| Disclosure in board of directors report explanatory DIRECTORS REPORT TO THE MEMBERS Your Directors have pleasure in presenting their 75th Annual Report and the Audited Accounts of the Company for the year ended 31st March 2015. FINANCIAL RESULTS The financial results for the year ended 31st March, 2015 after charging all expenses and contribution to Ramaraju Memorial Fund of Rs.15.00 Lakhs (which is within the limits laid in the Articles of Association) but before deducting finance cost and depreciation have resulted in operating profit of Rs. 3,735.86 Lakhs against Rs.6,718.17 Lakhs for the previous financial year 2013-14. After deducting Rs.1,905.34 Lakhs towards finance cost and providing Rs.1,215.62 Lakhs towards Depreciation, the Net Profit for the year is Rs.614.90 Lakhs, against Rs.2,657.55 Lakhs for the previous financial year 2013-14. Adding the surplus of Rs.182.37 Lakhs brought forward from the previous year, your Directors propose to appropriate the total sum of Rs.797.27 Lakhs as detailed below: Provision for Taxation | Current Tax MAT MAT credit for the current year MAT credit related to earlier years withdrawn Deferred Tax | 119.58 (119.58) 44.33 169.56 | Dividend | Rs.1.20 per share (PY: Rs.3.00 per share) | 23.68 | Tax on Dividend | @20.358% | 4.82 | Transfer to General Reserve | | 400.00 | Balance carried over to Balance sheet | | 154.88 | Total | | 797.27 |
SHARE CAPITAL The Paid-up Capital of the Company is Rs.197.33 Lakhs (Previous Year: Rs.197.33 Lakhs) consisting of 19,73,280 Shares of Rs.10/- each. DIVIDEND Your Directors have pleasure in recommending a Dividend of Rs. 1.20 per share (Previous Year:
Rs.3.00 per share). The dividend will be tax free income in the hands of Shareholders as the
Company will pay Dividend Distribution Tax under Income Tax Act, 1961. The total amount of
Dividend outgo for the year will be Rs.23.68 Lakhs. The amount of tax on dividends would be
Rs.4.82 Lakhs. TAXATION The Company is not liable to pay income tax under regular Income-Tax provisions. An amount of Rs.119.58 Lakhs towards current tax (MAT) and Rs.169.56 Lakhs towards Deferred Tax has been provided for the year. The tax paid under MAT will be available for set off in the year of regular income tax liability. SPINNING DIVISION TRADE CONDITIONS During the year under review, the performance of the Company was severely affected due to the following reasons: The cotton prices have prevailed at higher level during the first half of year under review and started declining from October 2014 onwards due to record cotton crop estimated at 400 Lakhs Bales for the cotton season 2014-15. The reduced demand of Cotton from China, have negatively impacted on the cotton prices. Because of this, cotton prices have fallen below the Minimum Support Prices and Government of India has started procuring cotton at minimum support price through Cotton Corporation of India (CCI). CCI has purchased majority of the cotton produced in Andhra Pradesh / Telangana Region during current cotton season 2014-15, which has resulted in non-availability of cotton to the Spinning Mills at reasonable price. The fall in prices of yarn in export market due to sluggish demand for yarn in the China, Europe, Japan and other major yarn importing Countries from India has negatively impacted on the profitability of the Company. Yarn export to China, which is one of the largest Importer of Cotton Yarn from India has declined by 20% due to change in Chinese Government policy to liquidate their cotton inventory. Because of the slowdown in export market, there has been an excess supply of cotton yarn in
domestic market. This has resulted in mismatch between supply and demand for yarn in India. The increased supply of cotton yarn in domestic market has brought down the selling prices of yarn in India. Steep fall in cotton prices have also put pressure on selling prices of yarn in domestic and export markets. The power cut in Tamil Nadu / Andhra Pradesh is still continuing. Timely decision taken by your
Directors to install Windmills in previous years has helped the Company to mitigate the power short fall during peak wind season. The restrictions imposed by the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) in evacuation of power generated by wind mills has continued this year also, which has resulted in loss in generation of power from wind mills to the extent of approximately 9.12 Lakhs units, which translated into Rs. 60.78 Lakhs in monetary terms. Due to shut-down of wind mills by TANGEDCO, the Company was forced to purchase the power from power generating companies / run the DG & HFO sets, which are costly compared to wind mills. Due to this, the power cost during the year has gone up substantially. The reduction in yarn selling price and the increase in costs have