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Precot Ltd.

BSE: 521184 Sector: Industrials
NSE: PRECOT ISIN Code: INE283A01014
BSE 05:30 | 01 Jan Precot Ltd
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Precot Ltd. (PRECOT) - Director Report

Company director report

#MDStart#

Management Analysis

Dear Shareholders

Your Directors hereby present the 59 Annual Report of your Company along with thefinancial results for the year ended 31 March 2021.

State of affairs of the company

a. Financial results (` In lakhs)

Particulars 31.03.2021 31.03.2020
Revenue from operations 66514 72612
PBIDT 9314 4831
Less: Finance cost 3272 3919
Profit from Operations 6042 913
Other Income 570 1065
PBDT 6612 1978
Less: Depreciation and Amortisation 3317 3274
PBT (Before Exceptional item) 3295 (1296)
Exceptional item - -
PBT (After Exceptional item) 3295 (1296)
Less: Tax expenses - 357
MAT Credit - -
Deferred Tax - -
Profit After Tax 3295 (1652)
Other Comprehensive Income (149) (898)
Total Comprehensive Income 3146 (2550)
Add: Opening balance in Retained
Earnings including OCI 12540 15090
Less: Transfer to General Reserve - -
Less: Provision for proposed dividend
(including dividend tax) - -
Closing balance in Retained
Earnings including OCI 15686 12540

b. Dividend and transfer to reserves

Although your Company has earned a profit during the financial year the Directors arenot in a position to recommend a dividend in view of the provisions of Rule 3 of Companies(Declaration and Payment of Dividend) Rules 2014. No amount was proposed to betransferred to reserves.

Industry Overview

FY 2020-21 was a turnaround year for your Company. Despite the year starting with thenationwide lockdown and the uncertainty caused by the Covid-19 pandemic being feltthroughout the turnaround was possible due to the sharp recovery in demand for textileproducts in the second half of the year as well as the excellent performance of thetechnical textile division. The performance of the spinning industry was affected severelyright from the start of the financial year by the nationwide lockdown imposed by theCentral Government. Even after the gradual relaxation of the lockdown the complete freezein retail trading had resulted in lot of inventory pile up in the supply chain and therewas very limited consumer demand. Consequently the first quarter was a complete washoutfor the spinning industry. Consumer demand started to pick up from the beginning of thesecond quarter starting from the casual wear leisure wear and undergarment sectors inthe domestic market and the home textile and knitted garments sectors in the exportmarkets. However operations were still at suboptimal levels due to Covid related stoppagesand non-availability of workers.

During the third quarter before operations normalized the demand for yarn across allsegments and markets had raised to high levels. This was due to the fact that severaldown-stream industries had resumed operations prior to the spinning industry. As a resultthe supply chain inventories had dried up and there was a shortage of yarn in the marketwhich caused yarn prices to trend upwards. This trend prevailed until the end of thefourth quarter and the yarn prices continued to raise steadily right until April 2021.The country ended the year with a similar level of yarn exports both in quantity andvalue terms as in the previous financial year backed by a very strong performance postNovember 2020.

The technical textile division caters primarily to the hygiene and cosmetic sectors anddemand for these products remained strong right from the first quarter especially fromthe US market. Demand came down to normal levels post the second quarter. The Indiantechnical textile industry was in the forefront of the fight against Covid. The countrybecame the second largest manufacturer and exporter of PPE kits and masks within a veryshort span of time. The demand for technical textile products in the Medtech and Protechsegments will continue to remain robust and will spur significant growth in this industryduring the current fiscal.

Review of operations

Your Company registered a turnover of Rs. 666 Crores during FY 2020-21 a decrease of8% compared to the previous year. Turnover reduced on account of the very low yarnproduction and sales during the first quarter. Whereas Profit from operations increasedto Rs. 60.4 Crores compared to Rs. 15.4 Crores in the prior year. During the year underreview your Company has reaped the benefits of the improvements in productivity qualityand product mix that were done in the spinning business during the past three years. Wehave also increased production in all our units by 5-10 % by optimizing our machineryset-up and improving yarn productivity. Your Company will complete the planned investmentsin compact spinning and spindle monitoring systems during FY 2021-22.

We are very glad to note that the technical textiles division achieved its best annualperformance so far with a turnover of Rs.139 Crores as compared to Rs.119 Crores in theprevious year. The division was positive at a PBT level for the first time on the back offavourable conditions such as a weaker rupee robust demand and lower raw material pricesfor most of the year. The performance tapered down due to lower demand and rising inputcosts in the fourth quarter.

