The Board of Directors takes immense pleasure in presenting the Twenty Fifth AnnualReport on the Audited Financial Statements of Sarla Performance Fibers Limited ("theCompany") for the financial year ended 31st March 2018.
Sarla Performance Fibers Limited ("Your Company") is engaged in the businessof Specialty Yarn from Past 24 Years having with 2 Manufacturing Plants at Silvassa UT ofDadra & Nagar Haveli and a Dyeing Plant at Vapi Gujarat and Wholly Owned Subsidiaries(WOS) at British Virgin Islands (BVI) and United States of America (USA) with Group'sCorporate Office situated at Mumbai.
FINANCIAL SUMMARY HIGHLIGHTS
The highlights of the performance of the Company for the year ended March 31 2018 issummarized below:
(Rs. in Lakhs)
|Particulars ||STANDALONE ||CONSOLIDATED |
| ||2017-18 ||2016-17 ||2017-18 ||2016-17 |
|Sales & Operations ||27864.53 ||27669.25 ||30630.04 ||32185.93 |
|Add: Other Income ||2366.62 ||1671.46 ||1829.35 ||2703.00 |
|TOTAL INCOME ||30231.15 ||29340.71 ||32459.39 ||34888.93 |
|Profit Before Interest Depreciation & Tax ||7865.90 ||7304.38 ||7288.22 ||8055.60 |
|Less: Finance Cost ||618.18 ||502.14 ||734.76 ||715.50 |
|Less: Depreciation & amortization ||1317.04 ||1243.55 ||2015.14 ||1969.55 |
|PROFIT BEFORE TAX ||5930.68 ||5558.69 ||4538.33 ||5370.74 |
|Less: Provision for Taxation || || || || |
|- Current ||1505.00 ||1200.10 ||1510.74 ||1204.93 |
|- Deferred ||362.83 ||879.93 ||565.62 ||1228.90 |
|- Earlier Years ||182.22 ||- ||182.22 ||- |
|- MAT credit Entitlement ||(145.39) ||(492.70) ||(1453.89) ||(492.70) |
|NET PROFIT AFTER TAX ||4026.02 ||3971.36 ||3733.64 ||3429.61 |
|Net Comprehensive Income for the Year ||4015.02 ||3967.60 ||3733.69 ||3452.51 |
|Balance bought forward ||12753.60 ||8994.77 ||11940.69 ||8743.66 |
|Profit for the Year ||4026.02 ||3971.36 ||2147.12 ||3410.49 |
|Re measurement of Net defined benefit plans (net of tax) ||(11.00) ||(3.76) ||(11.00) ||(3.76) |
|Dividend for the year ||918.53 ||208.77 ||919.48 ||209.70 |
Operations: During the year under review the sales of the Company on standalonebasis were Rs. 27864.53 Lakhs as against Rs. 27669.25 Lakhs in 2016-17 witnessing aminimal increase of 0.70%. The FOB value of exports stood at Rs. 14689.04 Lakhs comparedto Rs 14635.78 Lakhs in 2016-17.
The profit before Depreciation Interest & Tax was Rs. 7865.90 Lakhs as compared toRs. 7304.38 Lakhs in the previous year after providing for depreciation of Rs. 1317.04Lakhs (Previous Year Rs. 1243.55 Lakhs) & provision for taxation of Rs. 1505.00 Lakhs(Previous Year Rs.1200.10 Lakhs) there was a net profit of Rs. 4026.02 Lakhs as comparedto Rs. 3971.36 Lakhs in the Previous Year.
A. BUSINESS & ECONOMIC OVERVIEW
Global and India Economy: In 2017 the cyclical upswing underway since mid-2016continued to strengthen and the global economy witnessed a pickup in growth. According tothe International Monetary Fund (IMF) the year reported the broadest synchronized globalgrowth surge since 2010. The advanced economies witnessed expansion owing to increasedinvestments and manufacturing output. Similarly key emerging markets and developingeconomies including Brazil China and India posted strong upward momentum
Given stronger than expected economic activity in 2017 the IMF has revised its growthforecast for the United States from 2.3% to 2.7% in 2018 and from 1.9% to 2.5% in2019.Stronger domestic demand in the United States is projected to increase imports. InEurope too economic activity in 2018 and 2019 is projected to remain stronger thananticipated. Moreover the advanced economies in Asia are expected to deliver strongergrowth while the emerging and developing ones are expected to grow at around 6.5% over2018-19 broadly the same pace as in 2017.
