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S P Apparels Ltd.

BSE: 540048 Sector: Industrials
NSE: SPAL ISIN Code: INE212I01016
BSE 00:00 | 07 Aug 72.80 1.80
(2.54%)
OPEN

72.05

HIGH

73.30

LOW

70.45

NSE 00:00 | 07 Aug 72.75 1.00
(1.39%)
OPEN

73.00

HIGH

73.70

LOW

70.30

OPEN 72.05
PREVIOUS CLOSE 71.00
VOLUME 4827
52-Week high 245.95
52-Week low 57.95
P/E 3.63
Mkt Cap.(Rs cr) 187
Buy Price 70.05
Buy Qty 50.00
Sell Price 78.00
Sell Qty 1.00
OPEN 72.05
CLOSE 71.00
VOLUME 4827
52-Week high 245.95
52-Week low 57.95
P/E 3.63
Mkt Cap.(Rs cr) 187
Buy Price 70.05
Buy Qty 50.00
Sell Price 78.00
Sell Qty 1.00

S P Apparels Ltd. (SPAL) - Director Report

Company director report

To

The Members

The Directors of your Company are pleased to present the 14th Annual Report on thebusiness and operations of the Company together with the Audited Financial Statements(Standalone & Consolidated) for the year ended 31st March 2019. The ManagementDiscussion and Analysis is also included in this Report.

FINANCIAL RESULTS

The Company's financial performance for the year ended 31st March 2019 is summarisedbelow:

PARTICULARS STANDALONE CONSOLIDATED
2018-19 2017-18 2018-19 2017-18
Sales and other income
Revenue from Operations 7781.42 6280.10 8263.76 6624.15
Other Income 34.14 164.55 34.40 163.82
Total 7815.56 6444.65 8298.16 6787.97
Profit before Interest & Depreciation 1340.60 1202.87 1372.77 1221.97
Less: Interest 60.81 286.20 62.44 287.42
Depreciation 232.79 240.70 215.88 223.89
Profit Before Tax 1047.00 675.97 1094.45 710.66
Less : Taxation
Provision for Current Tax 362.08 252.73 367.75 253.71
MAT Credit -- -- (0.89) (1.01)
Deferred Tax Expenses / (Credit) (12.79) 3.12 (6.13) (20.17)
Profit After Tax 697.71 420.12 733.72 478.13
Other comprehensive Income (Net of tax) 40.30 (50.03) 40.30 (50.03)
Minority Interest - - 0.61 (8.59)
Total Comprehensive Income 738.01 370.09 774.63 419.51

Review of Operations: Garment Division:

This financial year has been a good year where we have grown by 19%. During thisfinancial year we have added couple of factories and added sewing machines to ourcapacity. We have added 450 sewing machines during the current year and we are in theprocess of increasing our factories and capacity in coming years. Our customer base hasincreased and we are looking to increase our customer base further. Now we have customeracross geographies. Our debottlenecking Modernization and expansion in our spinning plantis completed and we have commenced the production successfully.

Putting up Bio-logical treatment plant in our dyeing house is under process and isexpected to be completed by the end of second quarter of the fiscal year 2020.

Retail Division

Our strategy in retail division during the FY 2018 – 19 was to increase ourpresence in large format stores by another 50%. During the financial year 2019 – 20our endeavour is to improve our presence through EBO's through franchise model. We areplanning to improve our distributor base considerably during the current year and improvethe product mix which will improve the revenue during the years to come.

SP UK

Our subsidiary company SPUK's total revenue recorded Rs.481.84 millions for FY 2018– 19 as against a revenue of Rs.353.63 millions during FY 2017 – 18 at a growthrate of 36.26%. EBITDA recorded Rs.26.96 millions as against Rs. 12.88 million for FY 2017– 18. There was no change in the nature of business of the Company during thefinancial year ended 31st March 2019.

DIVIDEND

Considering the capital requirement for ongoing business expansion the Board ofDirectors has not recommend any dividend on the equity shares of the Company for thefinancial year 2018-2019.

RESERVES & SURPLUS

As at March 31 2019 the Company had reserves of Rs. 4597.58 million. During the yearunder review the company has transferred Rs. 738.01 Million to Other Equity (Generalreserve)

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

Since there was no unpaid/unclaimed Dividend the provisions of Section 124 & 125of the Companies Act 2013 relating to transfer of Unclaimed dividend to InvestorEducation and Protection fund does not arise.

SHARE CAPITAL

The issued subscribed and paid up share capital of the Company as at 31.03.2019 stoodat Rs.256926000/- divided into 25692600 Equity Shares of Rs.10/- each. During thefinancial year under review the Company has redeemed its entire 20000000 10%Redeemable Cumulative Preference Shares of Rs.10/- each in accordance with the provisionsof Section 55 of the Companies Act 2013 read with Companies (Share capital anddebentures) Rules 2014. During the year under review the Company has issued and allotted525000 equity shares of Rs.10/- each at Rs.382.02 per Share to Promoters of the Companyon preferential basis.