Outlook for the current year

Global textile trade exhibited a very resilient performance during the year. Demand fortextile products especially in casual wear and home textiles continues to be strongglobally with the opening up of the economies in the US and Europe. The anti-Chinasentiment prevailing worldwide and the "China plus one" sourcing strategy beingemployed by many manufacturers and retailers has opened the doors for a lot of Indianexporters to capitalize across industries. The Indian Textiles and Clothing Industry arealso well poised to take advantage of this situation.

However the second wave of the pandemic in India and our low rate of vaccination is amajor cause for concern. We have already seen several Indian states imposing lockdowns ofvarying degrees starting from March and continuing until June. Our operations have alsobeen affected by these lockdowns and the ensuing disruptions caused to the movement ofpeople and logistics. We continue to operate wherever possible by following all necessarysafety protocols and ensuring the health and well-being of our employees. We are alsotaking efforts to ensure that all our employees are vaccinated at the earliest.

The steep rise in commodity prices have resulted in higher raw material freightchemicals and packaging costs which are affecting the bottom line. This is a concern goingforward especially in the technical textiles division.

Change of Company Name

During the year under review name of your Company has been changed from "PrecotMeridian Limited" to "Precot Limited" with effect from 14 December 2020.

Personnel

The Company has been able to continue maintaining cordial relations with its labourforce in all its units. The Company has 1596 permanent employees on the roll as on 31March 2021.

Internal Control Systems & Risk Management

The Company has adequate internal control systems to monitor business processesfinancial reporting and compliance with applicable Regulations. The systems areperiodically reviewed by the Audit Committee of the Board for identification ofdeficiencies and necessary timely corrective actions were taken to improve the controls atall levels. The committee also reviews the statutory auditors' report key issuessignificant processes and accounting policies. e Board and Committees thereof and theattendance particulars of the Directors in such meetings are provided under the CorporateGovernance Report.

Declaration by Independent Directors

The Independent Directors have submitted their disclosures to the Board confirming thatthey fulfill the requirements enumerated under Section 149(6) of the Companies Act 2013(hereinafter "the Act") and Regulation 25 of The Securities Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations2015.

Directors and Key Managerial Personnel (KMP)

Re - Appointments

During the financial year 2020-21 there was no appointment of Directors or KeyManagerial Personnel in the Company.

The members at the 55 Annual General Meeting held on 5 September 2017 had appointed MrVijay Raghunath as Independent Director of the Company for a term of 5 (five) consecutiveyears upto 31 May2022.

The Board based on the recommendation of the Nomination and Remuneration Committee andthe performance evaluation of the Independent Directors has recommended there-appointment of Mr Vijay Raghunath as an Independent Director for a term of 5 (five)consecutive years on the Board of the Company from 1 June 2022 to 31 May 2027.

Considering the background experience and contributions made by Mr Vijay Raghunathduring his tenure his continued association as an Independent Director would bebeneficial to the Company and it is desirable to continue to avail his services.Accordingly it is proposed to re-appoint Mr Vijay Raghunath as an Independent Director ofthe Company not liable to retire by rotation. A suitable resolution is being moved at theensuing Annual General Meeting for his reappointment.

Retirements and Resignations

There is no cessation of office by any Director due to death or resignation. HoweverMr T Kumar Executive Director had retired by rotation being eligible offered forreappointment and was reappointed as Director at the last AGM held on 24.09.2020.

The following are the whole-time key managerial personnel of the Company as per Section203 of the Act as on 31 March2021 (i) Mr Ashwin Chandran Chairman and Managing Director(ii) Mr A P Ramkumar Chief Financial Officer & (iii) Mrs S Kavitha CompanySecretary.

Performance Evaluation

The Board of Directors at their meeting held on 23 March 2021 had carried out anannual evaluation of its own performance and the performance of the Committees of theBoard and the individual Directors pursuant to the provisions of the Act and the corporategovernance requirements as prescribed by Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (hereinafter "ListingRegulations").

The performance of the Board was evaluated by the Board of Directors after seekinginputs from all the Directors on the basis of criteria such as Board composition andstructure effectiveness of the Board meetings and process and contributions made by theDirectors.