contributed to reduction in profits for the year 2014-15, compared to the previous year. EXPORTS On the export front during the year, we have made export of Cotton Yarn / Fabrics and Surgical Dressings (including merchant exports) for a value of Rs.110.20 Crores as against Rs.57.35 Crores of the previous year. Your Directors are thankful to M/s. Mitsubishi Corporation, M/s. Cottonificio Albini SPA and M/s. Tessitura Monti SPA, Italy for their continued support and efforts for promotion of exports to Japan and other countries. MODERNISATION As a part of continuous thrust on modernization and diversification programme, the Company has invested about Rs.7.10 Crores in Weaving division, state-of-the-art textile machinery and equipments like Uster Quantum III, Boiler, Air Compressor, Yarn Feeler etc. WIND MILL The Company has wind mills with installed capacity of 8.30 MW for its captive power consumption. These wind mills are connected to the grids maintained by Tamil Nadu Generation and Distribution Corporation (TANGEDCO). The generation from wind farms has been adversely affected due to evacuation constraints imposed by TANGEDCO. Because of this, even though our wind farm areas had witnessed good wind season, the windmills were not able to generate power to its full potential. The backing down of the wind electric generators imposed by TANGEDCO during the last year has continued this year also and caused generation loss of upto 27% during peak wind season. The wind farm has generated 123 Lakhs Kwh as compared to 132 Lakhs Kwh of the previous year. The income during the year from the Wind Mill Division was Rs.7.29 Crores as against Rs.7.63 Crores of previous year. PROSPECTS FOR THE CURRENT YEAR The cotton prices are prevailing at moderate level. There is a sign of revival of demand for yarn
in domestic as well as international yarn markets and the prices of yarn have started improving slowly. With the moderation in cotton prices & stability in yarn prices, your Directors are hopeful in achieving satisfactory results in the financial year 2015-16. The Company is maintaining high standards of yarn quality, cost effective production and stringent waste control measures and focusing on more automation with a view to utilize the skilled manpower more efficiently. The Company is making all efforts to cope up with the current challenges through continuous cost reduction, imparting training to the employees at all levels, re-engineering of process and improved customer service to protect & improve the profit margins. SURGICAL DIVISION The operation of the division has been satisfactory with good contribution to the profit of the
Company due to effective utilisation of machineries. Even though Raw Material cost and other input cost had gone up, the Company had effectively managed the situation by increasing the productivity and other cost reduction measures. The Company is in the process of introducing a new product to increase the profitability. The Company expects to perform better in the current year by increasing the capacity utilisation. Also, the Company will have the benefit of increased production from its new products, which will enable the Company to meet the increased market demand for surgical products. The Company continues its endeavour for the sale of Absorbent Cotton Wool. By concentrating on operational efficiencies and cost reduction measures in all areas of productionand distribution, the Company will strive to protect and improve its profitability. During the year under review, the Company has expanded the Weaving unit capacity from 7 Nos. to 15 Nos. imported Airjet Looms at Perumalpatti at a cost of Rs. 2.55 Crores for manufacturing of Grey Cloth which is the Raw Material for manufacturing the Surgical Gauze and Bandages. This has helped the Company to enhance the quality and reduction in the grey cloth cost by effective utilisation of machineries. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The disclosures in terms of provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and (3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, relating to remuneration are provided in Annexure-1. INDUSTRIAL RELATIONS AND PERSONNEL The Company has 1524 Employees as on 31.03.2015. Industrial relations with employees remained cordial during the year. Human Resources Development activities received considerable focus. The emphasis was on imparting training and development of the skill-set of the employees to enable them to face the challenges in the work environment. The scarcity of skilled labour coupled with high labour cost is a matter of concern for textile mills. We are striving our best to retain them by implementing various attractive incentive schemes. INTERNAL FINANCIAL CONTROL In accordance with Section 134(5)(e) of the