Your Directors present their 75th Annual Report on the performance ofthe Company together with the Audited Financial Statements for the financial year ended31st March 2021.The Management's Discussion and Analysis Report as required under theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 forms part of this report.
The financial performance of the Company for the financial year ended31st March 2021 is summarised below:
| || ||(Rs. in Crore) |
|Particulars ||2021 ||2020 |
|Revenue from Operations ||131.14 ||180.28 |
|Other income ||4.73 ||4.61 |
|Operating Profit / EBITDA (including other income) ||17.96 ||12.01 |
|Less: Finance Costs ||0.16 ||0.76 |
|Profit before Depreciation & Amortisation Expenses ||17.80 ||11.25 |
|Less: Depreciation & Amortisation Expenses ||0.39 ||0.46 |
|Profit before tax ||17.41 ||10.79 |
Review of Operations
The outbreak of Coronavirus (COVID-19) pandemic globally and in Indiais causing significant disturbance and slowdown of economic activities. The Company'soperations and revenue during FY21 were impacted due to COVID-19.
The manufacturing operations of the Company at its plant Village JolwaTaluka Palsana Dist. Surat remained temporarily suspended during major part of firstquarter of FY21 as per the directives of the Government keeping in mind the paramountneed of safety of the employees. The ongoing pandemic and partial lockdown during the yearin different parts of the country further restricted the logistic arrangement coupled withslowdown of overall demand and weakening of the various commodities.
The manufacturing operations of the Company are conducted in compliancewith the relevant guidelines / advisory issued by the central government and stateauthorities for taking necessary measures for the containment of COVID-19 includingmeasures like maintaining social distancing.
Sales fell sharply during the year with the Covid second wave andongoing local lockdowns disrupting both production and retail sales even as consumers cutback spending.
Your Company achieved total revenue of Rs.131.14 Crore for thefinancial year 2020-21 as compared to Rs.180.28 Crore for the previous year a decline ofabout 27.25%.
The fall in overall sales was primarily due to lower capacityutilisation due to Covid-19 restrictions and subdued raw material scenario which resultedinto lower price realisation.
Low international prices of oil drove down prices of PTA and MEG rawmaterials. However with demand picking up for specialty chips margins improved.
We earned an operating profit of Rs.17.96 Crore representing 13.70% oftotal revenues compared to Rs.12.01 Crore representing 6.66% of total revenues duringthe previous year.
The total sale of chips in volume terms for the year FY21 was lower at18155 MT as compared to 23305 MT in the previous year. The production of Chips during FY21was also lower at 18119 MT as compared to 23325 MT in the previous year.
During the year under review there were no exceptional orextra-ordinary items.
Close watch on raw material prices and strict inventory management hashelped the Company in these challenging times.
The Company continues to have a clear price and product leadership inits specialty chips segment especially cationic. It continues to be perceived in themarket as a premium producer of quality chips.
Better working capital management helped the Company to reduce itsInterest / Finance Costs from Rs.0.76 Crore in FY20 to Rs.0.16 Crore for FY21.
During second quarter of FY21 your Company resumed manufacturingoperation at its Polycondensation Plant at Village Jolwa in a gradual manner under theguidelines of central government and state authorities. However owing to COVIDrestrictions coupled with migration of labour the Company operated its plants at VillageJolwa at lower capacity.
The production at polyester spinning division of the Company at VillageJolwa remained suspended during the year 2020-21 due to competitive pressure andprevailing market conditions in the yarn segment.
In view of the current economic slowdown due to COVID-19 pandemichealth impact on employees and prevailing uncertainty to the growth of business activitiesmore particularly in the segment in which Company is operating the Directors areconsidering and evaluating the proposal for sale/transfer/disposal of the assets of'Spinning Division' and the Polycondensation Plant at Village Jolwa along with Land &Building and the Inventories on an "as is where is" basis in the overallinterest of the stakeholders.
Loss on investment held in Garden Silk Mills Limited consequent toextinguishment of equity capital.
The Hon'ble National Company Law Tribunal (NCLT) Ahmedabad Bench videits Order dated 1st January 2021 approved Resolution Plan of Garden Silk Mills Limited(GSML) in the matter of IA 661 of 2020 in CP(IB) 453 of 2018. As an integral part of theResolution Plan and on implementation on the same GSML stands delisted w.e.f. 8thFebruary 2021 from BSE and NSE.
Further as per the said Order the entire Issued Subscribed and Paidup Equity Share Capital of Garden Silk Mills Limited shall stand extinguished in fullwithout payment of any consideration / pay out / exit offer. Accordingly the investment of480878 Equity Shares of Rs.10 each fully paid up held by the Company in GSML standsextinguished and the loss on derecognition of investment by extinguishment of EquityShares of GSML have been passed in books of account of the Company.
Reclassification of Garden Silk Mills Limited shareholding fromPromoter category to Public category GSML one of the Promoter Group Company holding14500000 Equity Shares of Rs. 1/- each fully paid up in the Company had submitted itsrequest to the Board of Directors for their reclassification from Promoter and PromoterGroup Category to Public Category in the shareholding pattern of Surat Textile MillsLimited pursuant to Regulation 31A of SEBI (LODR) Regulations 2015.