The performance evaluation of each Director was done by the entire Board of Directorsexcluding the Director being evaluated taking into consideration inputs received from theother Directors covering various aspects of the Board's functioning such as activeparticipation and contribution during discussions effective deployment of knowledge andexpertise towards the growth and betterment of the Company impact and influence on thegrowth of the Company and performance of specific duties obligations and governance.

The performance of the committees was evaluated by the Board after seeking inputs fromthe committee members on the basis of criteria such as the composition of the committeesand effectiveness of the committee meetings.

In a separate meeting of Independent Directors held on 23 March 2021 performance ofthe non-independent Directors performance of the Board as a whole and performance of theChairman were evaluated taking into account the views of the executive Directors andnon-executive Directors.

The Board also carried out an evaluation on the performance of the IndependentDirectors and also verified the fulfillment of the criteria for independence as specifiedunder listing Regulations and their independence from the management. This evaluation ofIndependent Directors was done by the entire Board excluding the Independent Directorsbeing evaluated.

Policy on Director's appointment and remuneration and other details

The Company's policy on Director's appointment and remuneration and other mattersprovided in Section 178(3) of the Act has been disclosed in the Corporate GovernanceReport.

Auditors' report and Secretarial Auditors' report

The auditors' report and secretarial auditors' report do not contain anyqualifications reservation or adverse remarks.

During the year under review neither the Statutory auditors nor the SecretarialAuditor have reported to the Audit Committee any instances of fraud committed against theCompany by its officers or employees.

The report of the Secretarial Auditor is furnished as Annexure A and forms partof this report.

Receipt of any commission by Whole Time Directors from the Company or receipt ofcommission/remuneration from subsidiary Company

During the year under review the all the Executive Directors have received commissionfrom the Company. They have not received any commission/ remuneration from subsidiariesduring the year under review.

Annual Return

The extract of the annual return pursuant to Section 92 read with rule 12 of theCompanies (Management and Administration) Rules 2014 is available on the website of theCompany www.precot.com under investor relations.

Secretarial Standards

The Company complies with all the applicable mandatory secretarial standards issued bythe Institute of Company Secretaries of India.

Particulars of Employees

The particulars as required under rule 5 of Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is provided in Annexure B.

Consolidation of Accounts

The Company has control over "Suprem Associates" a partnership firm byholding majority of the shares in the firm. The accounts of the said firm are consolidatedas per the requirement of Indian Accounting Standards (IndAS).

Maintenance of Cost Records

The Company is maintaining the cost records as specified under Section 148(1) of theCompanies Act 2013.

Audit Committee

The Company has constituted an Audit Committee as per Section 177 of the Act andListing Regulations.

The details pertaining to vigil mechanism composition and meetings of the AuditCommittee are included in the Corporate Governance Report.

Energy Conservation Technology Absorption and Foreign Exchange Earnings and Outgo

The details as required under Section 134(3)(m) of the Act read with Rule 8 of theCompanies (Accounts) Rules 2014 is detailed in Annexure C.

Corporate Governance

A report on corporate governance is furnished as Annexure D and forms part ofthis report. This includes other disclosures as required under the provisions of the Act.The Company has complied with the conditions relating to corporate governance asstipulated in Regulation 34 of the Listing Regulations.

Corporate Social Responsibility (CSR)

The CSR Committee comprises of 1. Mr Ashwin Chandran 2. Mr Prashanth Chandran and 3.Mr Sumanth Ramamurthi. This committee takes care of CSR policy execution to ensure thatthe CSR objectives of the Company are met. The CSR policy deals with allocation of fundsactivities identification of programmes approval implementation monitoring andreporting. .

For the financial year 2020-21 the Company was not required to spend on CSR activitiesas per the provisions of the Companies Act.

The CSR policy is available on the Company's websitehttp://www.precot.com/investor-relations/

Particulars of Loan Guarantees or Investments

Details as per the provisions of Section 186 of the Act is given under notes tofinancial statements.

Related Party Transactions

None of the transactions with related parties falls under the scope of Section 188(1)of the Act. Information on transactions with related parties pursuant to Section 134(3)(h)of the Act read with rule 8(2) of the Companies (Accounts) Rules 2014 are given in AnnexureE in Form AOC-2 and the same forms part of this report.

