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Mohota Industries Ltd.

BSE: 530047 Sector: Industrials
NSE: MOHOTAIND ISIN Code: INE313D01013
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VOLUME 150
52-Week high 345.00
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P/E 18.66
Mkt Cap.(Rs cr) 57
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OPEN 39.70
CLOSE 38.15
VOLUME 150
52-Week high 345.00
52-Week low 34.75
P/E 18.66
Mkt Cap.(Rs cr) 57
Buy Price 37.05
Buy Qty 200.00
Sell Price 39.00
Sell Qty 250.00

Mohota Industries Ltd. (MOHOTAIND) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the (71 ) Seventy-First Annual Report on thebusiness and operation of the Company together with the

Audited Financial Statement for the year ended March 31 2018. A summary of theFinancial Results is given below. The Management discussion and analysis is also includedin this report.

( Rs in Lakhs)
FINANCIAL RESULTS For the year ended 31 March 2018 For the yearended 31 March 2017
Gross Revenue 35759.19 33207.68
Gross Profit (before interest depreciation & tax) 1900.94 1545.15
Less: Interest 950.57 815.93
Depreciation 336.72 369.40
Profit before tax & extraordinary Item 613.65 359.82
Less: Provision for tax
Mat Current 125.80 85.81
Deferred 114.35 17.85
Net Profit for the year 373.50 291.86
Appropriation :
Transfer to Reserve & Surplus - -
Surplus/(Deficit) in the Statement of Profit & Loss Account 373.50 277.01

1. CORPORATE OVERVIEW

Mohota Industries Limited (Formerly- The Rai Saheb Rekhchand Mohota Spg. & Wvg.Mills Ltd.) ("The Company") is a leading and the oldest Composite Textile Millin Vidarbha region of Maharashtra. The Company has its Corporate Head Office atHinganghat Dist – Wardha Maharashtra.

2. OVERVIEW OF THE ECONOMY

Global Economy

In 2017 the cyclical upswing underway since mid-2016 continued to strengthen and theglobal economy witnessed a pickup in growth. According to the International Monetary Fund(IMF) the year reported the broadest synchronized global growth surge since 2010. Theadvanced economies witnessed expansion owing to increased investments and manufacturingoutput. Similarly key emerging markets and developing economies including Brazil Chinaand India posted strong upward momentum.

Given stronger than expected economic activity in 2017 the IMF has revised its growthforecast for the United States from 2.3% to 2.7% in 2018 and from 1.9% to 2.5% in 2019.Stronger domestic demand in the United States is projected to increase imports. In Europetoo economic activity in 2018 and 2019 is projected to remain stronger than anticipated.Moreover the advanced economies in Asia are expected to deliver stronger growth whilethe emerging and developing ones are expected to grow at around 6.5% over 2018-19 broadlythe same pace as in 2017.

Indian Economy

India's economy picked up some pace in FY 2017-18 and the gross domestic product growthwas better than FY 2016-17. The structural reform of The Goods and Services Tax (GST)within a year of demonetisation is expected to provide a boost to the economic growth andinvestments in the long run.

With an improving business ecosystem stable macroeconomic indicators and a liberal FDIregime foreign capital inflow have provided impetus to the domestic economy. According toWorld Bank's Global Economic Prospects report India's GDP is expected to rise to 7.4% inFY 2018-19 and 7.8% in FY 2019-20.

3. FINANCIAL PERFORMANCE

Your company reported a Top-line growth of 7.69% over the previous year. The GrossRevenue stood at ` 35759.19 Lakhs compared with ` 33207.68 Lakhs in the previous year.The Profit before tax stood at ` 613.65 Lakhs as against ` 359.82 Lakhs in the previousyear. Profit before tax is increased by 70.54% as compared to previous year. The NetProfit for the year stood at ` 373.51 Lakhs against ` 291.86 Lakhs in the previous year.

There are no material changes or commitments affecting the financial position of theCompany which have occurred between the end of the financial year and the date of thisreport.

The Company has issued 117647 equity shares to Shri. Vinodkumar Mohota Promoter ofthe company in its meeting held on 7 July 2018 on preferential basis pursuant to theapproval of shareholders in its EGM held on 24 March 2018.

4. DIVIDEND AND RESERVE

Directors recommend a dividend of 1% i.e. ` 0.10 per equity share of ` 10 eachaggregating to ` 14.59 Lakhs (` 14.59 Lakhs previous year). During the year under reviewno amount was transferred to General Reserve.

