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Sarla Performance Fibers Ltd.

BSE: 526885 Sector: Industrials
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OPEN 52.00
VOLUME 15294
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P/E 8.60
Mkt Cap.(Rs cr) 460
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Sell Price 0.00
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OPEN 52.00
CLOSE 54.60
VOLUME 15294
52-Week high 63.45
52-Week low 18.95
P/E 8.60
Mkt Cap.(Rs cr) 460
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sarla Performance Fibers Ltd. (SARLAPOLY) - Director Report

Company director report

Dear Members

The Board of Directors takes immense pleasure in presenting the 27th(Twenty Seventh) Annual Report on the Audited Financial Statements of SarlaPerformance Fibers Limited for the financial year ended 31st March 2020.

1. Corporate Overview:

Sarla Performance Fibers Limited (“Your Company/ theCompany”) is engaged in the business of Specialty Yarn for the past 26 years and has2 (two) Manufacturing Plants at Silvassa UT of Dadra & Nagar Haveli and a DyeingPlant at Vapi Gujarat. It also has Wholly Owned Subsidiaries (WOS) at British VirginIslands (BVI) and United States of America (USA) and the Group's Corporate Office issituated at Mumbai.

2. Financial Summary Highlights

The Company's financial performance for the year ended 31stMarch 2020 is summarized below:

(Rs in Lakhs)

2019-20 2018-19 2019-20 2018-19
Sales & Operations 29832 31632 31094 32430
Add: Other Income 1804 1809 1754 1756
Total Income 31636 33441 32848 34186
Total Expenses 25220 27033 26113 27328
Profit Before Interest Depreciation & Tax 6415 6408 6735 6859
Less: Finance Cost 963 727 1058 807
Less: Depreciation &amortization 1766 1448 2520 2204
Profit Before Tax 3686 4233 3157 3847
Less: Provision for Taxation
- Current 1031 961 1046 971
- Deferred (799) 321 (800) 323
- Earlier Years - (0.15) - (0.15)
- MAT credit Entitlement - - - -
Net Profit After Tax 3454 2951 2911 2553
Net Comprehensive Income for the Year 3469 2942 3038 2355
Balance bought forward 18372 15851 15542 13428
Profit for the Year 3454 2951 2932 2536
Re measurement of Net defined benefit plans (net of tax) 15 (9) 15 (9)
Dividend Paid during the year 417 420 413 412

3. Business Performance: Operations:

During the financial year under review the sales of the Company onstandalone basis were INR. 29832 Lakhs as against INR. 31632 Lakhs in the financial year2018-19 witnessing a decreasing of 5.69%. The FOB value of exports stood at INR. 18068Lakhs compared to INR. 18385 Lakhs in 2018-19.

The Consolidated Sales and Operation of the Company for the financialyear 2019-20 were INR. 31094 Lakhs as against INR. 32430 Lakhs in the previous year i.e.2018-19. Registering a negative growth of 4.12%.


The profit before Depreciation Interest & Tax was INR. 6416 Lakhsas compared to INR. 6408 Lakhs in the previous year after providing for depreciation ofINR. 1767 Lakhs (Previous Year INR. 1448 Lakhs) & provision for taxation of INR.1031 Lakhs (Previous Year INR. 961 Lakhs) there was a net profit of INR. 3454 Lakhs ascompared to INR. 2951 Lakhs in the Previous Year.

There are no material changes or commitments affecting the financialposition of the Company which have occurred between the end of the financial year and thedate of this Report other than the impact of COVID-19 on the domestic and internationalbusiness operations of the Company detailed in this Report as well as Notes to theFinancial Statements of the Company.

A. Business & Economic Overview:

Global Economy:

Although slowdown in the manufacturing sector and trade tensionsbetween the US and China were among the many factors that softened the economic outlookfor 2019 the year did begin on a firm footing. The projected global economic growthalbeit downgraded was 2.9%. Despite the economic and financial headwinds growth indeveloping Asia was projected to remain a robust 5.5% during 2019 (Asian DevelopmentOutlook Update September 2019). However in 2019-20 the Indian economy grew by 4.2%against 6.1% expansion in 2018-19 whereas China's growth was 6.1% in 2019 vs. 6.7% in2018. Growth among advanced economies was forecast to drop to 2% during the year althoughgrowth in Sub-Saharan Africa was projected to accelerate to 3.1% (Source: World EconomicOutlook International Monetary Fund). However due to the COVID-19 pandemic theInternational Monetary Fund has projected a sharp contraction of the global economy to astatus much worse than what resulted from the 2008-09 financial crisis.

