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Western India Cottons Ltd.

BSE: 532026 Sector: Industrials
NSE: N.A. ISIN Code: INE078F01017
BSE 05:30 | 01 Jan Western India Cottons Ltd
NSE 05:30 | 01 Jan Western India Cottons Ltd

Western India Cottons Ltd. (WICOTTONS) - Director Report

Company director report

2016-2017

FINANCIAL SUMMARY

Your Directors have pleasure in presenting their report and audited accounts for thefinancial year 2016-2017.

(Rs. In lakhs)

2016-17 2015-16
Sales/Other Operating Income 405.89 388.12
Other Income 87.14 76.28
Gross Income 493.03 464.40
Profit before Tax 12.47 16.35
Provision for Taxation / Deferred Tax -0.71 10.30
Profit/Loss for the year 13.13 6.05
Add: Loss brought forward 2111.86 2117.92
Add Transfer to Capital Reserve \ Remission of Secured Loan -
Accumulated Loss as on 31st March 2098.73 2111.87

REVIEW OF OPERATIONS

Your Company could achieve a gross revenue of Rs. 493.03 lakhs (Note no.:14&15(464.40 lakhs) consisting of (i) Sales revenue of Rs. 405.89 lakhs (388.12 lakhs) (ii)Rental income of Rs. 78.3 lakhs (74.19 lakhs) and (iii) Miscellaneous income of Rs.8.84lakhs (2.09 lakhs). (Figures in brackets for the previous year). Your Company's net profitstands at Rs.13.13 lakhs against Rs.6.05 lakhs for the previous year.

In regard to trading the problem of uncertainty of demand for our limited conventionalproducts is accelerated by availability of cheap and duplicate products flooding themarket more so during festival seasons. Despite our best efforts to ensure consistency ofmonthly sales the trend of sales is festival and season related which is evident from thefollowing statement.

Period Sale value Average sale value per month
01-04-2015 to 30-09-2015 Rs. 232 Lakhs Rs. 38.7 Lakhs
01-10-2015 to 31-03-2016 Rs. 174 Lakhs Rs. 29 Lakhs

In the distinctly developed culture of preference for readymade items which often areavailable on reduced rates on reduction sales the merely bleached mull items bear lowestpriority in demand and are used presently for exceptional occasions as traditional ware.Also the number of players as competitors to our products are increasing every day mainlyfrom Tamil Nadu.

Despite confronting such significant challenges emanating from a deficient productprofile and proliferation of competitors with cheap items and general decline in textilebusiness your Company has been able to achieve a sales turnover of Rs. 405.89 lakhscompared to Rs.388.12lakhs for the previous year.

In our continuous efforts to add some more products to the product profile yourCompany has recently introduced bed sheets as sourced items with a hope to increase thesales income. .

In the past the Company had the benefit of some orders for specially made up items bothinternal and export oriented demanding intricate specifications which were executedthrough the inbuilt technological competence of the Company. The demand for such itemsstands considerably reduced and during the year there was virtually no export of any madeup items. The income from internal special products sales during the year stands at Rs.101.2 Lakhs. The resultant adverse effect on earnings through trading is that the surplusgenerated during the initial months of the year is consumed by the losses occurred duringthe last months of the year.

In regard to renting of godown space in the Mill premises considering the presenttrend of lean trading activities the immediate alternative has been to generate someincome from godown renting of the large area in the Mill premises by carrying outessential repairs in the existing old buildings to suit modern godown facilities.Recordically the buildings appear to have been constructed about 80 years ago with woodand tiled roofs which were maintained mainly from the point of view of preventing leakageand changing broken tiles and battens. Even this minimum maintenance was not done since2003 after suspension of manufacturing activities of the Mill which is being attended toduring the last four years.

The buildings being more than seven decades old demanding repair / replacement of roofsand floors after dismantling the old heavy machines for preparing the same to suit theminimum warehousing requirements logistics conveniences and protecting from rains theexpenditure incurred during the year 2016-17 was Rs.26 lakhs against a rental income ofRs.78.3 lakhs. However with these major repairs undertaken normal general maintenance hasto be ensured for upkeep of the building and protection of the stored goods

After vacating the godown having an area of 23500 sq ft by the KSBC owing tocentralised warehousing arrangements done by some Companies resulting in direct deliveryfrom the main storage area and general decline in business another about 20000 sq ft ofgodown space has since been vacated during the year.