5. SHARE CAPITAL

The paid-up Equity Share Capital as on March 31 2018 stood at ` 1458.94 Lakhs. Duringthe year under review the Company has not issued any Sweat Equity shares Bonus shares orprovided any stock option scheme to the employees. None of the Directors of the Companyhold instruments convertible into equity shares of the Company. Company has not boughtback any of its securities.

Company increased its Authorized Share Capital of the Company from existing `180000000/- (Rupees Eighteen Crores only) divided into 15000000 (One Crore FiftyLakhs only) Equity Shares of ` 10/- (Rupees Ten only) each and 300000 (Three Lakhs only)Non-Cumulative Redeemable Preference Shares of ` 100/- (Rupees One Hundred only) each to `300000000/- (Rupees Thirty Crores only) divided into 27000000 (Two Crore SeventyLakhs only) Equity Shares of ` 10/- (Rupees Ten only) each and 300000 (Three Lakhs only)Non-Cumulative Redeemable Preference Shares of ` 100/- (Rupees One Hundred only) on 20January 2018 through postal ballot.

During the period under review Company initiated the process of issue of Equity shareson preferential basis. Same got approved by the members on its EGM held on 24 March 2018.Process of issue of Equity Shares is completed and will be reflected in the Financial Year2018-19.

6. ANALYSIS AND REVIEW

Global textile and apparel industry

Along with the upbeat outlook for the global economy the textile and apparel industryis also expected to witness growth across developed and emerging markets. While theapparel industry is still largely dominated by the European Union and the US countrieslike China India and Italy are emerging as key exporters of apparel and as futuredestinations for consumption. The global trade in the apparel segment is expected to growat a CAGR of 5% and the global textiles trade is projected to grow at a CAGR of 3% over2016-26. Fabric is expected to lead the category followed by yarns and fibre.

Indian Textile industry

The Indian textiles industry is among the oldest in the country. It is projected toreach USD 230 billion by 2020 from around USD 120 billion. Currently the domestictextiles industry contributes 10% to the manufacturing output of the country generatesabout 4% to its GDP and employs more than 45 million people. Importantly the sectorcontributes 15% to the export earnings of India. Mitigating the repercussions of currencyfluctuation remains a challenge. Exports have been a core feature of India's textilesector. The Indian textiles export market estimated at $18 billion is expected to growat a CAGR of 4% compared to the global CAGR of 3% over 2016-26.

Opportunities and Challenges

The future for the Indian textile industry looks promising buoyed by strong domesticconsumption. Overall the government has been supportive in encouraging textile industryin India. Many incentives and schemes have been announced in the Union Budget to promotethe sector. Further introduction of GST is seen as a positive step in the long run. Withthe right government policies we believe that the Indian Textile Industry is well poisedto benefit from the large opportunity offered in the domestic and export market.

However there are several challenges ahead for the Textile industry for enhancing itscompetitive strength and global positioning in terms of inflexible labour laws poorinfrastructure and competition from other low cost countries which will have to beaddressed to sustain the growth momentum of the industry.

Strengths of the Textile Industry

The following are a few strengths of the Indian Textile Industry:

• An independent and self-reliant industry;

• Large and potential domestic and international market;

• Abundant raw material availability that helps industry to control costs andreduces the lead-time across the operations;

• Availability of low cost and skilled manpower provides competitive advantage tothe industry;

• Availability of large varieties of cotton fiber and has a fast growing syntheticfiber industry;

• Promising export potential.

Weaknesses of the Textile Industry

The following are a few drawbacks of the textile industry which it has to overcome.

• The Industry is a highly fragmented Industry.

• It is highly dependent on Cotton.

• There is lower productivity in various segments.

• There is a declining Mill Segment.

• Lack of Technological Development that affect the productivity and otheractivities in whole value chain.

• Infrastructural Bottlenecks and Efficiencies such as transaction time at portsand transportation time.

• Unfavorable labour laws.

• Lack of trade membership which restricts us to tap other potential markets.

Performance Highlights

During the year under report the company's total sales registered growth of 7.69% to `35759.19 Lakhs from ` 33193.17 Lakhs in the previous financial year. The Gross OperatingProfit for the financial year 2017-18 stood at ` 1900.94 Lakhs as compared to

` 1599.33 Lakhs for previous financial year and Net Profit after tax stood at ` 373.51Lakhs as compared to ` 277.01 Lakhs in the previous financial year

Raw Material

The fundamental strength of the textile industry is its strong production base of widerange of fibre and yarns – from natural fibres like cotton jute silk and wool tosynthetic and manmade fibres such as polyester viscose nylon and acrylic. The challengehere is the fluctuation in prices of the raw materials like polyester and increase in oilprices which increase the input costs.

Retail Network

Company has a large retail network spread all over the country. It has more than thirtyagents and over two thousand retailers who help the Company to boost sales.

