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Mafatlal Industries Ltd.

BSE: 500264 Sector: Industrials
NSE: MAFATLAIND ISIN Code: INE270B01027
BSE 00:00 | 24 Apr 114.35 4.75
(4.33%)
OPEN

106.50

HIGH

114.95

LOW

106.00

NSE 05:30 | 01 Jan Mafatlal Industries Ltd
OPEN 106.50
PREVIOUS CLOSE 109.60
VOLUME 912
52-Week high 290.90
52-Week low 94.00
P/E
Mkt Cap.(Rs cr) 159
Buy Price 114.35
Buy Qty 2.00
Sell Price 114.35
Sell Qty 10.00
OPEN 106.50
CLOSE 109.60
VOLUME 912
52-Week high 290.90
52-Week low 94.00
P/E
Mkt Cap.(Rs cr) 159
Buy Price 114.35
Buy Qty 2.00
Sell Price 114.35
Sell Qty 10.00

Mafatlal Industries Ltd. (MAFATLAIND) - Director Report

Company director report

To

The Members

Mafatlal Industries Limited

Your Directors present the 104th Annual Report together with the Audited Statement ofAccounts for the year ended 31st March 2018.

Pursuant to the Notification issued by the Ministry of Corporate Affairs your Companyhas adopted Indian Accounting Standards (Ind AS) w.e.f. April 01 2017. Accordingly theseare the first Financial Statements prepared as per Ind AS.

1. Financial Results:

The Financial Results of the Company are as under:

(Rs. in Lakhs)
Current Year 2017-18 Previous Year 2016-17
Revenue from Operations 116760.04 123885.23
Other Income 3289.59 4792.97
Total Income / Revenues 120049.63 128698.20
EBIDTA 2524.31 6312.58
Less: Depreciation 3610.59 3237.67
Finance Costs 3108.54 2658.40
Profit before Exceptional Items -4194.82 416.51
Exceptional Items (Net) 0.00 -467.15
Profit before Taxes -4194.82 -50.64
Tax (Expense) / Benefits 17.00 463.04
Profit after Taxes -4177.82 412.40

2. Year in Retrospect:

During the year under review Textile industry was plagued with series of macro levelchallenges leading to all round underperformance. Your company's business pivots arounddomestic trade segment. The company has to rely for growth of its business on the strengthof its distribution network of Dealer Distributors Retailers etc to push the sale offabrics in the retail markets. The majority of the trade partners are part of unorganizedsector of India and not used to the banking system for carrying out financialtransactions. While textile trade fraternity was yet trying to resurrect from the effectsof demonetization there came another blow in the form of introduction of Goods &Service Tax (GST). As it is known Textile industry (especially fabric) was hitherto moreor less outside the ambit of excise duty & sales tax. Hence entire trade fraternitywas against the move of introduction of GST for Textile industry and this led to variousprotests agitations and strikes. The domestic trade was not at all prepared for GSTcompliance and hence sales in domestic market paralyzed for 2-3 months post GSTimplementation causing widespread disruption. This led to substantial inventory build-upwith the mills which created distress selling scenario putting huge pressure on sellingprices. The impact was catastrophic for Denim fabric as there is huge overcapacity indomestic market.

Against this backdrop it became impossible for your company defend its operatingmargins leading to losses. Total Revenue fell by 7% to Rs.120050 Lakhs EBIDTA went downby 60% to Rs.2524 Lakhs leading to a Net Loss for the year of Rs.4178 Lakhs as against aNet Profit of Rs.412 Lakhs for the previous year.

Further for FY 2017-18 the Company had higher Finance Cost & Depreciation chargesince we implemented the capacity expansion projects leading to higher term borrowings andincrease in fixed assets. The interest cost was also higher as working capital requirementwent up eventhough sales was down as Textile industry was beset with liquidity crisis.

Your Directors are of the view that the pain may continue during FY 2018-19 especiallyin the Denim market. Your Company is taking several initiatives aimed at turn around ofits business in the area of product development to produce differentiated & valueadded products aggressive thrust on exports and forming strategic relationship withcustomers. Your company is also looking at downsizing in certain areas of manufacturing toremain competitive and is taking several initiatives to improve manufacturing efficiencyand cost reduction to improve the operating margins.

