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Rajapalayam Mills Ltd.

BSE: 532503 Sector: Industrials
NSE: RAJPALAYAM ISIN Code: INE296E01026
BSE 13:24 | 29 Jun 738.40 13.65
(1.88%)
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NSE 05:30 | 01 Jan Rajapalayam Mills Ltd
OPEN 725.00
PREVIOUS CLOSE 724.75
VOLUME 95
52-Week high 1398.00
52-Week low 700.00
P/E 25.05
Mkt Cap.(Rs cr) 636
Buy Price 734.00
Buy Qty 17.00
Sell Price 739.00
Sell Qty 2.00
OPEN 725.00
CLOSE 724.75
VOLUME 95
52-Week high 1398.00
52-Week low 700.00
P/E 25.05
Mkt Cap.(Rs cr) 636
Buy Price 734.00
Buy Qty 17.00
Sell Price 739.00
Sell Qty 2.00

Rajapalayam Mills Ltd. (RAJPALAYAM) - Director Report

Company director report

TO THE MEMBERS

Your Directors have pleasure in presenting their 85th Annual Report and theAudited Accounts of the Company for the year ended 31st March 2021.

1. FINANCIAL RESULTS

The financial results for the year ended 31st March 2021 after charging allexpenses but before deducting finance cost and depreciation have resulted in operatingprofit (EBITDA) of Rs. 5376.39 Lakhs against Rs. 6103.79 Lakhs for the previousfinancial year 2019-20. Summary of Separate Financial Results of the Company is furnishedbelow:

Separate Financials
Financial Results Year ended Year ended
31-03-2021 31-03-2020
Revenue 42912.19 38406.41
Operating Profit: Profit before Interest
Depreciation and Tax (PBIDT) 5376.39 6103.79
Less: Interest 4448.33 2586.57
Profit before Depreciation and Tax (PBDT) 928.06 3517.22
Less: Depreciation 4759.90 3384.65
Profit before Tax (3831.84) 132.57
Less: Tax Expenses
Current Tax
Deferred Tax (withdrawal) (1168.48) (508.67)
Profit after Tax (2663.36) 641.24
Other Comprehensive Income for the Year (Net of Tax) 72.69 (31.04)
Total Comprehensive Income for the Year (TCI) (2590.67) 610.20

2. SHARE CAPITAL

The Paid-up Capital of the Company is Rs. 737.62 Lakhs (PY: Rs. 737.62 Lakhs)consisting of 7376160 Shares of Rs. 10/- each.

3. RIGHTS ISSUE

The Company in order to fund various capex proposals has decided to raise EquityShares for an amount of Rs. 69.95 Crores by way of Rights Issue in the ratio of 1:6 (1Rights Share for every 6 Equity Shares held by Shareholders). The issue has been opened on15-03-2021 and closed on 30-03-2021 with 115% subscription. The Company has made allotmentof Equity Shares raised through Rights Issue on 9th April 2021 and the Shareshave been approved for trading by BSE Limited with effect from 15-04-2021.

The Board of Directors are thankful to the Shareholders of the Company for reposingtheir faith and confident on the management by showing their overwhelming response to theRights Issue.

4. DIVIDEND

Your Directors have pleasure in recommending a Dividend of Rs. 0.50 per share (PreviousYear:

Rs. 1/- per share). The total amount of Dividend outgo for the year will be Rs. 43.03Lakhs. As per Income Tax 1961 the dividend will be taxable in the hands of theShareholders and the Company will make the payment of dividend after deducting applicableTDS.

The payment of Dividend is in accordance with the "Dividend DistributionPolicy" of the Company. The policy is available on the website of the Company underweblink http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/dividend-distribution-policy.pdf.

5. TAXATION

The Company has not provided any amount towards Current Tax since total income underregular computation and deemed total income under Section 115JB of the Income Tax Act1961 are negative. Deferred Tax of Rs. 1168.48 Lakhs (Previous Year: Rs. 508.67 Lakhs)has been withdrawn for the year 2020-21.

6. MANAGEMENT DISCUSSION AND ANALYSIS

TRADE CONDITIONS

COTTON

In India the opening stock of cotton for the current cotton season 2020-21 (October toSeptember) was historically at high level of 120 Lakhs Bales. The main reason for suchhigh level of carry over stock was due to lower consumption of cotton by Mills in Indiadue to disruptions in manufacturing activities caused by Covid-19 pandemic. This coupledwith higher production estimate of cotton during the current cotton crop season of 360Lakhs bales has pulled down the cotton prices during the initial cotton season. Due tothis CCI has purchased large volume of cotton under MSP operation during peak arrivalsof cotton bales in the market.

