Your Directors have pleasure in presenting the Thirty Sixth Annual Report together withAudited Financial Statements of the Company for the year ended 31st March2017. The financial statements have been prepared after giving accounting effect to thedemerger of the business of Spinning Unit-1 along with connected wind mills in favour ofShiva Mills Limited (Formerly known as STYL Textile Ventures Limited) a wholly ownedsubsidiary of your company. The financial results of the company excluding the revenueand profits of the Demerged business undertakings have been summarised and given below:-
| ||Financial Year |
| ||2016-2017 |
|Profit before Interest and Depreciation ||4990.28 |
|Less: Interest ||2060.81 |
|Profit before Depreciation ||2929.47 |
|Less: Depreciation ||1282.57 |
|Profit before Tax ||1646.90 |
|Less : Provision for Income Tax || |
|- Current Tax ||379.72 |
|- Deferred tax Liability (Net) ||214.09 |
|Profit after Tax ||1053.09 |
|Add : Surplus brought forward from last year ||369.57 |
|Excess provision for dividend distribution tax (FY 2015 - 2016) ||2.57 |
|Amount available for appropriation ||1425.23 |
|Appropriations : || |
|Transfer to General Reserve ||- |
|Surplus carried over to Balance Sheet ||1425.23 |
|Total ||1425.23 |
In the above results gross revenue of Rs.l 7169.77 laksh and profit after tax ofRs.453.31 lakhs earned in Shiva Mills Limited the Resulting Company are not included.
Your Directors are happy to recommend payment of dividend @ Rs.l .60/- per equity shareof Rs.l 0/- each (equal to 16 % of the paid-up share capital). The dividend will be paidon 12962713 equity shares of Rs.l 0/- each held by shareholders of your company who holdshares on the record date. The dividend together with distribution tax will absorbRs.249.61 lakhs.
As the scheme of demerger takes retrospective effect from the appointed day dividend @Rs. 1.60/- per equity share of Rs.l 0/- each (equal to 16% of the paid up capital) inrespect of 8641808 equity shares to be allotted by the Resulting Company as per Scheme ofDemerger will be paid by Shiva Mills Limited the resulting company as dividenddistribution for the financial year 2016-17 out of profits of the said Company.
The dividend recommended by Board is based on overall post tax profits of the Demergedand Resulting Company. SCHEME OF DEMERGER OF SPINNING UNIT-1 WITH CONNECTED WIND MILLS:
The National Company Law Tribunal (NCLT) vide their proceedings dated 24th August 2017in Company Petition No.359 & 360 of 2016 renumbered as TCP/22 & 23/CAA/2017approved the scheme for demerger of the business of Spinning Unit -1 along with connectedwind mills in favour of Shiva Mills Limited (formerly known as STYL Ventures Limited) awholly owned subsidiary of Shiva Texyarn Limited (Demerged Company). The demerger comes into effect from 1st April 2015 the appointed day fixed under the Scheme. In the accountsof the Company for the financial year 2016-17 accounting effect has been given for thedemerger by exclusion of assets and liabilities vested in the resulting company as onthe appointed day and for subsequent transactions between your company and the ResultingCompany carried out till 31 st March 2017.
Re-Organisation of the Capital
As per the Scheme of Demerger the Share Capital of the De-merged Company will bereduced from Rs.216045210 divided into 21604521 equity shares of Rs.l 0/- each toRs.l 29627130 divided into 12962713 equity shares of Rs 10/- each through pro-ratareduction of shareholding of the shareholders in the Demerged Company retaining 3 equityshares of Rs. 10 each out of every 5 equity shares of Rs. 10/- each held in the DemergedCompany on the Record Date of 6.11.2017. The said shares will not be available fortrading from 3.11.2017 till the trading permission is obtained for the said shares postthe re-organisation.
Allotment of Shares by the Resulting Company
Shiva Mills Limited the Resulting Company will allot and issue to the shareholders ofShiva Texyarn Limited 2 Equity shares of Rs. 10/- each fully paid up for every 5 equityshare of Rs. 10/- each held by the shareholders on the record date. Accordingly 8641808equity shares of Rs. 10/- each will be allotted and issued by Shiva Mills Limited whichwill be adjusted from Demerger Adjustment Account and transferred to the Share CapitalAccount for reduction of Share Capital as per Scheme of Demerger.