India's economy picked up some pace in FY 2017-18 and the gross domestic product growthwas better than FY 2016-17. The structural reform of The Goods and Services Tax (GST)within a year of demonetisation is expected to provide a boost to the economic growth andinvestments in the long run. With an improving business ecosystem stable macroeconomicindicators and a liberal FDI regime economy. According to World Bank's Global EconomicProspects report India's GDP is expected to rise to 7.4% in FY 2018-19 and 7.8% in FY2019-20.
Business Overview: Sarla Performance Fibers Limited is a leading exporter ofRegular as well as High Tenacity Polyester and Nylon Yarns. It started operations 24 yearsago as a commodity manufacturer of Man Made Fiber but transformed into a high value addedyarn maker in the past decade. It has an installed capacity of 11900 tons per annum formanufacturing yarns in Silvassa and 3200 tons per annum for a Dyeing unit at Vapi.ThePlant of the Company located at Walterboro South Carolina USA is temporarily shut downin December 2017 due to low capacity utilization. The Company is exploring various optionsfor its US Plant to make it profitable which includes entering into partnership/strategicalliance. The company's emphasis this year will be to focus on niche end user applicationsin India higher value added yarns to leading global apparel brands and companies. Thecompany exports to 40 countries.
SPFL also owns Wind Power Capacity of 14.75 MW in totality located in different statesi.e. 6 MW is in the state of Maharashtra 5.75 MW in the states of Gujarat and 3 MW in thestate of Madhya Pradesh. Our plant load factor for the fiscal year 2018 was about 22%.
Customer Segments and Growth: The Company's customer segments can be divided intofour parts:
1) Innerwear Narrow Fabrics Hosiery and Sportswear.
3) Industrial Yarns.
4) Regular Yarns.
Turnover Break Up (Customer Segment-wise)
|Segments ||FY 2017-18 ||FY 2016-17 |
| ||(% of Total Sales) ||(% of Total Sales) |
|Innerwear Narrow Fabrics Hosiery and Sportswear ||38.30 ||37.50 |
|Threads ||32.50 ||32.45 |
|Industrial Yarns ||13.10 ||12.45 |
|Regular Yarns ||15.90 ||17.60 |
| ||100.00 ||100.00 |
Turnover Break Up (Geographical)
|Regions ||FY 2017-18 ||FY 2016-17 |
| ||(% of Export Sales) ||(% of Export Sales) |
|South North & Central America ||24.84 ||17.60 |
|Middle East & Europe ||37.40 ||40.25 |
|Africa ||2.30 ||3.82 |
|Asia Pacific ||35.46 ||38.33 |
| ||100.00 ||100.00 |
In all we export to over 40 countries and to 105 customers. Our customer concentrationis well distributed and no single customer exceeds more than 10% of our revenue.
B. OPPORTUNITIES AND THREATS:
The Indian textiles industry is among the oldest in the country. It is projected toreach USD 230 billion by 2020 from around USD 120 billion. Currently the domestictextiles industry contributes 10% to the manufacturing output of the country generatesabout 4% to its GDP and employs more than 45 million people. Importantly the sectorcontributes 15% to the export earnings of Indiaremains a challenge.
Exports have been a core feature of India's textile sector.The Indian textiles exportmarket estimated at $18 billion is expected to grow at a CAGR of 4% compared to theglobal CAGR of 3% over 2016-26.The fundamental strength of the textile industry is itsprices of the raw materials like wool and increase in oilprices which increase the inputcosts.
One of the positive factors in recent time is the increasing gap between cotton andpolyester prices. Though there was a glut in cotton and prices had fallen due tooversupply and less offtake from China the synthetic fiber prices also fell following theslump in crude oil and its derivatives. We believe the demand for synthetic fiber willcontinue to outpace that of cotton due to the inherent price advantage and qualityimprovements.
One of our big market is the NAFTA and CAFTA market comprising of North Americancustomers. Due to the growing preference for locally sourced products the demand forsynthetic yarn in this geography is increasing by 5-6% p.a. We are beneficiaries of thisdue to our direct presence in South Carolina US through our manufacturing facility.Moreover there are substantial cost advantage of manufacturing in the US making usreasonably cost competitive vis a vis suppliers from China ASEAN and India. segment withnylon 66 production to ramp up this year.