However the sentiment in the markets had slowly turned positive soon after themanufacturing activities started picking up due to relaxations announced by Governmentwhich was earlier disrupted on account of Covid-19 pandemic. The cotton prices havegone-up by more than 30% compared to the price ruled during the initial cotton season. Theprices of some of the imported cotton varieties especially the long stable fibre had alsoincreased very steeply to the extent of 40% to 75% within a period of 3 to 4 months' time.

The Company is focusing to produce more value added count and in order to meet thequality requirement of value added counts more volume high quality imported cotton hasbeen procured when the prices were cheaper. This strategy has helped the Company toprocure diversified varieties of cotton across the global and to quote competitive pricesfor our yarn which helped to improve the operating margin in the last quarter of thefinancial year 2020-21.

YARN PRODUCTION

The production volume has decreased to 110.52 Lakhs Kgs during the financial year2020-21 as against 121.78 Lakhs Kgs of last year due to lock down imposed by Governmentfor 2 months during April 2020 & May 2020.

SALE OF YARN

Despite the adverse conditions prevailed during first 6 months of the financial yearunder review due to Covid-19 pandemic there is no slowdown in Company's focus on newproduct development innovation and cost-effective production. Inspite of reduction inproduction volume by 9% the Company was able to achieve growth in sale volume due toliquidation of stock. The sale volume for the FY 2020-21 stood at 121.99 Lakh Kgs ascompared to 118.79 Lakh Kgs of last year an increase of 3%. The sale value of yarn hasincreased to

Rs. 362.57 Crores during the FY 2020-21 as compared to Rs. 346.64 Crores of last yearregistering a growth of 5%. The overall revenue from operation has gone up by 15% duringthe FY 2020-21 of Rs. 411.78 Crores from Rs. 357.82 Crores of last year due to additionalturnover from Fabric Unit which came into operation during the FY 2020-21.

The Company was able to overcome the challenges posed by pandemic by continuousengagement with the Customers and none of the sales contracts was cancelled during thischallenging period though there was some deferment in the delivery schedule which hasbeen subsequently shipped successfully.

The yarn market in India has bounced back after witnessing a slowdown in last 2 years.Due to geopolitical factors like trade war between US and China and diversion of sourcingtextile products by many top global garment brands from China to India boosted the demandfor textile products including yarn manufactured in India. Due to good demand fromdomestic market the Company was able to liquidate the yarn stock from Rs. 42.23 Crores ason 01-04-2020 to Rs. 5.94 Crores as on 31-03-2021.

The Company's quality of yarn in value added segment has been well appreciated by thecustomers and the Company is receiving very good volume of orders for value added counts.

The sale volume of mercerized yarn has increased to 302 Tonnes during the FY 2020-21(PY: 154 Tonnes) Modal / Tencel yarn has increased to 329 Tonnes during the FY 2020-21(PY: 176 Tonnes) and the dyed yarn volume has increased to 133 Tonnes during the FY2020-21 (PY: 12 Tonnes). The Company is taking various steps to expand its market presenceboth in domestic and international markets and hope to achieve higher volume of sales invalue added yarns in the forthcoming years.

EXPORTS

We have made export of Cotton Yarn (including merchant exports) for a value of

Rs. 106.75 Crores as against Rs. 111.21 Crores of the previous year. In addition to ourregular International Market our sales volume has grown considerably in new markets viz.Turkey Portugal etc. where our yarn quality is well accepted.

Your Directors are thankful to M/s. Asahi Kasei Advance Corporation M/s. Doko SpinningCo. Ltd. and M/s. Unitika Ltd. Japan for their continued support and efforts forpromotion of exports to Japan.

POWER COST

During the financial year 2020-21 the Company was able to consume power from its ownwind farms to the extent of 66% (PY: 64%) of total power requirement. The power cost hasbeen decreased during the financial year 2020-21 to Rs. 26.91 Crores as compared to

Rs. 27.87 Crores incurred during previous year inspite of increased power consumptionat Fabric Unit. The reduction in power cost is partly due to lockdown imposed byGovernment for 2 months during April 2020 & May 2020 on account of Covid-19 pandemicand also because of various energy conservation measures taken by the Company.

FINANCE COST

The Finance cost has increased to Rs. 4448.33 Lakhs during the financial year 2020-21from

Rs. 2586.57 Lakhs of previous financial year mainly due to the additional borrowingsfor setting up of Fabric unit which has commenced the commercial production during thelast week of March 2020 and full impact of interest cost has been accounted during thecurrent financial year.