The existing Equity share capital for an amount of Rs.500000/- represented by 50000equity shares of Rs. 10/- each held by Shiva Texyarn Limited in Shiva Mills Limited willbe cancelled and transferred to Demerger Adjustment Account as per the Scheme ofDemerger. Consequently Shiva Texyarn Limited will cease to be the Holding Company of ShivaMills Limited. The balance amount in the Demerger Adjustment Account will be transferredand adjusted against General Reserve of Shiva Texyarn Limited.
REVIEW OF OPERATIONS:
Your Company achieved the following performance from the business undertakingsretained by the company as demerged company as per Scheme of Demerger approved by theNCLT; hence to facilitate comparison previous year figures given in brackets in thefollowing paragraphs for review of performance pertain to the business undertakingsretained byyourcompany.
During the year under review the spinning unit produced 12341.51 tonnes (12282.12tonnes) of yarn of which 2772.85 tonnes (1699.68 tonnes) was used to produce knittedfabrics. The spinning unit sold 9722.74 tonnes (10751.06 tonnes) of yarn out of whichexports accounted for 2399.30 tonnes (3063.76 tonnes) and 2692.03 tonnes (1651.06 tonnes)of knitted fabrics. Further during the year under review the Company sold 3730.17 tonnes(3674.65 tonnes) of waste cotton of which exports accounted for 770.2 tonnes (900.66tonnes). The Wind Mills with aggregate installed capacity of 18.145 MW generated 277.68lakh units of Wind Electricity as against 165.48 lakh units in the last year. The entirepower generated by Wind Mills was utilized for captive consumption at the textile mill.Unlike in the earlier years TANGEDCO was able to evacuate most of the wind energygenerated by the Wind mills as a result of which the performance of the Windmills improvedsignificantly during the year under review.
The performance of the Spinning Unit in terms of profitability was affected by steepfall in prices of yarn due to supply/demand mismatch in the second half of the year.However the significant improvement in Wind Electricity generated for captive use helpedthe Company to achieve improved profit during the year under review.
The Company's Technical Textile divisions viz. Coating Lamination and Processing havestabilized their operations and have contributed to the overall performance of the Companyin a significant way. The Bag division operating under the brands Wulf and Wulf Pro isimproving its market share gradually. The Company which started supplying Home Textiles toM/s Ikea Distribution services during lastyear has improved its performance during theyear. Moreover the Company which obtained an order from the Ministry of Defence for supplyof Nuclear Biological Chemical (NBC) suits shipped the first consignment during the year.The overall sales turnover of the Company from all divisions aggregated to Rs.37767.95Lakhs (Rs.30019.99 Lakhs) of which exports including Merchant exports amounted toRs.7697.47 Lakhs (Rs.7040.06 Lakhs) the exports contributing 20.38% (23.45%) of theoverall sales of the Company.
PROSPECTS FOR THE CURRENT YEAR
The Spinning segment of Textile Industry continues to face mismatch of prices of yarnwith reference to cost of raw material and other inputs. The prices of cotton is likely toremain low in the current season due to increase in domestic production. Hence withexpected increase in demand for cotton yarn both in domestic and export markets theperformance of the Spinning unit is set to improve in the remaining part of the ensuingyear.
The contribution from Technical Textile products is likely to improve significantly inthe coming years as new markets are explored. The recently started divisions of Garmentsare also expected to contribute to the overall earnings and profits of the Company in theensuing years and hence the overall performance of these divisions augur well for theCompany in the years to come.
Considering the above the overall performance of the Company as a whole is likely tobe better in the years to come.
EVENT SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS
There are no material changes and commitments affecting the financial position of theCompany except transfer of assets and liabilities for giving effect to the order fromNational Company Law Tribunal Division Bench Chennai was recorded after Demergerpursuant to the Scheme of Arrangement to the close of the Financial Year.
The Company has not accepted any public deposits within the meaning of Section 73 to 76of the Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014during the year under review and there are no outstanding deposits which are pending forrepayment.
In line with requirements of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 your Company is committed to the principles of good Corporate Governanceand continues to adhere good corporate governance practices consistently.
A separate section is given on Corporate Governance Management Discussion and Analysisalong with a certificate from the Auditors of the Company regarding compliance withconditions of Corporate Governance as stipulated under Regulation 34(3) read withSchedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015which forms part of this Annual Report.
