DIRECTORS REPORT TO THE MEMBERS 1. Your Directors have pleasure in presenting their Report together with the Audited Accounts for the year ended 31st March, 2015. 2. COMPANY'S PERFORMANCE During the year under review, although the turnover of the company marginally declined by 2.06%, the profit before taxes declined to Rs.17.71 lacs from Rs. 57.68 lacs. The marginal decline in turnover is mainly attributable to sudden decline in exports. During the year under review, the company made exports to the tune of Rs. 3666.24 Lacs as against exports of Rs. 4502.40 Lacs made during previous financial year showing a decline of 18.57%. The profit before taxes declined because the company's spinning unit, which was restarted from August 2013 incurred losses during the year. The said unit has started generating cash profit only from the last quarter of the year under review. THE MANAGEMENT DISCUSSION & ANALYSIS Spinning Unit at Dharuhera, Haryana The production activities in this unit were re-started from 31.8.2013. However, due to initial teething troubles, the production activities could be streamlined in March 2014 but the unit started generating cash profit only from the last quarter of FY 2014-15. In order to meet the growing competition in cotton yarn market, the company had decided to go for value addition by producing doubled yarn, for which the company decided to procure eight new TFOs and two Cheese Winding machines and also made advance payment to the supplier. State Bank of Travancore (SBOT) had also sanctioned a Term Loan of Rs.180 Lacs for purchase of these machines. However due to delay in obtaining NOC from some of the consortium member banks, the said loan could not be disbursed. As a result the machinery supplier diverted the machine to some other supplier. Since the next delivery period of the machines was very long, the company decided to procure/import state-of-the-art Circular Knitting Machine to manufacture fine quality fabric out of cotton yarn (i.e. forward integration), which will result in better value addition. SBOT has also approved the change of machine and advance to the machinery supplier has been made through partial disbursement of loan. The machines are expected to be ready for delivery by October 2015. With the addition of the machine, the profitability of the spinning unit is expected to improve. Knitting & Garment unit at Dharuhera, Haryana The production activities of the Fabric/Garment Division at Dharuhera are going on smoothly. The company is achieving average monthly turnover of Rs.2 Crore from this unit. The company is supplying garments for well known brands i.e. Future Group, Reliance Trend, Pantloon Retail, Spencer and Bharti Wallmart etc. Besides, the company is also exporting garments. Sewing Thread Unit At Kala Amb, Himachal Pradesh During the year under review, the capacity utilisation remained a cause of concern due to labour shortage problem. Although the company was able to largely overcome the labour shortage problem from January 2015 but after Holi festival, the situation has again deteriorated. The situation is gradually improving and it is expected that the situation will be back to normal by next month. The company has been exporting significant percentage of its production and more than 90% of the same was being exported to Turkey. However, due to some internal problem in Turkey, our exports have virtually stopped during last quarter of the year under review. Therefore, the company has increased domestic sales during the same period. However, the realisation period in domestic sales ranges from 90 days to 120 days, which has created stress on working capital. The situation is expected to improve gradually once the realisation cycle is complete. It is not out of place to mention here that margins in domestic market are better than export market. DIVIDEND In view of the requirement of fund for working capital of the company, the Board of Directors is not in a position to recommend any dividend for the year under review. DIRECTOR'S RESPONSIBILITY STATEMENT: In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed. ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 the year under review. iii) The directors have 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) The directors have prepared the annual accounts on a going concern basis. v) 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. vi) The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. STATUTORY AUDITORS During the year under review, the auditors need no rotation as they can continue as auditors for a period of two more years i.e. up the year 2017. M/s. B.K. Shroff & Co. Chartered Accountants, who are the statutory auditors of the Company, hold office till the conclusion of the forthcoming AGM and are eligible for re-appointment. Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Rules framed thereunder, it is proposed to appoint M/s. B.K. Shroff & Co. as statutory auditors of the Company from the conclusion of the forthcoming AGM till the conclusion of the thirty seventh AGM to be held in the year 2017, subject to ratification of their appointment at every AGM. INTERNAL CONTROL SYSTEMS Your Company has evolved a system of internal controls to ensure that the assets are safeguarded and transactions are authorised, recorded and correctly reported. The internal control system is supplemented by management reviews and independent periodical reviews by the outside chartered accountancy firms which evaluate the functioning and quality of internal controls and provides assurance of its adequacy and effectiveness. The scope of internal audit covers a wide variety of operational methods and, as a minimum, ensures compliance with specified standards with regard to availability and suitability of policies and procedures, extent of adherence, reliability of management information system and authorization procedures including steps for safeguarding of assets. The reports of internal audit are placed before Audit Committee of the Directors and Board. Audit Committee and board reviews such audit findings and the adequacy of internal control systems. The Statutory Auditors and the Internal Auditors of the Company also interact with the Audit Committee and Board to share their findings and the status of corrective actions under implementation. M/s. M.C. Jain & Co. Chartered Accountants, New Delhi were appointed as Internal Auditors of the Company for the Financial Year 2014-15 and their reports for the year were submitted to the Audit Committee and to the Board. COST AUDIT The Central Govt has approved the appointment of M/s Avtar Singh & Co. as cost auditors for conducting Cost Audit for the Financial Year 2014-15 The report of Cost Auditors in respect of audit of the cost records of the Company for the year ended 31st March 2015 will be submitted to the Central Government in due course. 