DIVIDEND INCOME

During the financial year 2020-21 the Company has received dividend income of

Rs. 13.01 Crores (PY: Rs. 21.28 Crores) and the particulars of dividend received areprovided under Note No.46 (a) (viii).

KEY FINANCIAL RATIOS

Pursuant to Schedule V(B) of SEBI (LODR) Regulations 2015 the Key Financial Ratiosfor the year 2020-21 are given below:

S.No. Particulars 31-03-2021 31-03-2020 Formula adopted
1 Debtors Turnover Ratio (Days) 56 57 365 Days / (Net Revenue / Average Trade Receivables)
2 Inventory Turnover Ratio (Days) 123 151 365 Days / (Net Revenue / Average Inventories)
3 Interest Coverage Ratio 0.14 1.01 (Profit Before Tax + Interest)/ (Interest + Interest Capitalised)
4 Current Ratio 0.94 1.03 Current Assets / (Total Current Liabilities - Other Financial Liabilities
- Current maturities of Long Term Debt)
5 Debt - Equity Ratio 2.28 1.96 Total Debt / Total Equity
6 Operating Profit Margin 13% 17% EBITDA / Net Revenue
7 Net Profit Margin (-) 6% 2% Net Profit / Net Revenue
8 Return on Networth (-) 9% 2% Total Comprehensive Income / Average Net worth
9 Total Debt / EBITDA 11.66 9.55 Total Debt / EBITDA
10 Return on Capital Employed 2% 4% (TCI + Interest)/ (Average of Equity plus Total Debt)
11 Price Earnings Ratio (-) 23 57 Market Price per share as at 31st March / Earning per share

Notes: a) For serial no. 3 7 8 10 and 11 there have been significant change (ie.25% or more) in the ratios compared to previous year. The same is due to decrease inProfit on account of disruptions caused by Covid-19 Pandemic.

b) EBITDA denotes Profit Before Tax + Interest + Depreciation.

7. MODERNISATION / EXPANSION

As a part of continuous thrust on modernization programme the Company has decided toreplace all the old Open End Spinning (OE) Machines with most modern fully automatic OEMachines at a cost of Rs. 45 Crores. The Company has already received these New OEMachines and the installation of all machines has been completed on 30-04-2021. With theinstallation of these advanced machines the Company will focus to sell the OE yarn indifferent value added segments like OE yarn for knitting segments Denim Segments etc.which are untapped by the Company so far. In addition to this the Company has alsoinvested an amount of Rs. 13 Crores (PY: Rs. 46 Crores) in modernizing other textilemachinery & equipment.

The Company is presently having 1 No. of Mercerisation Machine with a capacity toproduce 60 Tonnes of mercerized yarn per month. The order flow for gassed mercerized yarnthat too in super fine counts segment is very much encouraging. Hence it is proposed totriple the existing production capacity of Mercerizing yarn from 60 Tonnes to 180 Tonnesper month. The second line of Mercerisation plant is slated to come into stream during Q2of the current financial year 2021-22 while the 3rd line will commence itscommercial production during January - 2022.

In order to take advantage of the current higher demand for yarn the Company has alsoproposed to expand the spinning capacity by adding 18144 spindles in Rajapalayam byutilizing the existing building space.

The Company is also planning to expand the weaving capacity by adding 30 Looms whichwill increase the existing looms capacity from 122 Looms to 152 Looms in the existingloom-shed without incurring any additional construction cost. The additional looms willcommence the commercial production during Q4 of the current Financial Year.

Total outlay for all the above capex proposals is Rs. 180 Crores which will be fundedfrom proceeds of Rights Issue internal accruals and term loan from Banks.

8. PROSPECTS FOR THE CURRENT YEAR

The Cotton Association of India's estimates suggested that out of total cottonavailability of 496 Lakhs Bales for the cotton crop year 2020-2021 the consumption willbe around 330 Lakhs Bales and export will be around 60 Lakhs Bales leaving the carryoverstock to the next season of 160 Lakhs Bales. According to data published by ForeignAgricultural Service of USDA the world cotton production for 2021-22 season is expectedto rise at 4.70%. it also estimated a strong cotton consumption growth in 2021-22 as theworld economy recovers from the severe 2020 downturn. The global cotton consumption isexpected to grow by 4.10% and this will be the second consecutive year when worldconsumption will exceed the production of cotton. As a result the world cotton stocks areexpected to reduce and strong cotton consumption growth will support the price of cottonand cotton price is expected to go upwards in the coming cotton season. The Government ofIndia has imposed duty on imported cotton and this will make imported cotton dearer by 11%for Indian Spinning Mills.

