You are here » Home » Companies » Company Overview » Surat Textile Mills Ltd

Surat Textile Mills Ltd.

BSE: 530185 Sector: Industrials
NSE: N.A. ISIN Code: INE936A01025
BSE 00:00 | 24 Jun 7.63 0.36






NSE 05:30 | 01 Jan Surat Textile Mills Ltd
OPEN 7.63
VOLUME 1447712
52-Week high 7.84
52-Week low 2.03
P/E 11.74
Mkt Cap.(Rs cr) 169
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 7.63
CLOSE 7.27
VOLUME 1447712
52-Week high 7.84
52-Week low 2.03
P/E 11.74
Mkt Cap.(Rs cr) 169
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Surat Textile Mills Ltd. (SURATTEXTILE) - Director Report

Company director report

Dear Shareholders

Your Directors present their 74th Annual Report on the performance of the Companytogether with the Audited Financial Statements for the financial year ended 31st March2020. The Management's Discussion and Analysis Report as required under the Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 forms part of this report.

Financial Highlights

The financial performance of the Company for the financial year ended 31st March 2020is summarised below:

(Rs. in Crore)

Particulars 2020 2019
Revenue from Operations 180.28 216.28
Other income 4.61 4.07
Operating Profit / EBITDA (including other income) 12.01 12.18
Less: Finance Costs 0.76 1.08
Profit before Depreciation & Amortisation Expenses 11.25 11.10
Less: Depreciation & Amortisation Expenses 0.46 0.35
Profit before tax 10.79 10.75

Review of Operations

In terms of Order issued by Government of India/State Government/ Local Administrationfor containment of COVID-19 in the country directing nationwide lock down in the entirecountry w.e.f. 25th March 2020 and in consideration of the safety of our workersemployee and the surrounding community the Company decided to shut down its manufacturingfacilities at Village Jolva Taluka Palsana Dist. Surat Gujarat in phased manner.

The spread of coronavirus pandemic to different countries in the last quarter andresulting lockdown by various countries worldwide leading to shutdown of manufacturingplants including the raw material suppliers added to the slowdown of overall demand andweakening of the various commodities. The supply chains came under pressure due toadditional restrictions and constraints in material movements and port clearances duringthe lockdown.

Your Company's total revenue for the year 2019-20 was Rs.180.28 Crore as compared toRs.216.28 Crore for the previous year a decline of about 16.65%. The fall in sales wasprimarily due to lower price realisation competition and subdued market conditions.

Despite lower revenues we achieved Operating Profit / EBITDA of Rs.12.01 Crore in FY20as compared to Rs.12.18 Crore in the previous year. This was possible despite achallenging year that show an oil-price driven crash in raw material prices leading toinventory losses during some part of the year and weak market sentiments.

Your Company earned Profit before Tax of Rs.10.79 Crore for FY20 as compared toRs.10.75 Crore in previous year. The total sale of chips in volume term for the year FY20was higher at 22379 MT as compared to 20803 MT in the previous year. With better capacityutilisation the production of Chips during FY20 was also higher at 23325 MT as comparedto 22046 MT in the previous year.

Close watch on raw material prices and strict inventory management has helped theCompany in securing continued raw material supplies and protected against adverse impactof raw material price volatility.

The Company continued its efforts for expanding customer base developing new productsand exploring further export avenues. The focus will be on how the Company balance volumegrowth pricing and profitability.

The Company continues to have a clear price and product leadership in its specialtychips segment especially cationic. It continues to be perceived in the market as apremium producer of quality chips.

Better working capital management helped the Company to reduce its Interest/FinanceCosts from Rs.1.08 Crore in FY 19 to Rs.0.76 Crore for FY 20.

The Company resumed manufacturing operation at its Polycondensation Plant at VillageJolwa in a gradual manner however owing to lack of demand for the specialty chips coupledwith migration of labour the operations have been temporarily suspended. The productionat polyester spinning division of the Company at Village Jolwa continued to remainsuspended during the year 2019-20 also due to competitive pressure and market conditions.

The Board of Directors of the Company have considered the proposal forsell/transfer/dispose of the assets of 'Spinning Division' and the Polycondensation Plantat Village Jolwa along with Land & Building and the Inventories on an "as iswhere is" basis. The Directors are of the view that the current economic slowdown dueto COVID-19 pandemic may impact the valuation of the proposed transactions. Accordinglythe management of the Company is reconsidering and evaluating the proposal to fetch betterprice in the interest of the Company.

During the last quarter of the year under review the incidence of Covid-19 developedinto a global pandemic. The directors have assessed the impact of Covid-19 on the businessat the balance sheet date and there are no significant changes as of the balance sheetdate.


In order to strengthen the reserves of the year your directors consider it prudent toplough back the profits and not to recommend any dividend for the financial year 2019-20.

Transfer to Reserves

The Board of Directors have decided to retain the entire amount of profits for FY2019-20 in the Retained Earnings.

Nature of Business

Your Company is known to be a producer of polyester chips and differentiated partiallyoriented yarn (POY). During the year under review there was no change in the nature ofbusiness of the Company.

Overview of the economy

India's economy slowed down to 3.1% in Q4 on the back of the coronavirus pandemicsuperimposed on a prolonged slowdown. Economic growth slowed to an 11-year low of 4.2% in2019-20 against 6.1% expansion in 2018-19. Although this is the lowest growth rate in thelast 44 quarters it is still higher than the 2.2% growth predicted by most economists andratings analysts.