During the year under review your company has repaid long term borrowings amounting toRs.3631 Lakhs as per scheduled timeline and raised Rs.667 Lakhs to part finance capitalexpenditure plans being implemented. Your company expresses gratitude to all the term loanand working capital lenders for their continuing support and faith in the company.

During the year the Company has sold its non core investments (6250 equity shares) inNavdeep Investments Ltd. Beside as a part of restructuring of shareholding of promotersthe Company sold 118389 equity shares of Navin Fluorine International Limited.

During the year Credit Analysis & Research Limited (CARE) has revised credit ratingof the Company from CARE BBB to "CARE BBB-(negative) for the long term facilitieshaving tenure of more than one year and also revised rating for short term facilities fromits "CARE A3 + " to "CARE A3" for the short term facilities havingtenure of up to one year.

Pursuant to the disclosure requirements it is pertinent to note here that there hasbeen no change in nature of business during the year under review and no order has beenpassed by any Regulatory or Court or Tribunal which can impact the going concern statusof the Company and its Operations in the future. A detailed analysis of the financialresults is given in the Management Discussion and Analysis Report which forms part of thisreport.

3. Dividend:

The Board of Directors regret their inability to recommend any dividend for the year2017-18 in view of the Loss for the financial year ended 31st March 2018 and accordinglyhas not recommended any dividend.

4. Restructuring of Promoters Shareholding & reclassification of Promoters holding:

As reported earlier during the year 2016-17 Shri H A. Mafatlal Shri V. R Mafatlaltheir family members family trusts and the Companies including the three listed entitiesviz. the Company Navin Fluorine International Limited (NFIL) and NOCIL Ltd. entered intoan agreement to amicably restructure the shareholding of the three listed companies andother group companies in such a way that the Management of the Company and NOCIL Ltd.reside with Shri H. A. Mafatlal and the Management of NFIL reside with Shri V. R Mafatlal.The restructuring is part of a family settlement and succession plan between Shri H. A.Mafatlal and Shri V. R Mafatlal. Pursuant to the above the Company has already divestedits shareholding in Navin Fluorine International Limited and increased its shareholding inNOCIL Ltd.

Accordingly it is proposed to re-classify Shri V R Mafatlal and his Associatesincluding Navin Fluorine International Limited as Rromoters of the Company and categorizethem as non-promoter general public for all purposes for which requisite resolution hasbeen proposed at the ensuing AGM for approval.

5. Details of changes of Directors and Key Managerial Personnel:

There is no change in Directors and Key Managerial Personnel for the year 2017-18.Pursuant to the provisions of Section 152 of the Companies Act 2013 Shri Aniruddha RDeshmukh a director is liable to retire by rotation and being eligible offers himself forreappointment. Accordingly the requisite resolution is proposed at the ensuing AnnualGeneral Meeting for approval.

6. Employee Stock Option Scheme 2017:

The shareholders of the Company at 103rd Annual General Meeting held on 2nd August2017 consented for creation of 695000 options employee stock option pool under MafatlalEmployee Stock Option Rlan 2017 by way of special resolution. The Board of Directors ofthe Company has as per the recommendation of Nomination & Remuneration Committee(NRC) approved "Mafatlal Employees Stock

Option Rlan 2017. Thereafter NRC has at their meeting held on 10th November 2017approved the grant of 138000 options to certain senior management employees. The furtherdisclosures as required under SEBI Employee Share Based Benefits Regulations 2016 areprovided in annexure III to this report alongwith other disclosures.

