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Surbhi Industries Ltd.

BSE: 514260 Sector: Industrials
NSE: N.A. ISIN Code: INE899E01019
BSE 05:30 | 01 Jan Surbhi Industries Ltd
NSE 05:30 | 01 Jan Surbhi Industries Ltd

Surbhi Industries Ltd. (SURBHIINDUSTRIE) - Director Report

Company director report

To Dear Shareholders

The Directors of your Company have pleasure in submitting their Twenty Seventh AnnualReport together with the Audited Financial Statements for the year ended 31st March 2019.

FINANCIAL RESULTS

The year 2018-19 was very critical for the textile industries. Due to implementation ofGST Policy in the year 2017 the company has to face many issues in the beginning.Increasing stringent competition and vulnerable international markets during the year havemade very difficult to manage business of the company. During the year under review thecompany had managed to record turnover of Rs. 1942.92lakh against the previous yearturnover of Rs. 1980.21 lakh which shows approximately 1.88% decrease in comparison withthe previous year. This is mainly due to effect of GST implementation. The company hadoccurred loss of Rs. 67.68 Lakh during the year compared to previous year's loss of Rs.89.61 Lakh which shows decrease in loss of all most 24.47% as compared to previous year.Barring unforeseen events; your director expects to achieve good results in the comingyears in the same field of operation.

DIVIDEND

In view of requirement of financial resources and considering the future requirementsof funds your Directors are unable to recommend any Dividend for the year ended 31stMarch 2019.

TRANSFER TO RESERVES

No amount has been transferred to General Reserve Account.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return in format MGT -9 for the Financial Year 2018-19 has beenenclosed with this report as Annexure A1

BUSINESS

Efforts are being made to provide better result than earlier years. In view of theincreased activities expansions and programs to grab the emerging opportunities.

DIRECTOR

Pursuant to Section 152 of the Companies Act 2013 Mr. Ravjibhai Parbatbhai PatelDirector of the Company is liable to retire at the ensuing Annual General Meeting of theCompany and he being eligible offers himself for re-appointment. Your directorsrecommend for his appointment.

A brief resume of director(s) retiring by rotation seeking appointment at the ensuingAnnual General Meeting nature of their expertise in specific functional areas and name ofcompanies in which they hold directorship and/or membership/ Chairmanship of Committees ofBoard as stipulated under Regulations of LODR Regulation 2015are given in the AnnualReport.

Mr. Satish Narandas Patel and Mrs. Sheetal Harsh Patel were appointed as additionaldirectors pursuant to provision of section 149 and 152 on 30th June 2018. Theirappointment was confirmed at 26th Annual general meeting pursuant to provision of section149 and 152 of the companies act 2013.

Mr. Pravinbhai Patel and Mr. Nimishbhai N. Jariwala were resigned as on 30thJune 2018.

DEPOSITS FROM PUBLIC

The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.

INSURANCE

All the properties and the insurable interest of the company including building plantsand machinery and stocks wherever necessary and to the extent required have beenadequately insured.

AUDITORS

M/s VIKRANT B. GHAEL & CO. (FRN:122734W) was appointed as Statutory Auditor of thecompany from the conclusion of 26th AGM till the conclusion of 30th AGM at the 26th annualgeneral meeting of the company on such remuneration as may be agreed upon by the AuditCommittee/Board of Directors in consultation with the Statutory Auditors. As requiredunder the provisions of Section 139 of the Companies Act 2013

The Company has obtained written confirmation from M/s. M/s VIKRANT B. GHAEL & CO.confirming to the effect that their appointment would be accordance with the provision ofSection 141 of the Companies Act 2013.

Provision of Company (Amendment) Act 2017 become effective from 7th May 2018 and thusBoard has noted the appointment of auditor made for the period from the conclusion of 26thAnnual General Meeting to Conclusion of 30th Annual General Meeting and hence there is nochange in auditor formal resolution for ratification is not mentioned in the notice.

AUDITORS REPORT

In the opinion of the directors the notes to the accounts are self-explanatory andadequately explained the matters which are dealt with by the auditors.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(5) of the Companies Act 2013 the board of directors to thebest of their knowledge and ability confirm:

1. That In the preparation of the annual accounts the applicable accounting standardshave been followed and there are no material departures.

2. That such accounting policies have been selected and applied consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year ended on 31stMarch 2019 and of the profit of the Company for that period.