A new problem has emerged due to the classification of our building as "forIndustrial use" by the Panchayath. Due to this classification new trade licenses arenot being issued by the Panchayath. This problem emerged when a new tenant with whom weentered into an agreement in December 2016 approached the Panchayath for a Trade License.Their application was rejected by the authorities due to the classification of thebuilding as ‘for industrial use'. Hence till the classification is changed to‘warehousing category' new trade licenses will not be issued by the authorities. Toovercome this problem we are in the process of preparing the application for conversionof classification of buildings to Warehouse category. This process will entailconsiderable preparatory work expenses and time as the final approving authority is theChief Town Planner in Trivandrum. In view of this problem no godown could be rented forthe last 7 months despite enquiries therefor.

Despite above difficulties all out efforts are being made to find out new parties forrenting the built-up godown space after sorting out the conversion of classificationproblem which is taken up on priority basis.

The Company continues its honest efforts to maintain average monthly sales of aboutRs.40 lakhs which alone in the present circumstances allows a breakeven and a comfortablesurplus in operation. Despite the limited trading activities the Company has to meet thehuge operational expenses including expenses related to an ongoing Company. Though incomefrom renting activities has been Rs. 78.3lakhs during the year repair and maintenance ofold buildings to suit the minimum warehousing requirement carved a major portion of theearning. Also one old building had to be thoroughly renovated with a godown space of 12300sq ft. costing Rs. 12.6 lakhs which has since been certified by Chartered Engineer formore than 15 years life.

Despite these factors your Company has been able to earn a profit of Rs.‘13.13lakhs which is attributable to the strength of the Company derived through its reputationand business acumen. Having discharged major liabilities its strength lies in itsnon-dependence on outside finance.

During 2016-17 your Company strived to improve its performance despite confrontingsignificant challenges emanating from circumstances explained above. The Companysurmounted these challenges through strategic initiative and healthy corporate governance.

With the intended improvement in trading business and attempted increased incomethrough rent on solving the conversion issue there is definite scope for improvedturnover and profitability in future.

MATERIAL CHANGES AND COMMITMENTS IF ANY AFFECTING FINANCIAL POSITION OF THE COMPANYWHICH HAVE OCCURRED DURING THE END OF FINANCIAL YEAR AND THE DATE OF THE REPORT.

There are no material changes and commitments affecting the financial position of theCompany which has occurred between the end of the financial year of the Company i.e. March31 2017 and the date of the Directors' Report i.e. 8th August 2017.

PARTICULARS OF CONSERVATION OF ENERGY TECHNOLOGY UPGRADATION AND FOREIGN EXCHANGEEARNINGS AND OUTGO.

The report required to be made pursuant to section 134(3) (m) of the Companies Act2013 read with Rule 8(3) of the Companies (Accounts) Rules 2014 is given in Annexure A tothis report.

DIRECTORS:

Your Company has six directors including the Managing Director and a Woman Director anduntil November 2016 the Company had two Independent Directors. However pursuant to theprovisions of section 149 of the Companies Act which came into effect from April 1 2014every listed public company is required to have at least one-third of the total number ofdirectors as independent directors who are not liable to retire by rotation. Therequirement at that time with 5 Directors on the Board was two Independent Directorswhich was fulfilled in time. Subsequently as required under Companies Act 2013 a WomanDirector was appointed making the total strength on the Board as six Directors.

We have now been instructed by the BSE limited that as our Chairman of the Board is nota Non Executive Director and the number of Directors being six the Independent Directorsshould be 50% of the Board strength meaning that the Board shall have three independentDirectors. As this is an essentiality under the SEBI (Listing and Other DisclosureRequirements) Regulations 2015 the Board has appointed one more Independent Directoreffective November 2016.

All the Directors have filed Form MBP-1 regarding disclosure of concern or interest inany Company as required under Section 184(1} read with Rule 9(1) of the Companies Act2013.