EXTRACT OF ANNUAL RETURN

Pursuant to section 92 (3) of the Act and Rule 12 (1) of the Companies (Management andAdministration) Rules 2014 an extract of annual return in MGT-9 is annexed as Annexure-Ato this report and the same has been hosted on the website of the Company and can beviewed at http://www.spapparels.com/

CAPITAL EXPENDITURE

As on 31st March 2019 the gross fixed assets block stood at Rs.5994.85 Million andnet fixed assets block at Rs 3682.34 Million. Additions to Fixed Assets during the yearamounted to Rs. 827.57 Million.

BOARD AND COMMITTEE MEETINGS

The details of meetings of Board of Directors and Committees thereof and the attendanceof the Directors in such meetings have been enumerated in the Corporate Governance Report.

STATEMENT ON COMPLIANCE WITH SECRETARIAL STANDARDS

The Directors have devised proper systems to ensure compliance with the provisions ofall applicable Secretarial Standards and that such systems are adequate and operatingeffectively. The Company has duly complied with Secretarial Standards issued by theInstitute of Company Secretaries of India on meeting of the Board of Directors (SS-1) andGeneral Meetings (SS-2).

DIRECTORS' RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby confirmed that:

(a) in the preparation of the annual accounts the applicable accounting standards hadbeen followed;

(b) the directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the company at the end of the financial year and ofthe profit of the company for that period;

(c) the directors 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) the directors had prepared the annual accounts on a going concern basis;

(e) the directors laid down internal financial controls to be followed by the Companyand such internal financial control were adequate and operating effectively and

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

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12) OTHER THANTHOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There were no instances of frauds identified or reported by the Statutory Auditorsduring the course of their audit pursuant to Section 143(12) of the Companies Act 2013.

DECLARATION OF INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors of the Companyconfirming that they met the criteria of independence as stipulated in Section 149(6) ofthe Companies Act 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. Further they have also declared that they arenot aware of any circumstance or situation which exist or may be reasonably anticipatedthat could impair or impact their ability to discharge their duties with an objectiveindependent judgment and without any external influence.

COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT PAYMENT OF REMUNERATION AND OTHERMATTERS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT 2013

The Company pursuant to the provisions of Section 178 of the Companies Act 2013 and interms of Regulation 19(4) of the SEBI Listing Regulations has formulated a policy onNomination and Remuneration for its Directors Key Managerial Personnel and seniormanagement. The Nomination and Remuneration Policy of the Company is annexed herewith asAnnexure-B and can also be accessed on the Company's website at the link http://www.spapparels.com/

COMMENTS ON AUDITORS' REPORT:

There are no qualifications reservations or adverse remarks or disclaimers made byM/s. ASA & Associates LLP Statutory Auditors and Mr.M.D.Selvaraj proprietor of MDS& Associates Secretarial Auditor in their respective reports.

The maintenance of cost record as specified by the Central Government under Section148(1) of the Companies Act 2013 is applicable to the Company and accordingly the costaccounts and records are made and maintained. However the appointment of Cost Auditorunder the provisions of Section 148 is not applicable to the Company.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIESACT 2013

The Company has duly complied with the provisions of section 186 of the Companies Act2013 and as required therein the details of the loans is annexed by way of notes toaccounts. And also the details of the loans and investments made in earlier years aregiven in the Notes to the Financial Statements.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered into with related parties as defined under the Companies Act2013 during the financial year 2018-19 were in the ordinary course of business and on anarm's length basis. Since there are no transactions which are not on arm's length basisand material in nature the requirement of disclosure of such related party transactions inForm AOC-2 does not arise.

The Policy on Related Party Transactions as approved by the Board of Directors of theCompany has been uploaded on the Company's website and can be accessed through the link athttp://www. spapparels.com/

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

There have been no material changes and commitments if any affecting the financialposition of the Company which have occurred between the end of the financial year of theCompany to which the financial year ended 31st March 2019 relate and the date of thereport.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy technology absorption ForeignExchange Earnings and outgo as required under section 134(3)(m) of the Companies Act 2013read with Rule 8(3) of the Companies (Accounts) Rules 2014 is annexed as Annexure-C andis attached to this report.