The Board of Directors of the Company at its meeting held on 31stMarch 2021 approved the proposal for reclassification as requested subject to approval ofshareholders and the approval of stock exchange i.e. BSE Limited where the shares of theCompany are listed.
In order to strengthen the reserves of the year your directorsconsider it prudent to plough back the profits and not to recommend any dividend for thefinancial year 2020-21.
Transfer to Reserves
The Board of Directors have decided to retain the entire amount ofprofits for Financial Year 2020-21 in the Retained Earnings and do not propose to transferany amount to general reserve.
The Paid-up Equity Share Capital of the Company as on March 31 2021was Rs.2220.64 Lakhs comprising of 222064440 equity shares of Rs.1 each. During theyear under review your Company has neither issued any shares with differential votingrights nor has granted any stock options or sweat equity. The Company has paid ListingFees for the Financial Year 2021-22 to BSE Limited where its equity shares are listed.
Nature of Business
Your Company is known to be a producer of polyester chips anddifferentiated partially oriented yarn (POY). During the year under review there was nochange in the nature of business of the Company.
COVID-19 and its impact
Your Directors have been periodically reviewing the impact of COVID-19on the Company.
The Company has considered the possible effects that may result fromCOVID-19 in the preparation of these financial results. The Company believes that pandemicis unlikely to impact on the recoverability of the carrying value of its assets as at 31stMarch 2021. Looking to the present situation of pandemic the extent to which the samewill impact Company's future financial results is currently uncertain and will depend onfuture developments.
The Management anticipates slowdown for the polyester sector overall inthe short term due to COVID-19 pandemic and is also keeping a close watch on any otherpossible impacts of second or future waves of the pandemic. The Board and the Managementwill continue to closely monitor the situation as it evolves and do its best to take allnecessary measures in the interests of all stakeholders of the Company.
(a) Overview of the economy Indian Economy
India's economy grew at a better-than-expected rate of 1.6% in theJanuary-March quarter from a year ago but the severe second Covid wave has createdeconomic uncertainty and dampened sentiment.
The economy which was facing a slowdown even before the pandemic brokeout last year contracted by 7.3% during April 2020 to March 2021 fiscal (FY21) weigheddown by nationwide lockdown that pummelled consumption and halted most economicactivities.
This is the first full-year contraction in the Indian economy in thelast four decades since 1979-80 when GDP had shrunk by 5.2%. The economy has grown by 4%in the previous 2019-20 fiscal.
The Government does not expect the severe second wave to have a largeeconomic impact. However the outlook appears uncertain.
The pandemic has resulted in a huge number of job losses. According toCMIE over 97% Indians have become poorer compared with the last year and unemploymentlevels are at 13.73%. This will take a toll on consumption and consumption led Companies.Given the strong recovery in other countries commodity prices may remain strong and thereis a worry about inflation global as well as local and its impact on interest rates.
The Indian manufacturing sector is showing increasing signs of strainas the Covid-19 crisis intensifies. Key gauges of current sales production and inputsbeing weakened noticeably in first quarter of FY22 and pointed to the slowest rates ofincrease in the ten months.
(b) Industry Scenario
The year under review saw a significant reduction in polyester demandand supply owing to the pandemic. However the industry recovered ferociously after the1st wave and did rather good overall for the year. This was true for the company'sproducts as well.
Raw material prices have recovered considerably but the industry haswitnessed healthy pricing power and been able to pass on these increases to the customer.
It is expected that once the 2nd wave wanes in the current fiscaldemand would recover as before.
(c) Opportunities Challenges Threats Risks and Concerns
The COVID-19 pandemic is a global humanitarian and health crisis whichcontinues to impact the major part of the country and the other geographies also reportingsecond and third waves of infections. The actions taken by various governments to containthe pandemic such as closing of borders and lockdown restrictions have resulted insignificant disruption to people and businesses.
The uncertainty in demand with prolonged economic impacts of theCOVID-19 pandemic will result in impact to production and may cause us to implement majorcost control measures and other initiatives.
New and changing regulatory compliance corporate governance anddisclosure requirements may increase our costs of compliance.
Change in the policies of the Government of India may adversely affecteconomic conditions in the country generally which could impact our business andprospects.
Covid has resulted in the loss of senior factory personnel andcontinues to pose a risk to health of employees just is does to the wider public. Risksrelated to the market in which we operate may affect our profitability negatively ifshutdown is prolonged or if we are unable to eliminate fixed or committed costs in linewith reduced demand.Unavailability of supply of electricity is another risk factor.
The Government's ability to limit the spread of the virus andmaterially increase the rate of vaccinations will have a direct impact on the trajectoryof both health and economic outcome.
(d) Business Outlook
Indian economy is expected to rebound in current fiscal ending March'22 and perhaps clock a growth of 9-10% but a severe second Covid wave has increasedrisks to India's credit profile and rated entities.
India's economy rebounded quickly from a steep contraction in 2020 buta severe second wave of the coronavirus has increased risks to the outlook with potentiallarger-term credit implications. Risk to India's credit profile including a persistentslow-down in growth weak government finances and rising financial sector risk have beenexacerbated by the shock.
There are signs of pickup in economic activity and the recovery shouldgather pace by the end of first quarter FY22 helped by the decline in COVID cases andfaster vaccination.
