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Spentex Industries Ltd.

BSE: 521082 Sector: Industrials
NSE: SPENTEX ISIN Code: INE376C01020
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52-Week high 2.02
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Buy Price 0.30
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Sell Price 0.30
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OPEN 0.30
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VOLUME 1
52-Week high 2.02
52-Week low 0.29
P/E
Mkt Cap.(Rs cr) 3
Buy Price 0.30
Buy Qty 104.00
Sell Price 0.30
Sell Qty 8500.00

Spentex Industries Ltd. (SPENTEX) - Director Report

Company director report

Dear Members

Your Directors are pleased to present the 26th Annual Report on the business andoperation of the Company along with the Audited Financial Statements for the financialyear ended at March 31 2018.

Financial Results

The highlights of the financial results for the year ended 31st March 2018 are asunder:

(Rs in Lakh except EPS)

2017-2018 2016-2017
Particulars Consolidated Standalone Consolidated Standalone
Revenue from operations 47997.69 47997.69 78230.04 78214.20
Other Income 9707.09 1127.32 7905.77 7904.94
Profit/(Loss) before depreciation finance costs and Tax (PBDIT) inclusive of other income 5909.64 (2670.13) 836.99 1429.25
Finance Costs 1938.56 877.12 6246.78 5084.38
Depreciation and amortization exp. 1057.63 1057.63 1388.73 1091.90
Profit/(Loss) before Exceptional items
Extraordinary items and tax (PBT) 2913.45 (4604.88) (6798.52) (4747.03)
Exceptional items (expenses) (14502.58) (12203.82) (24125.40) (2099.87)
Profit/(Loss) before tax 11589.13 (16808.70) (30923.92) (6846.90)
Tax expenses (44.13) (44.13) - -
Net Profit/(Loss) (11545.00) (16764.57) (30923.92) (6846.90)
EPS (12.86) (18.67) (34.45) (7.63)

Management Discussion and Analysis Report

Textile Industry

Textile industry plays a pivotal role in providing one of the most basic needs ofpeople-clothing. It is not only second largest employment provider after agriculture butis one of the critical drivers of Indian economy. Globally textile industry has seen anunprecedented growth paving the way for increasing role of Indian Textile companies inthe global textile industry.

Global Textile Market Overview

The global textile and apparel industry has grown over the years and is expected tofurther grow along with growing consumption of textile and apparel products in developingcountries and a gradual economic recovery of major developed markets. In 2015 all fourBRIC nations appear among the top markets having a cumulative share of approximately 23%with China leading the pack. Rest all largest markets are developed countries.

Global apparel market size is expected to grow at a CAGR of 4% from US$ 1.6 trillion in2015 to US$ 2.6 trillion in 2025. It is expected that apparel market size of the countrieslike India and China will grow at a CAGR of 12% and 10% respectively in coming 10 yearswhereas the growth rate of other countries will be comparatively very low.

Apparel and Home Textiles are the faster growing traded categories and have shown agrowth rate of 5% and 4% respectively in the last 10 years. Fabric and fibre categorieshave grown at a CAGR of 3% each while the filament and yarn categories have shown a CAGRof only 2% over the same period.

It is expected that the combined apparel market size of China and India will become US$795 Bn. by 2025 and surpass the combined market size of USA and Europe which will be US$775 Bn. in 2025. Trends facilitating the growth in India are increasing youth populationand high purchasing power shift from need- based purchase to aspiration- based purchasegrowing urbanization increasing the market demand increased penetration of technology andgreater access to internet resulting in significant growth in online retail sales.

Indian Textile Market Overview

The Indian domestic consumption of textile and apparel is valued at US$ 80 bn. in 2015.Within this apparel retail contributes US$ 59 bn. technical textiles contribute US$ 15bn. and home textiles contribute US$ 6 bn. The domestic apparel market worth US$ 59 bn.has registered a robust CAGR of 10% since 2005 despite global demand uncertainties. Indiandomestic market has performed better than the largest consumption regions like US EU andJapan where depressed economic conditions led to lower demand growth. Due to presence ofstrong fundamentals the domestic apparel market size of India is expected to reach alevel US$ 180 bn. by 2025.

Overview of the Global Trade/Economy

Global textile and apparel trade grew at a rate of 4 % over the last decade to reach avalue of US$ 776 bn. in 2015. During the same period India's export of textile andapparel grew at a comparatively higher rate of 8% to reach an export value of US$ 37 bn.India enjoys the position of being the second largest exporter of textile products to theworld with share of 5% of global trade and potential to increase share significantly infuture. Global yarn trade stood at US$ 27 bn in 2015 representing 4% of the total textileand apparel trade of world. In last few years the global trade of yarn has reduced;however global yarn trade registered growth at a CAGR of 3% from its value of US$ 21 bnin 2005.