India Economy:

India continues to be one of the fastest growing emerging economies inthe world. A slowdown in the manufacturing and construction sector has lately affected GDPgrowth slightly below 5% in the current fiscal. An impending revival in demand positiveconsumption pattern and rising disposable income makes India the most sought afterinvestment destinations. Already the fifth largest economy in the world India is supposedto take its place among the world's top three economic powers in the next 10-15years. The pandemic has undoubtedly affected India but with the right economic stimulusand the gradual opening up of the lockdown the situation can be expected to improve.Interstate movement of goods is gradually picking up and retail financial transactions areshowing a healthy trend.

India's Textile Industry:

India's textiles industry goes back several centuries and is amongthe oldest industries in the country. It accounts for 14% of the industry output and isone of the largest contributors to the economy accounting for 2% of the GDP. Afteragriculture it is the second largest generator of income employing close to 45 millionpeople and contributing 10% to the country's manufacturing owing to its labourintensive nature. The industry is vertically integrated with almost all sub-sectors and isthus integral to the economy.

India is the second largest producer and exporter of textiles afterChina and fourth largest producer and exporter of apparel after China Bangladesh andVietnam. The textiles and apparel industry constitutes 11% of the total exports of thecountry.

However one factor affecting India's textile trade is currencyfluctuation that remains a challenge for the industry. Exports have been a core feature ofIndia's textile sector. Indian textiles and apparel exports were estimated at $35.5billion in 2019 and is expected to grow at a CAGR of 11% over the next decade to reach$100 billion by 2029. Exports of both man-made textile and readymade garments have seen amajor boost.

A major factor behind the robustness of India's textile industryis its strong production base with a wide range of fibres and yarns. India is among thetop producers of jute and silk and beyond its natural fibres such as cotton jute silkand wool; and synthetic its manmade fibres such as polyester viscose nylon and acrylichave also created a niche for themselves in the market.

Business Overview:

Indian Operations:

The Company exports to 40 countries and is a leading exporter ofRegular as well as High Tenacity Polyester and Nylon Yarns. It started operations 26 yearsago as a commodity manufacturer of Man-Made Fiber but has transformed itself into a highvalue-added yarn maker in the past decade. It has an installed capacity of 11900 tons perannum for manufacturing yarns & 20 Tons per day Nylon POY in Silvassa and 3200 tonsper annum for a Dyeing unit at Vapi.

This product will be used as Import Substitute and will ensurecontinuous supply of Partially Oriented Yarn (POY) for further process. The Company'semphasis this year will be to focus on niche end user applications in India highervalue-added yarns to leading global apparel brands and companies.

SPFL also owns Wind Power Capacity of 14.75 MW in totality located indifferent states i.e. 6 MW is in the state of Maharashtra 5.75 MW in the state of Gujaratand 3 MW in the state of Madhya Pradesh. Our plant load factor for the fiscal year 2020was about 20-21%.

Overseas Operations

The Operations of the US Subsidiary was shut down in December 2017 dueto Lower Capacity Utilisation and since then the Management has undertaken an extensiveexercise even taking help from external consultant to find right Strategic/ FinancialPartner. We are optimistic to find solution in coming months. The Company has startedexploring various options for its US Plant to make it profitable which includes enteringinto partnership/strategic alliance.

Customer Segments and Growth:

The Company's customer segments can be divided into four parts:

1) Innerwear Narrow Fabrics Hosiery and Sportswear. 2) Threads. 3)Industrial Yarns. 4) Regular Yarns.

Turnover Break Up (Customer Segment-wise)

Segment FY 2019-20 FY 2018-19
(% of Total Sales) (% of Total Sales)
Innerwear Narrow Fabrics Hosiery and 41.67 40.30
Threads 30.21 31.50
Industrial Yarns 17.65 15.35
Regular Yarns 10.47 12.85
100.00 100.00

Turnover Break Up (Geographical)

Y (

(% of Total Sales) (% of Total Sales)
South North & Central America 23.82 22.45
Middle East & Europe 40.30 39.71
Africa 02.68 02.67
Asia Pacific 33.20 35.17
100.00 100.00

In all we export to over 40 countries and to 95 customers. Ourcustomer concentration is well distributed and no single customer exceeds more than 10% ofour revenue.

B. Opportunities and Threats:

The Indian textiles industry is among the oldest in the country. It isprojected to reach USD 230 billion by 2020 from around USD 120 billion. Currently thedomestic textiles industry contributes 10% to the manufacturing output of the countrygenerates about 2% to its GDP and employs more than 45 million people. Importantly thesector contributes 11% to the export earnings of India

Exports have been a core feature of India's textile sector. TheIndian textiles export market estimated at $18 billion is expected to grow at a CAGR of4% compared to the global CAGR of 3% over 2016-26.

One of the positive factors in recent time is the increasing gapbetween cotton and polyester prices. Though there was a glut in cotton and prices hadfallen due to oversupply and less offtake from China the synthetic fiber prices also fellfollowing the slump in crude oil and its derivatives. We believe the demand for syntheticfiber will continue to outpace that of cotton due to the inherent price advantage andquality improvements.

