Your Directors are pleased to present the Twenty Seventh Annual Reportof the Company together with the audited financials statements for the financial yearended March 31 2019.
1. CORPORATE OVERVIEW
Your company is into 100% exports of cotton garments especiallyInfantswear. The Company exports its products to United States and European Markets.
2. FINANCIAL HIGHLIGHTS
As mandated by the Ministry of Corporate Affairs your company hasprepared the financial statement (both standalone and consolidated) for the year endedMarch 31 2019 as per Indian Accounting Standard (IND AS') notified under Sec133 of the Companies Act 2013 read with notification no. G.S.R. 111(E) dated 16.02.2015as amended from time to time.
The Standalone and consolidated financial performance of the Companyfor the financial year ended March 31 2019 is summarized below:
| || || || ||(र in Lakhs) |
| ||Standalone ||Consolidated |
|Particulars ||For the year ended March 31 2019 ||For the year ended March 31 2018 ||For the year ended March 31 2019 ||For the year ended March 31 2018 |
|Sales and other Income || || || || |
|Revenue from operations ||60680.46 ||55725.42 ||60680.47 ||55725.42 |
|Other Income ||2246.01 ||267.07 ||2247.12 ||267.07 |
|Total Revenue ||62926.47 ||55992.49 ||62927.58 ||55992.49 |
|Profit Before Interest and Depreciation ||16133.25 ||13670.24 ||16114.60 ||13670.24 |
|Less: Finance Charges ||387.99 ||581.18 ||388.00 ||581.18 |
|Depreciation ||2726.25 ||2340.14 ||2726.25 ||2340.14 |
|Net Profit Before Tax ||13019.01 ||10748.92 ||13000.35 ||10748.92 |
|Less: Provision for Tax ||4873.46 ||3746.69 ||4873.46 ||3746.69 |
|Net Profit After Tax ||8145.55 ||7002.23 ||8126.89 ||7002.23 |
|Share Of Profit/ (Loss) Of Associates ||- ||- ||(982.34) ||(647.29) |
|Net Profit after share of profit of Associates ||- ||- ||7144.55 ||6354.94 |
|Balance of Profit brought forward ||29252.65 ||24202.70 ||27489.37 ||23086.71 |
|Balance available for appropriation ||37376.59 ||31281.70 ||34612.31 ||29518.42 |
|Dividend paid on Equity Shares (Interim and Final) ||498.75 ||855.00 ||498.75 ||855.00 |
| ||102.52 ||174.06 ||102.52 ||174.06 |
|Transfer to General Reserve ||1000.00 ||1000.00 ||1000.00 ||1000.00 |
|Surplus carried to Balance Sheet ||35775.33 ||29252.65 ||33011.05 ||27489.37 |
3. FINANCIAL PERFORMANCE
The Company continues to strengthen its market leadership inInfantswear across US markets during the year. It delivered yet another year of consistentand profitable growth and fortified its manufacturing capabilities.
Your Company continued to build a strong product lines for the futureand invested in bringing operational efficiencies to improve the quality of products. Themanpower of the Company also remained a priority. During the year under report there wasa sustained focus to increase strength of your company and sharpen competitive advantageswith a view towards long term value creation.
On standalone basis your company reported the revenue from operationand other income was र 62926.47 lakhs signifying a growth of 12.38 % over previousfinancial year. The Revenue increased due to the better orders from the buyers. Theoperating profit stood at र 13019.01 lakhs compared with र 10748.92 lakhs in theprevious year. Total employee benefit expense has increased by 6.67%. Our effective taxrate is at 30.07% when compared to the previous year. The net profit for the year was र8145.55 lakhs against र 7002.23 lakhs reported in the previous year. The EPS fromcontinuing operations for the reporting year was
On consolidated basis total revenue for the financial year underreview was र 62927.58 lakhs as against र 55992.49 for the previous financial year 12.39%growth. Profit before tax was र 13000.35 lakhs and net profit after tax was र 8126.89lakhs for the financial year under review as against र 10748.92 lakhs and र 7002.23lakhs for the previous year.