RISK MANAGEMENT

Pursuant to section 134 (3) (n) of the Companies Act 2013 & Regulation 17(9) ofthe SEBI (Listing Obligations and Disclosure Requirements) Rules 2015 the Company hasframed an effective Risk Management policy in order to analyze control or mitigate risk.The board periodically reviews the risks and suggests steps to be taken to control thesame.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES:

The Corporate Social Responsibility Committee consisting of Directors Mr.P.Sundararajan- Chairman Mrs.S Latha and Mr.V Sakthivel as members of the committee have formulated andrecommended to the Board a Corporate Social Responsibility Policy (CSR Policy) indicatingthe activities to be undertaken by the Company as specified in Schedule VII of theCompanies Act 2013 which has been approved by the Board. The CSR policy can be accessedon the Company's website http://www.spapparels.com. The prescribed (two percent of theaverage net profit of the Company for last 3 financial years) CSR expenditure for the year2018-2019 is Rs 12.73 Million. The Company is required to spend Rs. 28.39 Million towardsCSR (Rs. 12.73 Million as 2% average net profit for last three financial years plusRs.15.66 million as carried forward amount of FY 2014-15 to 2017-18). During the year theCompany has spent Rs.14.92 Million towards CSR Activities. The annual report on CSRactivities is annexed as Annexure-D herewith.

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial Statementspursuant to the provisions of the Companies Act 2013. They are prepared in accordancewith the Accounting Standards prescribed by the Institute of Chartered Accountants ofIndia in this regard. The Consolidated Financials also show a significant increase inRevenues as well as Profitability.

ANNUAL EVALUATION OF THE BOARD ON ITS OWN PERFORMANCE AND OF THE INDIVIDUAL DIRECTORS

Pursuant to the provisions of the Companies Act 2013 the Board of Directors evaluatedthe annual performance of the members of the Board and its Committees vis a vis the natureof business of the Company its performance during the year and the contribution of eachof the Directors based on the criteria laid down by the Nomination and RemunerationCommittee.

The Independent Directors held a meeting during the year and inter-alia reviewed theperformance of the Non-Independent Directors and the Board as a whole and assessed thequality quantity and timeliness of flow of information between the Company and the Board.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mrs. S. Latha Executive Director (DIN: 00003388) retires by rotation at the AnnualGeneral Meeting and being eligible offer herself for re-appointment. Your Directorsrecommend herself re-appointment. The Board at its meeting held on 13th August 2019 hasre-appointed Mr.S.Chenduran (DIN: 03173269) as Director (operations) of the Company for afurther period of 3 (Three) years with effect from 30th March 2020. Accordingly necessaryresolution proposing the re-appointment of Mr.S.Chenduran as Director (operations) of theCompany has been included in the Agenda of the Notice convening the Annual General Meetingfor the approval of the members. Mr.V.Sakthivel (DIN : 00005720) was appointed as anIndependent Director of the company pursuant to Section 149 of the Companies Act 2013 forthe first term of 5 years and will and hold office upto 29th March 2020.Considering hisknowledge expertise and experience and the substantial contribution made byMr.V.Sakthivel during his tenure as an independent director since his appointment thenomination & remuneration committee and the board has recommended the reappointment ofMr.V.Sakthivel as independent director on the board of the company to hold office for thesecond term of five consecutive years commencing from 30th March 2020 and not liable toretire by rotation.

The company has received declaration from Mr.V.Sakthivel that he continue to fulfil thecriteria of independence as prescribed under Section 149(6) of the Companies Act 2013 aswell as SEBI (Listing Obligations and Disclosure Requirement) Regulation 2015 (includingstatutory re-enactment thereof for the time being in force). Mr.V.Sakthivel will attainthe age of 75 years on 9th August 10 2024 and hence continuation of his directorshipbeyond the age of 75 years requires the approval of members by way of a special resolutionIn terms of the provisions of Section 160(1) of the Companies Act 2013 the Company hasreceived notice a Member signifying his intention to propose the candidature for thereappointment of Mr.V.Sakthivel for the office of Independent Director.

The Board of Directors recommends the re-appointment of Mr.V.Sakthivel as independentdirector by way of a special Resolution.

Key Managerial Personnel of the Company as required pursuant to Section 2 (51) and 203of the Companies Act 2013 are

Mr.P.Sundararajan - Chairman and Managing Director
Mrs.S.Latha - Executive Director
Mr.S.Chenduran - Director (Operations)
Mr.V.Balaji - Chief Financial Officer and
Mrs.K.Vinodhini - Company Secretary.

SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES.

The Company has two subsidiary companies viz. Crocodile Products Private Limited andS.P.Apparels (UK) Private Limited. The consolidated financial statements of the companyand its subsidiaries were prepared in accordance with the applicable accounting standardshave been annexed to the Annual Report. The annual accounts of the subsidiary companiesare posted on the website of the Company viz. http://www.spapparels.com/. A reportcontaining the salient features of the subsidiaries as required under Section 129(3) ofthe Companies Act 2013 has been annexed herewith in AOC – 1 and is attached asAnnexure-E to this report.