7. FINANCE AND ACCOUNTS

During the year under review the Rating agency ‘BRICKWORK' maintained the"BBB" rating for the Company's long term borrowings and maintained the A3+rating for the Company's short term borrowings

As mandated by the Ministry of Corporate Affairs the financial statements for the yearended on March 31 2018 has been prepared in accordance with the Indian AccountingStandards (IND AS) notified under Section 133 of the Companies Act 2013 read with theCompanies (Accounts) Rules 2014. The estimates and judgments relating to the FinancialStatements are made on a prudent basis so as to reflect in a true and fair manner theform and substance of transactions and reasonably present the Company's state of affairsprofits and cash flows for the year ended March 31 2018.

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's Auditorsconfirming compliance forms an integral part of this report.

9. EXTRACT OF ANNUAL RETURN

The details as required under section 92(3) of the Companies Act 2013 read with rule12 of the Companies (Management and Administration) Rules 2014 is furnished in form MGT-9is enclosed herewith as Annexure – A and forms an integral part of thisDirectors report.

10. DIRECTORS

In accordance with the provisions of section 152 of the Companies Act 2013 and theCompany's Articles of Association Shri Ranchhoddas Mohota (DIN:00247357) and ShriShantilal Singhavi (DIN:00247332) Directors of the Company retire by rotation at theforthcoming Annual General Meeting and being eligible offer themselves forre-appointment.

Brief profile has been provided in the Notice convening Annual General Meeting.

11. KEY MANAGEMENT PERSONNEL

Company has following Key Managerial Personnel pursuant to section 203 of the CompaniesAct 2013

Sr. No. Name of the Person Designation
i Vinod Kumar Mohota Managing Director
ii Vinay Kumar Mohota Whole-time Director
iii Shantilal B. Singhavi Whole-time Director
iv Mukesh B. Mahajan Chief Financial Officer
v Sachin N. Kanojiya Company Secretary

Remuneration and other details of Key Managerial Personnel for the year ended 31 March2018 are provided in the Extract of

Annual Return is attached as "Annexure A".

12. BOARD EVALUATION

Pursuant to the provisions of the Companies Act 2013 and the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 a structured questionnaire was preparedand reviewed based on the evaluation policy after taking into consideration the variousaspects of the Board's functioning composition of the Board and its committees cultureexecution and performance of specific duties obligations and governance.

The Company has received necessary declarations from each Independent Director of theCompany under Section 149(7) of the Companies Act 2013 and Regulation 16 (b) of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 that the IndependentDirectors of the Company meet with the criteria of their Independence laid down in Section149(6).

The performance evaluation of the independent Directors Board as a whole andindividual Director was completed. The performance evaluation of the Chairman and theNon-independent Directors were carried out by the independent Directors. The Board ofDirectors expressed their satisfaction with the evaluation process.

13. NUMBER OF MEETINGS OF THE BOARD

During the year under consideration 8 (Eight) Board Meetings were convened and heldThe details of the meetings of the Board

and other Committees held during the Financial Year 2017-18 forms part of the CorporateGovernance Report.

14. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY COMPANY

Details of loan Guarantee or Investments made by the Company under Section 186 of theCompanies Act 2013 are given in the notes to Financial Statements.

The Company has invested ` 11.00 Crore in a partnership firm (KCM). The financialstatement of the said partnership firm for the year ended 31 March 2018 were notavailable hence the impact on the profit and corresponding impact on the carrying amountof investment is not ascertainable.

15. VIGIL MECHANISM/ WHISTLE-BLOWER POLICY

The Company has a Whistle-blower policy & Vigil Mechanism pursuant to theprovisions of section 177(9) & (10) of the Companies Act 2013 and as per ListingRegulation for their Directors and Employees to report their genuine concerns orgrievances. The policy has been posted on the website of the Company(www.mohotaindustries.com)

16. NOMINATION AND REMUNERATION POLICY

The Company has formulated the Nomination & Remuneration policy for its Directorskey managerial personnel and senior

employees keeping in view the following:

• the level and composition of remuneration is reasonable and sufficient toattract retain and motivate Directors of the quality

required to run the company successfully;

• relationship of remuneration to performance is clear and meets appropriateperformance benchmarks; and

• remuneration to directors key managerial personnel and senior managementinvolves a balance between fixed and incentive

pay reflecting short and long-term performance objectives appropriate to the working ofthe company and its goals:

This policy also lays down criteria for selection and appointment of Board Members.Details of this policy can be accessed at

Company's web-site www.mohotaindustries.com .