7. Subsidiaries Associates and Joint Ventures:

The financial position of the subsidiary company viz. Mafatlal services Limited isgiven in the Notes to Consolidated Financial Statements. The Company does not have anymaterial subsidiary. The Rolicy on Material Subsidiary framed by the Board of Directors ofthe Company is available on https://www.mafatlals.com/wp-content/uploads/2017/08/policy_on_materiality_of_subsidiary.pdf. The audited accounts of Mafatlal ServicesLimited a subsidiary of the Company for the year ended 31st March 2018 is placed on theCompany's website www.mafatlals.com and is also open for inspection by any member at theRegistered Office of the Company on any working day (Monday-Friday) during working hoursand the Company will make available these documents upon request by any member of theCompany who may be interested in obtaining the same.

As reported last year also Al Fahim Mafatlal Textiles LLC (UAE) remainednon-operational and since there is no foreseeable beneficial future the Board ofDirectors of the Company and the JV Rartner have consented for voluntary windingup/closure of that entity. The Company has also written to the Ministry of CommerceDepartment of Economic Development Dubai that there has been no operation of the said JVCompany from 2016 and accordingly we have not applied for renewal of license. Accordinglythe audited accounts of that JV Company are not available and the same are notconsolidated with the Accounts of the Company for the year 2017-18.

8. Deposits:

The Company does not have "Deposits" as contemplated under Chapter V of theCompanies Act 2013. Further the Company has not invited or accepted any such depositsduring the year ended 31st March 2018.

9. Internal Financial Controls:

The existing internal financial controls are adequate and commensurate with the naturesize complexity of the Business and the Business Rrocesses followed by the Company.During the year the Company has laid down the framework for ensuring adequate internalcontrols over financial reporting and such Internal Financial Controls have been reviewedby Independent Experts to ensure its effectiveness who have confirmed that such controlsare adequate and operating effectively.

10. Directors' Responsibility Statement:

As required under the provisions of Section 134 (5) of the Companies Act 2013 yourDirectors state that:

(i) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;

(ii) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe loss of the Company for the period under review;

(iii) the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the directors have prepared the annual accounts on a ‘going concern' basis;

(v) the directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively.

(vi) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

11. Industrial Relations:

The relations between the employees and the Management have remained cordial andharmonious during the year under review. The total number of permanent employees as on31st March 2018 were 2939 (2808 in previous year).

12. Insurance:

The properties and insurable interests of your Company like buildings plant andmachinery stocks etc. are adequately insured by the Company. Further disclosure on RiskManagement of the Company has been made under the Corporate Governance Report which formsa part of this report.

13. Corporate Social Responsibility (CSR):

Mafatlal Industries Ltd. a part of Arvind Mafatlal Group has been fulfilling itscorporate social responsibilities for over 50 years much before CSR has been prescribedstatutorily. The focus area of our working has been in the field of poverty alleviationhealth care education for young children and women's upliftment in rural India.

In conformity with the provisions of Section 135 of the Companies Act 2013 read withthe Companies (Corporate Social Responsibility Policy) Rules 2014 the Company has a CSRCommittee which presently comprises of Shri H. A. Mafatlal who is the Chairman of the saidCommittee Shri A. K Srivastava and Shri Sujal Shah (Independent Director) are otherMembers of the Committee.

Based on the recommendations of the CSR Committee the Board of Directors haveformulated a CSR Policy encompassing the Group's and the Company's philosophy fordescribing its responsibility as a corporate citizen and laid down the guidelines andmechanisms for undertaking socially relevant programs in conformity with the statutoryprovisions which is posted on the website of the Company and available on web linkhttps://www.mafatlals.com/wp- content/uploads/2017/08/corporate_social_responsibility_policy.pdf.

As per the provisions of section 135 read with the Section 198 of the Companies Act2013 the Company does not have CSR Obligation for the year 2017-18. Accordingly therehas been no meeting of CSR Committee held during the year. The statutory disclosures withrespect to CSR is annexed hereto forming a part of this report.

14. Related Party Transactions:

There are no materially significant related party transactions made by the Companyduring the year. Related Party Transactions Policy is posted on the website of the companyand is available at https://www.mafatlals.com/wp-content/uploads/2017/08/related_party_policy.pdf. The details of all the transactions with therelated parties are disclosed in the Notes forming part of financial statements annexed tothe financial statements for the year 2017-18.

