S P Apparels Ltd.
|BSE: 540048||Sector: Industrials|
|NSE: SPAL||ISIN Code: INE212I01016|
|BSE 00:00 | 22 Feb||251.30||
|NSE 00:00 | 22 Feb||252.15||
|Mkt Cap.(Rs cr)||646|
|Mkt Cap.(Rs cr)||645.59|
S P Apparels Ltd. (SPAL) - Director Report
Company director report
The Directors of your Company are pleased to present the 13th Annual Report on thebusiness and operations of the Company together with the Audited Financial Statements(Standalone & Consolidated) for the year ended 31st March 2018. The ManagementDiscussion and Analysis is also included in this Report.
The Company's financial performance for the year ended 31st March 2018 is summarisedbelow:
towards increase in our capacity base. We are planning to increase our capacity by 15%every year. We are also working towards improvement in our utilisation levels by 5% whichindeed will improve our margins. We are also consistently working on our operationalefficiency which is a continuous process. Higher efficiency will improve both revenue andthe margin.
The modernisation and expansion of our Spinning plant is in process and will becompleted by end of FY 2018 - 19. We are also in the process of enabling our processingplant suitable for bio-logical treatment and will be completed by end of FY 2018 - 19.This will enable us to increase our capacity by 20% in the processing plant. All ourknitting machines have been installed and are effectively under production as planned.
( Rs. In Millions)
The financial statements for 2016-17 have been redrawn as per Ind As. Accordingly thefigures stated above for 2016-17 may not be comparable with financials for 2016-17approved by the Directors dated May 24 2017.
REVIEW OF OPERATIONS:
During this financial year we have added a few new customers to our marque set ofcustomer list. We have added new customers from US such that our geographical customerbase is diversified. The strategy to change our product mix is also working well and incouple of years we will settle down to the ideal product mix.
During the current financial year we have increased our sewing capacity by 575 sewingmachines. We have added 2 more factories to our list of factories and we are consistentlyworking
Our strategy in retail division during the FY 2016 - 17 was to increase our presence inlarge format stores and during the current financial year our presence in large formatstores has increased by 53%. We are planning to increase our presence in large formatstores by another 50% by end of financial year 2018- 19. Our endeavour is to improve ourEBO's through franchise model.
Our distribution channel was affected this year mainly due to the implementation of GSTdomestically. We have planned to improve our distributor base considerably during thecurrent year and improve the product mix which will improve the revenue during the year tocome.
Our subsidiary company SPUK's total revenue recorded Rs.353.63 millions for FY 2017 -18 as against a revenue of Rs.128.95 millions during FY 2016 - 17 at a growth rate of174%. EBITDA recorded Rs.12.88 millions as against Rs. 0.17 million for FY 2016 - 17.
There was no change in the nature of business of the Company during the financial yearended 31st March 2018.
The Board in its meeting held on 14th August 2018 has recommended a dividend of 10%for the 20000000 Redeemable preference shares of Rs.l0/-each for the Financial Year2017-18 amounting to Rs.20.00 million subject to the approval of shareholders at theensuing Annual General Meeting (Previous Year: Rs.20.00 million). The Board furtherrecommended dividend of 5% on the 25167600 Equity shares of Rs.10/- each for theFinancial Year 2017-18 amounting to Rs.12.58 million subject to the approval ofshareholders at the ensuing Annual General Meeting (Previous Year: 5% per equity share).
The dividend payout is in accordance with the Company's Dividend Distribution Policy.The Dividend Distribution Policy of the Company is available in the following link :
RESERVES & SURPLUS
As at March 31 2018 the Company had reserves of Rs. 3773.23 million. During the yearunder review the company has transferred Rs. 200 Million to Capital Redemption Reservetowards redemption of 10% Redeemable Cumulative Preference Shares and Rs. 370.09 Millionto the general reserve.
TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND
Since there was no unpaid/unclaimed Dividend the provisions of Secion 124 & 125 ofthe Companies Act 2013 relating to transfer of Unclaimed Dividend to Investor Educationand Protection Fund does not arise.
The issued subscribed and paid up share capital of the Company as at 31.03.2018 stoodat Rs.451676000/- divided into 25167600 Equity Shares of Rs.10/- each and20000000 10% Redeemable Cumulative Preference Shares of Rs.10/- each. During the yearunder review the Company has not made any fresh issue of shares
However the Company has during the current year redeemed its entire 20000000 10%Redeemable Cumulative Preference Shares of Rs.10/- in accordance with the provisions ofSection 55 of the Companies Act2013 read with Companies (Share capital and debentures)Rules 2014.
Further the Company has during the current year allotted 525000 Equity Shares ofRs.10/- each on preferential basis to the promoters.
As on 31st March 2018 the gross fixed assets block stood at Rs 5200.47 Million andnet fixed assets block at Rs 3123.22 Million. Additions to Fixed Assets during the yearamounted to Rs. 373.85 Million.
CONSOLIDATED FINANCIAL STATEMENT
In accordance with the provisions of the Companies Act 2013 ("the Act") andInd AS 110 - Consolidated Financial Statement the audited consolidated financialstatement is provided in the Annual Report.
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.
The Company has two subsidiary companies viz. Crocodile Products Private Limited andS.P.Apparels (UK) Private Limited their financials and details as required Under Section136 of the Companies Act 2013 (hereinafter referred to as the 'Act') are available in thewebsite of the company. These documents will also be available for inspection on allworking days during business hours at the Registered Office of the Company.
The Company has formulated a Policy for determining Material Subsidiaries. The Policymay be accessed at: http://www.s-p-apparels .com/investors/policies/.
A statement pursuant to first proviso to Section 129(3) of the Companies Act 2013 inForm No. AOC-1 in respect of subsidiary companies is attached vide Annexure I.
Crocodile Products Private Limited (CPPL):
During the year under review CPPL has made a profit (after tax) of Rs 28.64 Million asagainst the profit of Rs 1.64 Million during the previous year. This increase is due toincrease in the royalty collection during the current year.
S.P.Apparels (UK) Private Limited:
During the year under review SPUK had made a total revenue of Rs.353.63 Million asagainst a revenue of Rs.128.95 Million during the previous year. EBITDA recorded Rs.12.88millions as against Rs. 0.17 million for FY 2016 - 17.
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.
Prompt repayments and pre-closure of certain high cost debt facilitated by healthycash flows elevated the standing of your Company. It enabled prudent application of fundsand better negotiation strength. This trend is expected to continue.
The Directors state that applicable Secretarial Standards i.e. SS-1 and SS-2 relatingto 'Meetings of the Board of Directors' and 'General Meetings' respectively have beenduly followed by the Company.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with the provisions of Section 152 of the Companies Act 2013 and theCompany's Articles of Association Mr.S.Chenduran Director (Operations) retires byrotation at the forthcoming Annual General Meeting and being eligible he offers himselffor re-appointment. The Board of Directors has recommended his re-appointment.
The details of the above Director required to be disclosed under Regulation 36(3) ofSEBI (Listing Obligations and Disclosure Requirement) Regulations 2015 form part of theNotice to the ensuing Annual General Meeting. All the Directors of the Company haveconfirmed that they are not disqualified from being appointed as Directors in term ofSection 164 (2) of the Act.
Mr.Srinivas Chidambaram Non-Executive Director has ceased to be a Director of theCompany w.e.f. June 29 2017. The Board places on record its appreciation towards valuablecontribution made by Mr.Srinivas Chidambaram during his tenure as a Director of theCompany
The shareholders of the Company at its Annual General Meeting held on August 11 2017have approved re-appointment of Mrs.S.Latha Executive Director on the Board of theCompany by passing an ordinary resolution.