During the year under review as noted by the World Bank global economic growthsentiments improved much stronger than expected with the recovery in investmentmanufacturing and trade which continues as commodity-exporting developing economies alsobenefit from firming commodity prices. In its latest India Development Update the WorldBank said India's economy will grow 7.3% in this fiscal year 2018-19. The Government'spush towards manufacturing sector and digital economy and "Make in India"initiatives will further provide the thrust for fuelling economic growth in times tocome.

Overall Company Performance Review

Your Company has integrated Cotton Polyester & blended Yarn manufacturingfacilities in India with a capacity of 214416 spindles and stable customer base withlong term mutually beneficial business relationship both in India and abroad. Your companyhas presence across the entire value chain of cotton and polyester yarn with ability tooffer varied products as required by the Indian and global markets.

Business environment for Textile Industry where your company operates remained highlyvolatile in recent past and its adverse impact affected the performance of the company.During the year under review the operations of your Company were adversely impacted dueto combination of macro affairs like legged affect of demonetization huge disruption intextile industry post introduction of Goods & Service Tax Act (GST) and poor cashflow. In addition to the above other factors viz. (a) gap in demand/supply of yarn (b)Increase in Raw Material Cost and Power tariff (c) constraints of working capital leadingto non optimal utilization of plant capacities (d) Poor domestic demand and overallsubdued sentiments in the business world and (e) Steep fluctuation in Foreign Currency& Fuel etc. also adversely impacted the performance of the Company.

Your Company's Exports have failed to cheer up due to lack of adequate working capitalas well as lack of demand and competition from neighboring countries and also due to hugedisparity between spot cotton prices and yarn prices. As a result there has beensignificant decline in EBIDTA levels which have resulted in huge financial strain on theCompany. Efforts are being continuously made to make the Company withstand such pressuresand grow within the highly competitive environment.

Management Perception on Opportunities Risks Concern & Outlook

Opportunities & Outlook

Your Company has been taking several initiatives for restructuring of businessprocesses improving plant efficiency and cost savings which should bear fruits in thefuture. Your Company has approached the banks/financial institutions to bailout theCompany from the present situation by restructuring its loans and to extend financialassistance to address its requirement of working capital and other needs. Hopefully yourCompany would be successful to get restructuring of its debts done in due course. Withadequate working capital and a strong export base built over the years your Company willcontinue to offer market driven quality product mix for progressively improving itsoperational profile and outcomes.

Your Company is in process of reviewing its strategy and tools to find ways to increaseits turnover reduce its costs and achieve a higher value addition so that it could comeout with the positive result in the near future. Management is keeping a close watch onvarious threats/risks being faced by the company and taking all appropriate steps toimprove the performance of the Company.

With due strategic focus on efficient plant operations cost cutting close monitoringof operations by management and other administrative & operational initiatives takenby the company and keeping in view the market trends & the emerging businessscenario your Company is confident of achieving improvement in its operationalperformance in near future.

Risks and Concerns

Though we welcome implementation of the GST but during the initial period of 2017 -18Indian economy had to bear the twin shocks i.e after effects of demonetization and themid-year rollout of the new indirect tax system by implementing Goods & Services Tax(GST) without putting adequate infrastructure in place which resulted in reduced cashflow and sluggish sales. The Indian textile sector is also facing major challenges in theform of rising production costs due to increasing wages power and interest cost whichhas an adverse cascading effect on the industry as a whole. Further due to fluctuatingcotton and yarn prices and uncertainties in the foreign exchange market increase in powercost introduction of GST and lack of adequate working capital the EBIDTA levels mayremain stagnant during the year. However your directors and management would take allnecessary measures to hedge these risk and increase the EBIDTA levels in coming quartersand with that your Company expects business environment to improve going forward. With thestrong domestic consumption trend and initiatives formulated by the company with regard toproduct mix waste material control & other related issues your directors areconfident that sales volumes would reasonably shore up with consequent strengthening ofthe margins in due course. We also hope to get rid of the teething problems which aroseout of implementation GST very soon.

Internal Control Systems and Adequacy

The Company has an internal control system commensurate with the size scale andcomplexity of its operations. The Internal Audit Department monitors and evaluates theefficacy and adequacy of internal control systems accounting procedures and policies atall locations of the Company and its subsidiaries. Based on the internal audit reportsprocess owners undertake corrective actions in their respective areas and thereby furtherstrengthen the controls significant audit observations and corrective actions thereon arepresented to the Audit Committee of the Board.

Human Resources/Industrial Relations

The Company and its management value the talent commitment and dedication of itsemployees and acknowledge their contribution. All employees in the Company work as a teamand integral part of the family sharing their ideas and concerns through discussions andintranet network installed across the units. Industrial Relations scenario at all unitscontinues to be healthy and enthusiastic.

