DIRECTORS' REPORT Dear Shareholders, Your Directors hereby present the Thirty-sixth Annual Report on the business and operations of the Company, together with the Audited Statements of Accounts for the year ended 31st March, 2015. Dividend Considering the loss incurred by the Company, your Directors do not recommend any dividend on equity shares for the financial year 2014-15. Transfer to Reserve In absence of distributable profits / earnings, it is not proposed to transfer any amount to reserves for the financial year 2014-15. Nature of Business The Company belongs to the GARDEN VARELI Group which is a leader in the Indian Textile Industry with particular strength in polyester filament based textiles, both yarn and fabric. The Company is also a leading player in polyester chips for both textile and film applications. The Company is known to be a differentiated producer of chips, Partially Oriented Yarn (POY), Fully Drawn Yarn (FDY), Draw Texturised Yarn, Draw Warped Yarn, Draw Twisted Yarn, greige fabric, as well as printed and dyed fabric. The Company is a regular supplier of bright, cationic, micro denier, fine denier yarn, mother yarn and dope-dyed yarn in the market. There was no change in the nature of business of the Company during the year under review. Review of Operations The Company's standalone total revenue for the year 2014-15 was Rs. 2648.44 crore as compared to Rs. 3081.27 crore for the previous year, a decline of about 14%. The fall in sales was due to lower utilization rates due to excess capacity in the face of subdued market conditions. The entire industry operated at a lower utilization rate owing to a large capacity addition by the largest producer of PFY. Despite lower revenues, the operating profit (earning before interest, depreciation and tax) for the year 2014-15 was higher at Rs. 116.62 crore as compared to Rs. 66.69 crore in the previous year. This was possible despite a challenging year that saw an oil-price driven crash in raw material prices leading to concomitant inventory losses and weak market sentiment. Our emphasis on increased product differentiation, along with record operational efficiencies, timely exports and careful working capital management helped us to remain competitive and improve our EBITDA. However, the high and increased interest cost resulted in another year of loss for the Company. The net loss for the year stood at Rs. 142.75 crore as compared to Rs. 144.45 crore in the previous year. The sale of chips was lower at 102,031 MT for the year 2014-15 as compared to 124,620 MT in the previous year. The total sale of polyester filament yarn (PFY) was marginally lower at 149,222 MT as compared to 152,200 MT in the previous year. The overall production of Chips was at 244053 MT during the year 2014-15 as compared to 266831 MT achieved in the previous year. Whereas the production of PFY during the year was higher at 152275 MT as compared to 148949 MT in the previous year. In the weaving segment, grey cloth production for the year 2014-15 was higher at 292.89 lacs mtrs as compared to 275.86 lacs mtrs. during the previous year. The Company had to curtail the production during the year to avoid inventory losses due to volatility of prices of raw material as well as finished goods. Production was also hampered by a shortage of PTA due to plant maintenance by local PTA suppliers in the early part of the financial year. Your Company's performance was assisted by never-before achieved operational efficiency, first quality production and wastage levels across its yarn plants. Coal, which is the major fuel for the company reduced in price by over 8% during the year. This, coupled with increased substitution of gas with coal was a major cause of cost reduction across our chips and yarn divisions. Owing to the over-competitive local market, the company also increasingly focussed on the international market. Subsidiaries and their financial position During the year under review, GAIA International FZE, Wholly Owned Overseas Subsidiary was incorporated on 8th July, 2014. The subsidiary commenced its operation during the year 2014-15. The subsidiary achieved a turnover of Rs. 333.29 Lacs and incurred net loss of Rs. 20.09 Lacs for the year ended 31st March, 2015. Garden Exim Pte Ltd, another Wholly Owned Overseas Subsidiary was incorporated on 23rd October, 2014. The subsidiary has not commenced its operation during the year 2014-15. The subsidiary incurred net loss of Rs. 4.74 Lacs for the year ended 31st March, 2015. The consolidated total revenue of the Company for the year 2014-15 was Rs. 2648.69 crore. The operating Profit (earning before interest, depreciation and tax) was at Rs. 116.60 crore. The loss for the year 2014-15 was Rs. 143 crore. Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing the salient features of the financial statements of the Company's Subsidiaries (in Form AOC-1) is forming part of the Consolidated Financial Statements. Pursuant to Section 136 of the Companies Act, 2013 ("the Act") the Company is exempted from attaching to is Annual Report, the Annual Report of the Subsidiary Company. The financial statement of the subsidiary company is kept open for inspection by the shareholders at the Registered Office of the Company. The Company shall provide the copy of the financial statement of its subsidiary company to the shareholders upon their request free of cost. It is also available on the website of the Company. The financial year 2014-15, being the first year that consolidated financial statement are presented, comparative figures for the previous year have not been presented in accordance with the transitional provisions of AS-21 consolidated financial statement. Changes in Share Capital During the year under review, your Company allotted 1,949,860 equity shares ofRs. 10 each fully paid up at a premium of Rs. 25.90 per share to the promoters / promoter group on exercise of option for conversion of the 1,487,147 0.001% Optionally Convertible Cumulative Preference Shares (OCCPS) issued on preferential basis pursuant to the SEBI (ICDR) Regulation, 2009. As a result of such allotment, the paid up equity share capital of the Company increased from 40132665 equity shares of Rs. 10 each aggregating to Rs. 40,13,26,650 to 42082525 equity shares of Rs. 10 each aggregating to Rs. 42,08,25,250. During the year under review, the Company has not issued shares with differential voting rights, nor granted stock options nor sweat equity. As on 31st March, 2015, the shareholding of the Directors in the Company has been disclosed in the Corporate Governance Report which forms part of this report. Disclosures in respect of voting rights not directly exercised by employees. There are no shares held by trustees for the benefit of employees and hence no disclosure under Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014 has been furnished. Public Deposits During the year under review, your Company did not accept any deposits in terms of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014. As on April 1, 2014, no amounts were outstanding which were classified 'Deposits' under the applicable provisions of Companies Act, 1956 and hence the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Companies Act, 2013 is not applicable. DIRECTORS INDUCION On the recommendations of the Nomination and Remuneration Committee, the Board appointed Shri Sunil S. Sheth as an Independent Director of the Company with effect from 13th August, 2014. Shri Sunil Sheth had a long tenure as Member of the Board and retired by rotation at the AGM held on 30th July, 2014 and did not seek re-appointment. However, in the interest of maintaining continuity and providing guidance during challenging time, the Nomination and Remuneration Committee and the Board of Directors of the Company requested Shri Sunil Sheth to accept the Board position once again. Shri Sheth accepted the request. We seek your support in confirming the appointment of Shri Sunil Sheth in the ensuing AGM. Smt. Anita Mandrekar was appointed as an Additional Directors (Independent) on the Board with effect from 30th May, 2015 respectively. We seek your confirmation for her appointment as Independent Directors for a term up to 5 (five) consecutive years i.e. from the date of the 36th AGM of the Company on non-rotational basis. The resolutions seeking approval of the Members for the appointment of Shri Sunil S. Sheth and Smt. Anita Mandrekar have been incorporated in the Notice of the ensuing Annual General Meeting of the Company along with brief details about them. The Company has received notice under Section 160 of the Companies Act, 2013 along with the requisite deposit proposing the appointment of Shri Sunil S. Sheth and Smt. Anita Mandrekar. 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 their status of independence. Resignai During the year under review, Shri Madanlal Lankapati, independent Director resigned from the Board of Directors of the Company with effect from 30th March, 2015. The Board of Directors wish to place on record their appreciation for the contribution made by Shri Lankapati to the Board and the Company during his tenure as a Director. Re-a Pursuant to the provisions of Section 152 of the Companies Act, 2013, Shri Alok P. Shah (DIN: 00218180) will retire at the ensuing Annual General Meeting, and being eligible, seek re-appointment. The Board recommends his re-appointment. The Companies Act, 2013, provides for the appointment of Independent Directors. Sub-section (10) of Section 149 of the Companies Act, 2013 provides that Independent Directors shall hold office for a term of up to five consecutive years on the board of a company and shall be eligible for re-appointment on passing of a special resolution by the shareholders of the Company. Accordingly, all the Independent Directors except for Shri Sunil Sheth who was appointed as additional Director on 13th August, 2014 were appointed by the shareholders at the general meeting held on 30th July, 2014. Further, subsection (13) of Section 149, provides that the provisions of retirement by rotation as defined in sub-section (6) and (7) of Section 152 of the Companies Act, 2013 shall not apply to such IDs. Hence, none of the Independent Directors retire at the ensuing AGM. During the year, the non-executive directors of the Company have no pecuniary relationship of transactions with the Company. Key Managerial Personnel At the Board Meeting held on 28th May, 2014 Mr. Praful A. Shah, Managing Director, Mr. Alok P. Shah, Joint Managing Director and CFO and Mr. Kamlesh B. Vyas, Company Secretary and Compliance Officerwere designated as "Key Managerial Personnel" of the Company pursuant to Section 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an annual performance evaluation of its own performance and that of its committees viz. Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee and that of the individual directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Nomination and Remuneration Policy The Board has adopted, on recommendation of the Nomination and Remuneration Committee, a policy for selection and appointment of Directors, Senior Management and their remuneration. The details pertaining to criteria for determining qualifications, positive attributes, independence of a Director, remuneration policy and other related matters have been provided in the Corporate Governance Report and also posted on the website of the Company, www.gardenvareli.com Declaration by Independent Directors As per the provisions of Section 149 of the Companies Act, 2013 read with Clause 49 of the Listing Agreement, there were three Non-Executive Independent Directors - Shri Arunchandra N. Jariwala, Shri J. P. Shah and Shri Yatish Parekh. The Company has received the necessary declaration from each Independent Directors in accordance with Section 149(7) of the Companies Act, 2013, that he/she meets the criteria of independence as laid out in the sub section (6) of Section 149 of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Further the two new Additional Directors appointed by the board of Directors of the Company have also submitted similar Declarations. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors of the Company, to the best of their knowledge and ability, confirm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures; ii. they have 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 as at the end of the financial year and of the profit of the Company for that period; iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. they have prepared the annual accounts on a going concern basis; v. they have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively; vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Extract of Annual Return Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, Extract of the Annual Return in Form MGT-9, for the financial year ended 31st March, 2015 made under the provisions of Section 92(3) of the Act is attached as Annexure F which forms part of this Report. Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013 During the year under review, your Company has invested in 1 Equity Share of GAIA International FZE, Dubai of 185000 AED equivalent to Rs. 30.26 Lacs and 10000 Equity Shares of Garden Exim Pte Ltd, Singapore of 1 USD equivalent to Rs. 6.24 Lacs towards share capital of the subsidiaries. Corporate Governance The report on Corporate Governance and the certificate from the Statutory Auditors regarding compliance with the conditions of Corporate Governance have been furnished in the Annual Report and forms part of the annual report. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Energy conservation is a key component of the Company's continuous improvement program. Power, heat and steam are key inputs for the Company requiring careful and prudent management across levels in the organization. During the year under review, there was no major capital investment on energy conservation equipment. The particulars as required under the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 in respect of Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are furnished in Annexure A to this Report. Particulars of Employees and Related disclosure The information as required under the provisions of Section 197(12) of the Companies Act, 2013 and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are set out in Annexure G hereto, which forms part of this report. As on 31st March, 2015 there were 5639 permanent employees. Statutory Auditors: Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s Natvarlal Vepari & Co., Chartered Accountants, the Statutory Auditors of the Company, hold office upto the conclusion of this Annual General Meeting. However, their appointment as Statutory Auditors of the Company is subject to ratification by the Members at every Annual General Meeting. The Company has received confirmation from the firm regarding their consent and eligibility under Sections 139 and 141 of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014 for appointment as the Auditors of the Company. As required under Clause 41 of the Listing Agreement, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The Audit Committee and the Board of Directors have recommended the appointment of the Auditors for the financial year 2015-16. Necessary resolution for ratification of appointment of the said Auditors is included in the Notice of Annual General Meeting for seeking approval of members. Cost Auditors Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with notifications / circulars issued by the Ministry of Corporate Affairs from time to time and as per the recommendation of the Audit Committee, the Board of Directors at their meeting dated 28th May, 2014, appointed M/s Manubhai & Associates, Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2014-15. In respect of Financial Year 2015-16, the Board, based on the recommendation of the Audit Committee, has approved the appointment of M/s Manubhai & Associates, Cost Accountants, as the Cost Auditors of the Company. A resolution for ratification of the payment to be made for such appointment is included in the notice of the ensuing Annual General Meeting. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013, and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed M/s K. Dalal & Co., a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company for the year 2014-15. The report of the Secretarial Auditor is annexed to this report as Annexure D which is self explanatory and give complete information. Comments on the Auditors Report The Audit Report on the financial statements for the year ended on 31st March, 2015 and observations/comments/remarks etc. made by statutory auditors of the Company read with the Notes to Financial Statements are self-explanatory. With regard to the observation made by the Auditors at Point No.ix of the Annexure to the Auditors' Report regarding the delay in payment of interest for the quarter January-March, 2015, we would like to inform that the same has been paid during the quarter April-June 2015. Internal Auditors Pursuant to the provisions of Section 138 of the Companies Act, 2013, the Board of Directors of the Company has appointed Shri Piyush Patel, Chartered Accountant (ICAI Membership No.116769) as Internal Auditor of the Company. The audit committee of the Board of Directors in consultation with the Internal Auditor formulates the scope, functioning, periodicity and methodology for conducting the internal audit. Related Party Transactions The Company has formulated a policy on dealing with Related Party Transactions. The policy is disclosed on the website of the Company. All transactions entered into with Related Parties as defined under the Companies Act, 2013 and Clause 49 of the Listing Agreement during the financial year were in the ordinary course of business and on arm's length basis and do not attract the provisions of Section 188 of the Companies Act, 2013. During the year, the Company had not entered into any contracts / arrangements / transactions with related parties which can be considered as material in nature. The related party transactions are disclosed under Note 30 of the Note to Financial Statements for the financial year 2014-15. Disclosure of orders passed by the regulators or courts or tribunal No significant and material orders have been passed by any Regulators or Court or Tribunal which can have an impact on the going concern status and the Company's operations in future. Corporate Social Responsibility Committee The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The CSR committee was constituted by the Board of Directors of the Company comprising of three directors including Independent Directors. The Company has incurred loss during the last three financial years, therefore the provisions with respect to amount to be spent towards the CSR activity is not applicable. However, the Company has voluntarily incurred expenditure on CSR related activity during the year. The details in terms of the Companies (Corporate Social Responsibility Policy) Rules, 2014, are appended to this Report as Annexure B . Audit Committee An Audit Committee is in existence in accordance with the provisions of Section 177 of the Companies Act, 2013. The Audit Committee of the Company comprises of four Independent Directors. The composition of directors and other details are provided in the Corporate Governance Report of the Company. During the year, there were no instances where the Board has not accepted the recommendation of the Audit Committee. Nomination and Remuneration Committee A nomination and Remuneration Committee is in existence in accordance with the provisions of sub-section (3) of Section 178 Kindly refer section on Corporate Governance, under the head, 'Nomination and Remuneration Committee' for matter relating to constitution, meeting, functions of the Committee and the remuneration policy formulated by this Committee. Risk Management Policy The Board of Directors of the Company has formed a risk management policy to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. It regularly analyses and takes corrective actions for managing / mitigating the same. The audit committee has additional oversight in the area of financial risks and controls. Your Company's risk management framework ensures compliance with the provisions of Clause 49 of the Listing Agreement. The details of Risk Management as practiced by the Company forms part of the Corporate Governance Report. Insurance The properties and insurable interests of your Company like buildings, plant and machinery, stocks etc. are adequately insured by the Company. Finance Your Company has repaid / prepaid Secured Rupee Term Loan availed from banks / financial institutions, to the tune of Rs. 207.13 Crore during the year. The Company also availed term loan aggregating