A country-wide lock down was enforced by the government in late March 2020 due to theCOVID-19 pandemic. The economic impact of this has been so devastating that manufacturingand services activity came to a grinding halt resulting in demand falling tounprecedented lows that fed into PMI indices going into a free fall. The country is nowfaced with enormous job losses migration of labour increased expenses in medical andhealth infrastructure lower tax collections and high fiscal deficit.

The manufacturing sector contracted further recording a negative growth of 1.4%.Public administration defence and other services grew at 10.1%. "The most disturbingnews is that the three components of demand have fallen -- consumption demand has slowedwhile investments and exports are both in negative territory"

Economic activity remained largely subdued and tighter financial conditions impingedupon activity. The Government of India has responded to this economic fallout byannouncing two stimulus packages and liquidity easing measures to fuel the economicactivity. The lockdown is being removed in a phased manner and efforts are being made torevive the manufacturing services and other productive activities.

During the financial year 2019-20 market sentiments remained volatile since the startof the financial year due to escalating trade tensions between US and China fears ofdisruptions to supply chains prolonged uncertainty on Brexit and geopolitical tensions inMiddle East.

Amongst the growth enabling pillar of the economy the service sector is the largestcontributor to the nation's GDP followed by the manufacturing sector. With the intent toboost the domestic

manufacturing sector output the government has spearheaded several campaigns reformsand initiatives like make in India Start-up India to help the sectors increase its sharein the overall GDP.

Industry Scenario

The Indian textile sector is a major contributor to the Indian economy in terms of GDPindustrial production and the country's total export earnings. The Indian textile industryis passing through a turbulent phase. With the global downturn ravaging economies thetextile sector is one of the worst hit.

During the year under review the market of polyester filament yarn remained subdued.Higher raw material prices the slow pace of growth in demand and increase in supply werecontributing factors. The PFY spinning industry has gone through a difficult period.

India is the second largest producer of man-made fibres (MMF) in the world withpresence of large plants having state-of-the art technology. Indian Manmade fibre (MMF)textile industry is vibrant and growing. Demand for man-made fibre (MMF) textiles all overthe world is increasing as a substitute for cotton amid changes in global fashion trends.

India is presently self dependent in the entire textile value chain. It has sufficientraw materials / feedstock for the manufacturing MMF textiles. Adequate feedstockavailability reduces India's dependency on other countries for raw materials and able toproduce MMF textiles of international standard to meet the global demand.

Raw material prices of PTA and MEG fluctuated widely during FY 20 from a high of aroundUSD 857 and USD 604 per MT to a low of around USD 515 and USD 475 per MT respectively.

Opportunities Challenges Threats Risks and Concerns

The rampant spread of COVID-19 outbreak across borders and geographies has severelyimpacted almost the whole world and triggered significant downside risks to the overallglobal economic outlook. The lockdowns and restrictions imposed on various activities dueto the pandemic have posed challenges to all the businesses of your Company.

The Indian textile & clothing industry has been facing severe challenges in theaftermath of demonetization GST implementation global economic slowdown US-China tradewar and recently the Coronavirus outbreak in China.

Uncertain availability and volatility in prices of key raw materials is the majorconcern. The industry is dependent on the international price of crude oil which directlyimpacts the price of both our key raw materials PTA and MEG. Any crude supply shock couldhave an adverse impact on the performance of the Company.

In view of the projected growth scenario in Indian Polyester Filament Yarn industry weexpected and improved utilisation levels and margins in the industry and for the Company.Import of raw materials has been minimised owing to better negotiations with local PTAsupplies who have undertaken capacity expansion. The Company's strategic location in theheart of the textile industry of Surat and close to Hazira Port minimizes infrastructuralweakness generally faced by the industry.

The Indian economy provides a large opportunity to the Company to market its products.Slower growth of the Indian economy and stress in sectors such as textiles could impactthe performance of the Company.

The Company is exposed to risks attached to various statutes and regulations. TheCompany is mitigating these risks through regular reviews of legal compliances throughinternal as well as external compliance audits.

Business Outlook

The outlook for industry and the Company in the near term can be viewed with cautiousoptimism.

Fiscal FY 2021 began with a lockdown with almost zero economic activity in Indiawhich took strict measures to contain the spread and intensity of the pandemic. With anextended lockdown in Q1-F21 the impact on GDP is expected to be significant with the riskof negative growth for FY 2021 an all-time low in many years.

As the economy gradually normalises it is expected that both export and import growthmay recover although the current differential between their growth rates is still likelyto remain somewhat wide in the near future.

We expect the business conditions to remain stable for your Company. However the worldmarkets are uncertain at present and majority countries are facing economic issuesaffecting their growth.

The prospects of synthetic yarn industry in short term is linked with the movements ofcrude oil prices in international markets however the long term prospects depend with thegrowing Indian economy and demand growth in end-use products.

Continued slowdown in overall textile industry and slowdown in economic growth inrecent months can impact sale growth for current year. The export market is not veryencouraging either.

However the outlook is heavily contingent upon the intensity spread and duration ofthe pandemic.

