DIRECTORS' REPORT Dear Members, The Directors of your Company are pleased to present their 39th Annual Report on the business of the Company together with the Audited Accounts of the Company for the year ended on 31st March, 2015. 2. YEAR IN RETROSPECT M/s Malwa Cotton Spinning Mills Ltd (MCSML), based on its audited balance sheet as at 31st March,2013 had filed a reference under Sick Industrial Companies (Special provisions) Act 1985 and the reference was registered on 24th May, 2013 with Board for Industrial & Financial Reconstruction (BIFR). The Company has recorded net loss before depreciation, interest & tax of Rs 3403.16 lac as compared to previous year loss before depreciation, interest & tax of Rs.4485.94 lac. The performance of the Company deteriorated due to volatility and uncertainty in cotton prices, sudden glut in the synthetic yarn market , closure of dyeing units resulting in accumulation of fabric stock and above all undue delay in disbursing of need based funds by lenders in the past proved fatal & detrimental. Poor export demand and excess spinning capacity further resulted in accumulation of stock, hence crash of prices in the domestic market. Increase in power cost, high cost of labour and general increase in input costs resulted in poor performance of the company. These factors adversely affected the capacity utilization of the Company. During the year, the Company has achieved total production of 36.59 lac kgs for all types of yarns compared to previous year's production of 66.48 lac kgs. The Cotton Yarn production was 4.63 lac kgs against 8.56 lac kgs in the previous year and other yarns production was 31.96 lac kgs against 57.92 lac kgs. in the previous year. Thread production of 10.71 lac kgs was also achieved by the company against 19.57 lac kgs in the previous year. TURNOVER During the year, your Company has recorded gross sales of Rs 11071.25 lac against Rs. 18838.16 lac in the previous year. The Company has achieved Yarn sale of Rs 5667.41 lac, Thread sale of Rs 5080.38 lac and others of Rs 323.46 lac in the current year ended on 31st March, 2015 against sale of Yarn Rs. 10306.65 lac , Thread Rs.7893.91 lac and others Rs. 637.60 lac in the previous year. Export of Yarn was at Rs.754.39 lac (CIF) against Rs. 677.56 lac (CIF) in the previous year. BARNALA UNIT The Barnala unit has achieved production of 18.37 lac kgs of Yarn and capacity utilization at minimal levels in the current year. PAONTA SAHIB UNIT The Paonta Sahib unit was operating at low capacity utilization and had production of 8.97 lac kgs of yarns. MACHHIWARA UNIT The Worsted Unit had achieved production of 9.25 lac kgs during the year and the unit was operating at low capacity utilization . 3.SHARE CAPITAL The paid up Equity Share Capital as on 31st March,2015 was Rs 790.29 lacs and Preference Share Capital was Rs.2724.61 lacs. During the year under review, the Company has not: a)bought back any of its securities b)issued any Sweat Equity Shares c)issued any Bonus Shares to the existing shareholders of the Company d)issued any Equity Shares under the Employees Stock Option Plan during the year under review 4.DIVIDEND No Dividend was declared for the current financial year due to loss incurred by the Company and accumulated losses. 5.TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year. 6.DEPOSITS The Company has not accepted any deposits from the public during the year under review and as such, there are no outstanding deposits in terms of the Companies (Acceptance of Deposits) rules, 2014. 7.DIRECTORS a) Mr. Rishi Oswal & Mr. Rahul Oswal retire at the ensuing Annual General Meeting and are eligible for re-appointment as Directors subject to retirement by rotation. They offer themselves for the re-appointment. 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 evaluation of its performance, the directors individually, as well as the evaluation of the working of its Committees. At the meeting of the Board all the relevant factors that are material for evaluating the performance of the individual Directors, the Board and its various committees were discussed in detail. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Chairman and non-independent directors was also carried out by the independent Directors at their separate meeting. The Directors expressed their satisfaction with the evaluation process. b) Meetings During the year four Board Meetings were convened and held. The details thereof are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. 8.KEY MANAGEMENT PERSONNEL The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is appended as an Annexure -I and forms an integral part of this report. 9.REMUNERATION POLICY The Board on the recommendation of the Nomination and Remuneration Committee shall review and approve the remuneration payable to the Directors ,Key Managerial Personnel and Senior Management. The key provisions of Nomination and Remuneration policy are appended as an Annexure-II to the Board's report. 10.STATUTORY AUDITORS M/s. S.C.VASUDEVA & Co.,( Firm Registration Number: 000235N) Statutory Auditors of the Company hold office until the conclusion of the ensuing Annual General Meeting and being eligible, offered themselves for re-appointment. As required under the provision of Section 139 of the Companies Act, 2013, the Company has obtained a written confirmation from M/s. S.C.VASUDEVA & Co., and received a certificate from the above Auditors to the effect that their appointment, if made, would be in conformity with the limits specified in the said section. 11.AUDITORS' REPORT The Auditors' Report on the Accounts is self-explanatory and required no comments except (i) nondisclosure of segment results separately in respect of sewing thread segment in accordance with Accounting Standard (AS)-17. Results of the operations of the sewing thread segment is compiled to the extent it could be computed from the books of account however results of the textile segment (yarn & sewing thread ) is disclosed as per Accounting Standard (AS-17) (ii) Due to recession there is delay in realization of debtors and the Company is settling with parties for its recovery and confident of recovery of debtors in respect of which balances were not confirmed and however the company has made a provision for doubtful debts for Rs.1691.28 lac in respect of these debtors during the year. 12.COST AUDIT Cost audit for the financial year 2014-15 is not applicable to the Company as per Notification No.G.S.R.425[E] dated 30th June2014 issued by the Ministry Of Corporate Affairs, hence no cost auditor was appointed for cost audit purpose. 