One of our big market is the NAFTA and CAFTA market comprising of NorthAmerican customers. Due to the growing preference for locally sourced products the demandfor synthetic yarn in this geography is increasing by 5-6% p.a. Upon restarting ouroperations in US we will be the direct beneficiaries of this due to our presence in SouthCarolina US. Moreover there are substantial cost advantage of manufacturing in the USmaking us reasonably cost competitive vis a vis suppliers from China ASEAN and India.

C. Outlook:

The prospects of polyester/nylon yarns remain healthy due to increasein demand

D. Financial Performance:

(INR. in Lakhs)

Item 2019-20 2018-19 % increase/ decrease
Raw Material Cost & Purchase of Stock in trade 13864 17346 -20.07%
Employee Benefit and Other Expenditure 11336 9665 17.29%
EBIDTA 6416 6408 0.12%
Finance Cost 963 727 32.46%
Fixed Assets (Gross Block) 27543 24626 22.96%
Net Current Assets 8707 6422 35.58%
Working Capital Finance 6869 8452 -18.72%
Cash & Bank Balances 6825 4973 37.24%

(Note: standalone performance comparison Rupees in Lakhs)

Raw Material Cost:

The Raw Material prices decreased in the year 2019-20 due to decreasein the price of Partially Oriented Yarn (POY) and Chips. The Major reason for decrease inprices of Raw Material is decrease in price of Crude oil.

Interest Cost:

The interest cost increased mainly due to increase in USD/EURO viz. anINR exchange rate.

Fixed Assets:

The increase in fixed assets of INR. 2917 Lakhs is due to Setup of newplant at Dadra and Expansion and up gradation of existing Plant & Machinery.

Net Current Assets and Cash & Cash Equivalents:

The Increase in Net Current assets is due to Increase in Debtors andincrease in Fixed Deposits with banks.

E. Risk and Concerns:

Raw material sourcing:

We source 54% of our RM requirements (mainly POY) from India and 46 %from imports (Nylon chips/fiber). For our RM sources we have multiple suppliers. In2019-20 the price of our major RM POY ranged between INR. 55 to 174 per kg and that ofNylon yarn ranged between INR. 80 to 265 per kg.

Interest Rates:

The Company's average gross interest cost in the 2019-20 increasedby 0.80% The Company's present Debt Equity Ratio is 0.84. The long-term Debt equity Ratiois 0.33 Interest costs are 3.23% of total revenue.

Exchange Rate:

62% per cent of Company's revenue is in foreign currency (DollarEuro & GBP) and balance is in INR. Also we import 20% per cent of turnover (88% ofwhich consists of raw material purchases) creating a natural hedge to that extent. Apartfrom this from time to time forward cover is taken to hedge exposure in foreign currency.For Financial year 2020 our average forward cover was for 3 months of our revenue.


As we cater to Major Manufacturers of Sewing Threads HosieryKnitwear's etc. the inflationary pressures is passed over a period of time.

F. Internal Control System and Their Adequacy:

The Company has in place reasonable internal control system both fromthe business process and regulatory compliance point of view. The system is reviewed andupdated on regular basis. The company is continuously upgrading its internal controlsystems by measures such as strengthening of Information Technology infrastructure and useof external management consultant services.

G. Human Resources / Industrial Relations:

The human resources have always been of supreme importance at SPFL asthey are the growth-drivers and the mainstay of the organization. The prominence on thepeople of the organisation stems from the belief that they are the authors of theCompany's success story. Integral to the Company's approach human resourcedevelopment is its distinctive strategy. The strategy ensures developing and nurturing ateam of competent passionate and inspiring leaders who would turn to be the scribes of apromising future's slate. Thus building a future-ready organisation through the trueto type learning innovation and world-class execution.

The Company believes that the alignment of all employees to a sharedvision and purpose is crucial for succeeding in the marketplace. Further it recognisesthe mutuality of interests with key stakeholders and is committed to building harmoniousemployee relations.

SPFL is confident that its employees will relentlessly strive to meetthe growth agenda deliver world-class performance and innovate newer things. They willthus uphold human dignity foster team spirit and discharge their role as‘trustees' of all stakeholders with true faith and allegiance.

H. Capital Expansion and Investment:

In 2019-20 we incurred a CAPEX of INR. 2917.00 Lakhs towards HighTenacity Twisting plant at Dadra New and Expansion and upgradation of Plant &Machinery at Silvassa. For Financial Year 2020-21 we envisage amount of CAPEX to the tuneof about 1000 Lakhs.