During the year under review your company received and continues toreceive enormous order confirmations from major Infant Garment buyers viz. GerberChildrenswear LLC Carters Buy-Buy Baby Ross Stores Amazon Target and Walmart who cancontribute major part of your Company's turnover in coming years. There have been nomaterial changes or commitments affecting the financial position of the Company which haveoccurred between the end of the financial year and the date of this report except thefollowing: TOYS "R" US Inc. a customer of your Company had filed a petition inthe Bankruptcy Court in The United States of America to wind down its US operation in theprevious year. Provision of र 347.03 Lakhs was made for the receivables towards loss ifany on recovery of receivables in the financial year 2017-18. After the hearings at the USBankruptcy court on September 6 2018 and November 13 2018 Plan submitted under Chapter11 was confirmed. The Claim allowed to the company aggregates to 9.17 Million US Dollarsof which the company has already received an interim disbursement of 1.60 million dollars(17.50% of the claim allowed) during March 2019. Consequently the provision carried inthe books of र 347.03 Lakhs has been written back during the year. The accounting for thebalance claim will be made on the receipt of balance amount.
4. PERFORMANCE HIGHLIGHTS OF SUBSIDIARY & ASSOCIATE COMPANY
Kitex USA LLC being an Associate Company with joint investment betweenthe Company and Kitex Childrenswear Limited to support and facilitate design for US Marketcustomers. The Associate Company markets the licence brand "Lamaze" and OwnBrand "Little Star" Infantswear in US and Canada. As on March 31 2019 theCompany has an Associate Company. The Consolidated Financial Statements of the Companyalong with its Associate prepared for the year 2018-19 in accordance with relevant Ind ASissued by ICAI forms part of this Annual Report.
During the year under review the company has 6 wholly ownedsubsidiaries viz. Kitex Littlewear Limited Kitex Babywear Limited Kitex Socks LimitedKitex Packs Limited Kitex Knits Limited and Kitex Kidswear Limited. Further pursuant tothe provisions of Sec 136 of the Act the standalone financial statements (includingconsolidated) of the Company consolidated financial statements along with relevantdocuments and separate audited financial statements in respect of subsidiaries areavailable on the website of the Company www.kitexgarments.com.
A Report on the salient features of the financial statements ofSubsidiaries/ Associate Companies/ Joint Ventures prepared in form AOC-1 is provided asAnnexure A. There are no companies which have ceased to be its Subsidiaries jointventures or associate companies during the year under review.
The Company has adopted the policy for determining materialsubsidiaries in term of Reg 16(1)(c) of Listing Regulations as amended from time to timeand may be accessed on the company's website www.kitexgarments.com.
Your company has also sold products worth र 30417.82 Lakhs to itsAssociate during the reporting period. Your Company has made investment in Kitex USA LLCof $ 200000 lakhs in the previous year.
5. KITEX BRAND
At Kitex Garments we believe in perfection. Its brand reflectspassion values and beliefs. Kitex has launched multi-coloured logo as its identity ininternational apparel market.
6. DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to the requirement under Sec 134 (5) of the Act the Board ofDirectors of the Company hereby state and confirm that; (i) in the preparation of theAnnual accounts for the year ended March 31 2019 the applicable accounting standard havebeen followed along with proper explanation relating to the material departures if any;(ii) the Directors had selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at March 31 2019 and of the profit of theCompany for the year ended on that date; (iii) that the Directors have taken proper andsufficient care for the maintenance of adequate accounting records in accordance with theprovisions of the Companies Act 2013 for safeguarding the assets of the Company and forpreventing and detecting fraud and other irregularities; (iv) the annual accounts havebeen prepared on a going concern basis; (v) that proper internal financial controls werefollowed by the Company and that such internal financial controls are adequate and wereoperating effectively; and (vi) that the Directors had devised proper systems to ensurecompliance with the provisions of all applicable laws and that such systems were adequateand operating effectively.