Indian Accounting Standards (Ind AS)

The Company has drawn up its accounts for the first time under Indian AccountingStandards (Ind - As) as prescribed under Section 133 of the Companies Act 2013 read withthe Companies (Indian Accounting Standards) Rules 2015 as amended with the date oftransition to Ind-As as 1st April 2016.

Cautionary Statement

Statements in this Management Discussion and Analysis Report describing the Company'sobjectives projections estimates expectations or predictions may be 'forward-lookingstatements' within the meaning of applicable securities laws and regulations. Actualresults could differ materially from those expressed or implied. Important factors thatcould make a difference to the Company's operations include raw material availability andprices cyclical demand and pricing in the Company's principal markets changes inGovernment regulation tax regimes economic developments within India and the countriesin which the Company conducts business and other incidental factors includingavailability of adequate working capital etc.

Financial Analysis and Performance Review

During the financial year ended at 31st March 2018 the Company's operations wereadversely impacted due to continuing constraints of working capital leading to nonoptimal utilization of plant capacities low production volumes high power tariffincrease in Fiber/Raw Material cost and delayed realization of Government Revenue onaccount of implementation of G.S.T mechanism being still perfected. The Company'sturnover and other income on standalone basis for the year under review was Rs.49125.01 Lakh as against Rs. 86119.14 Lakh in the previous year. The Net Loss has beenregistered at Rs. 16764.57 Lakh against a net loss of Rs. 6846.90 Lakh in the previousyear. The loss during the year under review has been higher by Rs. 96 Crores due towrite-off/ provision made with regard to erosion of its investment made in itssubsidiary Amit Spinning Industries Limited.

Yarn Manufacturing

During the year under review the Company on standalone basis has manufactured30372.50 MT of yarn as compared to 44969.66 MT of yarn produced during the previousyear. Decrease in Production has been mainly due to non-availability of adequate workingcapital not able to run plants to their optimal capacities and slow progress inrestructuring by the Banks due to their cautious approach under the changed environment.

Subsidiaries

The Company has following three subsidiaries including step down subsidiary as onMarch 31 2018.

(a) M/s Amit Spinning Industries Limited (for which Resolution Plan has been approvedby NCLT under IBC 2016). (b) M/s Spentex Netherlands B.V. ( SNBV a Netherlands basedSubsidiary) (c) M/s. Schoeller Textile Netherlands B.V. (a Netherlands based step downsubsidiary )

There are no associate companies or joint venture companies within the meaning ofsection 2(6) of the Companies Act 2013 ("Act").

Amit Spinning Industries Ltd. (ASIL) India: ASIL has its manufacturing facilitiesat Kolhapur Maharashtra having a capacity of 30672 spindles. ASIL's operations remainsuspended since 11th August 2015 due to erosion of its net worth and financialconstraints including lack of working capital facility; and the said unit had been closedsince 1st July 2017 after completion of applicable legal formalities.

ASIL due to its financial constraints had approached to National Company Law Tribunal("NCLT") for initiating Corporate Insolvency Resolution Process under Insolvency& Bankruptcy Code 2016 and Hon'ble NCLT vide its order dated 1st August 2017 hadadmitted the petition and appointed Mr. Parveen Bansal as Resolution Professional.Further Hon'ble NCLT Principal Bench New Delhi has vide its order dated 31st July2018 approved the resolution plan as submitted by the Resolution Applicants for ASIL.ASIL consequent to such orders shall no longer be subsidiary of the Company onimplementation of Resolution Plan.

Spentex Netherlands B.V Netherlands (SNBV) & M/s. Schoeller Textile NetherlandsB.V (STNBV):

The Company holds 18200 ordinary shares in SNBV and remaining 1800 ordinary shares ofSNBV are held by the promoters of the Company. STNBV is wholly owned subsidiary of SNBV.As Schoeller Litvinov k.s. erstwhile step-down subsidiary of the Company had been takenover by secured creditors accordingly the Company has made provision of SNBV'sinvestment in Schoeller Litvinov k.s. in its books of accounts.

Consolidated Financial Statements

As stipulated by Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 ("SEBI Listing Regulations 2015") theCompany has prepared Consolidated Financial Statement in accordance with the applicableaccounting standards as prescribed under the Companies Act 2013 ("the Act").The Consolidated Financial Statement reflects the results of the Company and that of itssubsidiaries. As required under Regulation 34 of SEBI Listing Regulations 2015 theAudited Consolidated Financial Statement together with the Independent Auditors' Reportthereon is annexed and the same forms part of this Report.