The Company has formulated a Policy for determining Material Subsidiaries. The Policycan be accessed at: http://www.spapparels. com/.

The Company does not have Joint Venture or Associate Company.

FIXED DEPOSITS

The Company has not accepted any deposits from public within the meaning of Section 73of the Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014and hence no amount on account of principal or interest were outstanding for payment onthe date of the Balance Sheet.

FINANCE

Prompt repayments facilitated by healthy cash flows elevated the standing of theCompany. It enabled prudent application of funds and better negotiation strength. Thistrend is expected to continue.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATION IN FUTURE

No significant and material order was passed by any Regulators that have any impact onthe going concern status and the operations of the Company.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has an adequate Internal Control System commensurate with the size scaleand complexity of its operations. The Audit Committee of the Board periodically reviewsthe Internal Financial Control Systems and their adequacy and recommends corrective actionas and when necessary to ensure that an effective internal control mechanism is in place.

The directors confirm that the Internal Financial Control (IFC) are adequate withrespect to the operations of the Company. A report of Auditors pursuant to Section143(3)(i) of the Companies Act 2013 certifying the adequacy of Internal Financial Controlis annexed with the Auditors Report.

AUDITORS

a) STATUTORY AUDITORS

M/s. ASA & Associates LLP Chartered Accountants Chennai were appointed as theStatutory Auditors of the Company for a period of five years at the Annual General Meetingof the Company held on 11th August 2017. In accordance with the Companies Amendment Act2017 enforced on 7th May 2018 by the Ministry of Corporate Affairs the appointment ofStatutory Auditors is not required to be ratified at every Annual General Meeting. TheCompany has received a certificate from the Statutory Auditors to the effect that theirappointment as the Statutory Auditors of the Company would be within the limitsprescribed under section 139 of the Companies Act 2013.

b) SECRETARIAL AUDITOR

The Board has appointed Sri.M.D.Selvaraj of M/s. MDS & Associates CompanySecretaries in Practice Coimbatore as the Secretarial Auditors of the Company for theyear 2019-20 to carry out the Secretarial Audit pursuant to the provisions of Section 204of the Companies Act 2013. The report of the Secretarial Auditors for the financial year2018-19 is annexed as Annexure-F to this Report.

c) INTERNAL AUDITOR

The Board has appointed M/s. Deloitte Haskins & Sells LLP Chartered AccountantsCoimbatore as Internal Auditors for the financial year 2018-19.

EMPLOYEE WELFARE

The Employee Welfare Initiatives and practices followed by the Company is among thebest in the Corporate sector. The Company employs close to 13444 workers.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013

The Company has complied with the provisions relating to the constitution of InternalComplaints Committee under the Sexual Harassment of Women at Workplace in line with therequirements of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013. An Internal Complaints Committee has been set up to define thepolicy and redress complaints received. All employees (permanent contractual temporarytrainees) are covered under this policy. There were no complaints received from anyemployee or third parties during the Financial Year 2018-19.

PARTICULARS OF EMPLOYEES

Statement pursuant to Section 134 of the Companies Act 2013 read with the Companies(Particulars of Employees) Rules 1975 and Section 197(12) of the Companies Act 2013 readwith Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 is annexed as Annexure-G attached to this report.

CORPORATE GOVERNANCE

A report on Corporate Governance is annexed and forms part of this report. The Companyhas complied with the conditions relating to Corporate Governance as stipulated inRegulation 27 of SEBI (Listing Obligation & Disclosure Requirements) Regulations2015.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors has been duly constituted in accordancewith the provisions of Section 177 of the Companies Act 2013. Details relating to thecomposition meetings and functions of the Committee are set out in the CorporateGovernance Report forming part of this Annual Report. The Board has accepted the AuditCommittee recommendations during the year whenever required and hence no disclosure isrequired under Section 177(8) of the Companies Act 2013 with respect to rejection of anyrecommendations of Audit Committee by the Board.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

The Company has provided for adequate safeguards to deal with instances of fraud andmismanagement and to report concerns about unethical behaviour or any violation of theCompany's Code of Conduct. During the year under review there were no complaints receivedunder this mechanism. The policy can be accessed on the Company's website athttp://www.spapparels.com/

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation for the contribution made byall the employees at all levels but for whose hard work and support your Company'sachievements would not have been possible. Your Directors also wish to thank itscustomers suppliers and bankers for their continued support and faith reposed in theCompany.

For and on behalf of the Board of Directors
P. Sundararajan S. Latha
Chairman & Managing Director Executive Director
(DIN : 00003380) (DIN : 00003388)
Place : Avinashi
Date : 13.08.2019