resolution dated10.11.2016 Company decided to sell part of its assets viz. Unit-II and partial land andbuilding of Unit-I last year.

Further the Board of Directors had initiated a number of steps toreduce fixed costs recover higher raw material costs through higher price realization ofYarn and negotiate lower borrowing/finance cost. These efforts could not effect aturnaround in the fortunes of the company and in the light of erosion in net worth in thefourth quarter of financial year 2019-20 the refusal of bankers to lend further loans andtheir pressure to settle their dues and prevalent economic conditions the Board tookstrategic decision of closing the entire Bank debts and retire other liabilities to theextent possible by sale of plant and machineries of Unit-I of the Company in addition toreferred proposal of sale of Unit-II and part of land and building of the Company andfurther to lease the land and building of Unit-I of the Company where the Plant andmachinery is situated. Accordingly by obtaining necessary approvals from shareholdersthrough Postal Ballot resolution dt. 15.02.2020 in March 2020 the sale of Plant andMachinery and the referred assets were executed and the company ceased its yarn productionand has let out the immovable property on lease.

Using the sale proceeds of all the referred assets (Unit-II Unit-Ipart of land and building and Unit-I Plant and Machinery) the Company had closed itsentire bank debts and retired the other liabilities to the extent possible. The lease isoperational from the month of June 2020 and the lease rent receivables is the main incomefor the Company. By closing all the Bank debts and with no operating expenditure andhaving a regular lease income the Company has now become a risk-free and Bank debt-freeunit.

MANAGEMENT DISCUSSION AND ANALYSIS

(a) Industry structure and developments and future outlook:

The Indian cotton spinning industry which was already witnessingturbulent situation of fluctuating cotton prices coupled with lower demand for yarn is nowconfronted with yet another challenge of prevailing covid-19 pandemic situation. This hasfollowed shutdown of manufacturing units and the Indian cotton yarn industry is likely towitness a extremely challenging situation of decline in revenue and lower demand in boththe domestic and export markets. The prevailing covid-19 outbreak which has created aglobal pandemic situation as explained above has justified the decision of the Board indischarging the entire Bank and other liabilities to the extent possible by sale of assetsand leasing its immoveable property to have a regular lease income and making the Companya risk-free and Bank debt free unit.

(b) Strategies and Future plans

The Company has now come out of the stress situation and been able toconcentrate fully on the revival process. The cessation of Production of Yarn is to beviewed as an interim drastic measure to wipe out losses protect shareholders` interestsand retire all the bank liabilities. The quality of goods produced hitherto by company hasgenerated goodwill and brand image that the Board of Directors hope to continue to use byengaging inter-alia in trading in Yarn. The Company is exploring all the possibilities torevive in the near future.

(d) Risks and Concerns

Your Company has devised risk management policy which involvesidentification of the business risks as well as the financial risks its evaluationmonitoring reporting and mitigation measures. The Audit Committee and Board of Directorsof the Company periodically review the risk management policy of the Company so thatmanagement controls the risk through properly defined network. Head of Departments areresponsible for implementation of the risk management system as may be applicable to theirrespective areas of functioning and report to the Board and the Audit Committee. Thedetails of risk management mechanism and key risks faced by the Company are enumerated inthe risk management policy. Risk management policy is uploaded in the company's websitewww.kandagirimills.com.

(e) Internal control systems

The Company has in place a well established internal control procedurecovering various areas such as procurement of raw materials production planning qualitycontrol maintenance planning marketing cost management and debt servicing. Necessarychecks and balances have been instituted for timely correction with an effective internalaudit system.

(f) Human resources management

Employees are your company's most valuable asset. Your Companycontinues to create a favourable environment at work place.

The company also recognises the importance of training and consequentlydeputes its work force to various work related courses/seminars including important areaslike Total Quality Management (TQM) Technical skills etc. The fact that the relationshipwith the employees continued to be cordial is testimony to the company's ability to retainhigh quality workforce.