Financial Performance

Operational and Financial Performance

Total revenue from operation of the Company for FY20 declined by 16.65% at Rs.180.28Crore as compared to Rs.216.28 Crore in FY19.

Earnings before Interest Tax and Depreciation (EBITDA) for the year FY20 wasmarginally lower at Rs.12.01 Crore as compared Rs.12.18 Crore in the year FY19.

Other income for the year ended 31 March 2020 at Rs.4.61 Crore has increased fromRs.4.07 Crore in the previous year.

Material cost

Cost of raw material for FY20 constituted 80.83% of total expenses as compared to84.14% in previous year FY19. The cost of both major raw materials remained fluctuatingduring the year.

The material cost as a percentage of revenue decreased from 81.54% in the previous yearto 78.06% in the current year.

Energy cost

Power and Fuel cost for FY20 constituted 5.21% of total expenses. Optimizing power andfuel costs is one of the major drivers for improving the Company's operationalperformance.

Finance costs

The interest expense for the year ended 31 March 2020 was lower at Rs.0.77 Crore ascompared to Rs.1.08 Crore in the previous year.

Employee benefits expense

The employee benefits expense or personnel cost as a percentage of revenue hasincreased from 1.02% in the previous year to 1.20% in the current year. Overall employeecosts during the year FY20 was at similar levels as previous year.

Depreciation amortisation and impairment expense

Depreciation amortisation and impairment expenses for FY20 was at Rs.0.46 Crore ascompared to Rs.0.35 Crore in previous year. The increase in depreciation is on account ofadditional provision for lease liability.

Other expenses

Other expenses as a percentage of revenue for FY20 have increased from 13.69% in theprevious year to 16.63% in the current year.

Subsidiary Joint Venture and Associate Companies

The Company has no subsidiary / joint venture / associates for the financial year ended31st March 2020. Accordingly the requirements pursuant to Section 129(3) of theCompanies Act 2013 read with Rule 5 of the Companies (Accounts) Rules 2014 is notapplicable.

Indian Accounting Standard (Ind AS)

As mandated by the Ministry of Corporate Affairs the Company has adopted IndianAccounting Standards ('Ind AS') from 1st April 2017 with a transition date of 1st April2016. The financial results of the Company for the year 2019-20 have been prepared inaccordance with Indian Accounting Standards ('Ind AS') notified under section 133 of theCompanies Act 2013 ('Act') read with Companies (Indian Accounting Standards - Ind AS)Rules 2014 as amended and other recognised accounting practices and policies to the extentapplicable.


Your Company has repaid all the Secured Rupee Term Loan from banks. There was nooutstanding term loan at the beginning or at the end of financial year 2019-20. No freshTerm Loan was availed by the Company during the year. The Company has not availed anyworking capital facility from Banks during the year. With the better inventory managementyour Company's working capital requirements were met out from internal accruals only.

Adoption of new set of Memorandum & Articles of Association

The Board of Directors of the Company at its meeting held on 21st July 2020 subject tothe approval of shareholders of the Company by Special Resolution approved the proposalfor adoption of new set of Articles of Association of the Company and Memorandum ofAssociation of the Company in conformity with the Companies Act 2013.

Necessary Resolutions for the adoption of new set of Memorandum of Association andArticles of Association of the Company have been included in the notice convening theensuing AGM and requisite details have been provided in the explanatory statement of theNotice.

Corporate Governance

Your Company reaffirms its commitment to Corporate Governance and is fully compliantwith the conditions of Corporate Governance stipulated in Clause 'C' of Schedule V onAnnual Report pursuant to Regulation 34(3) of SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

A certificate from M/s Sharp and Tannan Statutory Auditors of the Company confirmingcompliance to the conditions of Corporate Governance as stipulated under SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 is annexed to Report onCorporate Governance. The auditor's certificate for the year 2019-20 does not contain anyqualification reservation adverse remark or disclaimer.

Directors and Key Managerial Personnel

At the 73rd Annual General Meeting of the shareholders of the Company held on 3rdSeptember 2019 Ms. Kruti Kothari was appointed as an Independent Director for a periodof 5 (five) consecutive years commencing from 9th July 2019 and upto 8th July 2024.

Further the Board of Directors at the recommendation of Nomination and RemunerationCommittee re-appointed Mr. Ketan A. Jariwala (DIN: 02095540) as an Independent Directorof the Company for a second term of 4 (four) years with effect from 26th August 2020 upto10th August 2024 subject to approval of shareholders of the Company at the ensuing AnnualGeneral Meeting.

In accordance with the provisions of Section 152 of the Act and the Articles ofAssociation of the Company Mr. Manikant R. Momaya (DIN: 00023993) will retire by rotationat the ensuing Annual General Meeting of the Company and being eligible has offeredhimself for re-appointment. The Board recommends his re-appointment.

Your Company has received declarations from all the Independent Directors confirmingthat they meet with the criteria of independence as prescribed under Section 149(6) of theCompanies Act 2013 and under Regulation 16 (1) (b) of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015. Further pursuant to Section 164(2) of theCompanies Act 2013 all the Directors have provided declarations in Form DIR- 8 that theyhave not been disqualified to act as a Director.

A brief resume of directors being appointed / re-appointed along with the nature oftheir expertise their shareholding in your Company and other details as stipulated underRegulation 36 (3) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is appended as an annexure to the Notice of the ensuing Annual GeneralMeeting.

