DIRECTORS' REPORT To, The Members Blue Chip Tex Industries Limited Your Directors are pleased to present herewith the 31st Annual Report on the business and operations of your Company and Audited Accounts for the Financial Year ended March 31, 2016 together with the Audited Statement of Accounts and Auditor’s Report thereon. The State of the Company's Affairs: 1. KEY FINANCIAL HIGHLIGHTS: During the year under review your Company has reported a total income of INR 1,38,07,16,834/- out of which non-operating income amounts to INR 8,12,845/-. Revenue from Operations Income registered increase by INR 26,42,51,508/- i.e. by 23.69 % as compared to the previous year. 2. DIVIDEND: Your Directors are pleased to recommend a final dividend of INR 1.50/- per equity share for the Financial Year ended 31st March, 2016. 3. TRANSFER TO RESERVES: The Company has proposed to transfer NIL amount to the General Reserve out of amount available for appropriations. 4. THE STATE OF COMPANY'S AFFAIRS : The highlights of State of Company's affairs are as under : The Company had completed its expansion programme and presently having own 5 Draw Texturing Machines and 3 Air Texturising Machines. The Company also hired Machineries to meet the demand. This year Company is concentrating upon existing production capacities for maximum utilisation and for future expansion the Company is searching suitable Industrial land in Dadra & Nagar Haveli. 5. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO [SECTION 134 (3) (m) OF THE COMPANIES ACT, 2013: Particulars required to be furnished by the Companies as per Rule 8 of Companies (Accounts) Rules, 2014, are as follows: A. Rule 8 Sub-Rule 3 (A) pertaining to Conservation of Energy: (i) Energy conservation measures taken: Appropriate measures have been initiated to conserve energy. The Company has always been conscious about the need for conservation of energy. (ii) Additional investments and proposals, if any, being implemented for reduction of energy consumption: The efforts for conservation of energy are on an ongoing basis throughout the year. (iii) The impact of the above measures for reduction of energy consumption and consequent impact on the cost of production of goods: The measures taken have resulted in savings in the cost of production. Total energy consumption and energy consumption per unit of production: B. Rule 8 Sub-Rule 3 (B) pertaining to Technology absorption Efforts in brief made towards technology, absorption, adoption and innovation: The Company keeps itself abreast of the technical development and innovation in its line of products worldwide and tries to bring about improvements in the product for better yield, quality and cost effectiveness etc. Continuous efforts are being made in the areas of quality improvements, waste reduction, process capability and cost minimization to specially improve the market acceptance of the product. C. Rule 8 Sub-Rule 3 (C) pertaining to Foreign exchange earnings and Outgo: There are NIL Foreign Exchange earned in terms of actual inflows during the year and the Foreign Exchange outgo was of INR 59,791/- towards payment of travelling expenses during the year in terms of actual outflows. 6. MATERIAL CHANGES AND COMMITMENTS DURING THE YEAR: No material changes and commitments other than in the normal course of business have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. 7. STATEMENT CONTAINING SALIENT FEATURES OF FINANCIAL STATEMENTS OF ASSOCIATE COMPANY: Your Company is not having any associate Company and hence the statement containing the salient feature of the financial statement of a company's associate company under the first proviso to subsection (3) of section 129 in the prescribed Form AOC-1 does not form part of Directors' Report. 8. DETAILS OF NEW SUBSIDIARY/ JOINT VENTURES/ASSOCIATE COMPANIES: There are no new Subsidiary/Joint Ventures/Associate Companies of the Company during the year under review. 9. CHANGE IN THE NATURE OF BUSINESS: There has been no change in the nature of business of the Company during the year under review. 10. INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS: The Company has adequate and effective control systems, commensurate with its size and nature of business, to ensure that assets are efficiently used and the interest of the Company is safe guarded and the transactions are authorized, recorded and reported correctly. Checks and balances are in place to determine the accuracy and reliability of accounting data. 11. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Particulars of loans, guarantees given and investments made during the year in accordance with Section 186 of the Companies Act, 2013 is annexed with this Report in "Annexure II". 12. ANNUAL RETURN: The extract of Annual Return pursuant to Section 92 of the Companies Act, 2013 read with The Companies (Management and Administration) Rules, 2014 in the prescribed Form MGT-9 is hereby annexed with this report as "Annexure I'' and the same is as on 31st March, 2016. 13. DEPOSITS: The Company has not accepted any deposits within the meaning of Section 73(1) of the Companies Act, 2013 and the Rules made thereunder. 14. QUALIFICATION GIVEN BY THE STATUTORY AUDITORS: There are no qualifications, reservation or adverse remarks or disclaimers made by the Statutory Auditors of the Company in their report. 15. AUDITORS: M/s Rajendra & Co., Statutory Auditors of your Company, bearing registration number 108355W retires at the ensuing Annual General Meeting and are eligible for re-appointment. The Auditors have given their consent in writing and have furnished a certificate to the effect that their re-appointment, if made, would be in accordance with the provisions of Section 139(1) and that they meet with the criteria prescribed under section 141 of the Companies Act, 2013. Directors recommend their re-appointment in the ensuing Annual General Meeting. 