Your Directors are pleased to present the (70 th ) Seventieth Annual Report on thebusiness and operation of the Company together with the Audited Financial Statement forthe year ended March 31 st 2017. A summary of the Financial Results is given below. TheManagement discussion and analysis is also included in this report.
| || ||(Rs. in Lacs) |
|FINANCIAL RESULTS ||For the year ended 31st March 2017 ||For the year ended 31st March 2016 |
|Gross Revenue ||33193.17 ||32961.61 |
|Gross Profit (before interest depreciation & tax) ||1599.33 ||1696.86 |
|Less: Interest ||881.10 ||853.31 |
|Depreciation ||369.40 ||424.67 |
|Profit before tax & extraordinary Item ||348.83 ||418.88 |
|Less: Provision for tax || || |
|Mat Current ||(71.82) ||(84.38) |
|Deferred ||(0.00) ||(0.00) |
|Net Profit for the year ||277.01 ||334.50 |
|Appropriation : || || |
|Transfer to Reserve & Surplus ||- ||- |
|(Surplus/Deficit) in the Statement of Profit & Loss Account ||277.01 ||334.50 |
1. CORPORATE OVERVIEW
The Rai Saheb Rekhchand Mohota Spg. & Wvg. Mills Ltd. ("The Company") isa leading and the oldest Composite Textile Mill in Vidarbha region of Maharashtra. TheCompany has its Corporate Head Office at Hinganghat Dist. Wardha Maharashtra India.
2. OVERVIEW OF THE ECONOMY
Global economy growth continued to stagnate following slow trades low investments andpolicy uncertainties in developed economies. Major global events during the year includedUnited Kingdom's decision to leave the European Union and the outcome of presidentialelections in United States of America. Both the events are expected to have long-termeffects on the global economy. Global growth in 2016 was estimated at 3.1% and isprojected to rise to 3.5% in 2017.
Growth in emerging markets and developing economies is expected to pick up in 2017 onthe back of fiscal stimulus measures in developed economies and narrowing of divergencebetween commodity exporters and importers. The main factors that could possibly weigh onthe medium-term growth prospects across many emerging markets and developing economies areweak investments below par levels of productivity coupled with heightened policyuncertainty and protectionist pressures.
India emerged as a bright spot' in an otherwise subdued world economy when itovertook China in 2015-16 as the fastest-growing major economy in the world. ThoughIndia's fundamentals still remain strong the recent demonetisation initiative undertakenby the Indian Government is expected to lower India's GDP growth from 7.6% in FY16 to 6.8%in FY17. The IMF mentioned that this cash shortage and slowed private consumption wouldonly be a temporary disruption and the otherwise healthy economy will return to familiarterritories post the predicted slowdown in FY17. The Indian Government's decisive policymanoeuvres towards ensuring fiscal consolidation and pegging back inflation will help itmaintain economic stability in the years ahead. India's eight core infrastructureindustries coal crude oil natural gas refinery products fertilisers steel cement andelectricity registered cumulative growth of 4.9% during the April-November period comparedto 2.5% a year ago.
(Source: International Monetary Fund (IMF) and Economic Survey)
3. FINANCIAL PERFORMANCE
Despite Marginal Top Line Growth of 0.70% over the previous year the company reportedgross profit from operation at Rs. 1599.33 lacs compared to Rs. 1696.86 lacs in theprevious year. The Operating Profit before tax stood at Rs. 348.83 lacs as against Rs.418.88 lacs in the previous year. The Net Profit for the year stood at Rs. 277.01 lacs asagainst Rs. 334.50 lacs in the previous year.
4. DIVIDEND AND RESERVE
Directors recommend a dividend @ 1% i.e. 0.10 per equity share of Rs. 10 eachaggregating to Rs. 14.59 lacs ( 14.59 lacs previous year). During the year under review noamount was transferred to General Reserve.
5. SHARE CAPITAL
The paid-up Equity Share Capital as on March 31 st 2017 stood at Rs. 1458.94 lacs.During the year under review Company has not issued any Sweat Equity shares Bonus sharesor provided 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.