The Company has adequate number of Independent Director in compliance with the Act andSEBI (LODR) Regulations 2015 hereinafter referred to as Listing regulations.Familiarization Program on the Company and its operation was conducted for the IndependentDirectors.
The Company pays remuneration by way of salary to its Chairman cum Managing Directorand fixed monthly remuneration to its Executive Director and Whole Time Director Director(Operations) in line with the approvals accorded by the General Meetings in pursuance ofthe recommendation of the Nomination and Remuneration Committee as per the guidingprinciples laid down in the Nomination and Remuneration Policy and also by the Board ofDirectors.
STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTOR
The Company has received requisite declaration pursuant to Section 149(6) of CompaniesAct 2013 from all independent directors confirming that they meet with the criteria oftheir Independence laid in Section 149 (6).
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
In pursuance of the Act the Company has Key Managerial Personnel. None of the ManagingDirectors or Whole Time Directors receive any remuneration or commission from theSubsidiary Companies and the remuneration paid to them is within the purview of theprovisions of Section 197 read with Schedule V of the Act. The information requiredpursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 in respect of Employees of the Company are provided inthe Annual Report which forms part of this Report.
In terms of Section 136 of the Act and as advised the Annual Report is being sent tothe members and others entitled thereto excluding the information on employeesparticulars which is available for inspection by the members at the Registered Office ofthe Company during business hours on working days of the Company up to the date of ensuingAnnual General Meeting. If any member is interested in inspecting the same such membermay write to the Company Secretary in advance.
The following policies of the Company are available at the Company website
a) Policy for Board Members and Senior Management Personnel; and
b) Nomination and Remuneration Policy.
ANNUAL PERFORMANCE EVALUATION
The Board has carried out an annual evaluation of its own performance the Directorsand also committees of the Board based on the guideline formulated by the Nomination &Remuneration Committee. Board composition quality and timely flow of informationfrequency of meetings and level of participation in discussions were some of theparameters considered during the evaluation process.
A note on the familiarization programme adopted by the Company for the orientation andtraining of the Directors and the Board evaluation process undertaken in compliance withthe provisions of the Companies Act 2013 and SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is provided in the Corporate Governance Report which formspart of this Report.
Further the Independent Directors of the Company met once during the year on February14 2018 to review the performance of the Nonexecutive directors Chairman of the Companyand performance of the Board as a whole.
As required by the provisions of the Act and Listing Regulations the Company hasalready formed the following Committees the details of which are disclosed in the Reporton Corporate Governance forming part of this Report.
I. Audit Committee
II. Stakeholders Relationship Committee
III. Nomination and Remuneration Committee
IV. Corporate Social Responsibility (CSR) Committee
As required by the provisions of the Act and the Listing Regulations the followingpolicies have been framed and disclosed on the Company's website 'www.spapparels.com'.
I. Nomination & Remuneration Policy
II. Related Party Transaction Policy
III. Corporate Social Responsibility Policy
IV. Vigil Mechanism Policy
V. Policy on Determining Material Subsidiaries
VI. Code for Fair Disclosure
VII. Risk Management Policy
Pursuant to section 134 (3) (n) of the Companies Act 2013 & Regulation 17 (9) ofthe Listing Regulations the Company has framed an effective Risk Management policy inorder to analyze control or mitigate risk. The board periodically reviews the risks andsuggests steps to be taken to control the same.
VIGIL MECHANISM & WHISTLE BLOWER POLICY
The Company has a vigil mechanism for reporting of genuine concerns or grievancesthrough its Whistle Blower policy. The Company provides key positions to womenprofessionals and encourages no disparity in any manner. This has created a congenial workatmosphere for women and to express their confidence of reporting of any grievances. TheCompany affirms that no personnel have been denied access to the Audit Committee. Allsuspected violations and reportable matters can be reported to the Chairman of the AuditCommittee at e-mail id - email@example.com. The Whistle Blower Policy has been posted on the website of the Company.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
The Corporate Social Responsibility Committee consisting of Directors Mr. PSundararajan- Chairman Mrs. S.Latha and Mr. V.Sakthivel as members of the committee have formulatedand recommended to the Board a Corporate Social Responsibility Policy (CSR Policy)indicating the activities to be undertaken by the Company as specified in Schedule VII ofthe Companies Act 2013 which has been approved by the Board. The CSR policy may beaccessed on the Company's website www.spapparels.com . The annual report on CSRactivities is annexed (Annexure II) herewith.