Key Managerial Personnel ('KMP')

The following have been designated as the Key Managerial Personnel of the Companypursuant to Sections 2(51) and 203 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014:

1. Mr. Manikant R. Momaya Managing Director

2. Mr. Yogesh C. Papaiya Wholetime Director & Chief Financial Officer (CFO)

3. Ms. Hanisha Arora Company Secretary and Compliance Officer

Independent Directors

In terms of Section 149 of the Act Mr. Harishchandra Bharucha Mr. Ketan A. Jariwalaand Ms. Kruti Kothari are the Independent Directors of the Company. The Company hasreceived declarations from all the Independent Directors confirming that they meet thecriteria of independence as prescribed under Section 149(6) of the Act and Regulation16(1) (b) of the Listing Regulations and are independent from the management. They are notliable to retire by rotation in terms of Section 149(13) of the Act.

The Board is of the opinion that the Independent Directors of the Company possessrequisite qualifications experience and expertise in the fields of auditing taxfinancial corporate governance business management etc. and that they hold the requiredstandards of integrity.

The Independent Directors of the Company are in the process of taking requisite stepstowards the inclusion of their names in the data bank of Independent Directors maintainedwith the Indian Institute of Corporate Affairs in terms of Section 150 of the Act readwith Rule 6 of the Companies (Appointment & Qualification of Directors) Rules 2014.

During the year the Non-Executive Directors of the Company had no pecuniaryrelationship or transactions with the Company other than sitting fee for the purpose ofattending the meetings of the Board and committees of the Board of which they are themembers.

Separate Meeting of Independent Directors

In terms of requirements under Schedule IV of the Companies Act 2013 and Regulation 25(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 aseparate meeting of the Independent Directors was held on 14th February 2020.

The Independent Directors at the meeting inter alia reviewed the following:-

• Performance of Non-Independent Directors and Board as a whole.

• Performance of the Chairman of the Company taking into account the views ofExecutive Directors and Non-Executive Directors.

• Assessed the quality quantity and timeliness of flow of information between theCompany Management and the Board that is necessary for the Board to effectively andreasonably perform their duties.

Familiarisation Programme for Independent Directors

All the Independent Directors of the Company are made aware of their roles andresponsibilities at the time of their appointment through a formal letter of appointmentwhich also stipulates various terms and conditions of their engagement.

Pursuant to Regulation 25(7) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 ("SEBI Listing Regulations") the Company imparted variousfamiliarisation programmes for its Directors including Industry Outlook at the BoardMeetings Regulatory updates at Board and Audit Committee Meetings covering changes withrespect to the Companies Act SEBI Listing Regulations Prevention of Insider TradingRegulations Framework for Related Party Transactions Meeting with Senior Executive(s) ofyour Company etc.

The Directors are provided with all the documents to enable them to have a betterunderstanding of the Company its various operations

and the industry in which it operates. Executive Directors and Senior Managementprovide an overview of the operations and familiarise the new Non-Executive Directors onmatters related to the Company's values and commitments.

Pursuant to Regulation 46 the details required are available on the website of yourCompany at policies.aspx

Declaration by Independent Director

For the Year 2019-20 all the Independent Directors of the Company have given theirdeclaration to the Company that they meet the criteria of independence as laid down underSection 149(7) read with Section 149(6) of the Companies Act 2013 and Regulation 16 ofthe Listing Regulations and affirmed compliance with Code of Ethics and BusinessPrinciples as required under Regulation 26(3) of SEBI (LODR) Regulations 2015 (asamended). The Appointment and Tenure of the Independent Directors including code forIndependent Directors are available on the website of the

Code of Conduct for Directors and Senior Management

All Board members and Senior Management personnel have affirmed compliance with theCode of Conduct for the year 2019-20. A declaration to this effect signed by the ManagingDirector of the Company is contained in this Annual Report. The Managing Director and CFOhave certified to the Board with regard to the financial statements and other matters asrequired under regulation 17(8) of the SEBI Listing Regulations 2015.

Code for Prevention of Insider Trading

Your Company has adopted a Code of Conduct to regulate monitor and report trading bydesignated persons and their immediate relatives as per the requirements under theSecurities and Exchange Board of India (Prohibition of Insider Trading) Regulations 2015.This Code of Conduct also includes code for practices and procedures for fair disclosureof unpublished price sensitive information which has been made available on the Company'swebsite at policies.aspx

Nomination and Remuneration Policy

The Board of Directors of the Company has adopted on recommendation of the Nominationand Remuneration Committee a policy for selection and appointment of Directors seniormanagement and remuneration including criteria for determining qualifications positiveattributes independence of Directors and other matters provided in section 178 (3) of theCompanies Act 2013.

The main objective of the said Policy is to ensure that the level and composition ofremuneration is reasonable and sufficient to attract retain and motivate the DirectorsKMPs and Senior Management employees.

Particulars of the Company's Remuneration Policy and information required under Rule5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule 2014 asset out in 'Annexure D' forms part of this Report. The said policy has been posted on thewebsite of the Company policies.aspx.

Disclosure Relating to Remuneration of Directors and Key Managerial Personnel

The remuneration paid to the Directors is in accordance with the Remuneration Policyformulated in accordance with Section 178 of the Companies Act 2013.