The Board has approved a policy for related party transactions which is available onthe Company's website http://www.precot.com/investor-relations/

Directors' responsibility statement

The Directors confirm that:

a) The applicable accounting standards have been followed and proper explanationsprovided relating to material departures if any

b) The Company has adopted prudent and consistent accounting policies so as to give atrue and fair view of the state of affairs of the Company

c) Proper and sufficient care has been taken for maintenance of adequate accountingrecords under the provisions of the Companies Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities

d) The annual accounts of the Company have been prepared on a going concern basis

e) The internal financial controls are adequate and are operating effectively and

f) A proper system for ensuring compliance of all the applicable laws are put in placeand are operating effectively.

Statutory Auditors

M/s VKS Aiyer & Co. Chartered Accountants (Firm Registration No. 000066S)pursuant to the provisions of Section 139 of the Act were appointed as the statutoryauditors of the Company for a term of 5 years from the conclusion of the 56 AGM till theconclusion of the 61 AGM to be held in the year 2023. They have confirmed that they arenot disqualified and are eligible to continue in the office for the year 2021-22.

Cost Auditor

Pursuant to Section 148 of the Act read with the Companies (Cost Records and Audit)Rules 2014 the Board of Directors on the recommendation of the Audit Committeeappointed Mr Ramasubramania Raja Cost Accountant as the cost auditor of the Company forthe financial year 2021-22.

Accordingly a resolution seeking member's ratification for the remuneration payable toMr Ramasubramania Raja Cost Auditor is included as Item No. 7 of the AGM notice.

Secretarial Auditor

Pursuant to Section 204 of the Act the Board of Directors has appointed Mr KDuraisami Practicing Company Secretary Coimbatore as the secretarial auditor of theCompany for the financial year 2021-22.

Insider Trading Regulations

Based on the requirements under SEBI (Prohibition of Insider Trading) Regulations2015 the 'Insider Trading Code' to regulate monitor and report trading by insiders andthe 'Code of Practices and Procedures for fair disclosure of Unpublished Price SensitiveInformation' are in force.

Change in nature of business

There was no change in the nature of the business of the Company during the year underreview.

Deposits from public

The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.

Material Changes

No material changes or commitments affecting the financial position of the Companyoccurred between the end of the financial year (i.e.31 March 2021) and the date of thisreport.

Vigil Mechanism/ Whistle Blower Policy

The Company has formulated and published a Whistle Blower Policy to provide VigilMechanism for employees including Directors of the Company to report genuine concerns andto ensure strict compliance with ethical and legal standards across the Company. Theprovisions of this policy are in line with the provisions of the Section 177(9) of the Actand Listing Regulations are available on the website of the Company athttp://www.precot.com/investor-relations/. The details of Whistle Blower Policy forms partof the Corporate Governance Report annexed with this report.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013

The Company has constituted an internal complaints committee to address the complaintsregarding sexual harassment. All employees are covered under this policy. The Company hasnot received any complaints during the year under review. The details relating toComplaints forms part of the Corporate Governance report.

Details of Application made or any proceeding pending under The Insolvency andBankruptcy Code 2016 during the year

No applications have been made and no proceedings are pending against the Company underthe Insolvency and Bankruptcy Code 2016 during the year under review.

Details of difference between amount of the valuation done at the time of one timesettlement and the valuation done while taking loan from the banks or financialinstitutions along with the reasons thereof

The disclosure under this clause is not applicable as the Company has not undertakenany one-time settlement with the banks or financial institutions during the year underreview.

Unclaimed Shares

In accordance with the requirement of Regulation 34(3) and Schedule V Part F of ListingRegulations the details in respect of equity shares lying in the suspense account is asfollows.

Particulars Number of share holders Number of Equity Shares
Aggregate number of shareholders and the outstanding shares in the suspense account as on 01-Apr- 2020 271 51050
Number of shareholders approached the Company for transfer of shares from suspense account during the year 40 6325
Number of shareholders to whom shares were transferred from suspense account during the year 40 6325
Aggregate number of shareholders and outstanding shares in the suspense account as on 31-Mar- 2021 231 44725

The voting rights on the shares outstanding in the suspense account as on 31 March2021 shall remain frozen till the rightful owner of such shares claims the shares.

Acknowledgement

Your Directors thank the Shareholders Customers Suppliers and Bankers for theircontinued support during the year. Your Directors also place on record their appreciationof the contributions made by Employees at all levels towards the growth of the Company.

By order of the Board
Coimbatore Ashwin Chandran
10-June-2021 Chairman and Managing Director

#MDEnd#

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