DIRECTOR'S REPORT TO THE MEMBERS OF THE KALLAM SPINNING MILLS LIMITED, I.Your directors have pleasure in presenting the Twenty-Third Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March 2015. II. DIVIDEND : In view of the company's profitable performance, your directors are pleased to recommend for approval of Shareholders a Final Dividend of 10% on 68,51,100 Equity shares of the company in respect of the financial year 2014-2015. The paid up capital of the company remained unchanged at Rs 685.11 Lakhs. Earnings per share was Rs 13.80. III. EXTRACT OF THE ANNUAL RETURN AS PER MGT-9 : The details forming part of the extract of the Annual Return in form MGT-9 as required under Section 92 of the Companies Act, 2013 is included in this Report as Annexure - I and forms an integral part of this Report. IV. NUMBER OF MEETINGS HELD OF THE BOARD: During the year, Four Board Meetings were held, with a gap between not exceeding the period of 120 days as prescribed under the Act. Details of the Board and Board Committee meetings held during the year are given in the Corporate Governance Report. V. DIRECTOR'S RESPONSIBILITY STATEMENT: To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors make the following statements and terms of Section 134(3)(c) of the Companies Act, 2013: • that in the preparation of the annual financial statements for the year ended March 31,2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures. • for the financial year ended March 31, 2015, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company and of the Profit and Loss of the Company for the year ended March 31, 2015. • that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. • the annual financial statements have been prepared on a going concern basis. • that the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively : and • that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively VI. A STATEMENT ON DECLARATION GIVEN BY INDEPENDENT DIRECTORS: During the year under review, one meeting of Independent Directors was held on 12th February, 2015 in compliance with the requirements of Schedule IV of the Companies Act, 2013. All the Independent Directors of the Company have declared that they meet the criteria of Independence in terms of Section 149(6) of the Companies Act, 2013 and that there is no change in status of Independence. VII. DIRECTORS: During the year, Pursuant to the Provisions of Section 149(1) of the Companies Act, 2013 read with Rule 3 of the Companies (Appointment and Qualification of Directors) Rules, 2014 and also as per Clause 49(II)(A)(1) of the Listing Agreement with Bombay Stock Exchange, the Company, with the approval of shareholders at AGM, has appointed Smt V.Bhargavi, a Qualified Chartered Accountant, as a woman director of the company on 27th September, 2014. Pursuant to Section 269 and other applicable provisions of Companies Act, 1956 read with Schedule XIII to the said act, the shareholders at their 20th Annual General Meeting held on 22nd September, 2012 appointed Sri P. Venkateswara Reddy as a Managing Director and Sri G.V. Krishna Reddy as a Joint Managing Director of the Company for a period of Three years with effect from 29th June, 2012.The Term of their appointment would come to an end on 28th June, 2015. It is necessary to Re-appointment them for another period of Three years. Hence the Board at their meeting held on 30-05-2015 decides to Re-appoint Sri P. Venkateswara Reddy as a Managing Director and Sri G.V.Krishna Reddy as a Joint Managing Director of the Company for another period of Three years on the recommendations of the Nomination and Remuneration Committee. Pursuant to Section 196, 197, 203 and other applicable provisions, if any, of Companies Act, 2013 read with Schedule V to the said act and Subject to the approval of the shareholders in Annual General Meeting, Sri P.Venkateswara Reddy and Sri G.V.Krishna Reddy be proposed to re-appoint as a Managing Director and Joint Managing Director of the Company for a period of Three years with effect from and including 29th June, 2015. In accordance with the provisions of Section 152 of the Companies Act, 2013 and the Company's Articles of Association, Sri P. Venkateswara Reddy, Director retires by rotation at the forth coming Annual General Meeting and being eligible offers himself for re-appointment. VIII. POLICY ON APPOINTMENT, NOMINATION AND REMUNERATION OF DIRECTORS : The Board has on the recommendation of the Nomination & Remuneration Committee, formulated criteria for determining Qualifications, Positive Attributes and Independence of a Director as also a Policy for remuneration of Directors, Key managerial Personnel and senior management. The details of criteria laid down and the Remuneration Policy are given in the Corporate Governance Report (Annexure II to the Director's Report). IX. EVALUATION OF BOARD, COMMITTEES AND DIRECTORS: Pursuant to the Provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board evaluated its own performance and the working of its Committees viz Audit Committee, Nomination and Remuneration Committee, finance Committee and Stakeholders Relationship Committee and Independent Directors (without participation of concern Directors). Independent Directors at their meeting without the participation of the Non-independent Directors and Management evaluated the Board's performance and other Non-independent Directors. X. REPORT ON CORPORATE GOVERNANCE: Your Directors are pleased to inform that your Company has implemented all the stipulations prescribed under clause 49 of listing agreement with the stock exchange(s). The Statutory Auditors of the Company have examined the requirements of the Corporate Governance with reference to Clause 49 of the Listing Agreement and have certified the compliance, as required under Clause 49 of the Listing Agreement and the Certificate from Statutory Auditors confirming compliance forms an integral part of this report as Annexure - II and Auditor's Certificate on Corporate Governance report also form part of this report as Annexure - III XI. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO : The Information under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 (3) of the Companies (Accounts) Rules, 2014 for the year ended March 31, 2015 is given here below and forms part of the Director's Report (Annexure - IV) XII. RISK MANAGEMENT: During the year, According to the Clause 49(VI) of the Listing Agreement the company had laid down a framework for evaluating the elements of business risk. The risk management framework defines the risk management approach of the Company and also includes the periodical review of such risks. The board periodically discusses the significant business risks identified by the management and the mitigation measures to address such risks. Some of the risks that the Company is exposed to are : (1) QUALITY RISK : Quality of yarns and Fabric manufactured is the single most important factor that will take a company forward in its success story. Your company has been aware of the said importance from its inception and the progress that it has made through the years was mainly because of the strict adherence to the quality of its yarns and Fabric which has resulted in the company reaping the best possible price for its yarns and Fabric, both in the internal and international markets. (2) COMMODITY PRICE RISKS : The Company is exposed to the risk of price fluctuation of raw materials as well as finished goods. The Company proactively manages these risks through forward booking, inventory management and proactive vendor development practices. The Company's reputation for quality , product differentiation and service, coupled with the existence of powerful brand image with robust marketing network mitigates the impact of price risk on finished goods and with the addition of weaving unit, the value added chain had increased and decreasing the influence of raw material. (3) HUMAN RESOURCES RISKS : Retaining the existing talent personnel and attracting new talent are major risks. The Company has initiated various measures including rolling out strategic talent management system, training and integration of learning and development activities. (4) FINANCIAL RISK : The Company's Policy is to actively manage its foreign exchange risk within the framework. Given the Interest rate fluctuations, the Company has adopted a prudent and conservative risk mitigation strategy to minimize interest risks. (5) INDUSTRY RISK : The main twin risks in this industry, especially in the cotton yarn spinning sector, procurement prices for cotton for its quality and the yarn realisation vis a vis the cotton cost. Raw material prices, as is common with every industry, are conditioned by their supply position in the market. The addition of weaving had contributed absorbing some of the yarns produced in the spinning unit. Mainly the combed and combed compact yarns are absorbed by weaving unit. In the case of marketing of yarn, the price realization depends on the demand from garment manufacturers and power loom sector. In recent times the competition from the emerging economies in the neighbouring countries such as Sri Lanka, China and Pakistan with their comfortable status engendered by the preferential treatment in USA and EU markets poses a real challenge to the textile yarn spinning units in our country. XIII. DEPOSITS: During the year under review, our Company did not accept any deposits within the meaning of provisions of Chapter V Acceptance of Deposits by Companies of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. As per the provisions of the Companies Act, 2013 any amount received from relatives of Director(s) is not an exempt deposit. So, during the year, unsecured loans took from relatives of Promoter(s)/Director(s) were repaid on 