3. That proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities.

4. That the annual accounts have been prepared on a going concern basis

5. That internal financial controls have been laid down to be followed by the Companyand that such internal financial controls are adequate and operating effectively.

6. That proper systems have been devised to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors and external consultants and the reviews performed by management andthe relevant board committees including the audit committee the board is of the opinionthat the Company's internal financial controls were adequate and effective during thefinancial year 2018-19.

RISK MANAGEMENT

Details of risk management committee is given under the Corporate Governance reportwhich is forming part of this report.

NUMBER OF MEETINGS OF THE BOARD& COMMITTEES

For details of the meetings of the board please refer to the corporate governancereport which forms part of this report.

POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Company's policy on directors' appointment and remuneration and other mattersprovided in Section 178(3) of the Act has been disclosed in the corporate governancereport which is forming part of the directors' report.

DECLARATION OF INDEPENDENT DIRECTORS

Pursuant to the provisions of Section 149 of the Act which came into effect from April1 2014 Mr. Nimish N. Jariwala (DIN: 00421374) and Mr. Pravinchandra G. Patel (DIN:00421416) were appointed as independent directors at the annual general meeting of theCompany held on 30thSeptember 2014. The terms and conditions of appointment ofindependent directors are as per Schedule IV of the Act. They have submitted a declarationthat each of them meets the criteria of independence as provided in Section 149(6) of theAct and there has been no change in the circumstances which may affect their status asindependent director during the year.

Pursuant to the provisions of Section 149 of the Act which came into effect from April1 2014 Mr. Satish Narandas Patel (DIN: 08168748) and Mrs. Sheetal Harsh Patel (DIN:06858676) were appointed as independent directors at the annual general meeting of theCompany held on 30th June 2018. The terms and conditions of appointment of independentdirectors are as per Schedule IV of the Act. They have submitted a declaration that eachof them meets the criteria of independence as provided in Section 149(6) of the Act andthere has been no change in the circumstances which may affect their status as independentdirector during the year.

AUDITORS REPORT SECRETARIAL AUDIT AND OBSERVATIONS

Pursuant to the provisions of Section 204 of Companies Act 2013 and rules made thereunder the Company has appointed Mr. Kunal Bajaj Practicing Company Secretary toundertake the Secretarial Audit of the Company.

Report of the secretarial auditor is given as an Annexure-A3 which forms part of thisreport.

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

The loans if any made by the Company are within the limits prescribed u/s 186 of theCompanies Act 2013 and no guarantee or security is provided by the company.

The particulars of loans guarantees and investments have been disclosed in thefinancial statements.

TRANSACTIONS WITH RELATED PARTIES

None of the transactions with related parties falls under the scope of section 188(1)of the Act. Information on transactions with related parties pursuant to section 134(3)(h)of the Act read with rule 8(2) of the Companies(Accounts) Rules 2014 are given inAnnexure II in Form AOC-2 and the same forms part of this report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

CONSERVATION OF ENERGY:

Company's knitting and twisting plants are running with electricity which is suppliedby the Dakshin Gujarat Vij Company Limited. The plants are periodically checked as ameasure of periodical maintenance to minimal break down and energy conservation. Howevercompany' production facilities do not offer much scope for energy conservation.

a) Steps taken or Impact on conservation of energy: Company has installed windmills to conserve the natural resources and to promote green energy.

During the year total 11.72 lakh units were generated through wind mill and credit ofthese units were given by DGVCL against its electricity consumption by the unit.

b) Steps taken by the company for utilizing alternate source of energy: Companyis using wind energy as alternate source of energy and the electricity generated by thewind mill was given as credit in the electricity bills raised by the DGVCL.

c) Capital investment on energy conservation equipment: Company has madeinvestment in wind mill only.

A. Power and Fuel Consumption:
Particulars 2018-19 2017-18
1 Electricity
(a.) Purchased
Total Units (In lacs kw) 26.38 24.70
Total Amount (In lacs Rs.) 175.61 168.89
Rate / unit (In Rs.) 6.66 6.84
(b) Own Generation
Wind Mill ( units in lacs ) 11.72 9.88
(Credit was given in Electric Bill of Rs 65.60 lacs which amounts to Rs. 5.60 per unit)
2 Diesel N.a. N.a.
3 Furnace Oil N.a. N.a.
4 Others N.a. N.a.