All the Related Party Transactions entered in to by the Company are in ordinary courseof business and on an arm's length basis except the promoters shareholding changes(selling of shares of Navin Fluorine International Limited and purchase of shares of NOCILLimited by the Company) which were on an arms' length basis for which requisite approvalsfrom the Audit Committee and the Board of Directors were obtained. The transaction amountswere not exceeding the applicable statutory limits and therefore no approvals from theshareholders were required.

15. Management Discussion and Analysis Report & Corporate Governance:

As required under Schedule V (B) and (C) of the SEBI (Listing Obligations &Disclosure Requirements) Regulations 2015 "Management Discussion and AnalysisReport" as well as "Corporate Governance Report" are attached herewith andmarked as Annexure I & II respectively and the same forms part of this Directors'Report.

Further during the year under review the Company has complied with all the mandatoryrequirements of the Corporate Governance. A certificate from the statutory auditors of theCompany regarding compliance of conditions of Corporate Governance as stipulated underSEBI (Listing Obligations & Disclosure Requirements) Regulations 2015 is annexed tothe Report on Corporate Governance.

16. Other Statutory disclosures:

The other statutory disclosures pursuant to Sections 134 135 188 197 and otherapplicable provisions of the Companies Act 2013 read with related rules are attachedherewith and marked as Annexure III.

17. Statutory Auditors & Audit Report:

The specific notes forming part of the Accounts referred to in the Auditor's Reportread with the notes to financial statements as referred to therein are self-explanatoryand give complete information and addresses the observations if any. The Audit report doesnot have any qualification or reservations or adverse comments.

18. Secretarial Auditor and Secretarial Audit Report:

The Board of Directors of the Company has in compliance with the provisions of Section304(1) of the Companies Act 2013 and Rules made in this behalf appointed Shri Umesh VedCompany Secretary in practice to carry out Secretarial Audit of the Company for thefinancial year 2017-18. The Report of the Secretarial Auditor is annexed to this Report asAnnexure IV. The Audit report does not have any qualification or reservations. As observedin that report please note that the Company has filed certain forms under the provisionsof the Companies Act 2013 with additional fees. The further observations made in auditreport with respect to the compounding and adjudication are suitably clarified/dealt within para VII of MGT 7 provided in annexure III to the Directors Report.

19. Cost Audit:

In accordance with the provisions of Section 148 (3) of the Companies Act 2013 readrelevant Rules made thereunder the audit of the cost records of the Company for the year2017-18 relating to the "Textiles" products manufactured and traded by theCompany is being carried out by Cost Auditors Shri. B. C. Desai Cost Accountants. TheCost Audit Report will be filed on or before due date with the Ministry of CorporateAffairs in due course of time after the same is approved by the Board of Directors of theCompany within the permissible timeline.

The Board has at their Meeting held on 3rd May 2018 re- appointed Shri B. C. Desai asCost Auditor to audit cost records in respect of "Textiles" productsmanufactured and traded by the Company for the Financial Year 2018-19 and the remunerationpayable to the Cost Auditor has been proposed for the approval/ ratification by theMembers of the Company at the ensuing Annual General Meeting.

20. Internal Auditor:

M/s. Aneja Associates a reputed firm of Chartered Accountants are Internal Auditorsof the Company. The Audit Committee of the Board of Directors in consultation with theInternal Auditors formulate the scope functioning periodicity and methodology forconducting the internal audit.

21. Appreciation:

The Directors wish to place on record their appreciation of the devoted services of theworkers staff and the officers for their continued contribution to your Company.

For and on behalf of the Board
Place: Mumbai H. A. MAFATLAL
Date: 3rd May 2018 Chairman
(DIN: 00009872)

Regd. Office:

Mafatlal Industries Limited (CIN L17110GJ1913PLC000035) 301-302 Heritage Horizon 3rdFloor Off: C G Road Navrangpura Ahmedabad 380009.Tel: 079-2644440406 Fax: 079 26444403Email: ahmedabad@mafatlals.com Website: www.mafatlals.com