During the year the Company has spent Rs 2.40 Million on CSR Activities out of thestipulated sum of Rs 12.73 Million. The Company's CSR initiatives involve setting thefoundation of various programs at a small scale to learn from on-ground realities gettingfeedback from community and then putting an enhanced sustainable model to ensure maximumbenefit to the community. For this reason during the year the Company's spend on the CSRactivities has been less than the limits prescribed under Companies Act 2013 and anamount of Rs 10.33 Million remains unspent. The existing CSR activities are scalable andnew initiatives are being considered. Going forward the Company will endeavour to spend onCSR activities in accordance with the legal requirements.
The Board of Directors met six times during the financial year on 24.05.201707.07.2017 14.08.2017 14.11.2017 14.02.2018 and 15.03.2018. The Composition of Boardprocedure dates and other details are included in the Corporate Governance Report thatforms part of this Report.
The Audit Committee comprises Independent Directors namely Mr.V.Sakthivel (Chairman)Mr.A.S.Anandkumar and Mr.P.Yesuthasen. During the year all the recommendations made by theAudit Committee were accepted by the Board.
CONSOLIDATED FINANCIAL STATEMENTS
Your Directors have pleasure in attaching the Consolidated Financial Statementspursuant to the provisions of the 'Act' and the Listing Regulations entered into with theStock Exchanges. They are prepared in accordance with the Accounting Standards prescribedby the Institute of Chartered Accountants of India in this regard. The ConsolidatedFinancials also show a significant increase in Revenues as well as Profitability.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Company has duly complied with the provisions of Section 186 of the Act and asrequired therein the details of the Borrowals Security Investment etc. are annexed byway of notes to accounts.
RELATED PARTY TRANSACTIONS
All transactions entered with Related Parties for the year under review were on arm'slength basis and in the ordinary course of business and the provisions of Section 188 ofthe Companies Act 2013 and the Rules made thereunder are not attracted. Thus disclosurein Form AOC-2 in terms of Section 134 of the Companies Act 2013 is not required.
Further these transactions are placed before the Audit Committee and Board of theCompany specifying the nature and value of transactions for their consideration andapproval.
The Transactions covered by Indian Accounting Standards - IND AS are reported in theNotes to Accounts of the Consolidated Financial Statements as well as Standalone FinancialStatements of your Company. The Company's Policy on dealing with related partytransactions is available on the Company's website.
The Employee Welfare Initiatives and practices followed by the Company is among thebest in the Corporate sector. The Company employs close to 12898 workers.
PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE
Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressall Act2013 provides for protection against sexual harassment of women at workplace and for theprevention and redressal of complaints of sexual harassment and also for the mattersincidental thereto. The Company has accordingly adopted the policy against SexualHarassment of Women at Workplace for the purpose of preventing prohibiting andredressing sexual harassment of female employees at all the workplace within the Companywhich are based on fundamental principles of justice and fair play.
Further Anti Sexual Harassment Committee has been constituted at each unit which shallbe responsible for redressal of complaints related to sexual harassment. The details ofall such complaints and its proper redressal through prompt corrective steps are informedto the Top Management so as to ensure that suitable processes and mechanisms are put inplace to ensure that issues of sexual harassment if any are effectively addressed.
During the year no complaints of sexual harassment were received by the Company fromany of its Units.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The particulars relating to energy conservation technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act read with theCompanies (Accounts) Rules 2014 are provided in the Annexure III to the Report.
DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to Section 134(3)(c) of the Companies Act 2013 your Directors hereby statethat:
a) in the preparation of the annual accounts for the year ended March 31 2018 theapplicable accounting standards read with requirements set out under Schedule III to thesaid Act have been followed and there are no material departures from the same;
b) the Directors have selected such accounting policies and applied them consistentlyand made judgements and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company as at March 31 2018 and of the profit ofthe Company for the year ended on that date;
c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the Directors have prepared the annual accounts on a 'going concern' basis;
e) the Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and
f) the Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems are adequate and operating effectively.
MATERIAL CHANGES AND COMMITMENTS
The Company has during the current year redeemed its entire 20000000 10% RedeemableCumulative Preference Shares of
Rs.10/- each and has issued and allotted 525000 Equity Shares of Rs.10/- each onpreferential basis to the promoters after the balance sheet date. There has been no changein the nature of business of the Company.
SIGNIFICANT & AAATERIAL ORDER PASSED BY THE REGULATORS
No significant and material order was passed by any Regulators that have any impact onthe going concern status and the operations of the Company.
MANAGEMENT DISCUSSION AND ANALYSIS STATEMENT
In pursuance of Listing Regulations and the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 Management Discussionand Analysis Statement is presented in a separate section forming part of the AnnualReport attached to this Report.
CORPORATE GOVERNANCE REPORT
The Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by the Securities and ExchangeBoard of India (SEBI). The report on Corporate Governance as stipulated under the ListingRegulations forms an integral part of this Report. Certificate from the SecretarialAuditor of the Company confirming the compliance with the conditions of CorporateGovernance is also attached to the report on Corporate Governance.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations. The details of Internal Financial Control (IFC) and theiradequacy are included in the Report of Management Discussion and Analysis which formspart of this report.
RATIO OF REMUNERATION TO EACH DIRECTOR
Details / Disclosures of Ratio of Remuneration of Director to the median employee'sremuneration as required by the Act and Companies Rules are appended.
AUDITORS AND AUDITORS REPORT:
a) STATUTORY AUDITORS
M/s. ASA & Associates LLP Chartered Accountants Chennai were appointed asStatutory Auditors of the Company for a term of 5 (five) consecutive years at the AnnualGeneral Meeting held on August 11 2017. They have confirmed that they are notdisqualified from continuing as Statutory Auditors of the Company.
b) SECRETARIAL AUDITOR
Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed M/s. S.Rajaguru & Associates Company Secretary in Practice to undertake theSecretarial Audit of the Company. The Secretarial Audit reports in Form MR-3 for the yearended 31st March 2018 is annexed to this report. There is no secretarial auditqualification for the year under review.
c) INTERNAL AUDITOR
The Board had appointed M/s. Deloitte Haskins & Sells LLP Chartered AccountantsCoimbatore as Internal Auditors for the financial year 2017-18.
The Auditor's Report to the Shareholders does not contain any qualification.
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 forms part of thisReport.
CONVERGENCE WITH IND AS FROM APRIL 1 2017
The Ministry of Corporate Affairs (MCA) in 2015 had notified the Companies (IndianAccounting Standards (IND AS)) Rules 2015 which stipulated the adoption and applicabilityof IND AS in a phased manner. As per these rules in the second phase all listed Companiesincluding the parent or subsidiaries of such companies will have to prepare theirfinancial statements following Ind AS with effect from 01st April 2017 with comparativeperiods beginning 01st April 2016. Accordingly the financial statements for 2017-2018have been drawn up as per Ind AS and opening Balance sheet as of April 1 2016 has beenrestated to reflect the changes brought in by Ind AS.
Reconciliation of Standalone Statement of Profit and Loss as per Ind AS with previousGAAP for the year ended March 31 2017:
(Rs. in millions)
Reconciliation of Consolidated Statement of Profit and Loss as per Ind AS with previousGAAP for the year ended March 31 2017:
(Rs. in millions)
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