Technology absorption

The Company's plant is running satisfactorily. No other technology is involved inCompany's facility other than windmill power generation. No amount was used in research& development

Foreign exchange inflow / out flow Year 2018-19 Year 2017-18
Foreign Exchange inflow nil nil
Foreign Exchange outflow Rs. 200460 Rs. 75449

CORPORATE SOCIAL RESPONSIBILITY:

Our company does not fall under the purview of Section 135 of companies Act 2013.Hence no Corporate Social Responsibility initiatives have been taken during the year.

BOARD EVALUATION

The board of directors has carried out an annual evaluation of its own performanceboard committees and individual directors pursuant to the provisions of the Act and thecorporate governance requirements as prescribed by Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 ("SEBI ListingRegulations").

The performance of the Board was evaluated by the Board after seeking inputs from allthe directors on the basis of the criteria such as the Board composition and structureeffectiveness of board processes information and functioning etc.

The performance of the committees was evaluated by the board after seeking inputs fromthe committee members on the basis of the criteria such as the composition of committeeseffectiveness of committee meetings etc.

The Board and the Nomination and Remuneration Committee ("NRC") reviewed theperformance of the individual directors on the basis of the criteria such as thecontribution of the individual director to the Board and committee meetings likepreparedness on the issues to be discussed meaningful and constructive contribution andinputs in meetings etc. In addition the Chairman was also evaluated on the key aspectsof his role.

In a separate meeting of independent Directors performance of non-independentdirectors performance of the board as a whole and performance of the Chairman wasevaluated taking into account the views of executive directors and non-executivedirectors. The same was discussed in the board meeting that followed the meeting of theindependent Directors at which the performance of the Board its committees andindividual directors was also discussed.

INTERNAL FINANCIAL CONTROL SYSTEMS AND THEIR ADEQUACY

The details in respect of internal financial control and their adequacy are included inthe management discussion & analysis which forms part of this report.

CORPORATE GOVERNANCE

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015the report of the Corporate Governance and the Certificate of the Auditors of the Companyin respect of compliance thereof are appended hereto and forming part of this report.

As per Regulation 15 of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the company is not required to comply with the provisions of Regulations17 to 27 and Clauses (b) to (i) of sub regulation (2) of Regulation 46 and para C D and Eof Schedule V respectively but for better governance the Company had voluntarilycomplied the same to the extent possible.

COST AUDIT:

Applicable provisions of Cost Audit compliance if any were dealt separately. Duringthe year under review cost audit was not applicable to company and pursuant to Section 148(1) company had maintained the applicable cost records.

LISITNG

At present your Company's securities are listed on the BSE Limited. Necessary steps andapplication for revocation of suspension of trading is made at the BSE Limited. And replyof BSE Ltd is awaited.

PARTICULARS OF EMPLOYEES

The information required under Section 197 of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow: a. The ratio of the remuneration of each director to the median remuneration ofthe employees of the Company for the financial year*:

Executive directors/ Non-executive director Ratio to median
Ravjibhai Parbatbhai Patel 18.52 :1
Bipinbhai Jasmatbhai Patel 16.02 :1

Note: Generally more than 85% of employees are of daily wage earner or of blue collarworkers and hence statistical date of median remuneration are not comparable in this typeof industries. b. The percentage increase in remuneration of each director chiefexecutive officer chief financial officer company secretary in the financial year *

Directors Chief Executive Officer Chief Financial Officer and Company Secretary % increase in remuneration in the financial year
Ravjibhai Parbatbhai Patel NIL
Bipinbhai Jasmatbhai Patel 15.33

c. The percentage increase in the median remuneration of employees in the financialyear*- approx. 10.69 %

* Company operates in the field of textile where in most of the employees are ondaily wages basis most of them are of operator helper and cleaner category and due tohigh attrition and irregular presence the salary of average employees are aroundapproximate Rs. 360-410 per day. In our case comparison of median salary of employee andKMP is not comparable.

d. The number of permanent employees on the rolls of Company-

108 employees.

e. The explanation on the relationship between average increase in remuneration andCompany performance

On an average there is approximate 8-15 % rise in the remuneration of the employees.