Retail sales of textile products across the globe is witnessing a robust trend. Thisdemand along with lower levels of inventory with a Retailers will boost the demand foryarn manufactured in India for the current financial year 2021-22. India is becoming astrong alternative sourcing base to China for textile products. The Company has reshapeditself to a better position by strengthening its product lines with more value addedcustomized yarn counts viz. Mercerized Yarn Melange Yarn Core Yarn etc. to take fulladvantage of the current market trend. The Company is continuously monitoring variousprocess parameters and also implemented various system controls to deliver consistentquality of yarn and fabric to the end customers. The Company has also strengthened theproduct lines with more automation like fully automatic contamination removal system atblow room stage 100% ring spindle monitoring system installation of linkconers etc.which has resulted in overall improvement of efficiency of the Mill.

The Company's strategic decision to focus on more value added counts has startedyielding results and good volume of yarn orders in Q1 and Q2 of the current financial year2021-22 with more long stable varities of cotton have been booked. The prudent purchasepolicy of imported cotton when the prices were lower will also help to sustain theoperating margins in FY 2021-22.

Efforts are being taken continuously to scale up the production & sale of valueadded counts like Mlange yarn Mercerized yarn core spun yarn etc. which will replacecommodity counts in the forthcoming years. The spreading of Covid-19 in India and otherCountries during its second wave is posing continuous challenges and the Company isstrictly and continuously following the SoPs to safeguard its employees and thrive todeliver world-class yarns and fabrics to its Customers. With the flexibility to producevalue added super fine counts the Company is poised to post decent growth both in toplineas well as bottom line for the financial year 2021-22.

9. FABRIC PROJECT

Fabric Unit commissioned during last year is successfully running with the capacity of122 Looms. Though there was subdued demand for fabric due to lockdown imposed during the 1sthalf year of the FY 2020-21 it has started picking-up from 3rd quarter and thefabric unit has reached its optimum utilization level from 4th quarter of theFY 2020-21.

The Fabric Unit is producing special value added fabric especially from its JacquardLooms and the quality is well appreciated by the customers in Export Market. The unit hasproduced and sold

41 Lakhs Meters of Fabrics. Total Revenue generated by Fabric unit for the financialyear 2020-21 was Rs. 38.67 Crores out of which Export Turnover was Rs. 11.47 Crores. TheCompany expects better revenue and profitability from Fabric Unit in the coming years.

10. WIND MILL

The Company has wind mills with installed capacity of 35.15 MW for its captive powerconsumption. The wind farm has generated 564 Lakhs Kwh as compared to 596 Lakhs Kwh of theprevious year. The wind availability / velocity during the financial year 2020-21 was lowas compared to the financial year 2019-20. All the Units generated by wind mills wereadjusted for captive consumption at our Mills. The income during the year from the WindMill Division was Rs. 37.59 Crores as against

Rs. 39.62 Crores of previous year.

11. ASSOCIATE COMPANY

The Company has three Associate Companies viz. M/s. The Ramco Cements Limited M/s.Ramco Industries Limited and M/s. Ramco Systems Limited.

In accordance with Rule 5 of Companies (Accounts) Rules 2014 a statement containingthe salient features of the financial statements of the Company's Associates' is attachedin Form AOC-1 as Annexure - I.

CONSOLIDATED FINANCIAL STATEMENTS

As per provisions of Section 129(3) of the Companies Act 2013 and Regulation 34 ofSEBI (LODR) Regulations 2015 Companies are required to prepare consolidated financialstatements of its Subsidiaries and Associates to be laid before the Annual General Meetingof the Company.

Accordingly the consolidated financial statements incorporating the accounts ofAssociate Companies viz. M/s. The Ramco Cements Limited M/s. Ramco Industries LimitedM/s. Ramco Systems Limited along with the Auditors' Report thereon forms part of thisAnnual Report. As per Section 136 (1) of the Companies Act 2013 the Financial Statementsincluding Consolidated Financial Statements are available at the Company's website at thefollowing link at http://www.rajapalayammills.co.in.

The consolidated profit of the Company amounted to Rs. 10118.48 Lakhs for the yearended 31st March 2021 as compared to Rs. 9206.79 Lakhs of the previous year.

The Consolidated Total Comprehensive Income for the year under review is Rs. 10216.67Lakhs as compared to Rs. 9113.07 Lakhs of the previous year.