I. Value Added Statement:

(INR. in Lakhs)

Particulars 2019-20 2018-19 2017-18 2016-17 2015-16
Income from Production / Operations 29832 31632 27647 25954.04 24871.70
Add: Other Income 1804 1809 2585 2026.98 2181.88
Corporate Output 31636 33441 30232 27981.02 27053.58
Less: Cost of Raw Materials 13864 17346 13751 10852.68 11095.02
Less: Cost of Traded Goods - - - 57.07 1159.90
Less: Other Manufacturing Expenses 6889 6119 5435 5964.82 4847.21
Less: Administrative & Other 3120 2395 2171 2022.55 1922.64
Equals Gross Value Added 7763 7557 8875 9083.90 8028.81
Less: Depreciation &Amortization 1767 1448 1317 1243.55 1014.40
Less: Extra Ordinary / Prior Period - - - - -
Equals Net Value Added 5996 6109 7558 7840.35 7014.41
Allocation of Net Value Added
To Personnel 1346 1150 1008 921.73 831.10
To Taxes (including tax on proposed div.) 232 1281 1905 1666.99 1587.87
To Creditors (via interest) 963 727 618 579.11 508.07
To Investors (via dividend) 417 420 919 918.53 876.78
To the Company (via retained earnings) 3038 2531. 3108 3753.99 3210.60
5996 6109 7558 7840.35 7014.41

4. Impact of Global Crisis : COVID -19:

In March 2020 the World Health Organisation (WHO) declared COVID-19 aglobal pandemic. Consequent to this Government of India declared nation-wide lockdown onMarch 24 2020 which has impacted normal business operations of the Company. The Companyhas assessed the impact of this pandemic on its business operations and has considered allrelevant internal and external information available up to the date of approval of thesefinancial results to determine the impact on the Company's revenue from operationsfor foreseeable future and the recoverability and carrying value of certain assets such asproperty plant and equipment investments inventories trade receivables and MAT credit.The impact of COVID-19 pandemic on the overall economic environment being uncertain mayaffect the underlying assumptions and estimates use to prepare Company's financialresults which may from that considered as at the date of approval of the financialsresults. As the situation is unprecedented while the lockdown is gradually lifting theCompany is closely monitoring the situation as it evolves in the future. The Company hasresumed its business activities by reopening of its factories and office in line withguideline issued by the Government authorities initiating pre-monsoon preparednessactivities. The Company does not anticipate any challenges in its ability to Continue asgoing concern or meeting its financial obligations.

5. Dividend:

In order to conserve the resources of the Company by taking intoaccount the prevailing economic situation and the need of resources for growth the Boardof Directors of the Company have decided not to recommend any dividend on the EquityShares of the Company for the Financial Year ended March 31 2020.

Your Company continues with its task to build businesses with long-termgoals based on its intrinsic strengths in terms of its quality manufacturing prowessdistribution strengths and customer relationships. To accelerate further value creationyour Company continues to evaluate new areas of growth. The initiatives aimed atrationalising and streamlining operations to bring about efficiencies and reducing costsremain top priority.

6. Amount if any proposed to transfer to reserves

The Company has made no transfer to reserves during Financial Year2019-20.

7. Share Capital:

The paid-up Equity Share Capital as on 31st March 2020 isINR. 83503000. During the year under review the Company has not issued shares onrights basis Equity Shares with differential voting rights nor granted any stock optionsor sweat equity or warrants or bonus shares. As on 31st March 2020 none of theDirectors of the Company held instruments convertible into equity shares of the Company.

8. Deposits:

The Company has not accepted any Deposit covered under Section 73 ofthe Companies Act 2013 and the Companies (Acceptance of Deposit) Rules 2014 during theyear under review. Hence the requirement for furnishing of details relating to depositscovered under Chapter V of the Act or the details of deposits which are not in compliancewith the Chapter V of the Act is not applicable.

9. Credit Rating:

Acuite Ratings and Research Ltd (Formerly Known as SMERA RatingsLimited) have reaffirmed the Company's long-term borrowings rating to ‘SMERAA' and reaffirmed the short-term borrowing rating as ‘SMERA A1' for thefinancial year 2019-20.

These ratings are considered to have high degree of safety regardingtimely servicing of financial obligations and carry very low credit risk.

10. Management Discussion & Analysis:

Management's Discussion and Analysis Report for the year underreview as stipulated under the Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 (“ListingRegulations”) is presented in a separate section forming part of the Annual Report.

11. Consolidated Financial Statement:

In accordance with the provisions of the Companies Act 2013 (“theAct”) and Ind AS 110 Consolidated Financial Statement read with Ind AS - 28Investments in Associates and Ind AS 31 Interests in Joint Ventures the auditedconsolidated financial statement is provided in the Annual Report.

12. Subsidiaries Joint Ventures and Associate Companies:

The Company does not have any Indian Company as Subsidiary. There aretwo wholly owned overseas subsidiaries viz. Sarla Overseas Holdings Ltd (BVI) andSarlaflex Inc. (USA) and one Step down subsidiary viz. Sarla Europe (LDA) as on 31stMarch 2020 which is a subsidiary of Sarla Overseas Holdings Ltd (BVI). There has been nomaterial change in the nature of the business of the subsidiaries. The Policy fordetermining material subsidiaries as approved may be accessed on the Company'swebsite at

Pursuant to the provisions of Section 136 of the Companies Act 2013the financial statements of the Company consolidated financial statements along withrelevant documents and separate audited accounts in respect of subsidiaries are availableon the website of the Company at the link:

The Company will make available the Financial Statements of theSubsidiary Companies to any Member of the Company who may be interested in obtaining thesame.