Disclosures of the ratio of the remuneration of each director to the median employee'sremuneration and other details as required pursuant to Section 197(12) of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are provided as 'Annexure C'.

The details of remuneration paid to the Directors including Executive Directors of theCompany are given in Form MGT-9 forming part of the Directors Report.

Attributes Qualifications & Independence of Directors and their Appointment

The Nomination & Remuneration Committee of Directors has approved a Policy for theSelection Appointment and Remuneration of Directors which inter-alia requires that theDirectors shall be of high integrity with relevant expertise and experience to have adiverse Board. The Policy also lays down the positive attributes criteria whilerecommending the candidature for the appointment of a new Director.

Directors are appointed/re-appointed with the approval of the Members for a term inaccordance with the provisions of the law and the Articles of Association. The initialappointment of Managing / Wholetime Director is generally for a period of 3-5 years. AllDirectors other than Independent Directors are liable to retire by rotation unlessotherwise specifically provided under the Articles of Association or under any statute.One-third of the Directors who are liable to retire by rotation retire at every AnnualGeneral Meeting and are eligible for re-appointment.

The NRC has formulated the criteria for determining qualifications positive attributesand independence of Directors in terms of provisions of Section 178 (3) of the Act and theListing Regulations.

Committees of Board

Pursuant to requirement under Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board of Directors has constituted variousCommittees of Board such as Audit Committee Nomination & Remuneration CommitteeStakeholders Relationship Committee and Corporate Social Responsibility Committee. Thedetails of composition and terms of reference of these Committees are mentioned in theCorporate Governance Report.

Internal Financial Control System and their Adequacy

Your Company's Financial Statements are prepared on the basis of the SignificantAccounting Policies that are carefully selected by Management and approved by the AuditCommittee and the Board. These Accounting policies are reviewed and updated from time totime.

The Company uses Oracle e business suite ERP systems as a business enabler and tomaintain its Books of Account. The transactional controls built into the Oracle ERPsystems ensure appropriate segregation of duties appropriate level of approval mechanismsand maintenance of supporting records.

Your Company has in placed adequate Internal Financial Controls with reference to theFinancial Statements commensurate with the size scale and complexity of its operations.

The findings of the Internal Audit Report are reviewed by the Audit Committee of theBoard and proper follow-up actions are ensured wherever required. The Statutory Auditorshave evaluated the internal financial controls framework of the Company and have reportedthat the same are adequate and commensurate with the size of the Company and nature of itsbusiness.

Adequate internal control systems safeguard the assets of the Company with timelyidentification and intervention to assuage risks. The internal audit report is discussedwith the Management and members of the Audit Committee to keep a check on the existingsystems and take corrective action to further enhance the control measures.

Directors' Responsibility Statement

Pursuant to the requirements of Section 134(1)(c) read with Section 134(5) of theCompanies Act 2013 and on the basis of explanation and compliance certificate given bythe executives of the Company and subject to disclosures in the Annual Accounts and alsoon the basis of discussions with the Statutory Auditors of the Company from time to timewe state as under:

(a) that in the preparation of the annual accounts for the year ended 31st March 2020the applicable accounting standards read with requirements set out under Schedule III tothe Act have been followed and there are no material departures from the same;

(b) that the directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company as at 31st March 2020and of the profit of the Company for the year ended on that date;

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

(e) that the Board has laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

(f) that the directors have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.

Meeting of the Board of Directors

During the year 2019-20 your Company had convened and held 6 (six) Board Meetings. TheDetails of the Board Meeting with regard to their dates and attendance of each of theDirectors thereat have been provided in the Corporate Governance Report. The interveninggap between the meetings was within the period prescribed under the Companies Act 2013and SEBI Listing Regulations.

Performance evaluation of Board

Pursuant to the provisions of the Companies Act 2013 and Regulation 17(10) the Boardhas devised a policy on evaluation of performance of Board of Directors Committees andIndividual directors. The policy is also in compliance to Regulation 19 read with ScheduleII Part D of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015. The Nomination and Remuneration Committee has defined the evaluation criteria forthe Performance Evaluation of the Board its Committees and individual Directors.

The performance of the Board and individual Directors was evaluated by the Board afterseeking inputs from all the Directors. The criteria for performance evaluation of theBoard was based on the Guidance Note issued by SEBI on Board Evaluation which includedaspects such as Board composition and structure effectiveness of Board processescontribution in the long term strategic planning etc. The result of the evaluation issatisfactory and adequate and meets the requirements of the Company.

The independent directors were highly satisfied with the overall functioning of theBoard its various committees and with the performance of Executive Directors. They alsoappreciated the leadership role of the Board Chairman in upholding and following thestandards of corporate governance.

Particulars of Employees and Related Disclosures

During the financial year 2019-20 none of the employee of the Company was in receiptof remuneration prescribed in terms of the provision of Section 197(12) of the CompaniesAct 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rule 2014.

Statutory Auditors

M/s Sharp and Tannan Associates Chartered Accountants (ICAI Firm Registration No.109983W) were appointed as the Statutory Auditors of the Company for a period of 5 yearscommencing from the conclusion of the 71st Annual General Meeting until the conclusion of76th Annual General Meeting by the shareholders on such remuneration as may be determinedby the Board of Directors.

The Statutory Auditors have confirmed that they hold a valid certificate issued by thePeer Review Board of the Institute of Chartered Accountants of India (ICAI).