30-03-2015. XIV. INTERNAL CONTROL SYSTEM AND COMPLIANCE FRAMEWORK: The Company has an Internal Control System, commensurate with size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations. The Internal Control System of the Company has been designed to provide for : • Accurate recording of transactions with internal checks and prompt reporting. • Adherence to applicable Accounting Standards and Policies. • Compliance with applicable statutes, policies and management policies and procedures. • Effective use of resources and safeguarding of assets. The Company has appointed M/s. Mallikarjuna Rao & Co., as Internal Auditors of the Company. The Audit Committee in consultation with the Internal Auditors formulates the Scope, functioning , periodicity and methodology for conducting the internal audit. The internal auditors carryout audit, covering inter alia, monitoring and evaluating the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations and submit their periodical internal audit reports to the Audit Committee, process owners undertake necessary actions in their respective areas. The internal auditors have expressed that the internal control system in the Company is effective. The Board has also put in place requisite legal compliance framework to ensure compliance of all the applicable laws and that such systems are adequate and operating effectively. XV. FAMILIARISATION PROGRAMME FOR INDEPENDENT DIRECTORS : According to the terms of Clause 49(I)(D)(3d) and Clause 49(II)(B)(7) of the Listing Agreement with the Stock Exchange : a) The Company conducted the Familiarisation Program for Independent Directors about their roles, rights, responsibilities in the company, nature of the industry in which the company operates, business model of the company, etc., through various programmes. b) All the independent directors are issued a formal letter of appointment through which they are made aware of their role and duties at the time of appointment. c) The details of such familiarisation programme/policy were disclosed on the Company's website www.ksml.in XVI. PERFORMANCE REVIEW: Company financial performance during the year under review. Consolidated sales scaled up by 13.74% over the previous year. Profit before interest, depreciation and tax (EBITDA) went down by 5.79%, whereas Profit after tax was lower by 35.55% over the previous year. There is no change in the nature of business of the Company. There are no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company and the date of this report. No significant or material orders passed or have been passed against the Company by the regulators, courts or tribunals, which impacts the going concern status and Company's operations in future. XVII. WHISTLE MECHANISM: The Company has set up vigil mechanism viz. Whistle Blower Policy to enable the employees and Directors to report genuine concerns and irregularities, if any in the Company, noticed by them. The Whistle Blower policy has been posted on the Website of the Company (www.ksml.in ) XVIII. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013: There were no Loans, Guarantees, Investments and securities given/made/provided by the Company during the year. XIX. AUDITORS: M/s. Brahmayya & Co. Chartered Accountants (Firm Reg. No.: 000513S) were appointed as Statutory Auditors of your Company at the last Annual General Meeting held on 27th September, 2014 for a term of Three consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by Members at every Annual General Meeting. The Report given by the Auditors on the financial statements of the Company is part of the Annual Report. There has been no qualification, reservation, adverse remark or disclaimer given by the Auditors in their Report. XX. COST AUDITOR : Pursuant to the Provisions of the Section 148 of the Companies Act, 2013, The Board had appointed Mr. P. Srinivas, (M.No.: 21170) Cost Accountant as a Cost Auditor for the financial year 2014-15 to carry out the cost audit of Company's records in respect of Textiles. XXI. SECRETARIAL AUDIT : Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, your Company engaged the services of M/s. K. Srinivasa Rao & Co, Company Secretaries in Practice, Guntur to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2015. There was a qualification, reservation or adverse remark given by Secretarial Auditors of the Company. The detailed reports on the Secretarial Standards and Secretarial Audit in Form MR- 3 are appended as an Annexure V to this Report. XXII. RELATED PARTY TRANSACTIONS: All related party transactions that were entered during the financial year were on an arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company which may have a potential conflict with the interest of the Company at large and thus disclosure in Form AOC-2 is not required and the Details of Transactions with the Related parties were mentioned in point 31 of the Notes forming part of the Accounts. In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, your Company has formulated a Policy on Related Party Transactions which is also available on Company's website at www.ksml.in . The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. XXIII. MANAGEMENT DISCUSSION AND ANALYSIS : A detailed Management Discussion and Analysis forms part of this annual report, which is attached to this Report in Annexure- VI. XXIV. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS OF THE COMPANY: There were no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company. XXV. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES : The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report in Annexure -VII. The above information is not being sent along with this Report to the Members of the Company as per the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Managing Director at the Registered Office of the Company. The aforesaid Annexure is also available for inspection by Members at the Registered Office of the Company, 21 days before the 23rd Annual General Meeting and up to the date of the Annual General Meeting during the business hours on working days. There were no employees in the Company as per Rule 5(2) of Chapter XIII, the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. XXVI. RESIGNATION OF DIRECTOR: The Chairman of the Board of Directors of the Company Sri K.Haranadha Reddy, who is also a Non Independent and Non -Executive Director of the Company, was submitted his resignation to the Board on the Board Meeting held on 12th February, 2015. The Board has accepted his resignation and relieved him as a Director of the Company with effect from the Same Board Meeting where he submitted his resignation and Board placed on record its sincere appreciation of services rendered by him as a director and also a chairman of Board of Directors of the company during his tenure. Pursuant to Clause 30 of the Listing Agreement, We informed the same to Bombay Stock Exchange, where the shares of the company were listed and also as per Section 168 of the Companies Act, 2013 the Board of directors also took the note of his resignation and intimate to the Registrar of Companies. XXVII. HUMAN RESOURCES: Your Company firmly believes that employees are the most valuable assets and key players of business success and sustained growth. Various employee benefits, recreational and team building programs are conducted to enhance employee skills, motivation as also to foster team spirit. Company also conducts in-house training programs to develop leadership as well as technical/functional capabilities in order to meet future talent requirements. Industrial relations were cordial throughout the year. XXVIII. CORPORATE SOCIAL RESPONSIBILITY (CSR): Pursuant to the provisions of section 135 of the Act, read with CSR Rules, the Company has constituted CSR committee and formulated CSR policy. your Company at the Board Meeting held on 27th May, 2014 approved a Policy on CSR and the Policy was hosted on the website of the Company viz www.ksml.in The Report on CSR activities as required under Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure VIII to this Report. XXIX. PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE: As per the requirement of The Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013 ('Acf) and Rules made there under, your Company has constituted Internal Complaints Committees (ICC). The Company has designated the external independent member as a Chairperson for each of the Committees which was beyond the requirements of law. No complaints were received in this regard during the year. XXX. FUTURE OUTLOOK: The Company is projecting Rs. 300 crores turnover during the financial year 2015-16. The Weaving and Dyeing units are expected to add bottomline to the Comapany. XXXI. REGISTRAR'S AND SHARE TRANSFER AGENTS: Your Registrar and Share Transfer Agents of the Company is M/s. Big Share Services Private Limited, 306, 3rd Floor, Right Wing, Amrutha Ville, Opp. Yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad - 500 082. XXXII. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF: Pursuant to the provisions of section 124 of the companies Act, 2013, the declared dividends which remained un paid or unclaimed for a period of seven years, have been transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government. XXXIII. APPRECIATIONS AND ACKNOWLEDGEMENTS: Your Directors place on record their earnest appreciation for the unstinted commitment, dedication, hard work and significant contribution made by employees in ensuring sustained growth of the Company. The Directors also take this opportunity to thank all Investors, Clients, Vendors, Banks, Government and Regulatory Authorities and Stock Exchanges, for their continued support. For and on behalf of the Board P. Venkateswara Reddy Managing Director. Place: Chowdavaram Date: 14-08-2015. |