No Company has become or ceased to be a Subsidiary during the yearunder consideration.

The Company is not having any Holding Company or Joint Venture or anyAssociates Company.

A statement containing the salient features of the financial statementof subsidiary / associate / joint venture companies as per Section 129(3) of theCompanies Act 2013 read with Rule 5 of the Companies (Accounts) Rules 2014 is providedherein below in prescribed Form AOC-1:

(INR. In Lakhs)

Name of the Subsidiary Sarla Overseas Holdings Ltd (SOHL) Sarlaflex Inc. Sarla Europe LDA (Subsidiary of SOHL)
Reporting period for the subsidiary April to March April to March April to March
Reporting Currency USD USD EURO
Conversion Rate 75.39 75.39 83.05
Number of Shares 435000 989000 3000
Share Capital 196.99 596.50 3.17
Reserve and Surplus 5945 -9297 -39
Total Assets 8713 16070 248
Total Liabilities (including reserves) 2571 16946 284
Investments 0 6879 0
Turnover 3610 6 281
Profit before Taxation 521 -588 -47
Provision for Taxation 0 0 15
Profit after Taxation 521 -588 -62
Proposed Dividend 0 0 0
% of shareholding 100% 100% 60%
Country British Virgin Island United States of America Portugal

13. Secretarial Standards:

The Directors state that applicable Secretarial Standards i.e. SS-1and SS-2 relating to ‘Meetings of the Board of Directors' and ‘GeneralMeetings' respectively have been duly followed by the Company.

14. Directors' Responsibility Statement:

To the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors make the following statementin terms of Section 134(3)(c) read with Section 134(5) of the Companies Act 2013:

1) that in the preparation of annual accounts for the year ended 31stMarch 2020 the applicable accounting standards had been followed along with properexplanation relating to material departures for the same;

2) that they had 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 31stMarch 2020 and of the profit and loss of the Company for that year;

3) that the Directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of theCompanies Act 2013 for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities;

4) that the Directors had prepared the annual accounts on a 'goingconcern' basis

5) that the Directors had laid down internal financial controls andsuch internal financial controls are adequate and operating effectively and

6) that the Directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and such systems are adequate and operatingeffectively.

15. Corporate Governance:

As per the regulation 34(3) read with the Schedule V of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the Report on the CorporateGovernance is annexed and forms an integral part of this Report. The requisite certificatefrom the Practising Company Secretary confirming compliance with the conditions ofCorporate Governance is attached to the report of Corporate Governance.

16. Disclosure under the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013:

In order to comply with provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and Rules framed thereunderthe Company has formulated and implemented a policy on prevention prohibition andredressal of complaints related to sexual harassment of women at the workplace. All womenemployees whether permanent temporary or contractual are covered under the above policy.The said policy has been uploaded on the internal portal of the Company for information ofall employees. An Internal Complaint Committee (ICC) has been set up in compliance withthe said Act. During the year under review no complaints were reported to the Board.

17. Internal Financial Control Systems their Adequacy and RiskManagement:

The Company has an Internal Control System commensurate with the sizeof its operations. The Internal Audit Department monitors and evaluates the efficacy andadequacy of internal control system in the Company its compliance with operating systemsaccounting procedures and policies at all locations of the Company and its subsidiaries.Based on the report significant audit observations and corrective actions thereon areregularly presented to the Audit Committee of the Board.

The Company's Internal Audit Department also monitors andevaluates the internal control system and submits Quarterly Reports which are placedbefore the Audit Committee of the Board.

18. Risk Management:

The Risk Management Policy of the Company is available on the CompanyWebsite at:

19. Directors:

Mr. Paulo Manuel Ferreira Moura De Castro was appointed as anIndependent Director of a Company which effect from 23 May 2019. There after he wasconfirmed as director and appointed as independent Director of the company in the previousAnnual General Meeting of the members held on 27th September 2019.

In terms of provisions of the Section 152(6) of the Companies Act2013 Ms. Neha Jhunjhunwala Director retire by rotation at the ensuing Annual GeneralMeeting and being eligible offers herself for reappointment. The profile of Directorseeking reappointment pursuant to Regulation 36 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is included in the Annual Report.

All Independent Directors have given declarations that they meet thecriteria of independence as laid down under Section 149 (6) of the Companies Act 2013 andRegulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.

20. Board Meetings:

During the financial year 2019-20 4 (Four) Board Meetings were heldand the gap between two Board Meetings did not exceed 120 days. The details of theattendance of Directors at the Board Meetings are mentioned in the report on CorporateGovernance annexed hereto.