The Auditors have also furnished a declaration confirming their independence as well astheir arm's length relationship with the Company as well as declaring that they have nottaken up any prohibited non-audit assignments for the Company. The Audit Committee reviewsthe independence of the Auditors and the effectiveness of the Audit process. The Auditorsattend the Annual General Meeting of the Company.

The Notes on financial statement referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors report for thefinancial year 2019-20 on the financial statements of the Company forms part of thisAnnual Report. There are no qualifications reservations or adverse remark or disclaimermade in the audit report for the Financial Year 2019-20.

Cost Auditors

The Board had appointed Messrs M/s P. M. Nanabhoy & Co. Cost Accountants (FirmRegistration Number 000012) as Cost Auditor for conducting the audit of cost records ofthe Company for the Financial Year 2019-20 on a remuneration of Rs.75000 plus out ofpocket expenses and applicable taxes. Pursuant to Companies (Cost Records and Audits)Rules 2014 the Cost Audit Report for the financial year 2019 was filed with the Ministryof Corporate Affairs on 9th August 2019 vide SRN H81873994.

The Board of Directors on the recommendation of the Audit Committee appointed M/s P.M. Nanabhoy & Co. Cost Accountants (Firm Registration Number 000012) as the CostAuditors of the Company for the Financial Year 2020-21 under Section 148 of the CompaniesAct 2013 and has recommended their remuneration to the Shareholders for theirratification at the ensuing Annual General Meeting.

M/s P. M. Nanabhoy & Co. have confirmed that their appointment is within the limitsof Section 141(3)(g) of the Companies Act 2013 and have also certified that they are freefrom any disqualifications specified under Section 141(3) and proviso to Section 148(3)read with Section 141(4) of the Companies Act 2013. The Audit Committee has also receiveda Certificate from the Cost Auditors certifying their independence and arm's lengthrelationship with the Company.

As per the provisions of the Companies Act 2013 the remuneration payable to the CostAuditor is required to be placed before the Members in a General Meeting for theirratification. Accordingly a Resolution seeking Members' ratification for the remunerationpayable to M/s P. M. Nanabhoy & Co. Cost Auditors is included in the Notice conveningthe 74th Annual General Meeting.

Cost Records

As per Section 148 of the Companies Act 2013 read with the Companies (Cost Recordsand Audit) Rules 2014 your Company is required to maintain cost records and accordinglysuch accounts and records are maintained.

Internal Auditor

Pursuant to the provisions of Section 138 of the Companies Act 2013 and Rules madethereunder the Board of Directors of the Company have appointed M/s Aadil Aibada &Associates (ICAI Membership No.045310) Chartered Accountants as Internal Auditors of theCompany for the financial year 2020-21.

The audit committee in consultation with the Internal Auditor formulates the scopefunctioning periodicity and methodology for conducting the internal audit.

The Internal Audit department carries out risk-focused audits across all locationsenabling identification of areas where risk management processes may need to bestrengthened. Significant audit observations and corrective action plans are presented tothe Audit Committee.

Secretarial Auditor and Report

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorsof the Company have appointed Jigar Vyas (FCS No.8019) of Jigar Vyas & AssociatesPracticing

Company Secretaries (CP No.14468) to carry out Secretarial Audit of the Company. TheReport of the Secretarial Auditor in the prescribed form MR-3 is attached as 'Annexure E'.There are no qualifications reservations or adverse remark or disclaimer made in theSecretarial Audit Report for the Financial Year 2019-20.

Annual Secretarial Compliance Report

The Company has undertaken an audit for the Financial Year 2019-20 for all applicablecompliances as per Securities and Exchange Board of India Regulations andCirculars/Guidelines issued thereunder. The Annual Secretarial Compliance Report dulysigned by Mr. Jigar Vyas Practicing Company Secretary (ICSI Membership No.FCS 8019) hasbeen submitted to the Stock Exchange.

Audit Committee

The Audit Committee comprises of 4 Directors viz. Ms. Kruti Kothari Chairman and Mr.Harishchandra Bharucha Mr. Ketan A. Jariwala and Mr. Yogesh C. Papaiya as Members. Allthe Members of the Committee possess strong accounting and financial management knowledge.The Company Secretary of the Company is the Secretary of the Committee.

All the recommendations made by the Audit Committee during the year were accepted bythe Board.

Vigil Mechanism

The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribedthereunder and the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is implemented through the Company's Whistle Blower Policy to enable the Directorsemployees and all stakeholders of the Company to report genuine concerns to provide foradequate safeguards against victimization of persons who use such mechanism and makeprovision for direct access to the Chairman of the Audit Committee.

Whistle Blower Policy of your Company is available on the Company's website

Contracts or Arrangements with Related Parties

All transactions entered into with Related Parties as defined under Section 2(76) ofthe Companies Act 2013 and Regulation 23 of the Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("The ListingRegulations") during the financial year were in the ordinary course of business andat an arm's length pricing basis and do not attract the provisions of Section 188 of theCompanies Act 2013.

Suitable disclosure as required by the Indian Accounting Standards (Ind AS 24) has beenmade in the notes forming part of the Financial Statements.