7. DIVIDEND DIVIDEND DISTRIBUTION POLICY AND TRANSFER TORESERVE
Your directors are pleased to recommend for the approval ofshareholders a final dividend of 150 % (Re. 1.50 per equity shares of face value of र1/-). The Final dividend if declared shall be distributed to the members within 30 daysfrom the AGM. During the year under review your company transferred a sum of र1000 lakhs to the General Reserve on account of future expansions. The Total outgo onaccount of dividend inclusive of taxes for FY 2018-19 is र 601.27 lakhs which represents apayout of 7.38 % of the Company's standalone profits.
As per Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 top five hundred listed entities based on marketcapitalization are required to formulate a Dividend Distribution Policy. However sinceApril 2017 your company has been re-classified its class of scrip by the stock exchangesas small cap and hence this regulation does not apply to the Company. However the Boardapproved and adopted Dividend Distribution policy is available on the Company'sWebsite: viz. www.kitexgarments.com
8. SHARE CAPITAL
The paid-up equity share capital as on 31st March 2019 was र 6.65Crores consisting of 66500000 equity shares of
र 1/- each fully paid-up.
9. TRANSFER TO INVESTORS EDUCATION AND PROTECTION FUND a. Transfer ofUnpaid Dividend
Pursuant to the provisions of Sec 124 (5) of the Companies Act 2013your Company has transferred र 790103 for the financial year 2010-11 to InvestorsEducation Protection Fund (IEPF) on 03.07.2018. This amount was lying unclaimed/ unpaidwith the Company for the period of 7 (seven) years after declaration of final dividend forthe FY 2010-11. b. Transfer of shares underlying unpaid dividend
The Board of Directors at its meeting held on May 18 2018 transmitted164155 equity shares of the Company into the demat account of the IEPF Authority heldwith CDSL (DPID/ Client ID: 12047200 13676780) in terms of the provisions of Sec124 (6) of the Companies Act 2013 read with IEPF Authority (Accounting Audit Transferand Refund) Rules 2016 as amended from time to time.
The equity shares were the shares of 26 shareholders whose unclaimed/unpaid dividend pertaining to FY 2010-11 had been transferred into IEPF and who had notencashed their dividends for 7 (seven) subsequent financial years. The Company has takenvarious steps by sending reminders requesting them to encash their dividend so as toreduce the limit of unclaimed dividend before transferring the dues to IEPF. The completelist of such shareholders whose shares were due for transfer to IEPF was also placed ininvestor's relationship section on the website of the Company www.kitexgarments.com.
Further dividend which has become unclaimed for the last 7 years since2011-12 must be claimed by the concerned shareholders on or before June 10 2019 for whichCompany had sent the reminder letter to them. If the shareholders fail to claim thedividend the company will be transferring the unclaimed dividend and the correspondingshares to IEPF within a period of 30 days from the due date. The details are provided inthe Shareholder information section of this Annual Report and are also available on ourwebsite www.kitexgarments.com.
10. CAPITAL EXPENDITURE
As on 31st March 2019 the Fixed Assets stood at र 23271.19 lakhs andnet fixed assets of र 16387.63 lakhs. Additions during the year amount to र 2002.83lakhs.
Phase I expansion of र 241 Crores of capital investment for automationnew Plant & Machinery and other amenities which was approved by the Board of Directorson April 28 2017. The Board was informed that company had spent र 25 Crores out ofapproved limit and hence the balance of र 216 Crores is being carried out forimplementation of Strategic Road Map 2025. The Vendor successfully tested the automationto the extent of 25% and the delivery had completed and the Balance 75% the manufactureris hopeful to deliver the automation soon. The Board of Director has been taking utmosteffort to implement the expansion.
11. FUTURE PROSPECTS
The Board of Directors approved remaining investment plan of र 269Crores out of 910 Crores towards expansion plan for Kitex Garments Strategic Roadmap 2025.This include investment plan of र 241 Crores and र 400 Crores approved earlier at itsmeeting April 28 2017 and April 25 2018 respectively out of which र 25 Crores hasalready been utilised. The said investment shall be from internal accruals and borrowings.This investment plan is to be spent over the next 7 years in the Company and its whollyowned subsidiaries. The Board reviewed the roadmap 2025 as prepared by M/s. KPMG. TheBoard has also requested M/s. KPMG to assist with the evaluation of additional expansionplan for spinning unit socks diaper and wet tissue manufacturing.