Going forward capacity utilisation in polyester industry is expectedto sustain at better levels in FY22. Cotton yarn realisation is expected to be strongdriven by the ban on Chinese cotton by the US. Revenue of all three segments - cottonyarn readymade garments and home textiles is expected to recover to pre COVID levels inFY22 with good demand driven by knitted garments and home textiles segments withoperating profitability by 200-250 bps as cotton yarn spreads are expected to remain high(CRISIL). Polyester as a strong substitute of cotton is also expected to recover well inthe 2nd half of the year also owing to pent-up demand.
Total revenue from operation of the Company for FY21 declined by 27.25%at Rs.131.14 Crore as compared to Rs.180.28 Crore in FY20.
Other income for the year ended 31 March 2021 at Rs.4.73 Croremarginally increased from Rs.4.61 Crore in the previous year.
Earnings before Interest Tax and Depreciation (EBITDA) for the yearFY21 was higher at Rs.17.96 Crore as compared Rs.12.01 Crore in the year FY20.
Cost of raw material for FY21 constituted 77.42% of total expenses ascompared to 80.83% in previous year FY20. The cost of both major raw materials remainedlow during the year.
The material cost as a percentage of revenue decreased from 78.06% inthe previous year to 69.93% in the current year.
Power and Fuel cost for FY21 constituted 6.09% of total expenses ascompared to 5.21% in previous year FY20. Optimizing power and fuel costs is one of themajor drivers for improving the Company's operational performance.
The interest expense for the year ended 31 March 2021 was lower atRs.0.16 Crore as compared to Rs.0.76 Crore in the previous year.
Employee benefits expense
The employee benefits expense or personnel cost as a percentage ofrevenue has increased from 1.20% in the previous year to 1.87% in the current year.
Depreciation amortisation and impairment expense
Depreciation amortisation and impairment expenses for FY21 were atRs.0.39 Crore as compared to Rs.0.46 Crore in previous year.
Other expenses as a percentage of revenue for FY21 have increased from16.63% in the previous year to 18.12% in the current year due to lower business volume andrevenue.
The overall other expenses for FY21 were lower at Rs.23.76 Crore ascompared to Rs.29.98 Crore in FY20 primarily on account of reduction in manufacturingexpenses and selling and distribution expenses.
Subsidiary Joint Venture and Associate Companies
The Company has no subsidiary / joint venture / associates for thefinancial year ended 31st March 2021. Accordingly the requirements pursuant to Section129(3) of the Companies Act 2013 read with Rule 5 of the Companies (Accounts) Rules 2014is not applicable.
Indian Accounting Standard (Ind AS)
As mandated by the Ministry of Corporate Affairs the Company hasadopted Indian Accounting Standards ('Ind AS') from 1st April 2017 with a transition dateof 1st April 2016.
The financial results of the Company have been prepared in accordancewith Indian Accounting Standards ('Ind AS') notified under section 133 of the CompaniesAct 2013 ('Act') read with Companies (Indian Accounting Standards) Rules 2015 as amendedand other recognised accounting practices and policies to the extent applicable.
Resources and Liquidity
Our principal sources of liquidity are cash and cash equivalentinvestments and the cash flow we generate from operations. We continue to be debt-free andmaintain adequate liquidity to meet our operational requirements.
There was no outstanding term loan at the beginning or at the end offinancial year 2020-21. No fresh Term Loan was availed by the Company during the year. TheCompany has not availed any working capital facility from Banks during the year. With thebetter inventory management your Company's working capital requirements were met out frominternal accruals only. The surplus funds during the year were deployed in the securedmoney market instruments primarily in mutual funds.
Corporate Governance Report
Your Company is in compliance with all the applicable provisions ofCorporate Governance as stipulated under Chapter IV of the Listing Regulations. A detailedreport on Corporate Governance as required under the Listing Regulations is provided in aseparate section in Annexure G and forms part of this Report.
A certificate from M/s Sharp and Tannan Statutory Auditors of theCompany confirming compliance to the conditions of Corporate Governance as stipulatedunder SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is annexedto Report on Corporate Governance. The auditor's certificate for the year 2020-21 does notcontain any qualification reservation adverse remark or disclaimer.
Directors and Key Managerial Personnel
(i) Directors liable to retire by rotation
In accordance with the provisions of Section 152 of the Act and theArticles of Association of the Company Mr. Yogesh C. Papaiya (DIN: 00023985) WholetimeDirector and CFO whose office is liable to retire at the ensuing AGM being eligibleseeks reappointment. Based on performance evaluation and the recommendations of theNomination and Remuneration Committee the Board recommends his reappointment.
A brief resume of directors being appointed / reappointed along withthe nature of their expertise their shareholding in your Company and other details asstipulated under Regulation 36 (3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 is appended as an annexure to the Notice convening the75th AGM to be held on 20th July 2021.
(ii) Key Managerial Personnel ('KMP')
During the year under review Ms. Hanisha Arora Company Secretary andCompliance Officer resigned from the post with effect from 31st March 2021. The Board ofDirectors of the Company at its meeting held on 31st March 2021 while taking note ofresignation recognised her contribution during her tenure as Company Secretary andCompliance Officer. At the said meeting the Board approved the appointment of Mr. ChinmayM. Methiwala a qualified Company Secretary holding Membership No.ACS 48146 as CompanySecretary and Compliance Officer with effect from 1st April 2021.