(g) Environmental Protection Health and Safety (EHS)

EHS continues to receive the highest priority in all operational andfunctional areas at all locations of your Company. Systematic process safety analysisaudits periodic safety inspections are carried out by expert agencies and suitablecontrol measures adopted for ensuring safe operations at the site. Various processes asrequired for Pollution Control and Environmental Protection are strictly adhered to.

(h) Corporate Social Responsibility

Since the Company has no average net profit calculated in accordancewith the provisions of the Companies Act 2013 there was no CSR Obligation for the FY2019-20. CSR Disclosure in prescribed format is annexed with this report and forms part ofthis report.

The Board of Directors had constituted CSR committee in the year 2014devised CSR policy and spent CSR expenditure in accordance with the provisions of section135 of the Companies Act 2013. Eventhough the Company has come out attracting thespecified turnover/networth/profit criteria in the subsequent years for CSR applicabilityas stated under the provisions of section 135 of the Companies Act 2013 read with therules framed thereunder on the basis for continuation of applicability of CSR provisionsfor three consecutive years the Company continued the existence and functioning of CSRcommittee upto the FY 2019-20. As the CSR provisions became inapplicable to the Companythe CSR Committee was dissolved by the Board with effect from 18.06.2020.

( .i.) Changes in Key ratios

Details of significant changes on following ratios (i.e. changes if 25% or more as compared to immediately previous financial year

FY 2019-20 FY 2018-19 change change%
a. Debtors turnover ratio 8.78 24.20 (15.42) (63.72%)
b. Inventory turnover ratio 33.51 4.59 28.92 (630.40%)
c. Interest coverage ratio (0.43) (0.97) 0.54 (55.49%)
d. Current ratio 0.36 0.38 (0.02) (6.30%)
e. Debt equity ratio 3.86 0.93 2.93 314.67%
f. Operating profit margin % (8.17%) (8.93%) 0.76%
g. Net profit margin % (39.05%) (26.74%) (12.31%)
h. Return on net worth (222.15%) (310.01%) 532.16%

Explanations

By sale of assets of the Company the Company has closed its entireBank debts and other liabilities to the extent possible. Further the Company has ceasedits spinning business activity and the extent possible has disposed of all inventories atavailable prices. Because of these reasons there had been significant changes in the keyratios as compared to previous year.

Change in nature of business

As explained earlier by obtaining requisite approvals the Company on16.03.2020 had sold the spinning plant and Machinery and ceased the yarn productionactivity and has let out the immovable property for lease and the Company will be havingthe lease rent receivables as its main business income. The object clause of theMemorandum of Association of the Company is suitably altered to include the leasingbusiness clause. Further having generated goodwill and brand image for the quality ofgoods produced hitherto by company that the Board of Directors hope to continue to use byengaging inter-alia in trading in Yarn.

Extract of Annual Return

The extract of annual return in Form MGT – 9 has been annexed withthis report and forms part of this report.

Number of Board Meetings

The details pertaining to meetings of the Board has been explainedunder Corporate Governance Report annexed to the director's report and forms part of thisreport.

Establishment of Vigil Mechanism

The Company has established a vigil mechanism for Directors andemployees to report their genuine concerns. T h e p o l i c y h a s b e e n u p l o a d ed o n t h e C o m p a n y ' s w e b s i t e u n d e r t h e w e b l i n k :http://www.kandagirimills.com/investors/ksml2014-wbp.pdf

Declaration by Independent Directors

Independent directors of the Company have submitted a declaration thateach of them meets the criteria of independence as provided in Sub-Section (6) of Section149 of the Act. Further there has been no change in the circumstances which may affecttheir status as Independent director during the year.

Compliance with Secretarial Standards

The Company has adhered compliance on applicable Secretarial Standards.

Audit Committee

Details of Composition of Audit Committee are covered under CorporateGovernance Report annexed with this report and forms part of this report. Further duringthis year all the recommendations of the Audit Committee have been accepted by the Board.

Policy of Directors Appointment and Remuneration

Company's policy on Directors' appointment and remuneration includingcriteria for determining qualifications positive attributes independence of a directorand other matters provided under section 178(3) of the Act are covered under Nominationand Remuneration Policy and it is available in the web-link of the Companyhttp://www.kandagirimills.com/investors/ksml2015-nrp.pdf. Further information aboutelements of remuneration package of individual directors is provided in the extract ofAnnual Return as provided under Section 92(3) of the Act in prescribed form MGT-9 annexedwith this report and forms part of this Report.