Pursuant to the provisions of Section 129(3) of the Companies Act 2013 read with Rule5 of Companies (Accounts) Rules 2014 a statement containing salient features offinancial statements of subsidiaries of the Company in Form AOC-1 is attached to theAccounts.

In accordance with the provisions of Section 136 of the Companies Act 2013 theaudited financial statements including consolidated financial statements of the Companyand accounts in respect of each of the subsidiary companies are available on website ofthe Company www.spentex.net. These documents shall also be kept open for inspection duringbusiness hours at the Registered Office of the Company on or before ensuing Annual GeneralMeeting. The Company will also make available these documents upon request by any Memberof the Company interested in obtaining the same.

Share Capital

As on 31st March 2018 the Company's issued and paid up capital stands Rs.897720350/- divided into 89772035 fully paid up equity shares of Rs. 10/- each.During the year under review the Company has not issued any share capital. Further theCompany has also not issued any share with differential Voting Rights/Sweat Equityshares/under Stock Option Scheme (ESOS) earlier and during the year. The Company has noscheme or provision of money for purchase of its own shares by employees or by trusteesfor the benefit of its employees. Hence the details under rule 16 (4) of Companies (ShareCapital and Debentures) Rules 2014 are not required to be disclosed.

The Company had issued 500 non-convertible debentures of Rs. 10.00 lakh each howeverduring the year under review no debenture has been issued. However the maturity date ofredemption of aforesaid NCDs expired on 31st March 2018 and the Company is in process toseek extension in the redemption of such NCDs till 31st March'2019 or till therestructuring of its debts as the case may be.

Directors and Key Managerial Personnel

As on 31st March 2018 the Company had the following Whole-time Key ManagerialPersonnel (KMPs) in accordance with the provisions of Section 203 of the Companies Act2013:

1. Mr. Ajay Kumar Choudhary - Chairman

2. Mr. Mukund Choudhary - Managing Director

3. Mr. Kapil Choudhary - Deputy Managing Director

4. Mr. Yash Jain - Chief Financial Officer

In accordance with the provisions of section 152(6) of the Act and the Articles ofAssociation of the Company Mr. Ajay Kumar Choudhary (DIN:0051629) retires by rotation atthe ensuing Annual General Meeting (AGM) and being eligible offers himself forre-appointment. The Board recommends his re-appointment.

Change in Directors or Key Managerial Personnel (KMPs)

During the period under review the following appointment/re-appointment/cessation havebeen made in directors/Key Managerial Personnel in terms of provisions of the CompaniesAct 2013 read with SEBI Listing Regulations 2015:

1. Ms. Kamal Kapur Independent Director and Mr. Samir Kumar Nath Nominee Director (onbehalf of State Bank of India) resigned from the Board of Directors of the Company w.e.f1st October 2017 and 1st December 2017 respectively.

2. Mrs. Charul Jain has been appointed as an Additional Director (Non-Executive andIndependent Directors) of the Company w.e.f 29th November 2017.

3. Mrs. Shivani Gupta and Mr. Kapoor Chand Garg have been appointed as AdditionalDirectors (Non-Executive and Independent Directors) of the Company w.e.f 17th July 2018.

4. Mr. Rajinder Kumar Jain has been appointed as Nominee Director (representing AxisBank Ltd) w.e.f 28th May 2018.

5. Mr. Bharat Kapoor has been appointed as Company Secretary and whole-time KeyManagerial Personnel of the Company w.e.f. 28th May 2018 in place of Mr. Prakash ChandraThakur who resigned as Company Secretary of the Company w.e.f 30th December 2017.

6. Mr. Yash Jain was appointed as Chief Financial Officer of the Company w.e.f 18thDecember 2017 and he subsequently resigned from the said position w.e.f 25th June 2018.

Based on the recommendation of the Nomination and Remuneration Committee at its meetingheld on 8th December 2017 Board of Directors of the Company at its meeting held on 12thFebruary 2018 has approved the re-appointment of Mr. Kapil Choudhary as Deputy ManagingDirector of the Company for a further period of 5 years with effect from 2nd December2018 and payment of remuneration to him for a period of three years i.e. April 1 2018 to31st March 2021 in accordance with Schedule V of the Companies Act 2013 and approval isbeing sought from the Members vide special resolution at the ensuing Annual GeneralMeeting.

Further your Board also recommends the appointment of Mrs. Shivani Gupta and Mr.Kapoor Chand Garg as Independent Directors of the Company for a period of threeconsecutive years from the date of their original appointment in the Company.

None of the Directors are disqualified under Section 164(2) of the Companies Act 2013.

Number of Meetings of the Board

During the year under review four meetings of the Board were held. The detailedinformation of the Board Meetings is mentioned in the Corporate Governance Report whichforms part to this report.