In terms of Section 203 of the Act the following are the KeyManagerial Personnel of the
1. Mr. Manikant R. Momaya Managing
2. Mr. Yogesh C. Papaiya Wholetime Director & Chief FinancialOfficer (CFO)
3. Ms. Hanisha Arora Company Secretary and Compliance Officer (upto31/03/2021)
4. Mr. Chinmay M. Methiwala Company
Secretary and Compliance Officer
The Board is of the opinion that the Independent Directors of theCompany possess requisite qualifications experience and expertise in the fields ofauditing tax financial corporate governance business management etc. and that theyhold the required standards of integrity.
During the year under review the Company did not have any pecuniaryrelationship or transactions with any of its Directors other than payment of remuneration/ Incentive to the Executive Directors
and payment of sitting fees commission to Non-executive Directors andreimbursement of expenses incurred by them for the purpose of attending meetings of theBoard / Committees of the Company.
Your Company has received declarations from all the IndependentDirectors confirming that they meet with the criteria of independence as prescribed underSection 149(6) of the Companies Act 2013 and under Regulation 16 (1) (b) of the SEBI(Listing Obligations and Disclosure Requirements) Regulations2015. Further pursuant toSection 164(2) of the Companies Act 2013 all the Directors have provided declarations inForm DIR- 8 that they have not been disqualified to act as a Director.
Separate Meeting of Independent Directors
In terms of requirements under Schedule IV of the Companies Act 2013and Regulation 25 (3) of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 a separate meeting of the Independent Directors was held on 31st March2021.
The Independent Directors at the meeting inter alia reviewed thefollowing:-
Performance of Non-Independent Directors and Board as a whole.
Performance of the Chairman of the Company taking into accountthe views of Executive Directors and Non-Executive Directors.
Assessed the quality quantity and timeliness of flow ofinformation between the Company Management and the Board that is necessary for the Boardto effectively and reasonably perform their duties.
Familiarization/Orientation program for Independent Directors
Pursuant to Regulation 25(7) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 ("SEBI Listing Regulations") duringthe year under review your Company imparted familiarization programmes for its Directorsincluding Industry Outlook at the Board Meetings Regulatory updates at Board and AuditCommittee Meetings covering changes with respect to the Companies Act SEBI ListingRegulations Prevention of Insider Trading Regulations.
The Company issues a formal letter of appointment to the IndependentDirectors outlining their role function duties and responsibilities the format ofwhich is available on the Company's Website at www.surattextilemillsltd.com.
Pursuant to Regulation 46 the details required are available on thewebsite of your Company at http://www.surattextilemillsltd.com/policies.aspx
Declaration by Independent Director
The Company has received necessary declaration from each independentdirector under section 149(7) of the Companies Act 2013 that he/she meets the criteria ofindependence laid down in section 149(6) of the Companies Act 2013 and Regulation 25 ofthe Listing Regulations.
The Appointment and Tenure of the Independent Directors including codefor Independent Directors are available on the website of the Company www.surattextilemillsltd.com.
Committees of Board
As on 31st March 2021 the Board had 4 committees the AuditCommittee the Nomination & Remuneration Committee the Stakeholders RelationshipCommittee and the Corporate Social Responsibility Committee.
A detailed note on the composition of the Board and its Committees andthe number of meetings held and attendance of Directors at such meetings is provided inthe Corporate Governance Report which forms part of the Annual Report.
During the year all recommendations made by the committees wereapproved by the Board.
Policy on directors' appointment and remuneration
The Nomination & Remuneration Committee of Directors has approved aPolicy for the Selection Appointment and Remuneration of Directors which inter-aliarequires that the Directors shall be of high integrity with relevant expertise andexperience to have a diverse Board. The Policy also lays down the positive attributescriteria while recommending the candidature for the appointment of a new Director.
The main objective of the said Policy is to ensure that the level andcomposition of remuneration is reasonable and sufficient to attract retain and motivatethe Directors KMPs and Senior Management employees.
The policy of the Company on directors' appointment and remunerationincluding the criteria for determining qualification positive attributes independence ofa director and other matters as required under sub-regulation 3 of Section 178 of theCompanies Act 2013 is set out in 'Annexure D' forms part of this Report and available onthe website http://www.surattextilemiNsltd.com/policies.aspx
Pursuant to the provisions of the Companies Act 2013 and Regulation17(10) the Board has devised a policy on evaluation of performance of Board of DirectorsCommittees and Individual directors. The policy is also in compliance to Regulation 19read with Schedule II Part D of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.The Nomination and Remuneration Committee has defined theevaluation criteria for the Performance Evaluation of the Board its Committees andindividual Directors.
The performance of the Board was evaluated by the Board after seekinginputs from all the directors on the basis of criteria such as the Board composition andstructure effectiveness of board processes information and functioning etc.
The performance of the Committees was evaluated by the Board afterseeking inputs from the Committee members on the basis of criteria such as the compositionof committees effectiveness of Committee meetings etc.
The performance assessment of Non-Independent Directors Board as awhole and the Chairman were evaluated at separate meetings of Independent Directors. Thesame was also discussed in the meetings of NRC and the Board. Performance evaluation ofIndependent Directors was done by the entire Board excluding the Independent Directorbeing evaluated.