Independent Auditors' Report and Secretarial Auditor Report

Independent Auditor has pointed out delay in repayment of Bank termloan principal and interest dues to the Bankers. With respect to delay in repayment ofBank term loan principal and interest dues your Directors wish to state that due to cashflow constraints there was delay in repayment of Bank dues which has been subsequentlypaid off. Further the Company has settled its entire Bank liabilities.

Company has appointed M/s B. K. Sundaram & Associates PractisingCompany Secretaries as Secretarial Auditors to conduct Secretarial Audit particularlywith reference to compliance with Companies Act 2013 and relevant SEBI Regulations forthe financial year 2019-20 The report of the Secretarial Audit for the financial year2019-20 in FORM MR-3 is annexed to this report and forms part of this report.

The Independent Auditors report and Secretarial Audit report containsqualified opinion with respect to 'Material uncertainty related to going concern' theManagement explanation provided is as follows:

"The company has been incurring losses over the years and upto thethird quarter of the current year. However the networth had remained positive andconsequently the yarn/textile business continued to be carried on. The Board of Directorshad initiated a number of steps to reduce fixed costs recover higher raw material coststhrough higher price realization of Yarn and negotiate lower borrowing/finance cost. Theseefforts could not effect a turnaround in the fortunes of the company and in the light oferosion in net worth in the fourth quarter the refusal of bankers to lend further loansand their pressure to settle their dues and prevalent economic conditions the companydecided in March 2020 to cease yarn production sell the Plant and Machinery lease theimmovable property and retire the liabilities to the extent possible. The Stock exchangeand other regulatory authorities have been duly informed. It may also be recalled thatnecessary approvals from the shareholders for disposal of assets had already beenobtained.

Necessary funds for retirement of dues and settlement of liabilitieshave been provided by the Directors/Promoters.

The quality of goods produced hitherto by company has earned goodwilland brand image that the Board of Directors hope to continue to engage inter-alia intrading in Yarn. The cessation of Production of Yarn is thus to be viewed as an interimdrastic measure to stem losses protect shareholders` interests and retire all the bankliabilities to maintain the reputation and credit ratings of the company. The situationarising out of Covid-19 Pandemic has justified the decision of the Board of Directors. Thelease rentals from lease of Land and Building and the assurance of infusion by thePromoters of further interest-free funds as and when deemed necessary will ensure that allremaining liabilities will be fully discharged and accordingly the Board of Directorsdeem it fit to continue adoption of Going Concern Concept in preparation of the financialstatements although the Statutory auditors have qualified their opinion with respect tothe same the lease rentals from lease of land and building and the assurance of infusionby the promoters of further interest free funds as and when deemed necessary will ensurethat all remaining liabilities will be fully discharged and accordingly the Board ofDirectors deem it fit to continue adoption of going concern concept in preparation of thefinancial statements provided in note 45 of the notes to the Standalone financialstatements and can be referred therewith."

Particulars of Employees

The information required under section 197 of the Act and rules madethere-under in respect of employees of as shown below:

(a) Employed throughout the year and in receipt of remunerationaggregating to Rs.10200000 or more - Nil

(b) Employed for part of the year and in receipt of remuneration ofRs.850000 or more per month - Nil Note : Remuneration includes salary and value ofperquisites and nature of employment is contractual.

Managerial Remuneration

Statistical Disclosures pursuant to Rule 5 of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 with subsequent amendments theretois annexed with this report and forms part of this report.

Related Party Transactions

Transactions entered with related parties have been explained in FormAOC -2 annexed with this report and forms part of this report. Further Policy on dealingwith Related Party Transactions has been uploaded on the Company's website under the weblink: http://www.kandagirimills.com/investors/ksml2014-rptp.pdf

Board Evaluation

In accordance with the provisions of Companies Act 2013 and SEBI(LODR) Regulations 2015 read with "Guidelines on Board Evaluation issued by SEBIvide its Circular dt. January 5 2017 In the separate meeting of the Independentdirectors performance of non-independent directors performance of the board as a wholeand performance of the Chairman was evaluated taking into account the views of executivedirectors and non-executive directors.