to Rs. 33.05 Crore from the banks / financial institutions during the year. Cash and cash equivalent as at March 31, 2015 was Rs. 45.37 crore. The Company continues to focus on judicious management of its working capital. Receivables, Inventories and other working capital parameters were kept under strict check through continuous monitoring. The working capital requirement of the Company continues to be funded by a consortium of banks led by Bank of Baroda. The Company has also taken steps to refinance some of its loans at a lower interest rate with the support of its bankers. Your Company has entered into a Long Term Advance Payment and Supply Agreement (ASPA) with one of its export customers. Under the ASPA, your Company has received Long Term Advances against Exports to the tune of USD 66.48 Million which will be adjusted against exports to that Customer over 10 years. Payment of remuneration / commission to Directors from holding or subsidiary companies None of the managerial personnel i.e. Managing Director and Whole Time Director/s of the Company are in receipt of remuneration / commission from the holding or subsidiary company of the Company. Meetings of the Board During the year, 6 Board Meetings and 4 Audit Committee Meetings were convened and held. Directors actively participated in the meetings and contributed valuable inputs on the matters brought before the members from time to time. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and as per Clause 49 of the Listing Agreement. The details of the meetings are furnished in the Corporate Governance Report. Independent Directors' Meeting In compliance with the requirements of Schedule IV of the Companies Act, 2013 and Clause 49(II)(B)(6) of the Listing Agreement a meeting of the Independent Directors was held on 18th March, 2015, without the participation of the Executive Directors or management personnel. The Independent Directors carried out performance evaluation of Non-Independent Directors and the Board of Directors as a whole, performance of Chairman of the Company, the quality, contents and timelines of flow of information between the Management and Board, based on the performance evaluation framework of the Company. The criteria for performance evaluation have been detailed in the Corporate Governance Report forming part of this report. Familiarisation programme for Independent Directors Pursuant to the provisions of Clause 49 of the Listing Agreement, the Company has formulated a programme for familiarizing the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company etc. through various initiatives. Quarterly updates on relevant statutory changes encompassing important laws are regularly circulated to the Directors. The detail of such familiarization programmes for Independent Directors are posted on the website of the Company at www.gardenvareli.com Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has in place an Ant Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company has constituted an Internal Complaint Committee ('ICC') as required by the said Act with 3 members of which 2 members as the employees and 1 member representing NGO. The Company is strongly opposed to sexual harassment and employees are made aware about the consequences of such acts and about the constitution of ICC. During the year under review, no complaints were filed with the Committee under the provisions of the said Act. Material Subsidiary During the year ended 31st March, 2015, the Company does not have any material listed / unlisted subsidiary companies as defined in Clause 49 of the Listing Agreement. The details of the policy on determining material unlisted subsidiary of the Company is available on the Company's website www.gardenvareli.com Disclosures under Section 134(3)(I) of the Companies Act, 2013 There were no material changes and commitment which could affect the Company's financial position have occurred between the end offinancial year of the Company and the date ofthis Report. Vigil Mechanism /Whistle Blower Policy Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Board of Directors had approved the Policy on Vigil Mechanism / Whistle Blower and the same was hosted on the website of the Company. Your Company hereby affirms that no Director / employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Brief details about the policy are provided in the Corporate Governance Report attached as Annexure B to this Report and also available on the Company's website www.gardenvareli.com Unclaimed and Unpaid Dividends As on 31st March, 2015 an aggregate amounts of Rs. 48.97 Lacs is lying in the unpaid equity dividend account of the Company in respect of the dividend for the financial year 2007-08,2008-09,2009-10 and 2010-11. Members who have not yet received / claimed their dividend entitlements are requested to contact the Company or the Registrar and Transfer Agents of the Company. Investor Education and Protection Fund In terms of Section 205C of the Companies Act, 1956, read with the Investor Education and Protection Fund (Awareness and Protection of Investor) Rules, 2001 (which are still applicable as the relevant sections under the Companies Act, 2013 are yet to be notified), the