Status update for Key activities
|Preparation of strategy document ||100% completed |
|Incorporation of Wholly owned Subsidiaries ||- 100% completed |
|Land identification ||100% completed |
|Preparation of detailed project report ||90% completed |
|Machinery and supplier identification ||80% completed |
|Land acquisition ||45% completed |
|Building and infrastructure planning ||30% completed |
|Automation of existing machinery ||30% completed |
12. CREDIT RATING
During the year under review ICRA the Credit Rating Agency maintainedthe "[ICRA] AA-" rating with stable outlook for the company's long termborrowings and maintained the "[ICRA] A1+" rating for the Company's shortterm borrowings.
13. QUALITY AND ACCOLADES
Your Company continues to win awards year by year thus reiterating itscredible market position. During the year the Company was the recipient of the followingawards:
Social Impact Award by Bharathiyar School of Management &Entrepreneur Development Alumni Association on
Top exporter award at Cochin Sea Port 2018 on International Customs dayon 25.01.2019.
Future Kerala entrepreneurial excellence & best CEO awards 2018.
14. CHANGE IN THE NATURE OF BUSINESS
During the year under review there was no change in the nature of thebusiness.
The Equity Shares of the Company continue to remain listed on BSELimited and the National Stock Exchange of India Limited.
16. DEPOSIT FROM THE PUBLIC
The Company has not accepted any deposit within the meaning of ChapterV of the Companies Act 2013 and the Rules framed thereunder.
17. EXTRACT OF ANNUAL RETURN
As per the requirements of Sec 92 (3) of the Act and Rules framedthereunder the extract of annual return for the FY 2018-19 is given in Annexure Bin the prescribed form MGT 9 which is a part of this report. The same is available onwww. kitexgarments.com
18. SECRETARIAL STANDARD
The Company complies with all applicable secretarial standards.
19. PARTICULARS OF LOANS GUARANTEES OR INVESTMENT BY THE COMPANY
During the financial year ended March 31 2019 no loan guarantees andinvestments pursuant to the provisions of Section 186 of the Act and SEBI (LODR)Regulations 2015 were made by the Company. However Investments covered under theprovision of Section 186 of the Companies Act 2013 are given in the notes to financialStatements.
20. DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Board has appointed Mr. Krishnaraj S. as Chief Financial officer(CFO) and Key Managerial Personnel (KMP) of the Company w.e.f. October 1 2018 in theplace of Mr. Sabu M. Jacob Chairman and Managing Director who has been additionallyholding the responsibility of CFO. Mr. Krishnaraj ceased to be associated with the Companyw.e.f. May 20 2019 due to his personal reasons. Consequent to the cessation Mr. Sabu M.Jacob was appointed as interim CFO till such time new incumbent joins the Company. Mr.Mithun B. Shenoy was appointed as Company Secretary and Compliance officer of the Companydesignated as Key Managerial Personnel w.e.f. November 5 2018 in the place of immediatepast Company Secretary who retired on October 12 2018 due to his superannuation.
There is no change in the Board of Directors & Key ManagerialPersonnel of your company during the financial year 2018-19 except as mentioned above. Inaccordance with the provisions of the Act and Article 117 & 118 of Articles ofAssociation of the Company Mr. Sabu M. Jacob (DIN 00046016) Chairman and ManagingDirector will be retire at the ensuing Annual General Meeting and being eligible seekreappointment. The Board of Directors recommends their re-appointment. Item seeking hisre-appointment along with his detailed profile has been included in the notice conveningthe AGM. Your Directors recommend the resolution for your Approval.