The prospects for outsourcing of polyester/nylon yarns remain healthy. This is becauseof increased capacity in India. While we remain optimistic about future growth.
We also have a strong opportunity for growth in the nylon yarn
D. FINANCIAL PERFORMANCE:
(Rs. in Lakhs)
|Item ||2017-2018 ||2016-2017 ||% increase |
|Raw Material Cost& Purchase of Stock in trade ||13751.31 ||11827.81 ||16.26% |
|Employee Benefit and Other Expenditure ||8613.94 ||10208.52 ||-15.62% |
|EBIDTA ||7865.90 ||7304.38 ||7.69% |
|Finance Cost ||618.18 ||502.14 ||23.11% |
|Fixed Assets (Gross Block) ||19183.23 ||17805.56 ||7.74% |
|Net Current Assets ||5178.62 ||3581.42 ||44.60% |
|Working Capital Finance ||6445.68 ||8186.51 ||-21.26% |
|Cash & Bank Balances ||4190.64 ||6923.46 ||-39.47% |
(Note: standalone performance comparison Rupees in lakhs)
Raw Material Cost: The Raw Material prices increased in the year 2017-18 due tocontinuous increase in Partially Oriented Yarn (POY) and Chips Prices. The Major reasonfor increase in prices of Raw Material is increase in price of Crude oil.
Expenditure: The Major reason for decrease in expenditure is reduction in ExciseExpenses after implementation of Goods and Services Tax (GST).
Interest Cost: The interest cost increased mainly due to increase in USD LIBOR.
Fixed Assets: The increase in fixed assets of Rs. 1377.67 is due to regularaddition in Plant and Machinery.
Net Current Assets and Cash & Cash Equivalents: the Decrease in Net CurrentAssets is majorly due to decrease in fixed deposits which are utilised for the purpose ofincurring capital expenditure for Plant & Machineries.
E. RISK AND CONCERNS
Raw material sourcing: We source 51% of our RM requirements (nylon and polyesterchips/fiber) from India and 49 % from imports. For our RM sources we have multiplesuppliers. Last year the price of our major RM POY ranged between Rs 62 to 115 per kg andthat of Nylon yarn ranged between Rs 210 to 310 per kg.
Interest Rates: The Company's average gross interest cost in the last yearincreased by 23.11%. The company's present Debt Equity Ratio is 0.35. The long term Debtequity Ratio is 0.13. Interest costs are 2.04% of total revenue.
Exchange Rate: 52% per cent of company revenue is in foreign currency (Dollar Euro& GBP) and balance is in INR. Also we import 23.54% per cent of turnover (88.27% 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 FY18 our average forward cover was for 3months of our revenue.
Inflation: The Company does not cater to retail customers. Its sales are to thebusiness segment and hence it has been able to pass on inflationary pressures. It does notexpect any major impact dueto current high level of inflation.
F. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:
The Company has in place reasonable internal control system both from the businessprocess and regulatory compliance point of view. The system is reviewed and updated onregular basis. The company is continuously upgrading its internal control systems bymeasures such as strengthening of Information Technology infrastructure and use ofexternal management consultant services.
G. HUMAN RESOURCES/INDUSTRIAL RELATIONS:
The Company has always valued and nurtured its human resources nonethelessglobalization high growth of the Indian economy in recent times and its ambitious growthtargets have made talent attraction and retention amongst the biggest challenges thecompany faces today.
The company has in place a good appraisal system to motivate all the employees. Thecompany believes in continuous development for all its employees and for that company isplanning to frame a program wherein all the employees will be provided training intorelated areas of skill development.
H. CAPITAL EXPANSION AND INVESTMENT:
Last year we incurred a CAPEX of Rs. 1377.67 towards purchase of Plant &Machinery. For F.Y. 2018-19 we envisage higher amount of CAPEX to the tune of about Rs.3000.00 Lakhs.