12. INTERNAL FINANCIAL CONTROLS

In accordance with Section 134(5)(e) of the Companies Act 2013 the Company hasInternal Financial Controls Policy by means of Policies and Procedures commensurate withthe size & nature of its operations and pertaining to financial reporting. Inaccordance with Rule 8(5)(viii) of Companies (Accounts) Rules 2014 it is herebyconfirmed that the Internal Financial Controls are adequate with reference to thefinancial statements. ERP System developed by Ramco Systems Limited has been installed foronline monitoring of all functions and management information reports are being used tohave better internal control system and to take decisions in time.

13. VIGIL MECHANISM / WHISTLE BLOWER POLICY

In accordance with Section 177(9) and (10) of the Companies Act 2013 and Regulation 22of SEBI (LODR) Regulations 2015 the Company has established a Vigil Mechanism and has aWhistle Blower Policy. The policy is available at the Company's website. The Policyprovides the mechanism for the receipt retention and treatment of complaints and toprotect the confidentiality and anonymity of the stakeholders. The complaints can be madein writing to be dropped into the Whistle Blower Drop Boxes or through E-Mail to dedicatedmail IDs. The Corporate Ombudsman shall have the sole access to these. The Policy providesto the complainant access to the Chairman of the Audit Committee. The weblink for theVigil Mechanism is disclosed in the Corporate Governance Report.

14. DIRECTORS

In accordance with the provision of the Companies Act 2013 and in terms of theMemorandum and Articles of Association of the Company the following Directors retire byrotation at the ensuing Annual General Meeting and they are eligible for re-appointment:

1. Smt. P.V. Nirmala Raju (DIN: 00474960)

2. Shri P.R. Venketrama Raja (DIN: 00331406)

At the Annual General Meeting held on 10-08-2017 Shri P.A.S. Alaghar Raja (DIN:00487312) was appointed as an Independent Director for a period of 5 consecutive yearscommencing 11-02-2017 to 10-02-2022. He is eligible for re-appointment for another periodof 5 years as an Independent Director from 11-02-2022 to 10-02-2027. In accordance withSection 149(10) of the Companies Act 2013 his re-appointment has been proposed in thenotice convening the Annual General Meeting as Special Resolution. His profile andrationale for re-appointment have been provided in the statement pursuant to Section 102of the Companies Act 2013 attached to the notice convening the Annual General Meeting.

Smt. Soundara Kumar (DIN 01974515) has been re-appointed as Independent Director foranother term of 5 years at the Annual General Meeting held on 15th September2020. In the opinion of the Board Smt. Soundara Kumar possess integrity expertise andexperience for being re-appointed as an Independent Director. Smt. Soundara Kumar hascleared the on-line proficiency Self-Assessment test conducted by the Indian Institute ofCorporate Affairs by securing 72% of marks.

The Independent Directors hold office for a fixed term of 5 years and are not liable toretire by rotation.

Pursuant to Rule 8(5)(iii) of Companies (Accounts) Rules 2014 it is reported thatother than the above there have been no changes in the Directors or Key ManagerialPersonnel during the year.

The Company has received necessary declarations from all the Independent Directorsunder Section 149(7) of the Companies Act 2013 that they meet the criteria ofindependence as provided in Section 149(6) of the Companies Act 2013.

Independent Directors have complied with the Code for Independent Directors prescribedin Schedule IV of the Companies Act 2013.

The Company had formulated a Code of Conduct for the Directors and Senior Managementpersonnel and the same has been complied with.

The Audit Committee has four members out of which three are Independent Directors.Pursuant to Section 177(8) of the Companies Act 2013 it is reported that there has notbeen an occasion where the Board had not accepted any recommendation of the AuditCommittee.

The Company has a policy relating to appointment and remuneration of Directors KeyManagerial Personnel and other employees duly approved by the Board of Directors basedupon the recommendation of Nomination and Remuneration Committee in accordance withSection 178(3) of the Companies Act 2013.

As per Proviso to Section 178(4) the salient features of the Nomination andRemuneration Policy should be disclosed in the Board's Report. Accordingly the followingdisclosures are given:

Salient Features of the Nomination and Remuneration Policy:

The objective of the Policy is to ensure that:

(a) the level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully;

(b) relationship of remuneration to performance is clear and meets appropriateperformance benchmarks;

(c) remuneration to directors key managerial personnel and senior management shall beappropriate to the working of the Company and its goals; and

(d) to carry out any other function as is mandated by the Board from time to time and /or enforced by any statutory notification amendment or modification as may beapplicable.