The Company has formulated a policy on materiality of Related Party Transactions anddealing with Related Party Transactions which has been uploaded on the Company's websitewhich can be accessed at following link

Pursuant to Regulation 23(9) of the Listing Regulations your company has filed halfyearly report on Related Party Transactions with the stock exchanges.

All transactions with related parties were reviewed and approved by the AuditCommittee.

Pursuant to section 134(3)(4) of the Companies Act 2013 and Rules made thereunderparticulars of transactions with related parties as required under section 188(1) of theCompanies Act 2013 read with Rule 8(2) of Companies (Accounts) Rules 2014 is annexedwith this Report in Form AOC-2 as 'Annexure F'.

Reporting of Fraud

During the year under review neither the statutory auditors nor the secretarialauditors has reported to the Audit Committee under Section 143(12) of the Companies Act2013 any instances of fraud committed against the Company by its officers or employeesthe details of which needs to be mentioned in this Report.

Energy technology and foreign exchange

Information on the conservation of energy technology absorption foreign exchangeearnings and outgo as required to be given pursuant to the provisions of Section 134 ofthe Act read with the Companies (Accounts) Rules 2014 which is marked as 'Annexure A'and forms part of this report.

Prevention of Sexual Harassment ('POSH')

The Company has constituted an Internal Complaints Committee under section 4 of theSexual Harassment of women at workplace (Prevention prohibition and Redressal) Act 2013.

The Company has a Policy on "Prevention of Sexual Harassment of Women atWorkplace" and matters connected therewith or incidental thereto covering all theaspects as contain under "The Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013".

During the year under review there were no cases filed pursuant to the SexualHarassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.

The Policy of the "Prevention of Sexual Harassment of Women at Workplace" ofthe Company is available on the website of the Company

Corporate Social Responsibility (CSR)

The Company has constituted a Corporate Social Responsibility (CSR) Committee inaccordance with Section 135 of the Companies Act 2013. The CSR Committee comprises of Mr.Ketan Jariwala as the Chairman Mr. Harishchandra Bharucha and Mr. Yogesh C. Papaiya asMembers.

The CSR Committee of the Company has laid down the policy to meet the Corporate SocialResponsibility. The CSR Policy includes any activity that may be prescribed as CSRactivity as per the Rules of the Companies Act 2013. The CSR Committee met on 20th March2020 to review the Corporate Social Responsibility Policy.

During the year under review your Company has spent Rs.27.89 Lakhs on CSR activities.The average net profit for the past three financial years was Rs.1383.69 Lakhs.

The CSR Committee will further continue to identify the project which can be coveredunder the CSR guidelines in compliance with the CSR objectives and policy of the Company.

Towards the end of the financial year the Company took various initiatives towardsfinancial medical and community support in the fight against Covid-19 pandemic.

Corporate Social Responsibility Report pursuant to clause (o) of sub section (3) ofSection 134 of the Act and Rule 9 of the Companies (Corporate Social Responsibility)Rules 2014 including salient features mentioned under outline of Company's CSR policyforms part of this Report as 'Annexure B'.

The CSR Policy of the Company is available on the website of the Company

CEO and CFO certification.

Pursuant to the Listing Regulations Managing Director and CFO Certification isattached with Annual Report. Managing Director and CFO also provide quarterlycertification on financial results while placing the financial results before the Boardin terms of the Listing Regulations.

Health safety and environment

Your Company believe that organisations' sustainability is directly proportional to thesafety health and environment management. We endeavour to demonstrate environmental andsocial responsibility at every step.

We are devoted to benefit communities - workforce public and environment. Our safetyhealth and environment objectives include complying with all applicable laws relevant tothe industry. The Management believes in sharing responsibility throughout the hierarchyin conforming to the existing laws.

The Company obtained necessary approvals from concerned Government Department /Pollution Control Board and all required environment clearances / safety clearances /stipulations are complied with at Plant facilities of the Company. The Company continuesto focus on maintenance and performance improvement of related pollution control facilityat its manufacturing locations.

Your Company has adopted several measures to maintain ecological balance in and aroundour production facilities.

Industrial Relations / Human Resources

The industrial relations scenario continued to be largely positive across themanufacturing locations. Significant emphasis was also laid towards raising awareness onhealth and wellness of employees through annual medical check-ups and health awarenessactivities.

In line with the 'Go Green' philosophy your Company is continuously adopting newtechniques to eliminate and minimise the overall environmental impact. The Companycontinuously works to nurture this environment to keep its employees highly motivatedresult oriented and adaptable to changing business environment. Your Company's valueproposition is based on providing value to our customer through innovation and byconsistently improving efficiency at all levels.

Your Directors wish to place on record their appreciation for the dedicated andcommendable services rendered by the employees of the Company. The strength of permanentemployees as on 31st March 2020 was 53 Nos.

Information Technology

Information Technology is the driving force of the business. The Company iscontinuously adopting and utilizing various information technology tools and successfullyimplemented new age technologies like Internet of Things (IOT) among other to improvebusiness process efficiency.

As a part of Digital Transformation journey your Company has implemented productionplanning and execution system which was otherwise manual process.

The system for adopting GST in Oracle EBS12 implemented by the Company is in operation.This project was carried out entirely in house.

Secretarial Standards

The Directors have devised proper systems and processes for complying with therequirements of applicable Secretarial Standards issued by the Institute of CompanySecretaries of India and that such systems were adequate and operating effectively.