I. VALUE ADDED STATEMENT
(Rs. in Lackhs)
|Particulars ||2017-18 ||2016-17 ||2015-16 ||2014-15 ||2013-14 |
|Income from Production/Operations ||27864.53 ||25954.04 ||24871.70 ||27229.95 ||24365.14 |
|Add : Other Income ||2366.62 ||2026.98 ||2181.88 ||1146.98 ||783.89 |
|CORPORATE OUTPUT ||30231.15 ||27981.02 ||27053.58 ||28376.94 ||25149.03 |
|Less : Cost of Raw Materials Consumed ||13751.31 ||10852.68 ||11095.02 ||12023.68 ||12718.59 |
|Less : Cost of Traded Goods ||- ||57.07 ||1159.90 ||2962.63 ||1307.76 |
|Less : Other Manufacturing Expenses ||5068.47 ||5964.82 ||4847.21 ||4792.65 ||4192.62 |
|Less : Administrative & Other Expenses ||2207.38 ||2022.55 ||1922.64 ||2173.37 ||1760.33 |
|EQUALS GROSS VALUE ADDED ||9203.99 ||9083.90 ||8028.81 ||6424.61 ||5169.72 |
|Less : Depreciation &Amortization ||1317.04 ||1243.55 ||1014.40 ||913.55 ||935.98 |
|Less : Extra Ordinary/Prior Period Items ||- ||- ||- ||- ||- |
|EQUALS NET VALUE ADDED ||7886.95 ||7840.35 ||7014.41 ||5511.06 ||4233.75 |
|ALLOCATION OF NET VALUE ADDED || || || || || |
|To Personnel ||1007.77 ||921.73 ||831.10 ||778.28 ||619.19 |
|To Taxes (including tax on proposed div.) ||1904.66 ||1666.99 ||1587.87 ||1383.90 ||1087.74 |
|To Creditors (via interest) ||618.18 ||579.11 ||508.07 ||514.48 ||388.89 |
|To Investors (via dividend) ||918.53 ||918.53 ||876.78 ||668.02 ||521.27 |
|To The Company (via retained earnings) ||3437.81 ||3753.99 ||3210.60 ||2166.38 ||1616.66 |
| ||7886.95 ||7840.35 ||7014.41 ||5511.06 ||4233.75 |
Keeping in view the continued good performance future fund requirements of the Companyand for rewarding shareholders your directors are pleased to recommend a dividend @ 110%i.e. Rs. 1.10 per equity share of face value of Re. 1 each fully paid-up Equity Shares[Excluding the Share upon which the Promoter / Member have waived / forgone / his / her /their right to receive the Dividend by him / her / them for the financial year ended 31stMarch 2018]. The dividend shall be paid to members whose names appear in the Register ofMembers as on 21st September 2018.
MANAGEMENT DISCUSSION & ANALYSIS:
Management's Discussion and Analysis Report for the year under review as stipulatedunder the Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 ("Listing Regulations") is presented in aseparate section forming part of the Annual Report.
CONSOLIDATED FINANCIAL STATEMENT:
In accordance with the provisions of the Companies Act 2013 ("the Act") andInd AS 110 - Consolidated Financial Statement read with Ind AS - 28 Investments inAssociates and Ind AS 31 - Interests in Joint Ventures the audited consolidated financialstatement is provided in the Annual Report.
SUBSIDIARIES JOINT VENTURES AND ASSOCIATE COMPANIES:
The Company does not have any Indian Company as Subsidiary. There are two wholly ownedoverseas subsidiaries viz. Sarla Overseas Holdings Ltd (BVI) and Sarlaflex Inc. (USA) andone Step down subsidiary viz. Sarla Europe (LDA) as on 31st March 2018. 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's website atwww.sarlafibers.com.
Pursuant to the provisions of Section 136 of the Act the financial statements of theCompany consolidated financial statements along with relevant documents and separateaudited accounts in respect of subsidiaries are available on the website of the Companyat the link: www.sarlafibers.com.
The Company will make available the Financial Statements of the Subsidiary Companiesto any Member of the Company who may be interested in obtaining the same.
No Company has become or ceased to be a Subsidiary during the year under consideration.
The Company is not having any Holding Company or Joint Venture or any AssociatesCompany.