21. Annual evaluation of Board its Committees and individualDirectors:

Pursuant to the provisions of the Companies Act 2013 and Regulation 17and 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theBoard has carried out an annual performance evaluation of its own performance thedirectors individually as well as the evaluation of the working of its Audit CommitteeCSR Committee Nomination & Remuneration Committee Risk Management Committee andStakeholder Relationship Committee. The manner in which the evaluation has been carriedout has been explained in the Corporate Governance Report.

22. Particulars of contracts or arrangements with Related PartyTransactions:

All related party transactions that were entered into during thefinancial year were on an arm's length basis and were in the ordinary course ofbusiness. There are no materially significant related party transactions made by theCompany with Promoters Directors or Key Managerial Personnel which may have a potentialconflict with the interest of the Company at large.

All Related Party Transactions are placed at the meetings of AuditCommittee and also at the Board meeting for approval. The particulars of contracts orarrangements with related parties referred to in sub-section 1 of Section 188 of theCompanies Act 2013 are furnished in Form AOC-2 in ‘Annexure A' to this report.

The Policy on materiality of related party transactions and dealingwith related party transactions as approved by the Board may be accessed on theCompany's website at the link:

Members may refer to Note No. 43 to the Standalone Financial Statementwhich sets out related party dislosures pursuant to Ind AS.

23. Significant and Material Orders passed by the Regulators or Courts

There are no significant material orders passed by the Regulators /Courts which would impact the going concern status of the Company and its futureoperations.

24. Material changes and commitments if any affecting financialposition have occurred between the end of the financial year of the Company and date ofthis report:

No material changes and commitments which could affect theCompany's financial position have occurred between the end of the financial year ofthe Company and date of this report.

25. Corporate Social Responsibility:

In accordance with the provisions of Section 135 of the Act and Rulesframed there under the Company has a Corporate Social Responsibility (“CSR”)Committee of Directors comprising of Mr. Madhusudan Jhunjhunwala Chairman; Mr. ParantapDave Member and Mrs. Shreya Desai Member.

The CSR Committee had met on 09th November 2019. Asrequired under Section 135 of the Companies Act 2013 during the year the Companyundertook CSR initiatives which is mainly focused on promoting education health andpublic hygiene. In this connection the Company during the year under consideration spentan amount of INR. 65 Lakhs as against an amount of INR. 88.43 Lakhs required to be spent.A detailed list of the CSR expenditure made is annexed herewith as ‘Annexure B'.The shortfall is mainly due to the fact that some of the projects sanctioned are takingtime for completion and hence entire amount on those Projects has not been spent.

The CSR Policy is available on the Company Website

26. Auditors and Auditors' Report

Statutory Auditors:

CNK & Associates LLP Chartered Accountants Mumbai (ICAI FirmRegistration No. 101961W) were appointed as the Statutory Auditors of the Company for aterm of five consecutive years at the Twenty Fourth AGM of the Company held on 29thSeptember 2017. They have confirmed that they are not disqualified from continuing asAuditors of the Company.

In terms of the Companies (Amendment) Act 2017 and vide notificationno S.O.1833(E) dated 07th May 2018 the Ministry of Corporate affairs havedone away with the requirement of ratification of the appointment of auditors at eachsubsequent annual general meeting by deleting the 1st Proviso to the sub-section (1) ofSection 139 of the Companies act 2013. Accordingly the same is now not required to beput up to the members for ratification.

CNK & Associates LLP Chartered Accountants have confirmed thatthey continue to be eligible under Section 141 of the Companies Act 2013 and the Rulesframed thereunder for continuing as Auditors of the Company.

The Notes on financial statement referred to in the Auditors'Report are self-explanatory and do not call for any further comments. The Auditors'Report contain modified opinion the details of which are given as under:

1) Auditor in their report on Financial statements have modifiedtheir opinion in respect of the Company has an exposure to its Wholly Owned Subsidiary‘Sarlaflex Inc.' of 8670 lakhs towards investments in equity preferenceshares and unsecured loans. The Company also has indirect exposure in Sarlaflex Inc. byway of unsecured loans amounting to INR. 6739 lakhs through its wholly owned subsidiarySarla Overseas Holdings Limited (SOHL). Sarlaflex Inc. has suspended manufacturingoperations since December 2017 and has a negative net worth as on 31st March 2020. Theseconditions raise substantial doubt about its ability to continue as a going concern.

In the absence of any impairment testing by management during the yearwe are unable to comment on the impact if any on that we are unable to comment on theimpact if any on standalone annual financial results.

2) Sarlaflex Inc. the wholly owned subsidiary having totalassets of INR. 16070 lakhs has suspended manufacturing operations since December 2017and has a negative net worth as on 31st March 2020. These conditions raise substantialdoubt about its ability to continue as a going concern.