The same was discussed and noted by the Board at the subsequent BoardMeeting. Further Board carried out an annual evaluation of its own performance Boardcommittees and individual directors pursuant to the provisions of Companies Act 2013 andSEBI (LODR) Regulations 2015 read with "Guidelines on Board Evaluation issued bySEBI vide its Circular dt. January 5 2017.

The performance of the Board was evaluated by the Board after seekinginputs from all the directors on the basis of criteria such as the Board Composition andstructure effectiveness of the Board processes information and functioning etc. Theperformance of the Committees was evaluated by the Board after seeking inputs from theCommittee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc. The Independent Directors were evaluated withoutthe presence of the director getting evaluated.

None of the Independent Directors has been proposed for reappointmentthis year.

Outcome of evaluation process

Based on inputs received from the members it emerged that the Boardhad a good mix of competency experience qualifications and diversity. Each Board membercontributed in his/her own manner to the collective wisdom of the Board keeping in mindhis/her own background and experience. The necessary disclosures under SEBI Regulationsare given hereunder

( .i.) Previous year observation and action taken:

(a) To ensure availability of funds for the effective functioning ofthe Company

(b) Need of strategy and performance evaluation of the Company

( .c.) Recruitment of employees in all the key areas

The above are the previous year observations the required actions weretaken by the Company. Based on the above observations and other aspects as discussed inthe Management Discussion and Analysis report the following observations were made in thecurrent year

(ii) Current year Observations of Board evaluation (based on previousyear) and proposed actions to be carried out

Strategic action plan to close all the liabilities of the Company assuggested by the Board need to be implemented.

The Company has closed the entire Bank liabilities and the otherliabilities to the extent applicable as discussed in Management Discussion and AnalysisReport

Familiarisation Programme of the Independent Directors

Periodic presentations are made by Senior Management Statutory andInternal Auditors at the Board / Committee meetings on business and performance updates ofthe Company global business environment business risks and its mitigation strategyimpact of regulatory changes on strategy etc. Updates on relevant statutory changesencompassing important laws are regularly intimated to the Independent directors.

Deposits

The following are the details of fixed deposits accepted from theshareholders covered under Chapter V of the Act:

.i. Deposits at the beginning of the year on 01 st April 2019: Rs58.44 lakhs ii. Deposits Accepted from shareholders during the year (2019 - 20): NIL iii.Deposits repaid during the year (2019-20): Rs 33.49 lakhs

iv. Deposits outstanding at the end of the financial year on 31 stMarch 2020: Rs 24.95 lakhs v. Remained unpaid or unclaimed as at the end of the year :NIL vi. Any default in repayment of deposits or payment of interest thereon during theyear: NIL

Company has duly complied with the provisions of section 73 of theCompanies Act 2013 read with relevant rules with respect to fixed deposits.

The following are the details of fixed deposits accepted from thedirectors:

.i. Deposits at the beginning of the year on 01 st April 2019: Rs1443.33 lakhs ii. Deposits Accepted from shareholders during the year (2019 - 20): Rs2360.45 lakhs iii. Deposits repaid during the year (2019-20): Rs 2296.81 lakhs

iv. Deposits outstanding at the end of the financial year on 31stMarch 2020: Rs 1506.97 lakhs

Cost Audit Report

Cost Audit Report for the FY 2018-19 in XBRL format was filed with MCAon 06.09.2019 vide SRN H87360665. CMA K.M. Krishnamurthy Cost Accountants were appointedas Cost Auditor of the Company for the FY 2019-20 and the Cost Audit report for the year2019-20 in XBRL format will be filed with MCA well within the due date. In accordance withthe provisions of section 148 of the companies Act 2013 the cost records are made andmaintained by the Company.