RETIREMENT OF DIRECTORS

Mrs. Nadeera Shameem has to retire by rotation and is eligible for re-appointment.. TheBoard reviewed her performance and recommended her reappointment for consideration of theMembers.

PERFORMANCE EVALUATION OF INDEPENDENT DIRECTORS BY THE BOARD

In terms of the provisions of Schedule IV (Para VII) and section 134(3) (p) of theCompanies Act 2013 performance evaluation of the Independent Directors shall be doneannually by the Board of Directors. An evaluation of the Independent Directors wasconducted by the Board in the absence of the concerned Directors. The Chairman of theReview Committee made a note of the result of such reviews which forms the basis forrecommending for retention / extension/ reappointment of the concerned Director.

PERFORMANCE REVIEW OF NON-INDEPENDENT DIRECTORS AND THE CHAIRMAN BY INDEPENDENTDIRECTORS.

In terms of the provisions of schedule IV (Para VIII) of the Companies Act 2013Independent Directors shall hold an Annual Meeting without the attendance of Non-Independent Directors and members of the Management and review the performance ofNon-Independent Directors including the Chairman. Accordingly a review was held by theIndependent Directors and their opinion minuted and placed before the Board of Directors.

PERSONNEL:

There were no employees drawing remuneration in excess of the limits specified undersection 134 of the Companies Act 2013 read with Rules of the Companies (Appointment andRemuneration of Managerial Personnel) Rule 2014 during the year under report.

APPOINTMENT OF KMP

Shri. Suneed Hashir is appointed as the Chief Financial Officer of the Company witheffect from 1.1.2015

CONTRACT WITH RELATED PARTIES

There is no instance of any contract with related parties reportable during the yearunder review.

CORPORATE GOVERNANCE

Your Company is committed to adopting the best corporate governance practices. Itbelieves that proper corporate governance is not just a requirement for regulatorycompliance but also a facilitator for enhancement of stakeholders' value. The details ofyour Company's corporate governance practices are given in this Annual Report as aseparate section under Report on Corporate Governance as Annexure ‘B'.

EXTRACT OF THE ANNUAL RETURN

Extract of the Annual Return in Form MGT 9 forms part of this Report and is given atAnnexure ‘C'.

DIRECTORS RESPONSIBILITY STATEMENT:

Your Directors hereby confirm:

1. That in the preparation of Accounts for the period ended 31st March 2017; applicableaccounting standards have been followed along with proper explanation relating to materialdepartures wherever necessary.

2. 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 for the financial yearended 31st March 2017 and of the profit/loss of the Company for that period.

3. 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

4. That the statements of Profit and Loss and Balance Sheet have been prepared on agoing concern basis.

5. The directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

6. The directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

THE DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS.

The Company has an elaborate internal financial controls and processes policy in placewhich provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements. These controls and processes are applied strictlyand reviewed periodically. The Company has not revised any Financial Statements or Board'sReport during the preceding three years. The Company has not maintained any charges withthe MCA.

COMPLIANCE CERTIFICATE - SECRETARIAL AUDIT

In terms of the provisions 204 of the Companies Act 2013 Secretarial Audit Reportobtained from Shri. Murali Kanniyath Practicing Company Secretary Kannur for the yearended 31st March 2017 is given in Annexure ‘D' and forms part of this report

AUDITORS:

M/S.T K Menon & Co. Chartered Accountants Calicut the Statutory Auditors wereappointed by the Shareholders until the completion of audit for the AGM of 2017 and wouldretire after the Annual General Meeting 2017. Owing to the criteria of mandatory rotationof statutory auditors M/s.T.K.Menon & Co. having completed ten years and cannotcontinue as Statutory Auditors your Directors recommend M/s.Varma & Varma CharteredAccountants for appointment as Statutory Auditors on retirement of T.K.Menon & Co.after the Annual General Meeting 2017. This item is included in detail in the notice forthe Annual General Meeting 2017.

INSURANCE:

The Company's Assets have been adequately insured.

DIVIDEND:

Though your Company has earned small amounts of operational profits during the years2010-2011 onwards owing to accumulated losses of Rs.2098.73 lakhs as on 31st March 2017no dividend could be declared under the Companies Act.

Also as the Company has huge accumulated loss which is not set off in full againstthe current profits there is no amount to be carried to reserves.