16. CONTRACT OR ARRANGEMENT WITH RELATED PARTIES: The Company has entered into transactions with related parties in accordance with the provisions of the Companies Act, 2013 and the particulars of contracts or arrangements with related parties referred to in Section 188(1), as prescribed in Form AOC - 2 is appended as "Annexure III'' of the rules prescribed under Chapter IX relating to Accounts of Companies under the Companies Act, 2013, is duly entered in the register. 17. DISCLOSURE OF REMUNERATION PAID TO DIRECTOR AND KEY MANAGERIAL PERSONNEL AND EMPLOYEES: The details with regard to payment of remuneration to Director and Key Managerial Personnel is provided in Form No. MGT 9- extract of annual return appended as "Annexure I". 18. CHANGE IN CAPITAL STRUCTURE: There has been no change in the capital structure of the Company during the year ended 31st March, 2016. 19. CORPORATE SOCIAL RESPONSIBILITY POLICY: During the year under review, the Company has not developed the policy on Corporate Social Responsibility as the Company does not fall under the prescribed classes of Companies mentioned under section 135(1) of the Companies Act, 2013. 20. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBULNALS IMPACTING THE GOING CONCERN STATUS AND THE COMPANY'S OPERATION IN FUTURE: There are no material or significant orders passed by the regulators or courts or tribunals impacting the going concern status and the company's operation in future. 21. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013: The Company is committed to provide safe and conducive environment to its employees during the year under review. Your Directors further state that that during the year under review, there were no cases filed pursuant to the Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 22. CONSOLIDATION OF FINANCIAL STATEMENTS: Company does not have any subsidiaries and Associate Company so there was no need to prepare Consolidated Financial Statement for the Financial year 2015-2016. 23. STATEMENT ON DECLARATION GIVEN BY THE INDEPENDENT DIRECTORS UNDER SECTION 149 (6) OF THE COMPANIES ACT, 2013: As per the provisions of Section 149(4) of the Companies Act, 2013 every listed public company shall have at least one-third of the total number of directors as independent directors. All the above Independent Directors meets the criteria of 'independence' prescribed under section 149(6) and have submitted declaration to the effect that they meet with the criteria of 'independence' as required under section 149(7) of the Companies Act, 2013. 24. COMMITTEES OF BOARD: I. Nomination and Remuneration Committee: The 'Nomination and Remuneration Committee' consists of four Directors with three independent non-executive directors and one executive director with the Chairman being the Independent Director, and the said constitution is in accordance with the provisions of Section 178 of the Companies Act, 2013. The Committee acts in accordance with the Terms of Reference as approved and adopted by the Board. The Composition of the Committee is as under: Chairman: Mr. Kumar Nathani Members: 1. Mr. Nand Khemani 2. Mr. Vijay Mishra 3. Mr. Manmohan Anand Nomination and Remuneration Policy The Company's Nomination and Remuneration Policy for Directors, Key Managerial Personnel and other employees is annexed as "Annexure IV'' to the Directors' Report. Further, the Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors. The Company's Nomination and Remuneration Policy is directed towards rewarding performance based on review of achievements periodically. The Nomination and Remuneration Policy is in consonance with the existing industry practice. II. Audit Committee: In accordance with the provisions of Section 177 of the Companies Act, 2013 your Company has constituted an "Audit Committee" comprising of Four directors consisting of Three non- executive Independent directors and one executive director with the Chairman being Independent director. The Audit Committee acts in accordance with the Terms of Reference specified by the Board in writing. The Composition of the Committee is as under: Chairman: Mr. Kumar Nathani Members: 1. Mr. Ashok Khemani 2. Mr. Vijay Mishra 3. Mr. Manmohan Anand The Terms of reference of the Audit Committee are broadly stated as under: 1. Recommendation for appointment, remuneration and terms of appointment of auditors of the company; 2. Review and monitor the auditor's independence and performance, and effectiveness of audit process; 3. Examination of the financial statement and the auditors' report thereon; 4. Approval or any subsequent modification of transactions of the company with related parties; 5. Scrutiny of inter-corporate loans and investments; 6. Valuation of undertakings or assets of the company, wherever it is necessary; 7. Evaluation of internal financial controls and risk management systems; 8. Monitoring the end use of funds raised through public offers and related matters. 25. THE VIGIL MECHANISM: Your Company believes in promoting a fair, transparent, ethical and professional work environment. The Board of Directors of the Company has established a Whistle Blower Policy & Vigil Mechanism in accordance with the provisions of the Companies Act, 2013 and the Listing Regulations for reporting the genuine concerns or grievances or concerns of actual or suspected, fraud or violation of the Company's code of conduct. The said Mechanism is established for directors and employees to report their concerns. The policy provides the procedure and other details required to be known for the purpose of reporting such grievances or concerns. The same is uploaded on the website of the Company. 