All Independent Directors have given declaration that they meet thecriteria of independence as laid down under Section 149(6) of the Companies Act 2013 andReg 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 asamended from time to time. Based on the confirmation/ disclosure received from thedirectors the Non Executive Directors namely Mr. E. M. Paulose Mr. Benni Joseph and Mr.C. P. Philipose are treated as independent as on March 31 2019. Prof. E. M. Paulose andMr. Benni Joseph were appointed as Independent Directors of the Company w.e.f. January 122015 for a period of 5 consecutive years in the 23rd Annual General Meeting held on June4 2015. The said period of five years ends on January 11 2020. Considering the pastperformance of Prof. E. M. Paulose and Mr. Benni Joseph as Directors of the Company theirconsent and necessary disclosures to continue as Independent Directors of the Company andthat they continue to meet criteria of Independence the Board of Directors on July 52019 had approved their re-appointments as Independent Directors of the Company for thesecond term from January 12 2020 to January 11 2025 subject to approval of theshareholders and has recommended their re-appointments for approval of the shareholders inthe forthcoming Annual General Meeting by way of Special Resolutions.
The Company had approved through Postal Ballot the continuation ofdirectorship of Prof. E. M. Paulose and Mr. C. P. Philipose non-executive independentdirectors of the company who have attained age of above 75 years from the effective dateof the said Amendment Regulations i.e. April 01 2019 till the expiry of his term i.e.January 11 2020. The Board of Directors on July 5 2019 had also approved there-appointment of Prof. E. M. Paulose as Independent Director of the Company for thesecond term from January 12 2020 to January 11 2025 who has attained the age of 75years subject to the approval of the shareholders in the forthcoming Annual GeneralMeeting by way of Special Resolution.
The Company recognizes the importance of a diverse board and believesthat it brings new ways of thinking insights and different perspective on consumer wantsand needs. This will help company to retain competitive position in the corporate world.
During the year under review meetings of the Board of Directors andits Committees were held details of which are set out in the Corporate Governance Reportwhich forms part of this Report.
21. BOARD EVALUATION & FAMILIARISATION PROGRAMME
Having a formalized Board evaluation give Board Members an opportunityof assessing their own performance and brings out the importance of the contributions ofindividual directors. It is a mechanism by which Board members candidly reflect on howwell the Board is meeting its responsibilities.
The Board of Directors has carried out an annual evaluation of its ownperformance Board Committees and individual Directors pursuant to the provisions of theCompanies Act 2013 and Reg 17 (10) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.
With the objective of evaluating the performance of DirectorsNomination and Remuneration Committee has formulated a structured questionnaire aftertaking into consideration the various aspects viz. composition of the Board and itscommittees Board's function its culture quality and timely flow of informationfrequency of meetings execution and performance of specific duties obligations andgovernance. Board has carried out an annual performance evaluation of its own performancethe performance of various committees of the Board Individual Directors and the Chairmanbased on adopted questionnaire. A note on the familiarizing programme adopted by theCompany for the orientation and training of the Directors and the manner in which theBoard evaluation process undertaken in compliance with the provisions of the CompaniesAct 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 isprovided in the Corporate Governance Report which forms part of this Report. Further theIndependent Directors of the Company met on February 14 2019 to review the performance ofthe Non-executive directors Chairman of the Company and the access the quality quantityand timeliness of flow of information between the Company management and the Board toeffectively perform their duties. The details of familiarization program conducted forIndependent Directors of your Company are available on your Company's websitewww.kitexgarments.com.
22. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHERDETAILS
The Company's policy on directors' appointment andremuneration including criteria for determining qualifications positive attributesindependence of a director and other matters provided in Section 178(3) of the Act isavailable on our website www.kitexgarments.com. We affirm that remuneration paid to thedirectors is as per the terms laid out in the Nomination and Remuneration Policy of theCompany.
Some of the salient features of which are as follows:
1. To regulate the appointment and remuneration of directors keymanagerial personnel and the senior management personnel;
2. To identify persons who are qualified to become directors as per thecriteria/ Board skill matrix identified by the Board;
3. To ensure proper composition of Board of Directors and Boarddiversity;
4. To ensure that level and composition of remuneration is reasonableand sufficient to attract retain and motivate directors key managerial personnel andsenior management and their remuneration involves a balance between fixed and incentivepay reflecting short and long term performance objectives appropriate to Company'sworking and its goals.