Declaration by Independent Directors

The Company has received necessary declaration from each Independent Director underSection 149(7) of the Companies Act 2013 stating that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and SEBI ListingRegulations 2015.

The non-executive directors of the Company had no pecuniary relationship ortransactions with the Company other than getting the sitting fees and reimbursement ofexpenses incurred by them for the purpose of attending meetings of the Company.

Board evaluation

In terms of the applicable provisions of the Companies Act 2013 and SEBI ListingRegulations 2015 annual evaluation of the performance of the Board its committees andof individual directors has been made. The Board and the Nomination and RemunerationCommittee reviewed the performance of the individual directors on the basis of laid downcriteria.

Independent Directors of the Company had in their separate meeting held on 12thFebruary 2018 reviewed the performance of non-independent directors and Chairperson ofthe Company taking into account the views of Executive and Non-Executive Directors.Further the Independent Directors hold unanimous opinion that the Non-IndependentDirectors as well as the Chairman bring to the Board abundant knowledge in theirrespective field and are experts in their areas. Besides they are insightful convincingastute with a keen sense of observation and have a deep knowledge of industry. They havebeen performing reasonably well under the prevailing circumstances.

Nomination and Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors Senior Management and theirremuneration. The aforesaid Policy is stated in the Corporate Governance Report and isavailable on the website of the Company www.spentex.net . During the year under reviewneither the Managing Director nor the Whole-time Directors of the Company received anyremuneration or commission from any of its subsidiaries. Mr. Ajay Kumar Choudhary Mr.Mukund Choudhary and Mr. Kapil Choudhary the promoter directors of the Company have notreceived any remuneration for the period from May 2017 to March 2018 from the Companyin view of the financial difficulties being faced by the Company.

Committees of the Board

Currently the Board has seven committees namely the Audit Committee the Nomination& Remuneration Committee Corporate Social Responsibility Committee StakeholdersRelationship Committee the Risk Management Committee Banking Committee and FundManagement Committee respectively.

Audit Committee

Audit Committee of the Board has been constituted as per the SEBI Listing Regulationsand section 177 of the Companies Act 2013. The composition and other details of the AuditCommittee are provided in Corporate Governance Report which is part of this Report.

Corporate Social Responsibility

In accordance with the provisions of Section 135 of the Companies Act 2013 theCorporate Social Responsibility (CSR) Committee of the Board has been constituted and theCompany has framed a CSR Policy in compliance with the provisions of the Act and the sameis placed on the Company's website www.spentex.net .The composition of committee isdisclosed in Corporate Governance Report forming part to this report.

Risk Management

The Board of Directors of the Company has constituted a Risk Management Committee tooversee the risk management plan in the Company. The details of Committee and its terms ofreference are set out in the Corporate Governance Report forming part of the Board'sReport. The Risk Management Policy has also been hosted on the website of the Companywww.spentex.net .

A detailed note on the composition of the Board and its various committees is providedin the Corporate Governance Report forming part to this Annual Report.

Vigil Mechanism

The Company has framed and implemented a vigil mechanism named as Whistle Blower Policyto deal with instances of fraud and mismanagement if any in terms of Section 177 of theCompanies Act 2013 and Regulation 22 of SEBI Listing Regulations 2015. The details ofthe Whistle Blower Policy are provided in the Corporate Governance Report and also postedon the website of the Company.

Directors' Responsibility Statement

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

(a) in the preparation of the annual accounts for the financial year ended 31st March2018 the applicable accounting standards have been followed along with proper explanationrelating to material departures;

(b) the 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 as at March 31 2018 and of the profitand loss of the company for that period;

(c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the company and for preventing and detecting fraud and otherirregularities;

(d) the directors have prepared the annual accounts on a going concern basis;

(e) the directors have laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively; and

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

Related Party Transactions

In compliance with the provisions of the Act and SEBI Listing Regulations 2015 allrelated party transactions are placed before the Audit Committee for prior approval andalso before the Board wherever necessary. A prior omnibus approval of the Audit Committeeis obtained on a yearly basis for the transactions which are of a foreseen and repetitivein nature in terms of Regulation 23(2) of SEBI Listing Regulations 2015.

During the year under review all Contracts/arrangements/transactions entered into bythe Company with related parties were on an arm's length basis and largely in the ordinarycourse of business details of which are provided in the notes to the financialstatements. Accordingly there is no transaction to be reported in Form AOC- 2 in terms ofSection 134 of the Act read with Companies (Accounts) Rules 2014. There were nomaterially significant related party transactions with related parties during thefinancial year under review which may have a potential conflict with the interest of theCompany at large.

The policy on Related Party Transactions is available on the Company's websitewww.spentex.net.