6. ANALYSIS AND REVIEW
Global Textile and Apparel Industry
The global textile and apparel industry will continue to grow along with growingconsumption of textile and apparel products in developing countries and a gradual economicrecovery of major developed economies. Geography-wise while the apparel market is stilllargely dominated by the European Union and the US countries like China India and Russiaare emerging as future destinations for apparel consumption. The high growth in the marketis expected to be primarily driven by the increase in population as well as per capitaapparel spending of the already large population in these countries. The Global trade inthe apparel segment which is estimated at $467 billion is expected to grow at a CAGR of 5%and global textiles trade which is estimated at $ 341 billion is projected to grow at aCAGR of 3% over 10 years (i.e. 2016-26) (fabric is expected to lead the category followedby yarns and fiber).
Indian Textile industry
The Indian textile industry is one of the oldest industries of the country. The textileindustry has two broad segments. First the unorganised sector consisting of handloomhandicrafts and sericulture and the second is the organised sector consisting of spinningweaving knitting garments and home textiles segment. The industry has a majorcontribution to the national economy in terms of direct and indirect employment generationand net foreign exchange earnings. The sector contributes 14% to industrial production 4%to India's Gross Domestic Product (GDP) and 15% to the country's export earnings. It isthe second largest employment provider in the country employing nearly 51 million peopledirectly and 68 million people indirectly in 2015-16. Exports have been a core feature ofIndia's textile sector. The Indian textiles export market estimated at $18 billion isexpected to grow at a CAGR of 4% as 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 an 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 and reduces thelead-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 Efficiency such as transaction time at portsand transportation time.
Unfavorable labour laws.
Lack of Trade Membership which restricts us to tap other potential markets.
During the year under report the company's total sales registered a marginal growth of0.70% to Rs. 33193.17 Lacs from Rs. 32961.61 Lacs in the previous financial year. TheGross Operating Profit for the financial year 2016-17 stood at Rs. 1599.33 Lacs ascompared to Rs. 1696.87 Lacs for previous financial year and Net Profit after tax stood atRs. 277.01 Lacs as compared to Rs. 334.50 Lacs in the previous financial year
The price of PSF remained mostly stable for first three quarters of 2016-17 buteventually increased in the last Quarter. The price of VSF increased at the middle ofsecond quarter and remained stable till the end of last quarter where it increased again.Multiple raw materials cost saving initiatives helped the company to keep the costs incontrol. The cotton prices have increased throughout the year.
Company has a large retail network spread all over the country. It has more than thirtyagents and over two thousand retailers who helps the Company to boost sales.
7. FINANCE AND ACCOUNTS
During the F.Y. 2016-17 Company has repaid its entire term loan with last installmentpayment in December 2016. Company prepares its financial statements in compliance withthe requirements of the Companies Act 2013 and the Generally Accepted AccountingPrinciples (GAAP) in India. The financial statements have been prepared on historical costbasis. The estimates and provisions relating to the financial statements are made on aprudent basis so as to reflect in a true and fair manner the form and substance oftransactions and reasonably present the Company's state of affairs profits and cash flowsfor the year ended March 31 2017.
During the year under review the Rating agency "BRICKWORK" upgraded the"BBB" rating for the Company's long term borrowings and "A3+" forShort Term Borrowing. As mandated by the Ministry of Corporate Affairs the Company shalladopt the IND AS for the Financial Year commencing from April 1 2017.
There is no audit qualification in the financial statement by the statutory auditorsfor the year under review.
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 Directors 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 this DirectorsReport.
In accordance with the provisions of section 152 of the Companies Act 2013 and theCompany's Articles of Association Shri Vinod Kumar Mohota (DIN:00247348) and Shri VinayKumar Mohota (DIN:00247340) Directors of the Company retire by rotation at theforthcoming Annual General Meeting and being eligible offers themselves forre-appointment. The Board recommends their re-appointment for the consideration of theMembers of the Company at the ensuing Annual General Meeting.
Company at the 69 th Annual General Meeting held on 27 th September 2016 appointedSmt. Ritu Kabra (DIN: 07402599) as Independent Director for a period of 5 years andapproved the reappointment of Shri Vinod Kumar Mohota Managing Director Shri Vinay KumarMohota Whole Time Director and Shri Shantilal B. Singhvi Whole Time Director for furtherperiod of 3 years.