Companies Act, 2013, the Company has Internal Financial Control Policy by means of Policies and Procedures commensurate with the size & nature of its operations and pertaining to financial reporting. In accordance with Rule 8(5)(viii) of Companies (Accounts) Rules, 2014, it is hereby confirmed that the Internal Financial Controls are adequate with reference to the financial statements. ERP System developed by M/s. Ramco Systems Limited, has been installed for online monitoring of all functions and management information reports are being used to have better control and to take decisions in time. VIGIL MECHANISM / WHISTLE BLOWER POLICY In accordance with Section 177(9) and (10) of the Companies Act, 2013, the Company has established a Vigil Mechanism and has a Whistle Blower Policy. The policy is available at the Company's website. DIRECTORS In accordance with the provision of the Companies Act, 2013 and in terms of the Memorandum and Articles of Association of the Company, the following Directors retire by rotation at the ensuing Annual General Meeting and they are eligible for re-appointment. 1. Shri P.R. Ramasubrahmaneya Rajha (DIN: 00331357) 2. Shri P.R. Venketrama Raja (DIN: 00331406) The Members of the Company at the last Annual General Meeting held on 4th August, 2014 have approved the appointment of following Directors as Independent Directors for a period of five years with effect from 01-04-2014: 1. Shri P.J. Alaga Raja 2. Shri S.N. Rama Raju 3. Justice Shri P.P.S. Janardhana Raja 4. Shri V. Santhana Raman 5. Dr. K.T. Krishnan* 6. Shri P.J. Ramkumar Rajha *We regret to report the sad demise of Dr. K.T. Krishnan (DIN: 00707574) on 30-04-2015. The Directors place on record Dr. K.T. Krishnan's valuable and constructive contribution in the Board Meetings during his association with the Company. The Members of the Company had at the aforesaid Annual General Meeting also approved the appointment of Smt. R. Nalina Ramalakshmi as Managing Director for a period of 3 years with effect from 01-04-2014. The Director of Handlooms and Textiles has withdrawn the nomination of Smt. C. Padmavathy and nominated Shri A. Pandi as nominee of Government of Tamilnadu with effect from 03-08-2014. Subsequently, The Director of Handlooms and Textiles has also withdrawn the nomination of Shri A. Pandi and nominated Shri M. Sridharan as nominee director with effect from 12-05-2015. Shri A. Emarajan has been appointed as Secretary with effect from 15-10-2014. Pursuant to Rule 8(5)(iii) of Companies (Accounts) Rules, 2014, it is reported that, other than the above, there have been no changes in the Directors or Key Managerial Personnel during the year. The Company has received necessary declarations from all the Independent Directors under Section 149(7) of the Companies Act, 2013, that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013. In accordance with Section 178(3) of the Companies Act, 2013 and based upon the recommendation of the Nomination and Remuneration Committee, the Board of Directors has approved a policy relating to appointment and remuneration of Directors, Key Managerial Personnel and Other Employees. The objective of the Nomination and Remuneration Policy is to ensure that the level and composition of remuneration is reasonable, the relationship of remuneration to performance is clear and appropriate to the long term goals of the Company. BOARD EVALUATION Pursuant to Section 134(3)(p) of the Companies Act, 2013, Independent Directors have evaluated the quality, quantity and timeliness of the flow of information between the Management and the Board, Performance of the Board as a whole and its Members and other required matters. The Nomination Committee has laid down evaluation criteria for performance evaluation of Independent Directors, which will be based on attendance, expertise and contribution brought in by the Independent Director at the Board Meeting, which shall be taken into account at the time of re-appointment of Independent Director. MEETINGS OF THE BOARD During the year, Four Board Meetings were held the details are given below. No. of Meetings held during the year : 4 Date of the Meetings : 25-05-2014, 03-08-2014, 10-11-2014 and 11-02-2015 AUDIT COMMITTEE The Audit Committee consists of Shri S.N. Rama Raju, Shri P.J. Alaga Raja and Shri N.K. Shrikantan Raja as Members. No. of Meetings held during the year : 4 Date of the Meeting : 24-05-2014, 03-08-2014, 10-11-2014 & 11-02-2015 Out of the three Members, two are Independent Directors. Pursuant to Section 177(8) of the Companies Act, 2013, it is reported that there has not been an occasion, where the Board had not accepted any recommendation of the Audit Committee. PUBLIC DEPOSITS The Company had fixed deposits amounting to Rs.383.64 Lakhs at the beginning of the year.