Significant and Material Orders passed by the Regulators or Courts

During the year under review there are no significant or material orders passed by theRegulators / Courts which would impact the going concern status of the Company and itsfuture operations.

AUDITORS

Statutory Auditors

Pursuant to Section 139 of the Companies Act 2013 and rules framed there under M/s.R. N. Marwah & Co. LLP Chartered Accountants (Firm Registration No. 001211N) wereappointed as Statutory Auditors of the Company at 25th Annual General Meeting held on 25thSeptember 2017 for a term of three consecutive years to hold office from the conclusionof 25th Annual General Meeting till conclusion of 28th Annual General Meeting subject toratification of their appointment at every Annual General Meeting. However as perCompanies Amendment Act 2017 ratification of the appointment of Statutory Auditors isnot mandatory w.e.f 7th May 2018.

The Company has received a consent and eligibility certificate from M/s R.N. Marwah& Co. LLP Chartered Accountants for the financial year 2018-19.

Auditors Report

During the year under review the Statutory Auditors has not found any instances offraud committed against the Company by its officers or employees and accordingly reportingto the audit committee or Central Government under Section 143 (12) of the Companies Act2013 is not required. The Auditors' Report read with the Notes to Accounts isself-explanatory and does not call for any further explanation under Section 134 of theCompanies Act 2013 except for the responses in respect of some observations as mentionedhere in below.

Management's view on Auditor's Observations

Directors' response to the various observations of the auditors made in their reporteven though Management's view has been explained wherever necessary through appropriatenotes to accounts however such views are reproduced hereunder in compliance with therelevant legal requirements:

1. Auditor's Comment: The Company has not charged to statement of Profit andloss interest expense of Rs.536522381/- for the quarter and Rs. 961067255/- up toprevious quarter respectively and related penal interest and other charges if any inrespect of delay in repayment of borrowings from banks. Therefore Auditors are unable tocomment on the adequacy of interest and other charges provided for in the statement ofProfit & Loss.

Management's View: The Company's accounts had become Non performing assets (NPA)with the banks and as per extant applicable guidelines the lenders have stopped charginginterest from the company on their outstanding debts amount from the dates on which theiraccounts become NPA. Further company is in advanced discussion with its lenders for acomprehensive deep restructuring and the same is expected to be implemented in currentfinancial year. In view of the above the Company has not charged to statement of profitand loss account interest expenses and related other charges.

2. Auditor's Comment: The Company's net worth has deteriorated and as of31st March 2018 the Company's current liabilities exceeded its total assets by Rs.3928309074/-. These events or conditions indicate that a material uncertainty existsthat may cast significant doubt on the Company's ability to continue as a going concern.

Management's View: The Company has approached the banks/financial institutions tobailout the Company from the present situation by restructuring its loans and to extendfinancial assistance to address its requirement of working capital and other needs.Hopefully the Company would be successful to get restructuring of its debts done in duecourse. With adequate working capital and a strong export base built over the years theCompany will continue to offer market driven quality product mix for progressivelyimproving its operational profile and outcomes.

3. Auditor's Comment: The Company has made a provision for value of longterm Investment amounting to Rs. 204469921/- in Amit Spinning Industries Limited(ASIL) a subsidiary of the Company and written off recoverable amounting of Rs.755756460/- due from above subsidiary. During the year ASIL moved to National CompanyLaw Tribunal (NCLT) for resolution of its liabilities. Further NCLT vide its order dated01.08.2017 has admitted the ASIL's petition and had appointed Resolution Professional forASIL. Keeping in view of ongoing proceedings of ASIL in NCLT under the Insolvency andBankruptcy Code 2016 Auditors are unable to determine the amount of liability that mayarise on account of Corporate Guarantee given on behalf of subsidiary and compliance ofIND-AS 109 in respect to accounting of corporate guarantee.

Management's View: NCLT vide its order dated 31st July 2018 has approved theResolution Plan for ASIL and as per Resolution Plan as approved by NCLT all the debts ofsecured lenders will get finally satisfied and extinguished after final payment of theoffer as accepted in the approved Resolution Plan and afterwards there will not be anyamount left for payment/distribution to employees creditors and statutory authorities.

4. Auditor's Comment: The Company has not allotted shares against the shareapplication amount of Rs. 110950000/- which was brought in by the promoters in morethan one installment under restructuring scheme approved by the Bankers.

Management's View: Due to non receipt of necessary undertakings/approvals from theConsortium Bank the company could not issue shares against received share applicationmoney and the Company is still awaiting for aforesaid undertakings/approvals.

5. Auditor's Comment: The outstanding balance as on 31st March 2018 inrespect of certain trade receivables trade payables and loans & advances are subjectto confirmation/reconciliation and consequential adjustment if any from the respectiveparties.