13.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 Company has appointed M/s Rajeev Bhambri & Associates, a firm of Company Secretaries in practice (C.P.No 9491 ) to undertake the Secretarial Audit of the Company. The Secretarial audit report for the financial year ended 31st March, 2015 is annexed herewith as Annexure-III to this report. The Secretarial Audit report does not contain any qualification, reservation and adverse remarks. 14.PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 There were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provision is not applicable. 15.DIRECTORS' RESPONSIBILITY STATEMENT The Board Of Directors acknowledge the responsibility for ensuring compliance with the provisions of Section 134(3) read with Section 134(5) of the Companies Act, 2013 in the preparation of annual accounts for the year ended on 31st March,2015 and state : a)That in preparation of the Annual Accounts, the applicable Accounting Standards have been followed along with proper explanation relating to material departures. b)That the Directors 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 or Loss of the Company for that period. c)That the Directors 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. d)That the Directors have prepared the Annual Accounts on a going concern basis. e)That the Directors had laid down internal financial controls to be followed by the company and such internal financial controls are adequate and operating effectively. 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. 16.CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement, a separate Report on Corporate Governance together with Management Discussion and Analysis and certificate from Company's Auditors is annexed and forms part of the report. 17.AUDIT COMMITTEE & RISK MANAGEMENT The company has duly constituted Audit Committee, the scope of which is quite comprehensive and is in conformity with the provisions of the Companies Act, 2013 and revised clause 49 of the listing agreement. The composition of the Audit Committee is given in Corporate Governance Report. All the recommendations of the Audit Committee were accepted by the Board. RISK MANAGEMENT The Audit Committee has also been assigned the responsibility for monitoring, and reviewing risk management. The Committee identifies, review and mitigate all elements of risks which the Company may be exposed to. The Board also reviews the risk management assessment and minimization procedures. 18.DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM/WHISTLE BLOWER POLICY The Company has adopted Whistle Blower Policy/vigil mechanism for directors and employees to report concerns about unethical behavior, actual or suspected fraud, or violation of the Company's Code of Conduct and Ethics. 19.DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The Company has not developed and implemented any Corporate Social Responsibility initiatives as the said provisions are not applicable. 20.RELATED PARTY TRANSACTIONS There was no contract or arrangement made with related parties as defined under Section 188 of the Companies Act, 2013 during the year under review. 21.DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE There are no significant orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations. 22.DECLARATION BY INDEPENDENT DIRECTORS Necessary declarations have been obtained from the Independent Directors under Section 149(7) of the Companies Act, 2013 except Mr Arun Kumar Ahluwalia. 23.INTERNAL FINANCIAL CONTROL SYSTEM The Company has in place internal financial control system, commensurate with the size and complexity of its operations to ensure proper recording of financial and operational information and compliance of various internal controls and other regulatory and statutory compliances. The internal auditor monitors and evaluates the efficacy and adequacy of internal control systems in the Company. Based on the report of the internal auditor, respective departments undertake corrective action in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. 24.SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES The Company does not have any Subsidiary, Joint venture or Associate Company. 25.CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO The information pertaining to conservation of energy, technology absorption, Foreign exchange Earnings and outgo as required under Section 134 (3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure-IV. 26.MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT The Company has shut down the production activity during the year at Paonta Sahib unit. Except closure of Paonta Sahib unit, No material changes and commitments affecting the financial position of the Company occurred between the ends of the financial year to which these financial statements relate on the date of this report. 27.EXTRACT OF ANNUAL RETURN The details forming part of the extract of Annual Return in form MGT-9 is annexed herewith as Annexure -V 28.ACKNOWLEDGEMENTS The Board of Directors place on record its appreciation for the valuable assistance, support and guidance extended to the Company by the various Government Departments, Organisations and Agencies. The Company also acknowledges the support and co-operation received from dealers, Retailers, agents and other business partners for excellent support received from them. The Board also wishes to express its deep gratitude for the continued support from its shareholders and the employees and appreciate the co-operation and unstinted support extended to the Company. For and on behalf of Board JANGI LAL OSWAL Chairman-cum-Managing Director Place: Ludhiana Date : 30.05.2015 |