Company has credited during the year ended 31st March, 2015 an aggregate amount ofRs. 10.51 lacs, which pertains to the dividend for the year 2006-07 and remained unpaid or unclaimed for a period of 7 years from the date of declaration, to the Investor Education and Protection Fund (IEPF). Service of documents through electronic means All documents, including the Notice and Annual Report shall be sent through electronic transmission in respect of members whose email IDs are registered in their demat account or are otherwise provided by the members. A member shall be entitled to request for physical copy of any such documents. Adequacy of Internal Financial Control The Company has in place adequate internal financial controls with reference to financial statements. Periodic audits are undertaken on continuous basis covering all the major operations. Reports of internal audits are reviewed by management from time to time and desired actions are initiated to strengthen the control and effectiveness of the system. During the year, such controls were tested and no reportable material weakness in the design or operation was observed. The Internal Financial Control with reference to financial statements as designed and implemented by the Company are adequate. During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency of such controls. Overview of Economy The Indian economy in year 2014-15 was characterized by declining inflation, higher growth, a relatively stable currency, huge foreign inflows and improving investor confidence in India. India is likely to become the world's fastest-growing major economy by 2016, ahead of a slowing China. The Indian economy grew at 7.4% in 2014-15 as compared to 6.9% in 2013-14 and has been projected to grow faster still in 2015-16. The consumer inflation index reduced from 9.7% in 2013-14 to 5.2% in 2014-15. With the fiscal deficit in the range of4.0% and current account deficit expected to be around 1.7%, India's macroeconomic conditions look healthy. The steep fall in commodity prices of key imports like coal and especially oil will not just strengthen India's external stability and balance sheet, but also boost demand and growth in time to come. IMF expects India to grow 7.5 per cent in both 2015 and 2016, while China's growth rate has been projected at 6.8 per cent and 6.3 per cent, respectively. Though the recovery in advance economies is slow, the external environment for India is benign. Yet external challenges such as a slowing China, weak global trade growth and normalization of monetary policy in the US remain. A major concern for the economy is the weak industrial growth of 3.5% in FY15 and possibly slower in FY16. Pricing power, demand and thus margins in the industrial sector have been weak leading to low utilization levels and deferment if not abandonment of expansion plans. According to Crisil, utilization rates in 10 out of 12 sectors are at 5-year lows. Stimulating investment growth will remain a key challenge for the new government. Industry Scenario and Company Performance The Indian textiles and apparel industry, was estimated at around US $118 billion in 2014. This comprises a domestic market of $76 billion and export market of $42 billion. Both markets are projected to increase at 14% CAGR to make for a total of $500 billion by 2025 according to Wazir Advisors. The industry is the second largest employer after agriculture, providing direct employment to over 45 million and to around 60 million people indirectly. The importance of the sector to the well-being of the economy and its people is thus evident. Globally, in the year 2000 fibre consumption in textiles was predominantly cotton. Since then, polyester has begun to dominate the fibre mix and its global consumption is expected to be more than double that of cotton by 2030. In India, the major textile fibre consumed is still cotton, but as is happening in other countries polyester growth is widely expected to greatly outstrip that of cotton. Within the polyester sector the growth of polyester filament yarn, is expected to be fastest for textile applications. The vast majority of your Company's activities services the polyester filament yarn and fabric industry. While there has been a significant demand slowdown in the PFY industry over the last 4 years, the trend is expected to reverse in line with international and historical domestic trends. Very high growth and profitability in the industry upto FY11 led to substantial capacity expansions such that supply greatly exceeds demand leading to industry utilization rates of around 66%. In the years to come, however, utilization rates and margins are expected to continually improve. In the year under review, crude oil prices saw a massive correction from $115/barrel in June 2014 to $45/barrel in January 2015. This resulted in corresponding price reductions in PTA and MEG, your Company's key raw materials. From August 2014 to January 2015, PTA prices fell from $1000/MT to $580/MT. The speed of the drop led to panic in the markets, a demand slowdown and inventory losses for the entire polyester textile chain. Ant dumping duty was imposed on imported PTA but later was dropped for Chinese suppliers providing