In the absence of any impairment testing by management for these assetsduring the year we are unable to comment on the impact if any on the consolidatedfinancial results.

Board's Reply to Statutory Auditors' Modified Opinion:

The auditors have in their report on the standalone and consolidatedresults modified their opinion in respect of not testing for impairment ofinvestments/assets of the company's Wholly owned Subsidiary Sarlaflex Inc. Themanagement is exploring all the options to resolve the matter and hopeful in coming monthsthe decision would be made.

Details in respect of frauds reported by auditors pursuant to section143(12) of the Companies Act 2013:

There have been no instances of fraud reported by abovementionedAuditors under Section 143(12) of the Act and Rules framed thereunder either to theCompany or to the Central Government during Financial Year 2019-20.

Cost Auditor:

Pursuant to the provisions of Section 148 of the Companies Act 2013read with Rule 4 of the Companies (Cost Records and Audit) Rules 2014 and Rule 14 of theCompanies (Audit and Auditors) Rules 2014 and pursuant to the recommendations by theAudit Committee in that behalf M/s. B.F. Modi & Associates Cost Accountants(Membership Number: 6955)Vapi was appointed as Cost Auditors of the Company for carryingout the Audit of Cost Records of Company maintained for the financial year from 1stApril 2019 to 31st March 2020. They would be required to submit the reportsby 27th September 2020.

As required under the Companies Act 2013 the remuneration payable tothe Cost Auditor is required to be placed before the Members in a general meeting fortheir ratification. Accordingly a Resolution seeking Member's ratification for theremuneration payable to M/s. B.F. Modi &Associates Cost Auditors for Financial Year2019-2020 is included at Item No. 3 of the Notice convening the Annual General Meeting.

As per requirements of Section 148 of the Companies Act 2013 read withCompanies (Cost Records and Audit) Rules 2014 the Company is required to maintain costrecords and accordingly such accounts are made and records has been maintained in respectof the applicable products for the year ended 31.03.2020.

Secretarial Auditor:

Pursuant to the provisions of Section 204 of the Companies Act 2013and The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed CS Ajit Sathe- Proprietor of M/s. A. Y. Sathe & Co. CompanySecretaries in Practice (Registration

No.: FCS2899/ COP 738) to undertake the Secretarial Audit of theCompany for the financial year ended 31st March 2020. The Secretarial AuditReport is annexed herewith as “Annexure C”.

The Secretarial Auditor has made following qualifications / adverseremarks:

A) Under Companies Act 2013:

1) As on 31st March 2020 the Company had not filedForm IEPF - 4 in connection with transfer of unpaid/ unclaimed dividend and sharespertaining to the financial year 2011-12. In connection with such transfer the newspaperadvertisement was given on 11th September 2019 instead of on or before 19th August 2019.

B) Under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015:

1) For the half year ended 31/03/2019 the statement of relatedparty transaction was submitted to Stock exchanges on 02/08/2019; which is not within 30days from the date of publication of financial results on 23/05/2019. For the half yearended on 30/09/2019 the Company has not submitted any statement of Related PartyTransactions. No disclosures hosted on Website of the Company pertaining to this.

2) There has been delay of 1 hour and 25 minutes in submissionof Intimations to BSE and NSE regarding approval of the unaudited financial results forthe quarter ended June 2019 for which board meeting was held on 13.08.2019. There has beendelay of 16 minutes and 26 minutes respectively in submission of Intimations to BSE andNSE regarding approval of the unaudited financial results for the quarter ended December2019 for which board meeting was held on 04.02.2020.

3) The Trading restrictions period for adoption of unauditedresults for the quarter ended 31.03.2019 30.06.2019 30.09.2019 and 31.12.2019 did notcommence from 1st day of each of the next relevant quarter but commenced from15.05.2019 01.08.2019 30.10.2019 and 20.01.2020 resulting in delays but the closing ofthe trading period was as per the regulations

Board's Reply to Secretarial Auditors' qualifications/adverseremarks:

A) Under the Companies Act 2013:

1) The Company has deposited the unclaimed dividend amount forthe financial year ended 2011-12 to IEPF Authority within prescribed time. Howeverprocedure for transfer of shares for the said unclaimed dividend amount is pending fromRegistrar & Share Transfer Agent of the Company. Once procedure is completed from R& TA Form IEPF-4 will be filed.

B) Under SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015:

1) Through inadvertence there was delay in submission ofstatement of related party transactions for the half year ended 31st March2019 and non-submission of the said statement for the half year ended 30th September2019. Due care will be taken in future in filing these statements within prescribed timeincluding timely updation on the website of the Company.

2) These delays were on account of non receipt of signed copy ofLimited Review Reports for the quarter ended 30th June 2019 and 31stDecember 2019 from the Statutory Auditors of the Company within time. As the signedreports received the Company had immediately submitted necessary intimations to bothStock Exchanges.