17. RISK MANAGEMENT POLICY

Company has developed and implements Risk Management Policy including identification ofelements of risk which in the opinion of the Board may threaten to the existence of theCompany. Board and Audit Committee periodically reviewed/evaluates the risk managementframework so that the future risk can be minimized.

18. RELATED PARTY TRANSACTION

All transactions entered with Related Parties for the year under review were on arm'slength basis and in the ordinary course of business and that the provisions of Section 188of the Companies Act 2013 are not attracted. The disclosure in form AOC-2 is attached as AnnexureB. The Company has developed a Related Party Transactions framework through StandardOperating Procedures for the purpose of identification and monitoring of suchtransactions.

All Related Party Transactions are placed before the Audit Committee and also to theBoard for approval. Transactions which are of repetitive nature are reviewed on aquarterly basis and a statement giving details of all Related Party Transactions wasplaced before the Audit Committee and the Board for review and approval.

The policy on Related Party Transactions as approved by the Board of Directors has beenuploaded on the website of the

Company. The web-link of the same has been provided in the Corporate Governance Report.

19. 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.

20. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of knowledge and ability hereby confirm:

(i) That in the preparation of the Annual Accounts for the year ended March 31 2018the applicable accounting standards have

been followed along with proper explanation relating to material departures if any;

(ii) That the directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at March 31 2018 andof the profit of the Company for the year ended on that date;

(iii) That the directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

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

(v) That the directors have laid down internal financial controls to be followed by theCompany and that such internal financial

controls are adequate and were operating effectively; and

(vi) That the directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such

systems were adequate and operating effectively.

21. AUDITOR'S REPORT AND STATUTORY AUDIT

M/s M.M. Parikh & Co. Chartered Accountants (Firm Registration Number: 107557W)has been appointed as the Statutory

Auditors of the Company at the 70 Annual General Meeting (AGM) for the period of fiveyears i.e. until the conclusion of the 75 (Seventy Fifth) AGM of the Company to be held inthe year 2022 subject to the ratification by the members at every ensuing AGM. Thereforeratification of appointment of the Statutory Auditor is being sought from the members atthe ensuing Annual General meeting as required under the provisions of section 139 of theCompanies Act 2013 to audit the accounts of the company for the Financial Year 2018-19.

The Company has received written confirmation from M/s M.M. Parikh & Co. CharteredAccountants that their appointment if made would be in conformity with limit specifiedin the said section.

Auditor express following opinion on the financial results during the year underreview:

1. PCFC USD account showing credit balance of ` 3625076/- is subject toreconciliation.

2. The Company has invested ` 11 Crore in a partnership firm. The financial statementof the said partnership firm for the year ended 31 March 2018 were not available hencethe impact on the profit and corresponding impact on the carrying amount of investment isnot ascertainable.

The observations made in the Auditor's Report are dealt with separately in the Notes tothe Statement of Profit and Loss and the Balance Sheet in Note No. 30 to 40 of theAccounts. These are self-explanatory and do not call for any further comments.

22. COST AUDITORS

As per the requirement of Central Government and pursuant to Section 148(3) of theCompanies Act 2013 and Rules 6(2) read with the Companies (Cost Records and Audit) Rules2014 as amended from time to time the Company has been carrying out audit of cost recordsevery year.

The Board of Directors on the recommendation of the Audit Committee has appointed M/sKhanuja Patra & Associates Cost Accountants. (Firm Registration No.: 000214) as CostAuditor to audit the cost records of the Company for the Financial Year 2018-19. Asrequired under the Companies Act 2013 a resolution seeking members' approval for theremuneration payable to the Cost Auditor forms part of the Notice convening the AnnualGeneral Meeting for their ratification.

23. SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act 2013 and rules madethere under the Company has re-appointed Shri Dinesh Kumar Deora Company Secretary inPractice (Membership No. FCS 5683 C.O.P. No.4119) to undertake the Secretarial Audit ofthe Company for Financial Year 2018-19. The Secretarial Audit Report is included as Annexure– C and forms an integral part of this Report.

There is no audit qualification by the Secretarial auditor for the year under review.

24. SAFETY AND POLLUTION CONTROL

The Company accords priority to the health and safety of its employees andsurroundings. It has been taking proper care in complying with all the statutoryrequirements relating to safety environment and pollution control following are themeasures taken by the company.

1. Company has installed 264m3 per day feed capacity automated ETP tertiary system torecycle the water at the Company's effluent treatment plant.

2. Tree plantation in land adjacent to Mill's ETP Plant.

3. The Company has undertaken modernization in its Effluent Treatment Plant. Compressedair diffusers have been installed in dosing and aeration tanks. Results of treatedeffluent are at par with MPCB's Norms.

25. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING ANDOUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo pursuant to Section 134(3)(m) of the Companies Act 2013 read with theRule 8(3) of the Companies (Accounts) Rules 2014 is given in Annexure – D tothis Report.

26. PARTICULARS OF EMPLOYEES

The information required under Section 197(12) of the Companies Act 2013 read withCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is furnishedIn Annexure- E and forming part of the Directors' Report for the year ended March31 2018.

The Company at present does not have any employee drawing salary in excess of the limitspecified under section 197 of the Companies Act 2013.

27. SUBSIDIARIES

The Company does not have any subsidiary/subsidiaries within the meaning of theCompanies Act 2013.

28. DEPOSIT

The Company has not accepted any deposits from public. Therefore the requirement ofChapter V of the Companies Act 2013 is not applicable to it.

29. CORPORATE SOCIAL RESPONSIBILITY (CSR)

According to the Companies Act 2013 the company is not covered under the Companies(Corporate Social Responsibility) Rules 2013 during the period under review.

30. SEGMENTWISE PERFORMANCE:

The Company has only one business segment i.e. "Textiles".

31. INTERNAL CONTROL SYSTEM AND ADEQUACY:

The Company has a proper and adequate Internal Control System to ensure that its assetsare safeguarded and protected against unauthorized use and disposition and all thetransactions are properly recorded and reported. The Company also has a system ofmanagement reviews to ensure compliance with the prescribed procedures and authoritylevels.

Pursuant to section 134(5)(e) of the Companies Act 2013 The Company has proper andadequate Internal Control and Internal Financial Control System same is reviewed byCompany's Internal Auditor together with Statutory Auditors the Report by auditor on thecompany's Internal Financial Control System forms a part of Independent Auditors Report.

32. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION&

REDRESSAL) ACT 2013

The Company laid down an Anti Sexual Harassment Policy in line with the requirements ofthe Sexual Harassment of Women at workplace (prevention prohibition and redressal) Act2013. An Internal Complaints Committee has been set up to redress complaints received inthis regard. All employees (permanent contractual temporary trainees) are covered underthis policy. No sexual harassment complaints were received during the year 2017-18.

33. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT

Employees are the company's most valuable resources. The company continues to create afavorable environment at work place. The company also recognizes the importance oftraining and continuously deputes its work force in various courses/seminars relating toimportant management tools like ‘Total Quality Management' (TQM). The management isspecifically calling professionals from various research institutes to train its workforce.

The Company has taken following initiatives for skill development program for worker& staff.

1 Training to maintenance staff by qualified engineers from Voltas Ltd. MurataMachinery Saurer Schlafhorst and Toyota.

2. Shop floor training to technical staff on "Air Engineering"(Humidification System) by B.T.R.A. a renowned textile research association.

3 Training to shop floor workers/operatives by trainer from U.T.T.S. Ahmedabad whoguided them about discipline and work procedure while working on machines with propersafety for Toyota Airjet Looms.

4 Deputed staff members to attend National Textile Conference organized by TextileAssociation of India.

5. Organized in-house seminars on "Goods and Service Tax Implementation" forthe Top and Middle level employees. Deputed employees to attend various seminar organizedby VIA TEXPROCIL ICSI etc. as a part of an ongoing development process.

Following social activities held by the Company

1 Organized Blood donation Camp on Founder's Day of the Company i.e. on 29th March bywhich donated 100+ units of blood to Blood Bank.

2 During the year the Company organized seminar on "Stress-Management" byone of a reputed social and charitable Trust from Mumbai for entire staff members of theMills.

Industrial relations are cordial and satisfactory.

34. CAUTIONARY STATEMENT

Statement in this Director's Report including Management Discussion and Analysisdescribing the Company's objective projections estimates expectations or predictionsmay be "Forward Looking Statements" within the meaning of applicable securitieslaws & regulation. Actual results might differ materially from those expressed orimplied. Important factors that could make a difference to the Company's operationsinclude among others economic conditions affecting demand/supply and price conditions inthe market in which the company operates changes in the Government regulations tax lawsand other statutes and incidental factors.

35. ACKNOWLEDGEMENTS

The Directors wish to place on record their appreciation and gratitude for all theco-operation extended by Government Agencies Bankers Financial Institutions andShareholders. The Directors also record their sense of appreciation for the sincereservices rendered by all the Executives and Staff of the company and for their valuablecontribution in the working of the company.

On Behalf of the Board
Mohota Industries Limited
Sd/-
Place : Hinganghat Dr. Ranchhoddas Mohota
Dated: 14.08.2018 Chairman