The Company has decided not to accept fresh deposits from 01-04-2014. It has availed the option provided under Section 74 of the Companies Act, 2013 to repay all the existing deposits by complying with the formalities required in this regard. Accordingly, during the year, the Company has repaid all the deposits and there was no deposits unclaimed / unpaid as on 31-03-2015. There has been no default in the repayment of deposits / payment of interest thereon during the year. The Company has no deposit, which is not in compliance with the Chapter V of the Companies Act, 2013. ORDERS PASSED BY REGULATORS Pursuant to Rule 8(5)(vii) of Companies (Accounts) Rules, 2014, it is reported that, no significant and material orders have been passed by the Regulators or Courts or Tribunals, impacting the going concern status and Company's operations in future. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS The Company has not given any loans and Guarantees during the year 2014-15 under Section 186 of the Companies Act, 2013. The particulars of the investments are disclosed under Note No.10 of Notes to financial statements. CORPORATE SOCIAL RESPONSIBILITY In terms of Section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors have
constituted a Corporate Social Responsibility (CSR) Committee and adopted a CSR Policy which
is based on the philosophy that "As the Organisation grows, the Society and Community around
it also grows." The Company has undertaken various projects in the areas of education, health, rural development,
water and sanitation, promotion and development of traditional arts, protection of national heritage,
livelihood enhancement projects, etc. largely in accordance with Schedule VII of the Companies
Act, 2013. Your Directors are pleased to inform that the amount required to be spent on CSR for the year
2014-15 is Rs.17.60 Lakhs. Out of this requirement, the Company has incurred expenditure of
Rs.10.62 Lakhs for CSR activities. The Company proposes to identify suitable project in the coming year and meet its requirement as mandated in the Companies Act, 2013. The Company also has a practice of setting aside upto 3% of the Net Profit towards the Ramaraju Memorial Fund, which fund is only intended for charitable purposes including the objects specified in the Companies Act, 2013. Accordingly, the Company has a phased plan for meeting the CSR objective as required by the Companies Act, 2013. The Annual Report on CSR activities as prescribed under Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure-II. SHARES The Company was exclusively listed Company in Madras Stock Exchange Limited (MSE). Consequent to Voluntary de-recognition as stock exchange by MSE, the Company ceased to be a listed Company with MSE and has been placed on the Dissemination Board of National Stock Exchange of India Limited (NSE). NSE has allowed buying and selling of shares of the Company on the Dissemination Board with effect from 09-01-2015. STATUTORY AUDIT M/s. M.S. Jagannathan & N. Krishnaswami, Chartered Accountants are the Auditors of the Company. In the last Annual General Meeting, the above Auditors have been appointed as a Statutory Auditor for a period of 3 consecutive years being their remaining eligible period in terms of Rule 6 of Companies (Audit and Auditors) Rules, 2014. The matter relating to their appointment is being placed before the Members for ratification at the ensuing Annual General Meeting, in accordance with the requirements of Section 139(1) of the Companies Act, 2013. The Auditors have confirmed their eligibility to the effect that their re-appointment if made would be within the prescribed limit under the Companies Act, 2013 and they are not disqualified for re-appointment. The report of the Statutory Auditors for the year ended 31st March, 2015 do not contain any qualification, reservation or adverse remark. SECRETARIAL AUDIT Pursuant to the section 204 of the Companies Act, 2013 and the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Shri M.R.L. Narasimha, a Practicing Company Secretary to undertake the Secretarial Audit of the Company. The secretarial audit report submitted by the Secretarial Auditor for the year ended 31st March, 2015 is attached in Annexure-III. The report does not contain any qualification, reservation or adverse remark. COST AUDIT The Cost Audit Report for the financial year 2013-14 due to be filed with Ministry of Corporate Affairs by 27-09-2014, had been filed on 27-09-2014. The Company has appointed Shri M. Kannan, Cost Accountant as Cost Auditor for auditing the cost records of the Company relating to manufacture of Pharmaceutical product for the financial year 2014-15. The Cost Audit Report for the financial year 2014-15 is due to be filed within 180 days from the closure of financial year and will be filed within the stipulated period. Cost Audit is not applicable to the Company for the financial year 2014-15 related to manufacture of Textile products. However, the Ministry of Corporate Affairs (MCA) has amended the Companies (Cost Records and Audit) Rules, 2014 vide its notification dated 31-12-2014 and Textile Mills are required to file cost audit report with effect from the next financial year 2015-16. The Company has appointed Shri M. Kannan, Cost Accountant as Cost Auditor of the Company to audit the Company's Cost Records relating to manufacture of textile and pharmaceutical products for the year 2015-16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Pursuant to Rule 8(3) of Companies (Accounts) Rules, 2014, the information relating to Conservation
of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is attached as