The Company was under applicability of Cost Audit in accordance withthe provisions of section 148 of the Companies Act 2013 read with Cost Audit rules inaccordance with the turnover requirements upto the FY 2015-16. Though the turnover of theCompany was reduced to below Rs. 100 crore from the FY 2016-17 in accordance with theclarifications issued by Institute of Cost Accountants of India vide Frequently AskedQuestions (FAQs) dt. 19.03.2015 on applicability of Maintenance of Cost Accounting Recordsand Cost Audit under Companies Act 2013 by the Companies on continuous basis the costaudit is carried out till the FY 2019-20. Now since the Company has closed the spinningbusiness operations w.e.f 16.03.2020 and also the Company is already outside the ambit ofapplicability of cost audit based on the turnover requirements on the recommendation ofthe Audit Committee the Board has decided for non-continuance of cost audit from the FY2020-21. Accordingly the Company is not continuing the Cost Audit from the FY 2020-21.

Directors

At the 43rd AGM of the Company held on 11.08.2019 IndependentDirectors Sri. S. Gnanashekaran and Sri. Kameshwar M. Bhat were reappointed as IndependentDirectors for five consecutive years from 11.08.2019 to 10.08.2024. Independent DirectorsDr. V. Sekar Dr. R. Ramarathnam and Sri D. Balasundaram were

appointed at the 41st AGM of the Company held on 12.08.2017 to holdoffice upto the conclusion of 45th AGM of the Company.

During the FY 2019-20 Independent Director Dr. R. Ramarathnam andNon-Executive Director Dr. A. Sarayu resigned from the Board with effect from 11.08.2019and 10.11.2019 respectively because of their preoccupation with other business affairs.

Further since the Company has closed its core business activity ofspinning business settled all bank liabilities and the operations of the Company hadbecame very minimal the Independent Directors Sri Kameshwar M. Bhat Dr. V. Sekar and SriD. Balasundaram Chairman Sri S. Devarajan and Non-Executive Director Sri S. Vijay Shankarresigned from the Board with effect from 18.06.2020 as they felt their contribution asBoard of Directors of the Company is not much required for the Company at this stage.Accordingly the Board of the Company is downsized. Sri S. Vijay Shankar is continuing asChief Financial Officer of the Company.

The Board places on record its appreciation and gratitude for theinvaluable contributions made by all the resigned directors during their tenure as amember of the Board of Directors.

In accordance with the provisions of Companies Act 2013 and SEBIRegulations to have mandatorily woman Director on the Board of the Company and byexpressing willingness and consent to rejoin the Board of the company by Dr. A. Sarayubased on the recommendation of the Nomination and Remuneration Committee Board ofDirectors had appointed Dr. A. Sarayu as an Additional Director (Non-Executive) of theCompany on

09.02.2020 and she shall hold office upto the conclusion of thisensuing 44th Annual General Meeting of the Company. On the recommendation of Nominationand Remuneration Committee Board has placed the

resolution in the notice of the 44th AGM of the Company for appointmentof Dr. A. Sarayu as a Non-Executive Director of the Company liable to retire by rotationfor member's approval.

In accordance with the provisions of Companies Act 2013 and SEBIRegulations of necessary composition of Independent Directors on the Board of theCompany Sri S. Elangovan was appointed as an Additional Director (Non-ExecutiveIndependent) by the Board on 18.06.2020 and shall hold office upto the conclusion of this

ensuing 44th Annual General Meeting of the Company. On therecommendation of Nomination and Remuneration

Committee Board has placed the resolution in the notice of the 44thAGM of the Company for appointment of Sri S. Elangovan as a Non-Executive IndependentDirector of the Company for member's approval. In the opinion of the Board Sri S.Elangovan fulfills the criteria of integrity expertise and experience and is appearingfor the online proficiency self-assessment test in accordance with the provisions ofsection 150(1) of the Companies Act 2013

Non-Executive Director Sri S. Sivakumar retires by rotation at thisensuing (44th ) Annual General Meeting of the Company and he has not opted forre-election. The vacancy proposed to be caused by the cessation of

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Non-Executive Director Sri S. Sivakumar at the ensuing (44 ) AGM of theCompany need not be filled up.

Company's Code of Conduct applicable to the board has been adopted bythe board and all directors of the company have confirmed compliance with the Code ofConduct.