Code of Conduct for Directors and Senior Management
All Board members and Senior Management personnel have affirmedcompliance with the Code of Conduct for the year 2020-21. A declaration to this effectsigned by the Managing Director of the Company is contained in this Annual Report. TheManaging Director and CFO have certified to the Board with regard to the financialstatements and
other matters as required under regulation 17(8) of the SEBI ListingRegulations 2015.
Code for Prevention of Insider Trading
Your Company has adopted a Code of Conduct to regulate monitor andreport trading by designated persons and their immediate relatives as per the requirementsunder the Securities and Exchange Board of India (Prohibition of Insider Trading)Regulations 2015. This Code of Conduct also includes code for practices and proceduresfor fair disclosure of unpublished price sensitive information which has been madeavailable on the Company's website athttp://www.surattextilemillsltd.com/policies.aspx
Procedure for Nomination and Appointment of Directors
The Nomination and Remuneration Committee (NRC) has been mandated tooversee and develop competency requirements for the Board based on the industryrequirements and business strategy of the Company. The NRC reviews and evaluates theprofiles of potential candidates for appointment of Directors and meets them prior tomaking recommendations of their nomination to the Board.
Directors are appointed / re-appointed with the approval of the Membersfor a term in accordance with the provisions of the law and the Articles of Association.The initial appointment of Managing / Wholetime Director is generally for a period of 3-5years. All Directors other than Independent Directors are liable to retire by rotationunless otherwise specifically provided under the Articles of Association or under anystatute. One-third of the Directors who are liable to retire by rotation retire at everyAnnual General Meeting and are eligible for re-appointment.
Disclosures of the ratio of the remuneration of each director to themedian employee's remuneration and other details as required pursuant to Section 197(12)of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided as 'Annexure C'.
The details of remuneration paid to the Directors including ExecutiveDirectors of the Company are given in Corporate Governance Report which forms part ofAnnual Report.
Internal Control Systems & their adequacy
The Board has adopted policies and procedures for ensuring the orderlyand efficient conduct of its business including adherence to the Company's policies thesafeguarding of its assets the prevention and detection of frauds and errors theaccuracy and completeness of the accounting records and the timely preparation ofreliable financial disclosures.
The CEO and CFO certification provided in the CEO and CFO certificationsection of the Annual Report discusses the adequacy of our Internal Control System andprocedures.
Internal Financial Control System and their Adequacy
Your Company's Financial Statements are prepared on the basis of theSignificant Accounting Policies that are carefully selected by Management and approved bythe Audit Committee and the Board. These Accounting policies are reviewed and updated fromtime to time.
The Company uses Oracle e business suite ERP systems as a businessenabler and to maintain its Books of Account. The transactional controls built into theOracle ERP systems ensure appropriate segregation of duties appropriate level of approvalmechanisms and maintenance of supporting records.
Your Company has in placed adequate Internal Financial Controls withreference to the Financial Statements commensurate with the size scale and complexity ofits operations. The internal audit report is discussed with the Management and members ofthe Audit Committee to keep a check on the existing systems and take corrective action tofurther enhance the control measures.
Statutory Auditors of the Company have in their Report dated 3rd June2021 opined that the Company has in all material respects adequate internal financialcontrols over financial reporting and such internal financial controls over financialreporting were operating effectively as at 31st March 2021.
Directors' Responsibility Statement
Pursuant to the requirements of Section 134(1) (c) read with Section134(5) of the Companies Act 2013 and on the basis of explanation and compliancecertificate given by the executives of the Company
and subject to disclosures in the Annual Accounts and also on the basisof discussions with the Statutory Auditors of the Company from time to time the Board isof the opinion that the Company's internal financial controls were adequate and effectiveduring Financial Year 2020-21.
Accordingly pursuant to Sections 134(5) of the Act the Board ofDirectors to the best of its knowledge and ability confirm that:
(a) in the preparation of the annual accounts for the financial yearended 31st March 2021 the applicable accounting standards read with requirements set outunder Schedule III to the Act have been followed and there are no material departuresfrom the same;
(b) they 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 at the end of theFinancial Year and of the profit of the Company for that period;
(c) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the Annual Accounts for the Financial Year endedMarch 31 2021 on a going concern basis;
(e) they have laid down internal financial controls to be followed bythe Company and such internal financial controls are adequate and operating effectively;
(f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and operatingeffectively.
Number of meeting of the Board
The Board met five times during the financial year 2020-21. The meetingdetails are provided in the Corporate Governance Report that forms part of this AnnualReport. The maximum interval between any two meetings did not exceed 120 days asprescribed by the Companies Act 2013.
Particulars of Employees and Related Disclosures
During the financial year 2020-21 none of the employee of the Companywas in receipt of remuneration prescribed in terms of the provision of Section 197(12) ofthe Companies Act 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rule 2014.
Auditors and Audit Reports
In accordance with the provisions of Section 139 of the Companies Act2013 and the Rules made thereunder it is mandatory to rotate the statutory auditors oncompletion of maximum term permitted under the provisions of Companies Act 2013.
In line with the requirements of the Companies Act 2013 M/s Sharp andTannan Associates Chartered Accountants (ICAI Firm Registration No. 109983W) wasappointed as the Statutory Auditors of the Company to hold office for a period of 5consecutive years from the conclusion of the 71st Annual General Meeting held on 2ndAugust 2017 till the conclusion of the 76th Annual General Meeting to be held in 2022.