23. BOARD COMMITTEES
Detailed composition of the mandatory Board committees namely AuditCommittee Nomination and Remuneration Committee CSR Committee Stakeholders RelationshipCommittee its number of meetings held during the year under review and other relateddetails are set out in the Corporate Governance Report which forms part of this Report.
There have been no situations where the Board has not accepted anyrecommendation of the Audit Committee.
24. EMPLOYEES' STOCK OPTION SCHEME
The Company has not granted any Employee Stock Option within themeaning of section 62 (1) (b) of the Companies Act 2013 read with its Rules framedthereunder and respective SEBI regulations.
25. CORPORATE SOCIAL RESPONSIBILITY
Your Company believes in touching some of the important aspects ofhuman life. Even before commencement of Companies Act 2013 it has embarked on thejourney of social change through inclusive growth dedicated to the cause of future andfuture generations. The Company implements CSR directly to society of KizhakambalamPanchayat in which it operates and efforts are revolved around several projects relatingto Social Empowerment and Welfare Infrastructure Development Sustainable LivelihoodHealth Care and Education during the year under review. These projects are in accordancewith Schedule VII of the Act and its CSR policy.
The brief report of the Corporate Social Responsibility (CSR) policy ofthe Company and the initiatives undertaken by the Company on CSR activities during theyear are set out in Annexure C of this report in the format prescribed in the Companies(Corporate Social Responsibility Policy) Rules 2014. For other details regarding the CSRCommittee please refer to the Corporate Governance Report which is a part of thisreport. The Corporate Social Responsibility Policy (CSR Policy) indicating the activitiesto be undertaken by the Company are available on your Company's websitewww.kitexgarments.com
26. MANAGEMENT DISCUSSION AND ANALYSIS
The Management Discussion and Analysis Report on the operations of theCompany as required under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 as amended forms an integral part of this Report.
27. CORPORATE GOVERNANCE
A separate section on parameters of statutory compliance evidencing thestandards expected from a listed entity have been duly observed and a report on CorporateGovernance as well as certificate from statutory auditors confirming compliance with therequirements of SEBI (Listing Obligation and Disclosure Requirements) Regulations 2015forms part of this Report.
28. VIGIL MECHANISM
The Company has a Vigil Mechanism to report concern about unethicalbehavior actual or suspected fraud or violation of Company's code of conduct by theDirectors and employees. The vigil mechanism is disclosed in the website of the companyviz. www.kitexgarments.com
29. RELATED PARTY TRANSACTIONS
All transactions or arrangement entered into with the related partiesfor the year under review were on arm's length basis and in the ordinary course ofbusiness. Hence the provisions of Section 188 of the Companies Act 2013 and the Rulesmade thereunder are not attracted. Accordingly the disclosure of Related PartyTransactions as required under Section 134 (3) (h) of the Companies Act 2013 in Form AOC2 is enclosed as Annexure D. However certain related party transactions were considered asmaterial in accordance with the Company policy on materiality of related partytransactions and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015for which company is taking necessary statutory approval from shareholders at this AnnualGeneral Meeting. The company has developed a framework through Standard OperatingProcedures for the purpose of identification and monitoring of such Related PartyTransactions. All Related Party Transactions were placed before the Audit Committee asalso to the Board for approval. Omnibus approval was obtained on a yearly basis fortransactions which are of repetitive nature. Transactions entered into pursuant to omnibusapproval are audited by the Risk Assurance Department and a statement showing the detailsof all Related Party Transactions are placed before the Audit Committee and the Board forreview and approval on a quarterly basis.
None of the Directors has any pecuniary relationship or transactionsvis--vis the Company.
The policy on Related Party Transactions as approved by the Board ofDirectors has been uploaded on the website of the Company viz. www.kitexgarments.com.
30. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY
Your Company has an effective internal control and risk-mitigationsystem which are constantly assessed and strengthened with new/ revised standardoperating procedures. The Company's internal control system is commensurate with itssize scale and complexities of its operations. The Internal and operational audit isentrusted with M/s. K. Venkitachalam Aiyer & Co a firm of Chartered Accountants. Themain thrust of Internal Audit is to test and review controls appraisal of risks andbusiness processes besides benchmarking controls with best practices in the industry.
The Audit Committee of the Board of Directors actively reviews theadequacy and effectiveness of the internal control systems and suggests improvements tostrengthen the same. The Company has a robust Management Information System which is anintegral part of the control mechanism.
The Audit Committee of the Board of Directors Independent Auditors andthe Core Committee Heads have periodically been appraised the significant internal auditobservations and the corrective actions have been taken. The Audit Committee places a keyrole in providing assurance to the Board of Directors. In order to maintain itsobjectivity and independence the Internal Audit function reports to the Chairman of theAudit Committee.
31. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGEEARNINGS AND OUTGO
The information on conservation of energy technology absorption andforeign exchanges earnings and outgo pursuant to Section 134 (3) (m) of the Companies Act2013 read with the Rule 8(3) of the Companies (accounts) Rules 2014 as amended from timeto time is annexed as Annexure - E and forms an integral part of this Report.
32. BUSINESS RISK MANAGEMENT
Your Company continues to strengthen its robust Risk ManagementFramework and the same was reviewed by the Audit Committee periodically. The Committeemeets for focused interaction with business identifying and prioritizing strategicoperational risk and formulating appropriate mitigation strategies and conducting frequentreview of the progress on the management of the identified risk. Your company believesthat managing risk helps in maximizing return. The company's approach in addressingbusiness risks includes periodical review of such risks and thereby mitigating iteffectively. The risk management framework is reviewed periodically by the Board and theAudit Committee. Some of the risks that the company is exposed to are:
The Company's policy is to actively manage its foreign exchangerisks within the framework laid down by the Company's forex policy approved by theBoard. Given the interest rate fluctuations your Company has adopted a prudent andconservative risk mitigation strategy to minimize financial and interest cost risks.
COMMODITY PRICE RISKS
The Company is exposed to the risk of price fluctuations of rawmaterials as well as finished goods. The company proactively manages these risks throughforward booking inventory management and proactive vendor development practices. Yourcompany's reputation for quality product differentiation coupled with the existenceof a powerful brand image with a robust design and marketing network in US mitigates theimpact of price risk on finished goods.
The Company recognized its risks attached to various statutes laws andregulations. The company is mitigating these risks through regular review of legalcompliances carried out through our internal as well as external compliance audits by ourcustomers.
HUMAN RESOURCE RISKS
Retaining the existing talent pool and attracting new talent are themajor risks affecting the company. We have initiated various measures including rollingout of strategic talent management systems training and integration of learning anddevelopment activities. Our company has collaborated with various agencies like IntegratedSkill Development Scheme (ISDS) Kudumbashree which helps to identify nurture and groomlabour talents within all states of India to prepare them for future business leadership.
Emerging businesses capital expenditure for capacity expansion etc arenormal strategic risks face by your company. However your Company has well-definedprocesses and procedures for obtaining approval for investments in new businesses andcapacity expansions.
As per the provisions of Section 139 of the Companies Act 2013 MSKA& Associates Chartered Accountants (FRN 105047W) have been appointed as IndependentAuditors of the company for a period of 5 (Five) years in the AGM of the Company held onJuly 28 2018.
Further the report of M/s. MSKA & Associates CharteredAccountants the Independent Auditors along with notes to financial statements is enclosedto this Annual Report. The Auditors' Report does not contain any qualificationreservation disclaimer or adverse remarks.
Pursuant to the provisions of Section 204 of the Companies Act 2013read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the Company has re-appointed M/s. SVJS & Associates Practicing CompanySecretaries Kochi to conduct the secretarial Audit for the financial year 2018-19. TheAudit Report issued by the Secretarial Auditors for the said FY form part of this Reportand is set out in Annexure - F. The secretarial Audit report does not contain anyqualification reservation disclaimer or adverse remarks.