The Nomination and Remuneration Committee and this Policy are in compliance with theCompanies Act 2013 and SEBI (LODR) Regulations 2015. During the year under review therehas been no change in the policy.

The web address of the Policy is at http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/nomination-and-remuneration-policy.pdf

As required under Regulation 25(7) of SEBI (LODR) Regulations 2015 the Company hasprogrammes for familiarisation for the Independent Directors about the nature of theindustry business model roles rights and responsibilities of Independent Directors andother relevant information. As required under Regulation 46(2)(i) of SEBI (LODR)Regulations 2015 the details of the Familiarisation Programme for Independent Directorsare available at the Company's website at the following link -http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/familiarisation-programme-for-independent-directors-31-03-2021.pdf

The details of familiarisation programme are explained in the Corporate GovernanceReport also.

15. EVALUATION OF BOARD

Pursuant to Section 134(3)(p) of the Companies Act 2013 and Regulation 25(4) of SEBI(LODR) Regulations 2015 Independent Directors have evaluated the quality quantity andtimeliness of the flow of information between the Management and the Board Performance ofthe Board as a whole and its Members and other required matters.

Pursuant to Schedule II Part D of SEBI (LODR) Regulations 2015 the Nomination andRemuneration Committee has laid down evaluation criteria for performance evaluation ofIndependent Directors which will be based on attendance expertise and contributionbrought in by the Independent Director at the Board Meeting which shall be taken intoaccount at the time of re-appointment of Independent Director.

Pursuant to Regulation 17(10) of SEBI (LODR) Regulations 2015 the Board of Directorshave evaluated the performance of Independent Directors and observed the same to besatisfactory and their deliberations beneficial in Board / Committee meetings.

Pursuant to Regulation 4(2)(f)(ii)(9) of SEBI (LODR) Regulations 2015 the Board ofDirectors have reviewed and observed that the evaluation frame work of the Board ofDirectors was adequate and effective.

The Board's observations on the evaluations for the previous year were similar to theirobservations for the year under review. No specific actions have been warranted based oncurrent year observations. The Company would continue to familiarize its Directors on theindustry technology and statutory developments which have a bearing on the Company andthe industry so that Directors would be effective in discharging their expected duties.

16. MEETINGS

During the year five Board Meetings were held. The details of the Meetings of theBoard and its various Committees are given in Corporate Governance Report.

17. SECRETARIAL STANDARD

The Directors have devised proper system to ensure compliance with the provisions ofapplicable Secretarial Standards and that such system are adequate and operatingeffectively.

18. PUBLIC DEPOSITS

Pursuant to Rule 8(5)(v) & (vi) of Companies (Accounts) Rules 2014 it is reportedthat the Company has not accepted any deposit from public during the financial year underreview. There was no outstanding of deposits as on 31-03-2021 (Previous year: NIL). TheCompany has no deposit which is not in compliance with the Chapter V of the CompaniesAct 2013.

The Company has received a sum of Rs. 350 Lakhs from Directors as deposit / loan duringthe financial year 2020-21. The loans from Directors are not treated as deposits underChapter V of the Companies Act 2013.

19. ORDERS PASSED BY REGULATORS

Pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules 2014 it is reported that nosignificant and material orders have been passed by the Regulators or Courts or Tribunalsimpacting the going concern status and Company's operations in future.

20. PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

Pursuant to Section 186(4) of the Companies Act 2013 it is reported that:

(a) the particulars of loans are provided under Note No.46 (a) (xiv).

(b) the particulars of the guarantees and investments are provided under Note No.42 andNote No.9 & 10 respectively of Notes forming part of financial statements. Theguarantees are given to secure the loans from Banks / Financial Institutions to theborrowers.

21. CORPORATE SOCIAL RESPONSIBILITY

In terms of Section 135 and Schedule VII of the Companies Act 2013 the Board ofDirectors have constituted a Corporate Social Responsibility (CSR) Committee and adopted aCSR Policy which is based on the philosophy that "As the Organization grows theSociety and Community around it also grows."

The Company has undertaken various projects in the areas of education health ruraldevelopment water and sanitation promotion and development of traditional artsprotection of national heritage livelihood enhancement projects etc. largely inaccordance with Schedule VII of the Companies Act 2013.

The CSR obligations pursuant to Section 135(5) of the Companies Act 2013 for the year2020-21 is Rs. 20.23 Lakhs. As against this the Company has spent an amount of Rs. 20.44Lakhs on CSR. The Company had also spent a sum of Rs. 0.66 Lakhs on other social causesand projects which do not qualify as CSR expenditure under the classifications listed outin Schedule VII of the Companies Act 2013.