The requirement for the annual ratification of auditors' appointment atthe AGM has been omitted pursuant to Companies (Amendment) Act 2017 notified on 7th May2018.
During the year the Statutory Auditors have confirmed that theysatisfy the independence criteria required under the Companies Act 2013 the Code ofEthics issued by the Institute of Chartered Accountants of India (ICAI).The AuditCommittee reviews the independence of the Auditors and the effectiveness of the Auditprocess. The Auditors attend the Annual General Meeting of the Company.
The Auditors report is enclosed with the financial statements in thisannual report. The Auditors report for the financial year 2020-21 does not contain anyqualification reservation or adverse remark.
Pursuant to Section 148(2) of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Amendment Rules 2014your Company is required to getits cost accounting records audited by a Cost Auditor.
In terms of the provisions of Section 148 of the Act read with theCompanies (Cost Records and Audit) Rules 2014 as amended from time to time the Board ofDirectors based on the recommendation of the Audit Committee has appointed M/s P. M.Nanabhoy & Co. Cost Accountants (Firm Registration Number 000012) as Cost Auditorof the Company for conducting the Cost Audit for the Financial Year 2021-22 on aremuneration Rs.86250 plus out of pocket expenses and applicable taxes.
A Certificate from M/s P. M. Nanabhoy & Co. Cost Accountants hasbeen received to the effect that their appointment as Cost Auditor of the Company ifmade would be in accordance with the limits specified under Section 141 of the Act andRules framed thereunder.
A resolution seeking Member's ratification for the remuneration payableto the Cost Auditor forms part of the Notice of 75th Annual General Meeting and the sameis recommended for your consideration and ratification.
The Cost Audit Report for the financial year 2020 was filed with theMinistry of Corporate Affairs on 25th September 2020 vide SRN R59843433.
Pursuant to the provisions of Section 204 of the Companies Act 2013and the rules made there under the Board at its meeting held on 21st July 2020 hasappointed Jigar Vyas (FCS No.8019) of Jigar Vyas & Associates Practicing CompanySecretaries (CP No.14468) to conduct a secretarial audit of the Company for thefinancial year 2020-21. The report of Secretarial Audit carried out for the financial year2020-21 is annexed herewith as Annexure E.
The Secretarial Audit Report for the Financial Year 202021 does notcontain any qualification reservation adverse remark or disclaimer requiring explanationor comments from the Board under Section 134(3) of the Companies Act 2013.
The Board at its meeting held on 3rd June 2021 has reappointed JigarVyas (FCS No.8019) of Jigar Vyas & Associates Practicing Company Secretaries asSecretarial Auditor for conducting Secretarial Audit of the Company for the financialyear 2021-22.
Annual Secretarial Compliance Report
The Company has undertaken an audit for the Financial Year 2020-21 forall applicable compliances 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.FCS8019) has been submitted to the Stock Exchanges within the stipulated time in compliancewith the provisions of the Regulation 24A of SEBI (LODR) Regulations 2015.
Pursuant to the provisions of Section 138 of the Companies Act 2013and Rules made thereunder the Board of Directors of the Company have appointed M/s AadilAibada & Associates (ICAI Membership No.045310) Chartered Accountants as InternalAuditors of the Company for the financial year 2021-22.
The Internal Audit department carries out risk-focused audits acrossall locations enabling identification of areas where risk management processes may needto be strengthened. Significant audit observations and corrective action plans arepresented to the Audit Committee.
The audit committee in consultation with the Internal Auditorformulates the scope functioning periodicity and methodology for conducting the internalaudit.
Whistle Blower Policy / Vigil Mechanism
The Company has adopted a Whistle Blower Policy to provide a formalmechanism to the Directors' and employees to report their concerns about unethicalbehaviour actual or suspected fraud or violation of the Company's Code of Conduct orEthics Policy.
The Policy provides for adequate safeguards against victimization ofemployees who avail of the mechanism and provides to employees' direct access to theChairman of the Audit Committee. It is affirmed that no personnel of the Company have beendenied access to the Audit Committee.
The Whistle Blower Policy has been posted on the Website of the Companyat http://www.surattextilemillsltd.com/ policies.aspx
Related Party Transactions
All Related Party Transactions that were entered into during theFinancial Year under review were on an arm's length basis and in the ordinary course ofbusiness and are in compliance with the applicable provisions of the Act and the ListingRegulations. There were no materially significant Related Party Transactions made by theCompany during the year that required shareholders' approval under Regulation 23 of theListing Regulations.
All Related Party Transactions are placed before the Audit Committeefor prior approval. Prior omnibus approval of the Audit Committee is obtained for thetransactions which are repetitive in nature or when the need for these transactions cannotbe foreseen in advance.
Details of transactions with Related Parties as required under Section134(3)(h) of the Act read with Rule 8(2) of the Companies (Accounts) Rules 2014 are givenin Annexure - F in Form AOC - 2 and forms part of this Report.
The statement giving details of all Related Party Transactions areplaced before the audit committee / the Board for review and approval on a quarterlybasis. Pursuant to Regulation 23(9) of the Listing Regulations your company has filed halfyearly report on Related Party Transactions with the stock exchanges.