EXTRACT OF ANNUAL RETURN
An extract of the Annual Return as on 31st March 2017pursuant to thesub-section (3) of Section 92 of the Companies Act 2013 which forms part of the report inForm MGT - 9 is enclosed as Annexure -1
With effect from 31.08.2017 Dr S V Kandasami & Smt Sujana Abirami were inductedinto the Board Sri S V Alagappan resigned as Managing Director however he continues to beNon- Executive Chairman and Sri SKSundararaman was appointed as Managing Director of theCompany.
Sri S V Alagappan Director (DIN 00002450) is required to retire by rotation at theensuing Annual General Meeting he is eligible and seeks re-appointment.
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149 (6) of the Companies Act 2013.
KEY MANAGERIAL PERSONNEL
The Company has appointed the following persons as Key Managerial Personnel during theyear.
|Sri S KSundararaman ||Managing Director |
|Sri RSrinivasan ||Company Secretary |
|Sri C Krishna Kumar ||Chief Financial Officer |
The Audit Committee comprises of:
|1. Sri KN VRamani ||- Chairman (Non- Executive Independent Director) |
|2. Sri C S K Prabhu ||- Member (Non- Executive Independent Director) |
|3. Sri S KSundararaman ||- Member (Executive Director) and |
|4. Sri S Palaniswami ||- Member (Non- Executive Independent Director) |
The Board has implemented the suggestions made by the Audit Committee from time totime.
EVALUATION OF BOARD OF DIRECTORS
Pursuant to the provisions of the Companies Act 2013 and Regulation 17 (10) of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 IndependentDirectors at their meeting without participation of non Independent Directors andmanagement considered and evaluated the Boards' performance performance of the Chairmanand Managing Director.
The Board has carried out an annual evaluation of its own performance and performanceof the individual Directors as well as the Committees of Directors.
During the year under review four Board Meetings were conducted. The details of thesame have been given in the Corporate Governance Report under Regulation 17 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 forming part of thisReport.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The Company has not given any loans or guarantees governed under the provisions ofSection 186 of the Companies Act 2013. The details of the investments made by Company aregiven in the notes to the financial statements.
ESTABLISHMENT OF VIGIL MECHANISM /WHISTLE BLOWER POLICY
The Company has established a Vigil Mechanism for Directors and employees to reportconcerns about unethical behaviour actual or suspected fraud or violation of the Compan/scode of conduct or ethics. The policy has been posted in the website of the Company viz. www.shivatex.co.in .
POLICY ON NOMINATION AND REMUNERATION COMMITTEE
The Board of Directors have framed a policy setting out the framework for payment ofRemuneration to Directors Key Managerial Personnel and Senior Management Personnel of theCompany. The policy is explained as part of the Corporate Governance Report. The Committeeensures that:
a. The level and composition of remuneration is reasonable and sufficient to attractretain and motivate Directors of the quality required to run the Company successfully
b. Relationship of remuneration to performance is clear and meets appropriateperformance benchmarks and
c. Remuneration to Directors Key Managerial Personnel and senior management involves abalance between fixed and incentive pay reflecting short and long term performanceobjectives appropriate to the working of the Company and its goals.
RELATED PARTY TRANSACTIONS
All related parly transactions that were entered into during the financial year in theordinary course of business were on arm's length basis. Hence provisions of Section 188 ofthe Companies Act 2013 are not attracted. Further no materially significant related partytransactions were made by the Company with Promoters Key Managerial Personnel or otherdesignated persons which may have potential conflict with interest of the company atlarge. Hence reporting under AOC-2 is not required. Approval of Audit Committee wasobtained for transactions of repetitive nature on annual basis. All related parlytransactions were placed before the Audit Committee and Board of Directors for theirreview. The policy on Related Parly Transactions is available in the website www.shivatex.co . in.
The Company has one subsidiary viz. Shiva Mills Limited (Formerly STYL TextileVentures Limited). The statement pursuant to Section 129 (3) of the Companies Act 2013containing the salient features of the financial statements of subsidiary Company formspart of this Annual Report.
A separate statement containing the salient features of the Financial Statements of theSubsidiary in Form AOC-1 is furnished:
SIGNIFICANT/MATERIAL ORDERS PASSED BY THE REGULATORS/COURTS
There are no significant and material orders passed by the Regulators/Courts that wouldimpact the going concern status and the Company's operation in future.