Management's View: The management however does not expect any materialvariations.

6. Auditor's Comment: The Company is required to deposit/invest a sum of atleast 15% of the amount of its debentures maturing during the financial year 2017-18 inone or more of the prescribed methods vide circular no 04/2013 dated February 11 2013issued Ministry of Corporate Affairs.

Management's View: In view of financial difficulties and heavy losses of theCompany the company has applied to Securities & Exchange Board of India (SEBI)seeking exemption for maintaining at least 15% of the amount of its debenture and approvalis still awaited.

Cost Auditors

Pursuant to Section 148 and other applicable provisions of the Companies Act 2013 andthe Companies (Cost Records and Audit) Rules 2014 maintenance of cost records isrequired by the Company and accordingly such accounts and records are made andmaintained. Mr. Rajesh Goyal Cost Accountant of M/s. K G Goyal & Associates CostAccountants (Firm Registration No.000024) has been appointed as Cost Auditors to carry outaudit of the Cost Accounts maintained by the Company for the financial year 2018-19 at aremuneration of Rs. 50000/-. Remuneration payable to the Cost Auditor is subject toratification by the members of the Company at the ensuing AGM.

Secretarial Auditor

The Board appointed M/s. Loveneet Handa & Associate Practicing Company Secretary(having CP No. 10753 & Membership No. 9055) as Secretarial Auditor to conductsecretarial audit for the financial year 2017-2018 pursuant to Section 204 of theCompanies Act 2013 read with the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. The Secretarial Audit Report for the financial year ended March31 2018 in Form MR-3 is annexed herewith as Annexure I to this Report in compliance withthe provisions of Section 204 of the Companies Act 2013.

The qualifications/observations/remarks made by the Secretarial Auditors andmanagement's view thereon are given in the aforesaid Report itself.

Internal Auditors

The Company has a dedicated and independent internal Audit Department reportingdirectly to Audit Committee of the Board. Mr. Prakash Chandra Thakur Internal Auditor ofthe Company has resigned w.e.f the closing hours of 30th December 2017 and Mr. AmreshKumar Jha has been appointed as Internal Auditor of the Company w.e.f 28th May 2018.

Internal Financial Control Systems and Adequacy

The Company has in place an adequate system of internal control to ensure that theresources of the Company are used efficiently and effectively all assets are safeguardedand protected against loss from unauthorized use or disposition and the transactions areauthorized recorded and reported correctly financial and other data are reliable forpreparing financial information and for maintaining accountability of assets. The internalcontrol is supplemented by extensive programme of internal audits review by managementdocumented policies guidelines and procedures. All operating parameters are continuouslymonitored and controlled.

Extract of the Annual Return

As provided under section 92(3) and 134 (3) (a) of the Companies Act 2013 the extractof annual return as on the financial year ended 31st March 2018 in the prescribed FormMGT-9 is placed on the website of the Company www.spentex.net .

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

Company has implemented energy conservation initiatives as well as methods and suchaction has resulted into major savings in energy consumption as well as in cost control.The information as required to be disclosed under Section 134(3)(m) of the Companies Act2013 read with Rule 8 of The Companies (Accounts) Rules 2014 is set out in the Annexure- 2 to this Report.

Particulars of Employees

The statement containing particulars of employees as on 31st March 2018 as requiredunder section 197(12) of the Act read with Rule 5(2) & 5(3) of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 as amended is givenherein under:

Name Designation Remuneration Recieved (Rs.) (Per Month) Qualification Exp. In years Date of Birth Date of Commencement of the employment Last employment held by the employee before joining the company
1. Mr. Ajay Kumar Choudhary Chairman 460000/- B.Com 50 30-Oct-1947 5-May-2004 -
2. Mr. Mukund Choudhary Managing 460000/- B.Com 25 22-Aug-1971 5-May-2004 -
Director
3. Mr. Kapil Choudhary Dy. Managing 460000/- B.Com 25 19-Jun-1973 5-May-2004 -
Director
4. Mr. Yash Jain* CFO 450000/- B.Com & MBA 17 1-Jan-1981 9-Dec-2017 J.M.Financial ARC
5. Mr. L. N. Kaushik* President 635984/- B.Tech (Text) 30 1-Mar-1967 19-May-2006 -
6. Mr. Pankaj Sharma Sr. Vice 339085/- B.Tech 31 8-Jan-1965 1-May-2009 -
President-Mktg. (Textile)
7. Mr. Seemit Bhargava* Sr. Vice 339085/- B.Com 28 11-Oct-1968 23-Mar-2012 Eternit Everest
President-Mktg. Limited
8. Mr. Manish Gupta AVP-Operations 226666/- B.Sc. B.Tech 28 31-May-1966 5-Dec-2008 -
(Text)
9. Mr. Wasudeo Varade Sr. General 215000/- B.Tech (Text) 26 12-Dec-1968 12-Aug-1993 -
Manager
10. Mr. Koushal Madan GM-MIS 187450/- ICWA-Inter 23 10-Jan-1971 30-Non-2009 Auro Spining Mills

*As on the date of this report Mr. Yash Jain Mr. L.N. Kaushik and Mr. Seemit Bhargavaare not associated with the Company.