Significant / Material Orders passed by the Regulators

No significant material orders have been passed during the year under review by theregulators or courts or tribunals impacting the going concern status and Company'soperations in future.

Material Changes and commitments

The rampant spread of COVID-19 outbreak across borders and geographies has severelyimpacted almost the whole world and triggered significant downside risks to the overallglobal economic outlook. Due to the lockdown announced by the Government of India from25th March 2020 entire operations of the Company came to a halt.

Although there are uncertainties due to the pandemic the Company is taking severalmeasures to mitigate the adverse impact by optimising costs and continuously realigningthe cost-structures to the activity level.

Except the impact of COVID-19 as mentioned in this report no material changes andcommitments affecting the financial position of your Company have occurred between the endof the financial year of the Company to which the financial statements relate and on thedate of this report.

Risk Management

Your Company periodically assesses the risks in the internal and external environmentalong with treating the risks and incorporates risk management plans in its strategybusiness and operational plans. Your Company recognizes that the risk is an integral partof business and is committed to managing the risks in proactive and efficient manner.

The business plan for the future are devised and approved by the Board keeping in mindthe risk factors which can significantly impact the performance of the particularbusiness. All major financial commitments are subject to scrutiny by the Board andinvestments are permitted only on being satisfied about its returns or utility to theCompany. There are no risks which in the opinion of the Board threaten the existence ofthe Company.


The Company has taken all the necessary steps to insure its properties and insurableinterests as deemed appropriate and also as required under the various legislativeenactments.


The details of the Key Policies adopted by the Company are mentioned in the CorporateGovernance Report as Annexure to the Board's Report.

Deposits from Public

Your Company has not accepted any deposits within the meaning of Section 73 to 76 ofthe Companies Act 2013. Hence the disclosures required as per Rule 8 (5) (v) & (vi)of the Companies (Accounts) Rules

2014 are not applicable to your Company.

Particulars of Loans/Advances/Investments

There were no transaction(s) with a company belonging to the promoter/promoter groupwhich hold(s) more than 10% shareholding in the Company. Details as required pursuant topara A of Schedule V of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is disclosed separately in the Financial Statements of the Company.

Extract of Annual Return

Pursuant to Section 134(3)(s) of the Companies Act 2013 read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 an extract of the Annual Return inForm MGT-9 referred to in Section 92(3) of the Act is attached as 'Annexure G' to thisReport.

The Annual Return will be hosted on website of the Company at after necessary certification and filing thesame with the authority.

Business Responsibility Report

The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is not applicable toyour Company for the financial year ended 31st March 2020.

Statutory compliance

Ms. Hanisha Arora Company Secretary and Compliance Officer makes a declaration at eachBoard Meeting regarding the compliance with the provisions of various statutes afterobtaining confirmation from all the locations of the Company.

She also ensures compliance accordance to SEBI regulations and Companies Act 2013 andrules thereof and all other applicable statutes.

The Company has identified the following ratios as key financial ratios:

Sr. Particulars No. FY2019-20 FY2018-19
1 Debtors Turnover Ratio (times) 48.01 85.10
2 Inventory Turnover Ratio (times) 14.46 12.43
3 Interest Coverage Ratio (times) 15.70 11.25
4 Current Ratio (times) 10.62 4.45
5 Debt Equity Ratio (times) * -- --
6 Operating Profit Margin (%) 3.85 3.59
7 Net Profit Margin (%) 4.33 5.62
8 Return on Net Worth (%) 6.25 10.05

* The Company has no long term debt.


Your Directors state that no disclosure or reporting is made with respect to thefollowing items as there were no transactions during the year under review:

1. The issue of equity shares with differential rights as to dividend voting orotherwise.

2. The issue of Shares to employees of the Company under any Scheme [(Including SweatEquity Shares and Employees Stock Option Schemes (ESOS)] referred to in this Report.

3. Voting rights which are not directly exercised by the employees in respect of sharesfor the subscription/purchase of which loan was given by the Company (as there is noscheme pursuant to which such persons can beneficially hold shares as envisaged underSection 67(3) (c) of the Companies Act 2013).

4. There is no change in the share capital structure of the Company during the yearunder review.

5. There was no revision in the financial statements.

Caution Statement

Statements in the Directors Report and the Management Discussion and Analysisdescribing the Company's objectives expectations or predictions may be forward lookingwithin the meaning of applicable securities laws and regulations. Actual results maydiffer materially from those expressed in the statements. Crucial factors that couldinfluence

the Company's operations includes global and domestic demand and supply conditionsaffecting selling prices new capacity addition availability of critical materials andtheir cost changes in government policies and tax laws economic development of thecountries and other factors that are material to the business operations of the Company.


Your Directors wish to acknowledge the co-operation and assistance extended to theCompany by the Company's Bankers and State & Central Government agencies.

Your Directors also acknowledge with gratitude the support of customers dealersagents and suppliers and all other stakeholders for their continued faith and supportwhich has helped the Company to sustain its growth even during these challenging times.

The Board of Directors also wish to place on record its sincere appreciation for thecommitted services by the Company's executives staff and workers. Your Directors alsoappreciate and acknowledge the confidence reposed in them by shareholders and otherinvestors of the Company.

For and on behalf of the Board of Directors
Manikant R. Momaya
Managing Director
Surat 21st July 2020 DIN:00023993