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 Suchita Gupta & Co., a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as Annex-ure-A. AUDITORS' OBSERVATIONS Auditors' observations relating to Note no. 12 as contained in the Main Report under the para 'Basis of Qualified Opinion' are explained hereunder: - Although, the company has made representation to the competent authority for payment of compensation at market rate in respect of part of company's factory land acquired by Government of Haryana, the company feels that final decision in this regard may take a very long time and moreover there is uncertainty about the success of company's representation. Hence, it has been decided that its affect would be given in company's books as and when actual compensation is received from Government of Haryana. DEPOSITS During the year, the Company did not accept any deposits from the public within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS: During the year under review , company has not given any loans, Guarantee or made any investments covered under the provisions of Section 186 of the Companies Act, 2013. SUBSIDIARY COMPANIES: The Company does not have any subsidiary BUSINESS RISK MANAGEMENT Pursuant to the requirement of Clause 49 of the Listing Agreement, the Company has constituted a Risk Management Committee. The details of the Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. On the recommendation of the Risk Management Committee, the Board has adopted Risk Management Policy, which outlines the program implemented by the Company to ensure appropriate risk management within its system and culture. The Risk Management Policy is also posted on the website of the Company. The Company's risk management program comprises of a series of processes, structures and guidelines which assist the Company to identify, assess, monitor and manage its business risks, including any material changes to its risk profile. To achieve this, the Company has clearly defined the responsibility and authority of the Company's Board of Directors and of the Risk Management Committee to oversee and manage the risk management program while conferring responsibility and authority on the Company's senior management to develop and maintain the risk management program in light of the day to day needs of the Company. Regular communication and review of risk management practices provide the Company with important checks and balances to ensure the efficacy of its risk management program. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant and material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations. DIRECTORS (i) Retirement by rotation In accordance with the provisions of the Companies Act, 2013 and Articles of Association of the Company, Mrs. Vrinda Jain retires by rotation and is eligible for reappointment. The brief resume(s) of the all Directors proposed to be appointed or reap-pointed at the ensuing AGM, as required in terms of Clause 49 of the Listing Agreement with the stock exchanges is provided in the annexure(s) to the notice of Annual General Meeting. (ii) Resignation of Director:- During the year , Mr. S.K.Chaajer , whole Time Director of the company resigned from the Board on 30-6-2014. (iii) Declarations by Independent Directors All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. (iv) Board Evaluation In compliance with 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, the directors individually as well as the evaluation of the working of its Nomination & Remuneration Committee. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. (v) Nomination & Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a Policy for selection, appointment and remuneration of Directors and Key Managerial Personnel. More details of the same are given in the Corporate Governance Report. (vi) Board Meetings During the year, four (4) Board Meetings and four (4) Audit Committee Meetings were convened and held. The details are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS & OUTGO The information relating to conservation of energy, technology absorption and foreign exchange earnings & 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 Annexed herewith as Annexure-B. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure-C PARTICULARS OF EMPLOYEES The provisions of Rule 5(2) & (3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 requiring particulars of the employees in receipt of remuneration in excess of Rs.60 lacs per year to be disclosed in the Report of Board of Directors are not applicable to the Company as none of the employees was in receipt of remuneration in excess of Rs.60 lacs during the financial year 2014-15. The information in accordance with the provisions of Section 197 of the Companies Act,2013 read with rule 5 of the Companies ( Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed as Annexure-D. CORPORATE GOVERNANCE The Company has been in compliance with all the conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchange and a certificate from the Auditors to this effect is made part of the Annual Report. Committed to the practice of good Corporate Governance, the Board lays strong emphasis on transparency, accountability and integrity, with its 'Governance Committee' specifically assigned the task of analysing the clause with respect to good governance practice. In terms of such sub clause (v) of Clause 49 of Listing Agreement, Certificate of CEO/CFO, inter alia, confirming the correctness of the financial statements, adequacy of the internal control measures and reporting of matters to the Audit Committee in terms of the said clause, is also enclosed as a part of said Report. OBLIGATION OF COMPANY UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 In order to prevent sexual harassment of women at work place a new act The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 has been notified on 9th December, 2013. Under the said Act every company is required to set up an Internal Complaints Committee to look into complaints relating to sexual harassment at work place of any women employee. Company has adopted a policy for prevention of Sexual Harassment of Women at workplace and has set up Committee for implementation of said policy. During the year Company has not received any complaint of harassment. ACKNOWLEDGEMENT Your Directors convey their sincere thanks to the various agencies of the Central Government, State Governments, Banks and other concerned agencies for all the help and cooperation extended to the Company. The Directors also deeply acknowledge the trust and confidence the shareholders and investors have placed in the Company. Your Directors also record their appreciation for the dedicated services rendered by the workers, staff and officers of the Company For And on Behalf of Board of Directors Sd/- Ramesh Kumar Jain Chairman & Managing Director Place : New Delhi Dated : 14-8-2015 |