some relief to the industry. A weak monsoon coupled with poor government transfers to rural areas last year affected the demand growth for polyester. With the commissioning of an expected 3.3 million tons of PTA capacity this financial year, PTA availability and pricing is expected to improve for the industry. Last financial year saw the completion of a major PFY expansion of 390,000 MT p.a. by the largest producer of polyester. This worsened the demand-supply balance and reduced utilization rates in the industry. Despite this fact and the raw material price crash your Company improved its performance at the EBIDTA level. This was possible due to across the board improvements in efficiency, quality parameters and wastage levels across the Company's polymerization and spinning plants. In fact we can proudly say that the Company's plant performance has never been better. Careful raw material and working capital management also helped a great deal. But the largest contributor was the further improvement in the Company's product mix. Our volume of differentiated products increased in the year under review. During the year 2014-15 price of coal reduced in line with international prices while the Company increased the replacement of gas by coal in its fuel mix. This was also a major contributor in lowering cost of production across its polymerization and spinning plants. Our weaving and finishing (dyed and printed fabric) divisions continue to at the forefront of fabric and design innovation in India. The varieties of fabric bases as well as designs are unparalleled in the country. In the finished fabric division the Company emphasized higher-value cotton, viscose staple fibre, viscose filament and bemberg based printed fabrics for which there is a large international clientele as well Opportunity, Risks and Concerns The opportunity in the textile space is enormous. The textile market has been projected to increase from $118 billion in 2014 to $500 billion by 2025. With polyester projected to grow much faster than cotton, a large part of the increase in market will be due to polyester especially polyester filament based yarn, fabric and apparel. Within the polyester chips, yarn and fabric industry your Company is especially well-positioned as a leader in product-innovation. Your Company's product-range is unparalleled and its reputation for service and transparency is impeccable. This results in a price premium for the Company's products across its entire range. As demand grows, margins in the industry are expected to normalize resulting in significant gains to your Company. By 2017 CST-exemptions available to a number of companies in certain Union Territories will expire resulting in a significant improvement in your Company's sales and profits owing to creation of a level-playing field. The Company, like any other enterprise is exposed to business risks. Continuation of the slowdown in polyester demand growth will delay normalization of margins. It is widely expected, however that the slowdown is temporary. The high growth in India's GDP will be highly supportive of growth in the polyester industry as it has been in the past decades. Another risk faced by the Company in present scenario is sharp downward fluctuations in the prices of its raw materials. This results in weakening of demand and inventory losses although temporary the effect can be significant. On the positive side, the consequent lower price of the finished product will lead to improvement in demand albeit with a lag. Supply and price of cotton and any significant change in the size of cotton crop in India or globally could have an impact on the demand of the Company's products. Any negative effect is expected to be temporary, however, as the long term trend for polyester both globally and domestically has been to gradually replace cotton. An increase in the amount of competition that we face could have a material adverse effect on our market share and sales. It is widely expected that demand and supply will gradually balance out in the years to come, both in India as well as in China. This should lead to improved sales and margins in the years to come. Any unexpected changes in the regulatory framework and financial incentives from the government can affect our operations and profitability. The levy of anti-dumping duty on imported PTA was costly for the industry. Removal of 2% financial incentive for exports given in the Focused Product Scheme, for the company's products has adversely affected export profitability. Large additions to PTA capacity are expected this financial year that should result in more competitive PTA costs. This is likely to improve both domestic and export performance, other things being same. The Company's significant exports, imports and dollar liabilities make it vulnerable to currency fluctuations. However, the Company has put in place foreign-currency risk management rules to minimize the forex risk. The Company's sizeable interest burden make it vulnerable to increases in the interest rate. Yet, the Company is hopeful thai interest rates are on the way down. Business Outlook: The financial year 2015-16 began on a positive note, though, margins may remain weak owing to