3) Inadvertently there were delays in giving intimations fortrading restriction period to the Stock Exchanges. The due care will be taken in future toavoid such delays.

In terms of Section 204 of the Companies Act 2013 on therecommendation of the Audit Committee the Board of Directors has appointed CS Ajit Sathe-Proprietor of M/s. A. Y Sathe & Co. Company Secretaries in Practice (Registration No.:FCS 2899/COP 738) to undertake the Secretarial Audit of the Company for the financial year2019-20.

27. Audit Committee:

The Audit Committee comprises two Independent Directors namely Mr.Parantap Dave (Chairman) Ms. Shreya Desai and Mr. Madhusudan Jhunjhunwala Whole-timeDirector. During the year all the recommendations made by the Audit Committee wereaccepted by the Board.

28. Corporate Social Responsibility (CSR) Committee:

The CSR Committee comprises Mr. Madhusudan Jhunjhunwala (Chairman) Mr.Parantap Dave and Ms. Shreya Desai.

29. Vigil Mechanism:

The Company has established Vigil Mechanism and a Whistle-blower policyin accordance with provisions of the Act and Listing Regulations. The Vigil Mechanism andwhistle-blower policy is out on the Company's website and can be accessed

30. Particulars of Loans given Investments made Guarantees given andsecurities provided:

Particulars of Loans given Investments made Guarantees given andsecurities provided along with purpose for which the loan or guarantee or security isproposed to be utilised by the recipient are provided in Note No.47of the Standalonefinancial statements.

31. Conservation of Energy Technology Absorption and Foreign Exchangeearnings & outgo:

The particulars relating to conservation of energy technologyabsorption foreign exchange earnings and outgo stipulated under Section 134(3)(m) of theCompanies Act 2013 read with Rule 8 of The Companies (Accounts) Rules 2014 is annexedherewith as ‘Annexure D' to this Report.

32. Extract of the Annual Return:

The details forming part of the extract of the Annual Return in formMGT-9 as required under Section 92 of the Companies Act 2013 is annexed as Annexure-Eand forms an integral part of this Report.

33. Particulars of Employees and related Disclosures:

The disclosures required pursuant to Section 197(12) of the Act readwith Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 in respect of employees of the Company is provided in “Annexure-F”to this report. During the year under review the Company does not have any employee whois drawing a remuneration of ‘10200000 per annum or 850000 per month' asstipulated in the Act and the rules made thereunder. Hence disclosures required underRule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 have not been provided. The Managing Director of the Company did not receiveany remuneration or commission from any of the Company's subsidiaries. Hencedisclosure pursuant to Section 197(14) of the Act is not applicable to the Company.:

1. The Ratio of the remuneration paid to each director to themedian remuneration of the employees of the Company for the financial year 2019-20:

Name of Director Remuneration paid Median remuneration Ratio
Mr. Madhusudan Jhunjhunwala (Chairman Whole-time Director) 13800000 178800 77.18x
Mr. Krishnakumar Jhunjhunwala (Managing Director) 13800000 178800 77.18x

Independent directors are paid sitting fees for attending BoardMeetings which are not considered.

2. The percentage increase in remuneration of each DirectorChief Financial Officer Chief Executive Officer Company Secretary in the financial year2019-20:

Name of Director/ Key Managerial Personnel Remuneration paid Percentage Decrease in financial year Increase/ current
Mr. Madhusudan Jhunjhunwala (Chairman Whole-time Director) 13800000 NIL
Mr. Krishnakumar Jhunjhunwala (Managing Director) 13800000 NIL
Mr. MahendraSheth (Chief Financial Officer& Company Secretary) 4920800 -6.63%

3. The percentage increase in the median remuneration ofemployees in the financial year: 05-10%

4. The number of permanent employees on the rolls of company:277

5. Average percentage increase in salaries of non-managerialemployees was 05-10% as compared to average percentage increase in managerial remunerationwhich was 7 - 10%

6. The Board affirms that the remuneration paid is as per theRemuneration Policy of the Company.

Neither Managing Director nor Whole-time Director of the Companyreceives any remuneration or commission from any Subsidiary of the Company.

34. Acknowledgement:

Your Directors wish to place on record their appreciation of thededicated efforts by employees at all levels. The Directors also wish to place on recordtheir word of sincere appreciation to the bankers the investors the vendors thecustomers and all other business associates for their continued support.

35. Cautionary Statement:

Statements in this Report particularly those which relate toManagement Discussion and Analysis describing the Company's objectives projectionsestimates and expectations may constitute ‘forward looking statements' withinthe meaning of applicable laws and regulations. Actual results might differ materiallyfrom those either expressed or implied in the statement depending on the circumstances.

For and on behalf of the Board of Directors
Madhusudan S. Jhunjhunwala
Place: Mumbai Chairman and Whole Time Director
Date: 24th July 2020 (DIN: 00097254)