DIRECTORS' RESPONSIBILITY STATEMENT
As stipulated in Section 134 (5) of the Companies Act 2013your Directors confirm that:
a) Your Directors have followed in the preparation of the annual accounts theapplicable accounting standards with proper explanation relating to material departures;
b) Your Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;
c) Your Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) Your Directors have prepared the annual accounts on a going concern basis;
e) Your Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and
f) Your Directors have devised proper system to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.
As per Section 139 of the Companies Act 2013 the tenure of the present Auditors of theCompany M/s V K S Aiyer & Co Chartered Accountants Coimbatore ends at theconclusion of this annual general meeting. The Board based on the recommendation of theAudit Committee have proposed the appointment of M/s Deloittee Haskin & Sells LLP asAuditors for a term of 5 years and a suitable resolution as set out in the notice is beingplaced before the shareholders for their approval.
Pursuant to provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company appointedMr R Dhanasekaran Practicing Company Secretary to undertake the Secretarial Audit of theCompany. The report is attached herewith as Annexure - II
No adverse qualifications/comments have been made in the said report by the PracticingCompany Secretary.
Pursuant to section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 as amended from time to time the Board of Directors on therecommendation of Audit Committee have appointed Sri M Nagarajan Cost AccountantCoimbatore as Cost Auditor to conduct Cost Audit of the Company for the financial year2017-2018 with remuneration. As required under the Companies Act 2013 a resolutionseeking members' approval for the remuneration payable to the Cost Auditor forms part ofthe Notice convening Annual General Meeting.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Company has an Internal Control System commensurate with the size scale andcomplexity of its operations.
The Company has an Internal Audit Department which monitors and evaluates theefficiency and adequacy of internal control system in the Company its compliance withoperating systems accounting procedures and policies at all locations of the Company. Thescope and authority of the Internal Audit function is defined in the Internal AuditManual. To maintain its objectivity and independence the Internal Audit function reportsto the Chairman of the Audit Committee and to the Chairman &Managing Director.
Based on the report of internal audit function corrective actions are taken in therespective areas and thereby strengthen the controls. Significant audit observations andrecommendations along with corrective actions thereon are presented to the Audit Committeeof the Board.
STATEMENT ON RISK MANAGEMENT POLICY
Pursuant to section 134(3) (n) of the Companies Act 2013 and Regulation 21 of theSEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Company hasconstituted a Risk Management Committee. The Committee has developed a Risk ManagementPolicy and implemented the same. The details of the Committee and its terms of referenceare set out in the Corporate Governance Report forming part of the Boards Report. Atpresent the Company has not identified any element of risk which may threat the existenceof the Company.
CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Company has constituted Corporate Social Responsibility Committee (CSR) whichshall recommend to the Board the activities to be undertaken by the Company as specifiedin schedule VII recommend the amount of expenditure to be incurred on such activities andmonitor the CSR policy of the Company. The company has partially spent the amountstipulated under the requirements of the Act.
Corporate Social Responsibility Committee constituted by the Board with effect from21.5.2014 comprised of the following Directors.
|1. Sri S V Alagappan ||Chairman |
|2. Sri S KSundararaman ||Managing Director |
|3. Dr KRThillainathan ||Independent Director |
The CSR activities and its related particulars is enclosed as Annexure III STATUTORYDISCLOSURES
I. Conservation of Energy and others - The particulars required to be included in termsof Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) of the Companies(Accounts) Rules 2014 for the year ended 31st March 2017 relating toConservation of Energy etc. is enclosed as Annexure IV.
II. Remuneration of Directors and other details -The information required under Section197(12) of the Companies Act 2013 read with Companies Appointment and Remuneration ofManagerial Personnel) Rules 2014 and forming part of the Directors' Report for the yearended 3111 March 2017 is provided as Annexure V to this report.
HUMAN RESOURCES AND INDUSTRIAL RELATIONS
During the year under review the human relations continued to be very cordial. TheBoard of Directors wishes to acknowledge the contribution of the employees at all levelsof the organisation.
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 redresscomplaints for sexual harassment. All employees (permanent contractual temporarytrainees) are covered under this policy. The Company has not received any complaintsfordisposal during the year.
Your Directors acknowledge with gratitude the timely assistance and help extended bythe Bankers for having provided the required bank facilities. Your Directors wish to placeon record their appreciation of the contributions made by the employees at all levels forthe continued good performance of yourcompany.
By Order of the Board
S V ALAGAPPAN
1st November 2017