Mr. Ajay Kumar Choudhary Mr. Mukund Choudhary and Mr. Kapil Choudhary being thepromoters and executive directors are related to each other. There has been no increasein the remuneration of directors CFO and Company Secretary during the financial year2017-18. There was no employee who received remuneration in excess of limit prescribedunder Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014. The Company affirms that remuneration is as per the remuneration policy ofthe Company.

The detailed statement as required under Section 197(12) of the Companies Act 2013read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is available for inspection at the Registered Office of the Company duringworking hours and any member interested in obtaining such information may write to theCompany Secretary and the same will be furnished on request.

Deposits

The Company has not accepted or renewed any deposit during the year and there are nooutstanding and/or overdue deposits as at 31st March 2018.

Particulars of Loans Guarantees or Investments

Details of loans Guarantees and Investments covered under the provision of Section 186of the Companies Act 2013 are disclosed in the Financial Statements.

Dividend

In vie of loss suffered by the Company for the financial year ended on 31st March2018 your Directors do not recommend payment of any dividend.

Transfer of Reserves

During the year the Company has not transferred any amount to reserves.

Material changes and commitments affecting the financial position of the Companybetween the date of Board Report and end of Financial Year

There is no such material change and commitment affecting the financial position of theCompany which have occurred between the end of financial year of the Company to which thefinancial statements relate and the date of the report.

Change in name of the Company

The members of the Company have by way of postal ballot approved the SpecialResolutions (a) for change of name of the Company from Spentex Industries Limited to CLCIndustries Limited and (b) Amendment of Memorandum of Association of the Company to bringcontents of MOA in line with draft suggested in Table A of Schedule I to the CompaniesAct 2013. The aforesaid resolutions are deemed to have been approved on 19th June 2018(last date of The Company (being the last date for receipt of duly filled postal ballotforms and e-voting). The Registrar of Companies NCT of Delhi & Haryana has approvedthe change in name of the Company from Spentex Industries Limited to CLC IndustriesLimited w.e.f. 19th July 2018 and issued new Certificate of Incorporation of the Company.

Prevention of Sexual Harassment

To foster a positive workplace environment free from harassment of any nature theCompany has in place a policy on Prevention of Sexual Harassment of Employees. The Companyhas complied with provisions relating to constitution of internal complaint committee toaddress and redress complaints of sexual harassment at the workplace in accordance withthe Sexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act2013. During the year the Company has not received any complaint on sexual harassment.

Information Technology

Information Technology continues to be an integral part of the Company's businessstrategy. Recently the Company has taken proactive technology and compliance software forthe purpose of ensuing and monitoring timely regulatory and statutory compliancesalongwith system controls in respect of risk and governance. The Company is working on SAPplatform integrating all its units located at different places/locations its businessprocesses financial parameters customer transactions and people effectively on realtime basis. Comprehensive security strategies have been framed and the controls have beendesigned to mitigate the risks and enhanced resistance to cyber-attacks.

Change in the nature of Business

During the year there is no change in the nature of the business of the company.

Corporate Governance and Management Discussion and Analysis

As stipulated under SEBI Listing Regulations 2015 a report on Corporate Governance isattached separately as a part of the Annual Report . and Management Discussion andAnalysis is included in this Report.

Listing of Shares

Presently Company's shares are listed and traded at the BSE Ltd. and National StockExchange of India Ltd.

Conclusion

The Company enjoys leadership position in domestic market with strong competitiveadvantage in the export segment. However due to sluggish market shortage of workingcapital and consequent losses in the recent past the Company is currently inconsolidation mode. We shall however continue to explore the opportunities to makeinvestments and progress to further strengthen our leadership position once ongoing debtrestructuring by the existing lenders is completed.

Acknowledgements

Your Directors take this opportunity to thank the Financial Institutions BanksCentral and State Governments authorities Regulatory authorities Stock Exchangesstakeholders customers and vendors for their continuous support and co-operation and forthe trust reposed by them in the Management. Your Directors also wish to thank all theemployees of the Company for their commitment and contributions.

For and on behalf of Board of Directors
Sd/-
Ajay Kumar Choudhary
Place: New Delhi Chairman
Dated: 14th August 2018 DIN - 00051629