The Company has formulated a policy on materiality of Related PartyTransactions and dealing with Related Party Transactions which has been uploaded on theCompany's website which can be accessed at following link www.surattextilemillsltd.com.
Reporting of frauds by auditors
During the year under review neither the statutory auditors nor thesecretarial auditor has reported to the Audit Committee under Section 143(12) of theCompanies Act 2013 any instances of fraud committed against the Company by its officersor employees the details of which would need to be mentioned in the Board's report.
Conservation of Energy Technology Absorption and Foreign ExchangeEarnings and Outgo
The particulars as prescribed under sub section (3)(m) of Section 134of the Companies Act 2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 areenclosed as Annexure - A to the Board's report.
Policy on Prevention Prohibition and Redressal of Sexual Harassment atWorkplace
The Company has constituted an Internal Complaints Committee undersection 4 of the Sexual Harassment of women at workplace (Prevention prohibition andRedressal) Act 2013.
The Company has zero tolerance for sexual harassment at workplace andhas adopted a Policy on Prevention Prohibition and Redressal of Sexual Harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 (POSH) and the rules made thereunder.
The Policy aims to provide protection to employees at workplace andprevent and redress complaints of sexual harassment and for matters connected orincidental thereto with the objective of providing a safe working environment whereemployees feel secure.
During the year under review there were no cases filed pursuant to theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013.
The Policy of the "Prevention of Sexual Harassment of Women atWorkplace" of the Company is available on the website of theCompanyhttp://www.surattextilemillsltd. com/policies.aspx
Corporate Social Responsibility (CSR)
The Company has constituted a Corporate Social Responsibility (CSR)Committee in accordance with Section 135 of the Companies Act 2013. The CSR Committeecomprises of Mr. Ketan Jariwala as the Chairman Mr. Harishchandra Bharucha and Mr. YogeshC. Papaiya as Members.
The CSR Committee of the Company has laid down the policy to meet theCorporate Social Responsibility. The CSR Policy includes any activity that may beprescribed as CSR activity as per the Rules of the Companies Act 2013. The CSR Committeemet on 31st March 2021 to review the Corporate Social Responsibility Policy.
During the year under review your Company spent Rs.24.70 Lakhs on CSRactivities. The average net profit for the past three financial years wasRs.1230.49 Lakhs.
Annual Report on mandatory CSR activities as required under theCompanies (Corporate Social Responsibility Policy) Rules 2014 as amended have beenannexed as Annexure - B and forms integral part of this Report.
The Company has a Policy on Corporate Social Responsibility and thesame has been posted on the website of the Company athttp://www.surattextilemillsltd.com/policies.aspx.
CEO and CFO certification.
Pursuant to Regulation 17(8) of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015Managing Director and CFO Certification formspart of the Annual Report. Managing Director and CFO also provide quarterly certificationon financial results while placing the financial results before the Board in terms of theListing Regulations.
Health safety and environment
Your Company believe that organisations' sustainability is directlyproportional to the safety health and environment management. We endeavour to demonstrateenvironmental and social responsibility at every step.
We are devoted to benefit communities - workforce public andenvironment. Our safety health and environment objectives include complying with allapplicable laws relevant to the industry. The Management believes in sharingresponsibility throughout the hierarchy in conforming to the existing laws.
The Company obtained necessary approvals from concerned GovernmentDepartment / Pollution Control Board and all required environment clearances / safetyclearances / stipulations are complied with at Plant facilities of the Company. TheCompany continues to focus on maintenance and performance improvement of related pollutioncontrol facility at its manufacturing locations.
Your Company has adopted several measures to maintain ecologicalbalance in and around our production facilities.
Industrial Relations / Human Resources
The industrial relations scenario continued to be largely positiveacross the manufacturing locations. Significant emphasis was also laid towards raisingawareness on health and wellness of employees through annual medical check-ups and healthawareness activities.
In line with the 'Go Green' philosophy your Company is continuouslyadopting new techniques to eliminate and minimise the overall environmental impact. TheCompany continuously works to nurture this environment to keep its employees highlymotivated result oriented and adaptable to changing business environment. Your Company'svalue proposition 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 thededicated and commendable services rendered by the employees of the Company. The strengthof permanent employees as on 31st March 2021 was 58 Nos.
Overall harmonious industrial relations prevailed at all the Company'slocations during FY 2020-21.
In commitment to keep in line with the Green Initiatives and goingbeyond it electronic copy of the Notice of 75th Annual General Meeting of the Companyincluding the Annual Report for FY 2020-21 are being sent to all Members whose e-mailaddresses are registered with the Company / Depository Participant(s).
Information Technology is the driving force of the business. TheCompany is continuously adopting and utilizing various information technology tools andsuccessfully implemented new age technologies like Internet of Things (IOT) among otherto improve business process efficiency.
As a part of Digital Transformation journey your Company hasimplemented production planning and execution system which was otherwise manual process.
The system for adopting GST in Oracle EBS12 implemented by the Companyis in operation. This project was carried out entirely in house.
Compliance with the provisions of Secretarial Standards
The Company has in place proper systems to ensure compliance with theprovisions of the applicable secretarial standards issued by the Institute of CompanySecretaries of India and such systems are adequate and operating effectively. During thefinancial year under review the Company was in compliance with Secretarial Standards i.e.SS-1 and SS-2 relating to "Meetings of Board of Directors" and "GeneralMeetings" respectively.