The salient features of the financial statements of the subsidiaries in pursuance ofSection 129 (3) of the Companies Act 2013 read with Rule 5 of The Companies (Accounts)Rules 2014 are given herein below in prescribed form AOC-1:
(Rs. 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 ||65.04 ||65.04 ||80.62 |
|Number of Shares ||435000 ||989000 ||3 |
|Share Capital ||196.99 ||596.49 ||3.18 |
|Reserve and Surplus ||4853.31 ||(7105.99) ||(7.10) |
|Total Assets ||5697.44 ||15068.02 ||303.72 |
|Total Liabilities (Including Reserves) ||5697.44 ||15068.02 ||303.72 |
|Investments ||3.17 ||5934.20 ||- |
|Turnover ||4595.53 ||1681.33 ||270.04 |
|Profit before Taxation ||1185.21 ||(1512.13) ||17.67 |
|Provision for Taxation ||4.86 ||(203.66) ||4.86 |
|Profit after Taxation ||1180.35 ||(1715.79) ||12.81 |
|Proposed Dividend ||902.51 ||- ||- |
|% of shareholding ||100% ||100% ||60% |
|Country ||British Virgin Island ||United States of America ||Portugal |
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' RESPONSIBILITY STATEMENT:
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statement in terms ofSection 134(3)(c) of the Companies Act 2013:
a. that in the preparation of annual accounts for the year ended 31st March 2018 theapplicable accounting standards had been followed along with proper explanation relatingto material departures for the same;
b. that they had selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at 31st March 2018 and of the profit ofthe Company for that year;
c. that the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;
d. that the Directors had prepared the annual accounts on a 'going concern' basis ande. that the Directors had laid down internal financial controls and such internalfinancial controls are adequate and operating effectively.
f. that the Directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and such systems are adequate and operating effectively.
In compliance with the provisions of Schedule II of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Report on the Corporate Governance isannexed and forms an integral part of this Report. The requisite certificate from theStatutory Auditors of the Company confirming compliance with the conditions of CorporateGovernance is attached to the report of Corporate Governance.
Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013:
The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013.
Internal Complaints Committee (ICC) has been set up to redress complaints receivedregarding sexual harassment. All employees (permanent contractual temporary trainees)are covered under this policy.
The following is a summary of sexual harassment complaints received and disposed offduring the year 2017-18
- No of complaints received: NIL
- No of complaints disposed off: NIL
Internal Control Systems and Their Adequacy:
The Company has an Internal Control System commensurate with the size of itsoperations. The Internal Audit Department monitors and evaluates the efficacy and adequacyof 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 and evaluates the internalcontrol system and submits Quarterly Reports which are placed before the Audit Committeeof the Board.
DIRECTORS AND KEY MANAGERIAL PERSONNEL:
In terms of provisions of the Section 152(6) of the Companies Act 2013 Ms. Neha K.Jhunjhunwala Director retire by rotation at the ensuing Annual General Meeting and beingeligible offers herself for re-appointment. The profile of Director seeking reappointmentpursuant to Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is included in the Annual Report.
Mr. Arun Vaid Independent Director (DIN:00351464) has ceased to be an IndependentDirector of the Company with effect from 12th December 2017. The Board places on recordits appreciation towards valuable contribution made by Mr. Arun Vaid during his tenure asDirector of the Company.
The Board of Directors of the Company on the recommendation of Nomination andRemuneration Committee appointed Ms. Shreya Desai (DIN: 08041995) as an Additional(Independent Non-Executive) Director of the Company with effect from 12th December 2017subject to approval of Shareholders.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149 (6) of the Companies Act 2013 and Regulation16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.
ANNUAL PERFORMANCE EVALUATION:
Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout an annual performance evaluation of its own performance the directors individually aswell as the evaluation of the working of its Audit Committee CSR Committee Nomination& Remuneration Committee Risk Management Committee and Stakeholder RelationshipCommittee. The manner in which the evaluation has been carried out has been explained inthe Corporate Governance Report.
RELATED PARTY TRANSACTIONS:
All related party transactions that were entered into during the financial year were onan arm's length basis and were in the ordinary course of business. There are no materiallysignificant related party transactions made by the Company with Promoters Directors orKey Managerial Personnel which may have a potential conflict with the interest of theCompany at large.
All Related Party Transactions are placed at the meetings of Audit Committee and alsoat the Board meeting for approval. The particulars of contracts or arrangements withrelated parties referred to in sub-section 1 of Section 188 of the Companies Act 2013 arefurnished in Form AOC-2 in 'Annexure A' to this report.