Messrs. K. Venkitachalam Aiyer & Co Chartered Accountants continueto be the Internal Auditors of your company for the financial year 2018-19.
34. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There were no significant and material orders passed by the Regulators/courts except as detailed below which would impact the going concern status of yourcompany and its future operations during the period under review.
|Name of Regulator ||Date of levy ||Reason for levy ||Amount ||Company Remarks |
|SEBI ||31.08.2018 ||Non Redressal of investors complaint of Mr. Madhubhai Patwa ||Rs. 1100000 ||The Company has redressed the investor's complaint on time during the period where principle of natural justice was in force. Without considering it Adjudication officer has passed such order. The matter is now with Securities Appellate Tribunal (SAT) Mumbai. Considering the amount matter is not considered as material |
35. ENVIRONMENT AND SAFETY
The Company is conscious of the importance to environmental friendlyand safe operations. The company's policy requires conduct of operations in such amanner so as to ensure safety of all concerned compliance of environmental regulationsand preservation of natural resources.
As required by the Sexual Harassment of Women at Workplace (PreventionProhibition and redressal) Act 2013 the Company has formulated and implemented a policyon prevention of sexual harassment at the workplace with a mechanism of lodgingcomplaints. The following is a summary of sexual harassment complaints received anddisposed off during the reporting period:
No. of complaints received: Nil
No. of complaints disposed off: Nil
No. of complaints pending: Nil
The company has complied with provisions relating to the constitutionof Internal Complaints Committee under the Act. The Company has filed Annual Report forthe year ended December 31 2018 under the Act with District officer.
36. HUMAN RESOURCES AND INDUSTRIAL RELATIONS
Your Company believes that its manpower is an asset for the company andenjoys strong brand image as a preferred and caring employer. The ongoing focus is onattracting retaining and engaging talent with the objective of creating a robust talentpipeline at all levels. Value-based HR programmes have enabled your Company's HR teamto become strategic partners for the business. Your company laid stress to build awomen-friendly workplace by introducing various initiatives for the development of womenemployees in the organization. Your Company has focused on internal talents and nurturesthem through the culture of continuous learning and development thereby buildingcapabilities for creating future leaders. Your company's initiatives like a hiringfreeze at some levels robust talent review career development conservations andbest-in-class development opportunities which will help to enhance the employeesexperience at your Company. The Company's Human Resources plays a critical role inyour Company's talent management process.
The Disclosure as required under Rule 5(1) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed as Annexure G and forms a part of this report. Information relating to remuneration ofDirectors under Section 197 read with Rule 5(2) of Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 has been given Annexure H to the Director'sReport.
Your Directors state that no disclosure or reporting is required inrespect of the following items as there were no transactions on these items during theyear under review:
Neither the Managing Director nor the Whole-time Directors of theCompany receive any remuneration or commission from any of its subsidiaries;
there were no frauds reported by the auditors under provisions of theCompanies Act 2013;
Issue of equity shares with differential rights as to dividend votingor otherwise;
There were no revisions in the financial statements;
Issue of share (including sweat equity shares) to employees of theCompany under any scheme as permitted under any provision of Companies Act 2013.
Company is not required to maintain cost records as specified by theCentral Government under section 148(1) of the Companies Act 2013.
Your Directors thank various Central and State Government DepartmentsOrganizations and Agencies for the continued help and cooperation extended by them. TheDirectors also gratefully acknowledge all stakeholders of the Company viz. customersmembers dealers vendors banks and other business partners for the excellent supportreceived from them during the year. The Directors place on record their sincereappreciation to all employees of the Company for their unstinted commitment and continuedcontribution to the Company.
| ||For and on behalf of the Board of |
| ||Kitex Garments Limited |
|July 5 2019 ||Sabu M. Jacob |
|Kizhakkambalam ||Chairman and Managing Director |
| ||(DIN: 00046016) |