Significant and Material Orders passed by the Regulators or Courts
During the year there are no significant and material orders passed bythe Regulators or Courts or Tribunals that could impact the going concern status of theCompany and its future operations.
Further members' attention is drawn to the statement on contingentliabilities commitments in the notes forming part of the financial statements.
Material changes and commitment
The outbreak of COVID-19 pandemic in the financial year under reviewhas not been contained so far all over the globe including India and its severityimpacting economy has increased. The impact of COVID-19 pandemic has been disclosed inthis report. Apart from COVID-19 pandemic impact which may affect the financial conditionsof the Company there are no other material change and commitment affecting the financialposition of the Company required to be reported under this section.
Your Company periodically assesses the risks in the internal andexternal environment along with treating the risks and incorporates risk management plansin its strategy business and operational plans. Your Company recognizes that the risk isan integral part of business and is committed to managing the risks in proactive andefficient manner.
The business plan for the future are devised and approved by the Boardkeeping in mind the risk factors which can significantly impact the performance of theparticular business. All major financial commitments are subject to scrutiny by the Boardand investments 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 propertiesand insurable interests as deemed appropriate and also as required under the variouslegislative enactments.
The details of the Key Policies adopted by the Company are mentioned inthe Corporate Governance Report as Annexure to the Board's Report.
Your Company has not accepted any deposits within the meaning ofSection 73 to 76 of the Companies Act 2013. Hence the disclosures required as per Rule 8(5) (v) & (vi) of the Companies (Accounts) Rules 2014 are not applicable to yourCompany.
Particulars of Loans Guarantees and Investments
Disclosures with respect to Loans Investments and Guarantees coveredunder the provisions of Section 186 of the Act are not applicable since the Company hasnot granted any loan made any investment and provided any guarantees and securities tothe parties covered under Section 185 and 186 of the Act.
In accordance with the provisions of the Companies Act 2013 theannual return will be hosted on website of the Company at'http://www.surattextilemiNsltd.com' after necessary certification and filing the samewith the authority..
Events occurring after Balance Sheet date
There were no significant events that occurred after the Balance Sheetdate apart from the ones mentioned in 'Material changes and commitments affectingfinancial position between the end of the financial year and date of the report' in theBoard's report.
Business Responsibility Report
The Business Responsibility Reporting as required by Regulation 34(2)of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 is notapplicable to your Company for the financial year ended 31st March 2021.
Key financial ratios
In accordance with the SEBI (Listing Obligations and DisclosureRequirements) (Amendment) Regulations 2018 the Company is required to give details ofsignificant changes in key sector-specific financial ratios.
The Company has identified the following ratios as key financialratios:
|Sr. No. Particulars ||FY 2020-21 ||FY 2019-20 |
|1 Debtors Turnover Ratio (times) ||48.60 ||48.01 |
|2 Inventory Turnover Ratio (times) ||13.40 ||14.46 |
|3 Current Ratio (times) ||35.75 ||10.62 |
|4 Debt Equity Ratio (times) * ||-- ||-- |
|5 Operating Profit Margin (%) ||9.79 ||3.85 |
|6 Net Profit Margin (%) ||13.28 ||5.98 |
|7 Return on Net Worth (%) ||12.61 ||8.64 |
* The Company has no long term debt.
Ratios where there has been a significant change from FY20 to FY21.
Change in the Current Ratio Operating Profit Margin Net Profit Marginand Return on Net Worth have been explained in the relevant section above.
Other Disclosures / Reporting
Your Directors state that no disclosure or reporting is required inrespect to the following items as there were no transactions pertaining to these itemsduring the year under review:
1. Issue of equity shares with differential rights as to dividendvoting or otherwise.
2. Issue of shares (including sweat equity shares) to employees of theCompany under any scheme or ESOPs.
3. Voting rights which are not directly exercised by the employees inrespect of shares for the subscription/ purchase of which loan was given by the Company(asthere is no scheme pursuant to which such persons can beneficially hold shares asenvisaged under Section 67(3) (c) of the Companies Act 2013).
4. There is no change in the share capital structure of the Companyduring the year under review.
5. There was no revision in the financial statements.
6. Neither the Managing Director nor the Whole-time Directors of theCompany receive any remuneration or commission from any of its subsidiaries.
Forward Looking Statement
Certain statements made in the Directors Report relating to theCompany's objectives projections outlook expectations estimates and others mayconstitute 'forward looking statements' within the meaning of applicable laws andregulations. Actual results may differ from such expectations whether expressed orimplied. Several factors could make significant difference to the Company's Operations.These include climatic and economic conditions affecting demand and supply governmentregulations and taxation any epidemic or pandemic natural calamities over which theCompany may not have any direct / indirect control.
Your Directors wish to acknowledge the co-operation and assistanceextended to the Company by the Company's Bankers and State & Central Governmentagencies.
Your Directors also acknowledge with gratitude the support ofcustomers dealers agents and suppliers and all other stakeholders for their continuedfaith and support which has helped the Company to sustain its growth even during thesechallenging times.
The Board of Directors also wish to place on record its sincereappreciation for the committed services by the Company's executives staff and workers.Your Directors also appreciate and acknowledge the confidence reposed in them byshareholders and other investors of the Company.