The Policy on materiality of related party transactions and dealing with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: www.sarlafibers.com.
Members may refer to Note No 45 to the Standalone Financial Statement which sets outrelated party disclosures pursuant to Ind AS.
CORPORATE SOCIAL RESPONSIBILITY:
As required under Section 135 of the Companies Act 2013 the Board in its meeting heldon September 30 2014 formulated CSR Committee for formulating the CSR Policy andimplementing the Corporate Social Responsibility (CSR) activities of the Company.
The CSR Committee had met on 27th May 2017. The Company was required to make CSRcontribution aggregating to 2% of average net profits of preceding three financial years.The Committee earmarked Rs. 105.03 Lakhs towards company's CSR activities for financialyear under review. However the Committee was by then in process of identifying areaswhere it could contribute money. Hence the company could not contribute to CSR in time.Efforts would be made to contribute more in the coming years as we feel the sense ofsocial security. The CSR Policy is available on the Company Website atwww.sarlafibers.com.
The Annual Report on CSR activities is attached with this report as 'Annexure B'.
AUDITORS AND AUDITORS' REPORT
CNK & Associates LLP Chartered Accountants Mumbai (ICAI Firm Registration No.101961W) were appointed as the Statutory Auditors of the Company for a term of fiveconsecutive years at the Twenty Fourth AGM of the Company held on 29th September 2017.
They have confirmed that they are not disqualified from continuing as Auditors of theCompany.
In terms of the Companies (Amendment) Act 2017 and vide notification no S.O.1833(E)dt. 7.5.2018 the Ministry of Corporate affairs have done away with the requirement ofratification of the appointment of auditors at each subsequent annual general meeting bydeleting the 1st Proviso to the sub-section (1) of Section 139 of the Companies act 2013.Accordingly the same is now onwards not required to be put up to the members forratification.
The Notes on financial statement referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation adverse remark or disclaimer.
Pursuant to the provisions of Section 148 of the Companies Act 2013 read with Rule 4of the Companies (Cost Records and Audit) Rules 2014 and Rule 14 of the Companies (Auditand Auditors) Rules 2014 and pursuant to the recommendations by the Audit Committee inthat behalf M/s. B.F. Modi &Associates Vapi Cost Accountants (Membership Number:6955) was appointed as Cost Auditors of the Company for carrying out the Audit of CostRecords of Company maintained for the financial year from 1st April 2017 to 31st March2018.
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 CS Ajit Sathe- Proprietor of M/s A. Y Sathe & Co. Company Secretaries inPractice (Registration No.:FCS2899/COP738) to undertake the Secretarial Audit of theCompany. The Secretarial Audit Report is annexed herewith as "Annexure C".
The Secretarial Auditor has made following qualifications / adverse remarks:
I. Under the Companies Act 2013:
a) During financial year 2017-18 the Company has not spent full amounts due i.e. 2% ofaverage net profit of last three financial years towards Corporate Social Responsibilityactivities pursuant to Section 135 of the Companies Act 2013.
b) The Company is yet to file Statement of shares transferred to the Investor Educationand Protection Fund in Form IEPF-4 as required to be made under Section 124(6) of theCompanies Act 2013.
c) The Company is yet to file Form MGT-14 for appointment of Internal Auditor.
d) The Company has continued to give Interest Free Loans to its wholly ownedSubsidiaries during the financial year 2017-18.
Board's Reply to Secretarial Auditors' qualifications/adverse remarks:
I) Under the Companies Act 2013:
1) The Committee formed for CSR Purpose was in process of identifying areas where itcould contribute money and therefore full amount could not be contributed towards CSRobjectives.
2) The Company have already deposited the amount of unclaimed dividend for financialyear ended 31st March 2010 on 22nd November 2017 to IEPF Account. However the ShareTransfer Agent of the company is in the process of transfer of shares to IEPF Account. Assoon as the procedure is completedand The Company will file relevant form with ROC.
3) The Company inadvertently missed to file the MGT 14 to ROC. The same will be filedin Due Course. .
4) As a part of project funding the Company had agreed to give interest free loan toits wholly owned subsidiary and the said commitment continuous to make the projectfinancially viable. Even provisions under FEMA Regulations permit giving of interest freeloans to wholly owned subsidiary Company
Meetings of the Board:
Four meetings of the Board of Directors were held during the year. The particulars ofmeetings held and attended by each Director are detailed in the Corporate GovernanceReport which forms part of this Report.