CORPORATE SOCIAL RESPONSIBILITY

Though your Company is not covered by Corporate Social Responsibility as per theCompanies Act 2013 yet in its culture of being actively involved in socialresponsibilities emphasis will continue to be laid on this aspect.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALSIMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE:

During the year under review there has been no such significant and material orderspassed by the regulators or courts or tribunals impacting the going concern status andcompany's operations in future.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186:

During the year under review the Company has not advanced any loans/ given guarantees/made investments.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION PROHIBITIONAND REDRESSEL) ACT 2013.

All employees of the Company having gone on voluntary retirement the small scaletrading activity is conducted with ten number of contract male employees. InternalComplaints Committee is constituted to redress complaints received regarding sexualharassment. The Company has not received any complaint of sexual harassment during theyear 2016-17.

ACKNOWLEDGEMENT

Your Directors place on record their thanks and appreciation to the employees of theCompany at all levels shareholders agents and other business associates for theirdedication and contribution to the Company's operations.

Your Directors place on record their thanks to The ICICI Bank Ltd. The Federal BankLtd. The State Bank of India The Bank of India and The IDBI Bank for their valuableco-operation and support to the Company.

Place: Kannur On behalf of the Board
Date: 08.08.2017 Managing Director

Annexure - A to Directors Report

Particulars required as per Companies (Disclosure of particulars in the report of theBoard of Directors) Rules 1988.

CONSERVATION OF ENERGY (Not applicable for the year ended 31.03.2016 and 31.03.2017 asthere were no manufacturing activities.)

FORM B

FORM OF DISCLOSURE OF PARTICULARS WITH RESPECT TO ABSORPTION OF RESEARCH ANDDEVELOPMENT (R&D) TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION.

Though the Company is not in the field of manufacturing yet the Company avails ofinternet facility and contributes to various Textile Technology publications which renderthe latest technological aspects and research outcome in the textile industry

FOREIGN EXCHANGE EARNINGS AND OUTGO

1. Activities relating to Export initiatives taken to increase exports and development of new export markets for products and services Steps are being taken to increase exports by exploration through internet facilities
2. Expenditure in Foreign Exchange
A) Used on account of travelling NIL
Activities relating to Exports
- On import of spares etc NIL
- Others (Commission) NIL
Total NIL
3. B) Total Earnings in foreign exchange
- On Account of sales NIL

 

Place: Kannur On behalf of the board
Date: 08.08.2017 Managing Director

ADDENDUM TO DIRECTORS' REPORT

Based on the Qualified Opinion mentioned in the Auditors' Report to the Members dated8.8.2017.

1. Confirmation of balances:

As per the normal practice letters were sent to the debtors holders of advances(except statutory bodies) and liabilities for confirming the balances directly to theStatutory Auditors with a specific mention that if no reply was received the balancementioned in the Company's communication would be construed as correct. In many cases thedebtors were also reminded by personal contacts while on sales visit and over thetelephone. Being parties of small transactions they do not take care to meet the saidrequirement. Yet some replies have been received through the Auditors. However havingactively pursued the matter in many cases the amounts outstanding has since beenrealized.

2. Segment information required to be disclosed as per accounting standard AS 17 notdisclosed in the financial segment.

The relevant item pertains to leasing of godown space in the Mill premises which hadgathered momentum only for a while. Though there was mentionable improvement in leasingout godown space during the early part of 2014 -15 there was a reduction to the extent ofabout 50000 square feet by bringing down the rent income from about Rs.10.0 lakhs p.m. toalmost half of it owing to shifting of godown by the parties and centralizing theirwarehousing system wherefrom goods are directly delivered. The trend continues even nowand some more godown space was vacated during the year. Thus there is considerableinstability and uncertainty in declaring the rental activity as a separate segment foraccounting purposes. Depending upon the trend of progress during the year appropriateaction will be taken for considering this activity as a separate segment for accountingpurposes if the growth so permits.

3. AS 28 Impairment of assets:

Owing to the nature of our assets impairment of assets does not apply on our assets asthe carrying cost does not exceed their recoverable value.

Place: Kannur On Behalf of the Board
Date: 09.08.2017 Managing Director