oversuplly. Demand for both polyester and cotton is weak and might remain so for the next 2 quarters. The embroidery segment is facing a severe slowdown which has affected demand for dyed fabrics. Demand for water-jet loom based fabric has come down generally which has affected the sizing and air-texturising segments that feed it. This has affected the Company's draw-warping, sizing and air-texturising divisions which have been highly profitable for us in the past. Fortunately, the demand for many of the Company's specialties in both yarn and fabric remains strong. In particular, the Company has increased volumes in cationic, fine-denier and spandex-based yarns. The sales of Garden's natural fabric range is expected to be boosted by exports in the quarters to come. The polyester industry is greatly dependent on the rural economy which has been adversely affected in the past year owing to poor rural handouts and a weak monsoon. The quality of this years' monsoon will have a significant bearing on polyester. Low international demand for cotton and the consequent low cotton prices have also had some effect on polyester demand. Yet, we are cautiously optimistic as the large PTA expansions come on stream in India as this may result in our having internationally competitive raw material pricing. The outlook on long-term prospects of the polyester filament yarn (PFY) business is positive with most projections showing PFY to be by far the fastest growing fibre in the world and in India in particular. The Company is expected to be benefited as it enjoys a leadership position in textile grade polyester chips market not to mention its special position as a yarn and fabric innovator. With the rise in demand for company's products and better capacity utilisation an across-the-board improvement in performance is expected over the next 2-3 years. The Company's numerous initiatives towards improving operational effectiveness will reduce energy and manpower costs. A business restructuring is underway at our Jolva plant that will make the Company leaner still. Continued emphasis on the company's strength in product innovation will help it maintain pricing power. Garden is de-bottlenecking one of its FDY lines to increase output without a material increase in costs. The continuous efforts to improve product-mix through product innovation via close collaboration between R&D, production and marketing departments has been a key to Garden's profitability in the past and will continue to be so in future. Internal Control System and their Adequacy The Company has an internal control system that is commensurate with the size, scale and complexity of its operations. The internal audit department monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, and accounting procedures and policies at all the Company's locations. The Internal Control System provides for well documented policies / guidelines, authorizations and approval procedures. Considering the nature of its business and size of operations, your Company through its Internal Audit Department, carried out periodic audit based on the plan approved by the Audit Committee. Health, safety and environment Your Company continued its focus in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staff and labour for maintaining hygienic and green surrounding. The Company continues to focus on maintenance and performance improvement of related pollution control facility at its manufacturing locations. Your Company recognizes protection and management of environment as one of its highest priority and every effort is made to conserve and protect the environment. Industrial Relation / Human Resources The relations between the workmen, employees and the Management have remained cordial and harmonious during the year under review. The Company continuously works to nurture this environment to keep its employees highly motivated, result oriented and adaptable to changing business environment. Your Company's value proposition is based on providing value to our customer, through innovation and by consistently improving efficiency at all levels. Your Directors wish to place on record their appreciation for the dedicated and commendable services rendered by the employees of the Company. The total number of permanent employees as on 31st March, 2015 was 5639. CAUTONARY STATEMENTS Statements made in this report forming part of the disclosure related to Management, Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be 'forward-looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the Company's operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in government regulations, tax laws, and other factors such as litigation and industrial relations. Acknowledgement Your Directors take this opportunity to thank the customers, suppliers, bankers, business partners / associates, financia institutions and various regulatory authorities for their consistent support / encouragement to the Company. Your Directors are thankful to the esteemed shareholders for their continuous support and the confidence reposed in the Company and its management. For and on behalf of the Board Praful A. Shah Chairman & Managing Directo Place : Surat, date : 5th June, 2015 |