The Audit Committee comprises two Independent Directors namely Jigar Shah (Chairman)and Parantap Dave and Mr. Madhusudan Jhunjhunwala Whole-time Director. During the yearall the recommendations made by the Audit Committee were accepted by the Board.
Corporate Social Responsibility (CSR) Committee:
The CSR Committee comprises Mr. Madhusudan Jhunjhunwala (Chairman) Mr. Jigar Shah andMr. Parantap Dave.
The Company has established Vigil Mechanism and a Whistle-blower policy in accordancewith provisions of the Act and Listing Regulations. The Vigil Mechanism and whistle-blowerpolicy is out on the Company's website and can be accessed at: www.sarlafibers.comParticulars of Loans given Investments made Guarantees given and securities provided:
Particulars of Loans given Investments made Guarantees given and securities providedalong with purpose for which the loan or guarantee or security is proposed to be utilisedby the recipient are provided in Note No.51of the Standalone financial statements.
Conservation of Energy Technology Absorption and Foreign Exchange earnings &outgo:
The particulars relating to conservation of energy technology absorption foreignexchange earnings and outgo as required to be disclosed under the Act are provided in'Annexure D' to this Report.
Extract of the Annual Return:
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as "Annexure E".
Particulars of Employees and related Disclosures:
During the year under review there was no employee drawing remuneration in excess oflimits prescribed under Rule 5 (2) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014.
Information required pursuant to Section 197 (12) read with Rule 5 of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees:
1. The Ratio of the remuneration paid to each director to the median remuneration ofthe employees of the Company for the financial year 2017-18:
|Name of Director ||Remuneration Paid ||Median Remuneration ||Ratio |
|Mr. Madhusudan S. ||13800000 ||151800 ||90.90x |
|Jhunjhunwala || || || |
|(Chairman Whole- || || || |
|time Director) || || || |
|Mr.Krishnakumar ||13800000 ||151800 ||90.90x |
|M. Jhunjhunwala || || || |
|(Managing Director) || || || |
Independent directors are paid sitting fees for attending board meetings which are notconsidered.
2. The percentage increase in remuneration of each director Chief Financial OfficerChief Executive Officer Company Secretary in the financial year:
|Name of Director ||Remuneration paid ||Percentage Increase in current financial year |
|Mr. Madhusudan S. Jhunjhunwala (Chairman Whole-time Director) ||13800000 ||4.5% |
|Mr.Krishnakumar M. Jhunjhunwala (Managing Director) ||13800000 ||NIL |
|Mr. Mahendra Sheth (CFO & Company Secretary) ||4603208 ||5.84 |
3. The percentage increase in the median remuneration of employees in the financialyear:
4. The number of permanent employees on the rolls of company:
5. Average percentage increase in salaries of non-managerial employees was 7-10% ascompared to average percentage increase in managerial remuneration which was 5-7%
6. The Board affirms that the remuneration paid is as per the Remuneration Policy ofthe Company.
Neither Managing Director nor Whole-time Director of the Company receives anyremuneration or commission from any Subsidiary of the Company.
Your Director state that no disclosure or reporting is required in respect of followingmatters as there were no transactions on these items during the year under review:
" Details relating to Deposits covered under Chapter V of the Act.
" Issue of Equity shares with differential voting rights as to voting dividend orotherwise.
" Issue of shares (including sweat equity shares) to employees of the Companyunder any scheme save and except Employees' Stock Options Plan referred to in this Report.
" The Company does not have any scheme of provision of money for the purchase ofits own shares by employees or by trustees for the benefit of employees.
" No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations in future.
" No fraud has been reported by the Auditors to the Audit Committee or the Board.
Your Directors wish to place on record their appreciation of the dedicated efforts byemployees at all levels. The Directors also wish to place on record their word of sincereappreciation to the bankers the investors the vendors the customers and all otherbusiness associates for their continued support.
| ||FOR AND ON BEHALF OF BOARD OF DIRECTORS |
| ||MADHUSUDAN S. JHUNJHUNWALA |
|Place: Mumbai ||Chairman and Whole Time Director |
|Date: 14th August 2018 ||DIN: 00097254 |