The increase in remuneration is in line with the market trends in the respectiveindustries. Generally market rates are decided on the availability of the worker in thesurrounding areas sometimes during festive season daily wages workers travelled to theirhome location and during that period considering the requirement of organization and needof productions higher rates were also required to be paid. In order to ensure thatremuneration reflects Company performance the performance pay is also linked toorganization performance apart from an individual's performance.

f. Comparison of the remuneration of the key managerial personnel against theperformance of the Company

Aggregate remuneration of key managerial personnel (KMP) in FY18-19 4476000
Revenue 194292895
Remuneration of KMPs (as % of revenue) 2.30%
Profit before Tax (PBT) (13028037)
Remuneration of KMP (as % of PBT) -34.36%

During the previous years under review company had made expansion and cost ofdepreciation was higher the time and contribution given by the KMP can not only measuredin terms of percentages.

g. Variations in the market capitalisation of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year:*

Particular March 31 2019 March 31 2018 % Change
Market Capitalisation - - -
Price Earnings Ratio - - -

As on date status of company is suspended for trading and hence no trading dataavailable on BSE Ltd. In absence of trading value and market capitalization the above datacould not be comparable.

h. Percentage increase over decrease in the market quotations of the shares of theCompany in comparison to the rate at which the Company came out with the last public offer

Market Price (BSE) As per note given below
- -

As on date status of company is suspended for trading and hence no trading dataavailable on BSE Ltd. In absence of trading value and market capitalization the above datacould not be comparable. The shares of company's are thinly traded and there is no suchvolumes of trading in the scrip of the company. Company had issued shares before twodecades and thereafter company was not in a good financial conditions and the shares ofthe company were delisted and thereafter company made efforts to revoke the trading andsince then price of the company's scrip is showing thin trading.

Hence the data pertain to above is not comparable.

i. Average percentile increase already made in the salaries of employees other than themanagerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration:

j. Comparison of each remuneration of the key managerial personnel against theperformance of the Company:

Name of KMP Name of KMP
Ravjibhai Parbatbhai Patel Bipinbhai Jasmatbhai Patel
Remuneration in FY 2018-19 2400000 2076000
Revenue 194292895
Remuneration as % of Revenue 1.23% 1.07%
Profit before Tax (13028037)
Remuneration as % of PBT -18.42% -15.93%

k. The key parameters for any variable component of remuneration availed by thedirectors: N.A.

l. The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year: None

m. Affirmation that the remuneration is as per the remuneration policy of the Company:

The Directors of Company affirms remuneration is as per the remuneration policy of theCompany.

n. Percentage increase over decrease in the market quotations of the shares of theCompany in comparison to the rate at which the Company came out with the last public offer

Market Price (BSE) As per note given below
- -

The shares of company are thinly traded on off market {as status of company issuspended for trading } and there is no such volumes of trading in the scrip of thecompany. Company had issued shares before two decades and thereafter company was not in agood financial conditions and the shares of the company were delisted and thereaftercompany made efforts to revoke the trading and since then price of the company's scrip isshowing thin trading. Hence the data pertain to above is not comparable.

TAXES:

Company is regularly paying Income tax Sales Tax and other statutory dues likeProvident Fund ESIC as applicable. As regard to Service Tax appropriate provision andtreatments have been made as per law. Details of the payment refund and appeals anddisputed amount have been adequately provided in audit report and the same areself-explanatory and the amount of dispute is being dealt with various authorities andawaiting for final outcome.

INDUSTRIAL RELATIONS

Your Company's relations with its employees remained cordial throughout the year. TheDirectors wish to place on record their deep appreciation for the services rendered bystaff members and executives of the company. Your company has taken adequate steps for thehealth and safety of its employees.

Your Directors further state that during the year under review there were no casesfiled pursuant to the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013

MATERIAL CHANGES AFFECTING FINANCIAL POISTION OF THE COMPANY

No material changes or commitments affecting the financial position of the Companyhave occurred between the end of the financial year of the company to which the financialstatements relate i.e. 31st March 2019 and the date of Board Report. Company isassessing impact of GST in the textile industry and the same is seen as major challengesto the industry.

ORDERS PASSED BY REGULATORY BODIES OR COURTS

No regulatory body or court or tribunal has passed any significant and material ordersimpacting the going concern status and operations of the company. During the year BSE Ltd.had passed order for delisting of securities of company and after appropriaterepresentation with various authorities BSE Ltd vide its letter dated 31st August 2019revoked the order of delisting.