Annexure-IV. EXTRACT OF ANNUAL RETURN In Accordance with Section 92(3) of the Companies Act, 2013, read with Rule 12(1) of Companies (Management and Administration) Rules, 2014, an extract of the annual return in form MGT-9 is attached herewith as Annexure-V. RELATED PARTY TRANSACTION The transaction with related party entered into by the Company are periodically placed before the Audit Committee for its approval. No transaction with the related party is material in nature, in accordance with Company's "Related Party Transaction Policy". In accordance with Accounting Standard-18 (Related Party Disclosure), the details of transaction with related parties are set out in Note No. 26(15) of disclosures forming part of Financial Statements. RISK MANAGEMENT POLICY Pursuant to Section 134(3)(n) of the Companies Act, 2013, the Company has developed and implemented a Risk Management Policy. The Policy envisages identification of risk and procedures for assessment and minimization of risk thereof. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that: i) in the preparation of Annual Accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; ii) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; iii) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) they had prepared the annual accounts on a going concern basis; v) they 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 vi) they had devised proper systems to ensure compliance with the provisions of all applicable
laws and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT The Directors are grateful to the various Departments and agencies of the Central and State
Governments for their help and co-operation. They are thankful to the Financial Institutions and
Banks for their continued help, assistance and guidance. The Directors wish to place on record
their appreciation of employees at all levels for their commitment and their contribution. On behalf of the Board of Directors, For THE RAMARAJU SURGICAL COTTON MILLS LIMITED, Rajapalaiyam P.R. RAMASUBRAHMANEYA RAJHA 21st May, 2015 CHAIRMAN Description of state of companies affairTO THE MEMBERS Your Directors have pleasure in presenting their 75th Annual Report and the Audited Accounts of the Company for the year ended 31st March 2015. FINANCIAL RESULTS The financial results for the year ended 31st March, 2015 after charging all expenses and contribution to Ramaraju Memorial Fund of Rs.15.00 Lakhs (which is within the limits laid in the Articles of Association) but before deducting finance cost and depreciation have resulted in operating profit of Rs. 3,735.86 Lakhs against Rs.6,718.17 Lakhs for the previous financial year 2013-14. After deducting Rs.1,905.34 Lakhs towards finance cost and providing Rs.1,215.62 Lakhs towards Depreciation, the Net Profit for the year is Rs.614.90 Lakhs, against Rs.2,657.55 Lakhs for the previous financial year 2013-14. Adding the surplus of Rs.182.37 Lakhs brought forward from the previous year, your Directors propose to appropriate the total sum of Rs.797.27 Lakhs as detailed below: Provision for TaxationCurrent Tax – MAT MAT credit for the current year MAT credit related to earlier years withdrawn Deferred Tax119.58 (119.58) 44.33 169.56 DividendRs.1.20 per share (PY: Rs.3.00 per share)23.68 Tax on Dividend@20.358%4.82 Transfer to General Reserve400.00 Balance carried over to Balance sheet154.88 Total797.27 Details regarding energy conservationCONSERVATION OF ENERGY (i) the steps taken on conservation of energy;Optimisation of plant humidification plants and waste collection systems. Installation of energy efficient Boiler. Reduction of motor rating wherever lesser loads were available. Energy audit and energy conservation measures are being adopted periodically. Efficient operation of compressors. Impact on conservation of energyOptimisation of humidification plant had resulted in savings of 87,000 units per annum approx. Optimisation of waste collection systems had resulted in savings of 50,000 units p.a. approx. Installation of Boiler had resulted in energy savings of 600 tons of firewood per annum approx. (ii) the steps taken by the Company for utilising : alternate sources of energy;Already the Company had invested on Windmills to generate green energy for their captive consumption. (iii) the capital investment on energy conservation equipments;NIL Details regarding technology absorptionTECHNOLOGY ABSORPTION: (i) the efforts made towards technology absorption and the benefits derived like product improvement, cost reduction, product development or import substitution;The Company installed new modernized contamination detector machines at various stages of production, which effectively eliminate contamination in cotton and yarn. (ii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) (a) the details of technology importedNIL (b) the year of import; :NIL (c) whether the technology been fully absorbed;Not Applicable (d) if not fully absorbed, areas where absorption has not taken place and the reasons thereof andNot Applicable (iii) the expenditure incurred on Research and DevelopmentNot Applicable Details regarding foreign exchange earnings and outgo(C) FOREIGN EXCHANGE EARNINGS AND OUTGO The Foreign Exchange earned in terms of actual inflows during the year and :: Rs. 9,084.84 Lakhs The Foreign Exchange outgo during the year in terms of actual outflows.: Rs. 1,638.20 Lakhs Disclosures in director’s responsibility statementDIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section 134(5) of the Companies Act, 2013, the Directors confirm that: i) in the preparation of Annual Accounts, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; ii) they had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; iii) they had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) they had prepared the annual accounts on a going concern basis; v) they 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 vi) they had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. |