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 ||Shri Vinod Kumar Mohota ||Managing Director |
|ii ||Shri Vinay Kumar Mohota ||Whole-time Director |
|iii ||Shri Shantilal B. Singhvi ||Whole-time Director |
|iv ||Shri Mukesh B. Mahajan ||Chief Financial Officer |
|v ||Shri Sachin N. Kanojiya ||Company Secretary |
Remuneration and other details of Key Managerial Personnel for the year ended 31 stMarch 2017 are provided in the Extract of Annual Return is attached as "AnnexureA".
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 preparedafter taking into consideration the various aspects of the Board's functioningcomposition of the Board and its Committees culture execution and performance ofspecific 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 was completed. The performanceevaluation of the Chairman and the Non-independent Directors were carried out by theindependent Directors. The Board of Directors expressed their satisfaction with theevaluation process.
13. NUMBER OF MEETINGS OF THE BOARD
During the year under consideration 6 (Six) Board Meetings were convened and held. Thedetails of the meetings of the Board and Committees held during the Financial Year 2016-17forms part of the Corporate Governance Report.
14. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY COMPANY
During the year under review there was no loan Guarantee or Investments made by theCompany under Section 186 of the Companies Act 2013 hence the said provision is notapplicable.
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.rsrmm.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 companysuccessfully;
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 termperformance objectives appropriate to the working of the company and its goals:
This policy also lays down criteria for selection and appointment of Board Members.Details of this policy are explained in the Corporate Governance Report.
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 theCorporate Governance Report.
19. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
Pursuant to section 25-O(5) of the Industrial Disputes Act 1947 and AWARD 9/2011 Dtd.30/12/2016 awarded by the Industrial Tribunal Nagpur Company has discontinued itsunproductive Weaving Section of Hinganghat Unit having 192 old shuttle looms with effectfrom 01 st of March 2017.
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 2017the applicable accounting standards have been followed along with proper explanationrelating 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 2017 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 operatingeffectively; 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 operatingeffectively.
21. AUDITOR'S REPORT AND STATUTORY AUDIT
Board recommended the appointment of M/s M.M. Parikh & Co. Chartered Accountants(Firm Registration Number: 107557W) as the Statutory Auditors of the Company to holdoffice from the conclusion of this Annual General Meeting (AGM) until the conclusion ofthe 75 th (Seventy Fifth) AGM of the Company to be held in the year 2022 in place of M/s.Batliboi & Purohit Chartered Accountant (Firm Registration Number 101048W) whosetenure will be over pursuant to the provision of the company's Act 2013 in thisSeventieth (70 th ) AGM of the Company. The Company has also received written confirmationfrom M/s M.M. Parikh & Co. Chartered Accountants that their appointment if madewould be in conformity with limit specified in the said section.
There is no audit qualification during year under review.
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. 22 to 38 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 have re-appointed M/s G. R. Paliwal & Company CostAccountants (Registration Number 100058) Nagpur as the Cost Auditors of the Companypursuant to Section 148 of The Companies Act 2013 for conducting the Cost Audit Recordsof the Company for the Financial Year 2017-18.
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 2017-18. The Secretarial Audit Report is included asAnnexure 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 Mills 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 to thisReport.
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 2017.
The Company at present does not have any employee drawing salary in excess of the limitspecified under section 197 of Companies Act 2013.
The Company does not have any subsidiary/subsidiaries within the meaning of CompaniesAct 2013.
The Company has not accepted any deposits from public. Therefore the requirement ofChapter V of the Companies Act 2013 is not applicable.
29. CORPORATE SOCIAL RESPONSIBILITY (CSR)
According to the Companies Act 2013 the company is not covered under the Companies(Corporate Social Responsibility) Rules 2013.
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 Auditor together with the Risk pro (Organization of Professional withproficiency in Risk Management) the Report by auditor on the company's Internal FinancialControl System forms a part of Independent Auditors Report.
32. DISCLOSURE UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTIONPROHIBITION & 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 2016-17.
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 the various research institutes to train its workforce. The Company has taken following initiatives for skill development program forworker & 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. Ahemdabad 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. Orgainsed 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 29 th March bywhich donated 160+ units of blood to Blood Bank.
2 During the year company organized seminar on "Stress-Management" by one ofa reputed social and charitable Trust from Nagpur for entire staff members of the Mills.
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.
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 |
| ||Sd/- |
|Place : Hinganghat ||Dr. Ranchhoddas Mohota |
|Dated: 14.08.2017 ||Chairman |