CORPORATE GOVERNANCE:

The Company has complied with the requirement regarding corporate governance as perListing Obligation and Disclosure Requirement (LODR) Regulation 2015 and stock exchangewhere the Company's shares are listed. A report on the Corporate Governance in this regardis made a part of this Annual Report and a Certificate from the Auditor of the Companyregarding Compliance of the Conditions of the Corporate Governance is attached to thisreport and forming part this report.

MANAGEMENT DISCUSSION AND ANALYSIS:

1. INDUSTRY OUTLOOK:

India's textiles sector is one of the oldest industries in Indian economy dating backseveral centuries. Even today textiles sector is one of the largest contributors toIndia's exports with approximately 13-15 per cent of total exports. The textiles industryis also labour intensive and is one of the largest employers. The textile industry has twobroad segments. First the un-organised sector consists of handloom handicrafts andsericulture which are operated on a small scale and through traditional tools andmethods. The second is the organised sector consisting of spinning apparel and garmentssegment which apply modern machinery and techniques such as economies of scale.

The Indian textiles industry is extremely varied with the hand-spun and hand-woventextiles sectors at one end of the spectrum while the capital intensive sophisticatedmills sector at the other end of the spectrum. The decentralised power looms/ hosiery andknitting sector form the largest component of the textiles sector. The close linkage ofthe textile industry to agriculture (for raw materials such as cotton) and the ancientculture and traditions of the country in terms of textiles make the Indian textiles sectorunique in comparison to the industries of other countries. The Indian textile industry hasthe capacity to produce a wide variety of products suitable to different market segmentsboth within India and across the world.

2. OPPORTUNITIES AND THREATS:

The Indian cotton textile industry is expected to showcase a stable growth inFY2019-20 supported by stable input prices healthy capacity utilisation and steadydomestic demand.

Government is providing various incentives under TUFs .The Customers also growingrapidly. At the same time there is intense price pressure from the competitors andinternational financial crisis. Major threat is from international market and mainly fromchina. GST will impact most to the textile industry as the same is in most unorganizedsector and implementation of GST will be seen as game changer to this industry.

However international slow-down may have adverse impact on the growth the textileindustry.

3. INITIATIVES

The Indian government has come up with a number of export promotion policies for thetextiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector underthe automatic route. The initiatives are being taken by the Company too for improving thequality standards and reduction of costs at appropriate level. New machineries areimported to provide better result and to cope up with changing requirement of theindustry. The employees at all levels are being made aware of the changing conditions andthe challenges of the open market conditions and to train the personnel to tackle thedifficult situations which will improve the overall productivity profitability.

4. RISKS AND CONCERNS:

Now a days due to industrial slow down and change in market purchasing pattern IndianTextile Industry witness setback and down trade. Major fluctuations Rupee v/s dollar pricecorresponding to fluctuation in the raw material price and stringent market conditions canaffect the company's performance. Goods and Service Tax Act will have major impact on theindustry and the same cannot be assessed at this point of time.

5. INTERNAL CONTROL SYSTEM:

The Company has an adequate internal audit system commensurate with its size and thenature of its business towards achieving efficiency in the operation optimum utilizationof resources and effective monitoring thereof and compliance with applicable laws.

6. HUMAN RESOURCES:

Employee's relations continue to be cordial. Training and development activities areidentified organizes and progress monitored as part of human resource developmentactivities.

7. FUTURE PLAN:

The future for the Indian textile industry looks promising buoyed by both strongdomestic consumption as well as export demand. With consumerism and disposable income onthe rise the retail sector has experienced a rapid growth in the past decade with theentry of several international players into the Indian market. As a long term planningstrategy company is planning to develop cotton based technology. Company intend to launchnew project in the field of textile particularly embroidery based production.

ACKNOWLEDGMENT:

The Directors sincerely express their appreciation to the employees at all levelsBankers customers investors Government of Gujarat and Ministry of Government for theirsustained support and co-operation and hope that the same will continue in future.

Your Directors also wish to place on record their deep appreciation for the dedicationand hard work put by the employees at all levels towards the growth of the Company. Lastbut not the least the Board of Directors wish to thank the Investor/ Shareholders fortheir support co-operation and faith in the Company.

Registered Office: For and on behalf of the Board of Directors
"Surbhi House" By order of the Board
2nd Floor FP NO 206
B/h Old Sub Jail Ring Road Sd/-
Khatodara Surat 395002 Bipinbhai Patel
Chairman
DIN: 00023447
Date :28/05/2019
Place :Surat