Key Managerial Personnel

In view of the financial crisis of the Company MD and CFO had waivedtheir entire salary during the financial year 2019-20

Auditors

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At the 42 Annual General Meeting held on 11.08.2018 M/s R.Sundararajan & Associates Chartered Accountants were reappointed as StatutoryAuditors of the Company from the financial year 2018-2019 to 2021-2022. Statutory AuditorsM/s R. Sundararajan & Associates Chartered Accountants have confirmed theireligibility and willingness to continue their office. On the recommendation of the AuditCommittee Board is placing the resolution for the remuneration payable to the statutoryAuditors for the FY 2020-2021 before the member's for approval.

Particulars of Loans Guarantees or Investments under Section 186 ofthe Companies Act 2013

Details of loans guarantees and investments covered under theprovisions of Section 186 of the Companies Act 2013 are given in note 43 to the notes tothe Standalone financial statements.

Disclosure as per Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013

The Company has zero tolerance for sexual harassment at workplace andhas adopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the rules framed thereunder. TheCompany has set up a Committee for addressing issues related to women and during thefinancial year 2019-20 there were no complaints received on sexual harassment.

Performance of Associate Company

Your Company has an associate M/s SPMM Healthcare Services PrivateLimited within the meaning specified under Section 2 (6) of Companies Act 2013. M/s SPMMHealthcare services private Limited has recorded a total revenue of Rs. 445.70 lakhsduring the year 2019-20 as against Rs.457.27 lakhs in the previous year and profit aftertax of Rs. 6.22 lakhs during the year 2019-20 as against Rs. 24.65 lakhs in the previousyear. A separate statement containing the salient features of the financial statement ofthe associate in FORM AOC -1 has also been annexed with this report as per therequirements of provisions of section 129 of the Companies Act 2013 and forms part ofthis report.

Significant and Material Orders passed by the Courts or Tribunalsimpacting the Company: NIL

Material Changes and Commitments. if any occurred between the end ofthe financial year and the date of this report.

The covid-19 pandemic do not have any impact on the operations of theCompany because of closure of spinning manufacturing activity on account of sale ofspinning units and the company has let out the immoveable property on lease. Howeverbecause of the lockdown implemented from the last week of March 2020 upto the month ofMay 2020 the lease is operational from the month of June 2020. Accordingly there wereno material changes and commitments between the end of the period under review and thedate of this report which could have an impact on the Company's operation in the future orits status as a "going concern".

Annexures to this Report

The following are the annexures to this report

1. Director's Responsibility Statement in Annexure 1

2. Conservation of energy technology absorption Research anddevelopment and foreign exchange earnings and outgo in Annexure 2

3. Statement containing salient features of the financial statement ofassociate company (Form AOC – 1) in Annexure 3

4. Form AOC – 2 in Annexure 4

5. Extract of Annual Report (Form MGT-9) in Annexure 5

6. Secretarial Audit Report (Form MR-3) in Annexure 6

7. Secretarial Compliance Report in Annexure 7

8. Details of CSR Expenditure in Annexure 8

9. Particulars of Remuneration in Annexure 9 10. CEO/CFO Certificationin Annexure 10 11. Corporate Governance Report in Annexure 11 12. Non-disqualification ofDirectors in Annexure 12

Cautionary Note

Statements in the Directors' report and the Management discussion andanalysis describing the Company's objectives expectations or predictions may be forwardlooking within the meaning of applicable securities laws and regulations. Actual resultsmight differ materially from those either expressed or implied in the statement. Importantfactors that could influence the Company's operations include global and domestic economicconditions government regulations tax laws economic developments within the country andother related factors such as litigation and industrial relations.

Acknowledgement

Directors of your Company placed on record their sincere appreciationof the dedication and commitment of all employees. Your directors thank the ManagementShareholders Customers Suppliers Bankers and other stakeholders for their continuedsupport during the year. The directors of your company thank Central/State Governments andother government agencies for their support and look forward to their continued support infuture.

For and on behalf of the Board
S. Gnanashekaran
Salem Chairman
July 30 2020 (DIN: 06796817)

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