The CSR policy is available at the Company's website at the following link at http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/corporate-social-responsibility-policy.pdf.

The Annual Report on CSR activities as prescribed under Companies (Corporate SocialResponsibility Policy) Rules 2014 is attached as Annexure - II.

22. AUDITS

STATUTORY AUDIT

M/s. N.A. Jayaraman & Co. Chartered Accountants (FRN: 001310S) and M/s. SRSVAssociates Chartered Accountants (FRN:015041S) who have been appointed as the StatutoryAuditors of the Company at the 81st Annual General Meeting would be theAuditors of the Company till the conclusion of the 86th Annual General Meetingto be held in the year 2022.

As required under Regulation 33(1)(d) of SEBI (LODR) Regulations 2015 the Auditorshave also confirmed that they hold a valid certificate issued by the Peer Review Board ofthe Institute of Chartered Accountants of India.

The report of the Statutory Auditors for the year ended 31st March 2021does not contain any qualification reservation or adverse remark and no instance of fraudhas been reported by Auditors under Section 143(12) of Companies Act 2013.

SECRETARIAL AUDIT

Shri M.R.L. Narasimha a Practicing Company Secretary is the Secretarial Auditor of theCompany. Pursuant to Section 204(1) of the Companies Act 2013 the Secretarial AuditReport submitted by the Secretarial Auditor for the year ended 31st March 2021is attached as Annexure - III. The report does not contain any qualification reservationor adverse remark.

COST AUDIT

As per Section 148(1) of the Companies Act 2013 read with Rule 3 of Companies (CostRecords and Audit) Rules 2014 the Company is required to maintain cost records andaccordingly such records and accounts are made and maintained.

The Board of Directors had approved the appointment of Shri M. Kannan Cost Accountantas the Cost Auditor of the Company to audit the Company's Cost Records relating tomanufacture of textile products for the year 2021-22 at a remuneration of Rs. 150000/-(Rupees One Lakh fifty thousand only) exclusive of GST and out-of-pocket expenses.

The remuneration of the cost auditor is required to be ratified by the members inaccordance with the provisions of Section 148(3) of the Companies Act 2013 and Rule 14 ofCompanies (Audit and Auditors) Rules 2014. Accordingly the matter is being placed beforethe Members for ratification at the ensuing Annual General Meeting.

The Cost Audit Report for the financial year 2019-20 due to be filed with Ministry ofCorporate Affairs by 11-09-2020 had been filed on 09-09-2020. The Cost Audit Report forthe financial year 2020-21 due to be submitted by the Cost Auditor within 180 days fromthe closure of the financial year will be filed with the Ministry of Corporate Affairswithin 30 days thereof.

23. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE

EARNINGS AND OUTGO

Pursuant to Section 134(3)(m) of the Companies Act 2013 and Rule 8(3) of Companies(Accounts) Rules 2014 the information relating to Conservation of Energy TechnologyAbsorption and Foreign Exchange Earnings and Outgo is attached as Annexure - IV.

24. ANNUAL RETURN

In Accordance with Section 92(3) of the Companies Act 2013 read with Rule 12(1) ofCompanies (Management and Administration) Rules 2014 the copy of the Annual Return forthe year ended 31-03-2020 has been placed on the website of the Company and web link ofsuch Annual Return is - http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/annual-return-31-03-2020.pdf

25. CORPORATE GOVERNANCE

The Company has complied with the requirements regarding Corporate Governance asstipulated in SEBI (LODR) Regulations 2015. As required under Schedule V(C) of SEBI(LODR) Regulations 2015 a Report on Corporate Governance being followed by the Company isattached as Annexure - V.

As required under Schedule V(E) of SEBI (LODR) Regulations 2015 a Certificate from theAuditors confirming compliance of conditions of Corporate Governance is also attached asAnnexure - VI to this Report.

As required under Regulation 34(3) read with Schedule V Para C (10)(i) of SEBI (LODR)Regulations Certificate from the Secretarial Auditor that none of the Company's Directorshave been debarred or disqualified from being appointed or continuing as Directors ofCompanies is enclosed as Annexure - VI A.

No complaints had been received pertaining to sexual harassment during the year underreview. The relevant statutory disclosure pertaining to the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 are available at PointNo.10(l) of Corporate Governance Report.

26. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The disclosures in terms of provisions of Section 197(12) of the Companies Act 2013read with Rule 5(1) (2) and (3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 relating to remuneration are provided in Annexure - VII.

27. INDUSTRIAL RELATIONS AND PERSONNEL

The Company has 3340 employees as on 31-03-2021 (PY: 3320). Industrial relations withemployees remained cordial during the year. Human Resources Development activitiesreceived considerable focus. The emphasis was on imparting training and development of theskill-set of the employees to enable them to face the challenges in the work environment.

The Company has complied with provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013.

28. RELATED PARTY TRANSACTION

Prior approval / Omnibus approval is obtained from the Audit Committee for all relatedparty transactions and the transactions are periodically placed before the Audit Committeefor its approval. No transaction with the related party is material in nature inaccordance with Company's "Related Party Transaction Policy" and Regulation 23of SEBI (LODR) Regulations 2015. In accordance with Indian Accounting Standard - 24(Related Party Disclosure) the details of transactions with the related parties are setout in Note No: 46 of disclosures forming part of Financial Statements.

As required under Regulation 46(2)(g) of SEBI (LODR) Regulations 2015 The Company'sRelated Party Transaction Policy is disclosed in the Company's website and its web link ishttp://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/related-party-transaction-policy.pdf

29. RISK MANAGEMENT POLICY

Pursuant to Section 134(3)(n) of the Companies Act 2013 and Regulation 17(9) of SEBI(LODR) Regulations 2015 the Company has developed and implemented a Risk ManagementPolicy. The Policy envisages identification of risk and procedures for assessment andminimization of risk thereof. The Risk Management policy of the Company is available atthe Company's website at the following weblink- http://www.rajapalayammills.co.in/wp-content/themes/ramco/pdf/risk-management-policy.pdf

30. INVESTOR EDUCATION AND PROTECTION FUND (IEPF)

Dividend amount remaining unclaimed / unpaid for a period of over 7 years wastransferred to IEPF as detailed below:

Dividend Details Amount Transferred (in Rs.) Date of Transfer to IEPF
Final Dividend 2012-2013 228581 19-08-2020
Interim Dividend 2013-2014 1100040 24-02-2021

Shares corresponding to the said dividend were transferred to IEPF as detailed below:

No. of Shares Date of Transfer to IEPF
560 20-08-2020
120 01-09-2020
2740 30-03-2021
50 31-03-2021

Year wise amount of unpaid / unclaimed dividend lying in the unpaid account andcorresponding shares which are liable to be transferred to IEPF and due dates for suchtransfer are tabled below:

Year Type of Dividend Date of Declaration of Dividend Last date for claiming Unpaid Dividend Due date for transfer to IEP Fund No. of Shares of Rs.10/- each Amount of unclaimed / unpaid Dividend as on 31-03-2021 - Rs.
2013-2014 Final Dividend 04-08-2014 03-08-2021 01-09-2021 211694 529235.00
2014-2015 Dividend 12-08-2015 11-08-2022 09-09-2022 259410 648525.00
2015-2016 Interim Dividend 16-03-2016 15-03-2023 13-04-2023 285834 857502.00
2016-2017 Dividend 10-08-2017 09-08-2024 07-09-2024 282249 1128996.00
2017-2018 Dividend 10-08-2018 09-08-2025 07-09-2025 119327 477308.00
2018-2019 Dividend 14-08-2019 13-08-2026 11-09-2026 121100 484400.00
2019-2020 Dividend 15-09-2020 14-09-2027 13-10-2027 167167 161282.71

31. MATERIAL CHANGES SINCE 1ST APRIL 2021

There have been no changes affecting the financial position of the Company between theend of the financial year and till the date of this report.

32. DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013 the Directors confirm that:

(a) they had followed the applicable accounting standards along with proper explanationrelating to material departures if any in the preparation of the annual accounts for theyear ended 31st March 2021;

(b) they had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company as on 31st March 2021 and of the lossof the Company for the year ended on that date;

(c) they had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

(d) they had prepared the Annual Accounts on a going concern basis;

(e) they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and

(f) they had devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

ACKNOWLEDGEMENT

The Directors are grateful to the various Departments and agencies of the Central andState Governments for their help and co-operation. They are thankful to the FinancialInstitutions and Banks for their continued help assistance and guidance. The Directorswish to place on record their appreciation of employees at all levels for their commitmentand their contribution.

By Order of the Board
For RAJAPALAYAM MILLS LIMITED
RAJAPALAIYAM P.R. VENKETRAMA RAJA
28th May 2021. CHAIRMAN

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