26. QUALIFICATION GIVEN BY THE SECRETARIAL AUDITOR: There are no qualifications, reservation or adverse remarks or disclaimers made by the Secretarial Auditors of the Company in their report. The Board has appointed M/s. Pramod S. Shah and Associates, Practising Company Secretaries, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year ended March 31, 2016 is annexed as "Annexure V''. 27. ANNUAL EVALUATION BY THE BOARD OF ITS OWN PERFORMANCE AND THAT OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS: During the year, the Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and individual Directors, including the Chairman of the Board. The exercise was carried out through a structured evaluation process covering various aspects of the Boards functioning such as composition of the Board & committees, experience & competencies, performance of specific duties & obligations, governance issues etc. Separate exercise was carried out to evaluate the performance of individual Directors including the Board Chairman who were evaluated on parameters such as attendance, contribution at the meetings and otherwise, independent judgment, safeguarding of minority shareholders interest etc. The evaluation of the Independent Directors was carried out by the entire Board and that of the Chairman and the Non-Independent Directors were carried out by the Independent Directors. The Directors were satisfied with the evaluation results, which reflected the overall engagement of the Board and its Committees with the Company. Having regard to the industry, size and nature of business your company is engaged in, the evaluation methodology adopted is, in the opinion of the Board, sufficient, appropriate and is found to be serving the purpose. 28. DIRECTORS' RESPONSIBILITY STATEMENT: In accordance with provisions of section 134(3)(c) and 134(5) of the Companies Act, 2013, your Directors state the following:- (a) In the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards had been followed and there are no material departures from the same; (b) The Directors have selected such accounting policies and applied them consistently and made judgements 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 March 31, 2016 and of the profit of the Company for the year ended on that date; (c) The Directors 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; (d) The directors had prepared the annual accounts on a going concern basis; (e) The directors, had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively and (f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 29. MANAGEMENT DISCUSSION AND ANALYSIS: Industry Structure The Indian textile and apparel Industry has been a significant contributor to the Indian economy and continues to play a pivotal role in India's growth story through its contribution to industrial output, employment generation and export earnings. The textile Industry contributes 14% to the industrial production while it's share in Indian exports stands at a significant 12%. The Indian textile Industry contributes 5% to India's GDP. India is one of the few countries with a complete and integrated textile value chain having production at each level of textile manufacturing with an overall annual growth of 8.9%. The textile Industry is labour intensive and is one of the largest employers. The Indian textiles Industry, currently estimated at around 110 billion dollars approx is expected to reach us$ 114 billion by 2021. The Industry is the second largest employer after agriculture, providing direct employment to over 45 million and 60 million people indirectly. Strength and Opportunities - Ambition of the Government of India to make India a hub for textiles will create an opportunity for your company to perform better in the coming years also various initiatives provided by the Government will help to boost the textile Industry; - Make in India campaign; - Large overseas and domestic market: Increase in consumption pattern of polyester across the country and even globally will give a boost to the polyester yarn market also the use of polyester yarn as a affordable substitute of much other manmade and natural fibres has led to the increase in consumption of polyester yarn world over; - Abundant raw material availability; - Low cost skilled labour; - Promising export potential. Weakness and Threats - Fragmented Industry; - Cost competitiveness and low margins: Due to severe recessionary trends which are continuing in the developed countries, unit realisation of products may continue to be under pressure; - Technological obsolenscence in weaving and spinning sector; - Competition in the domestic as well as world markets specially from China; - Problems of power yet prevail: Severe power shortage in some of the states will remain a big threat for the utilisation of the plant and equipments due to shortage of power, the utilisation may drop severely and hence volatility in yarn prices may continue; - Increase in Labour wage rate on an average by 10-15%. - Shortage of skilled labour; - Increasing input costs i.e. power, finance and logistics; - Volatile government policies. Management Perception of Risks and Concerns - In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the company are imperative. The main risks include strategic risk, operational risk, financial risk and compliances and legal risk. The fast technology obsolescence, high cost of manufacturing and taxation are the major risk/ concerns of the business; - Fluctuations in foreign exchange adversely impacted exports and long term export orders cannot be booked in view of the uncertainty in exchange rates also the fluctuation in exchange rates makes it difficult to purchase machinery from abroad due to uncertainty of the future; - Adequate availability of raw material at the right prices is crucial for the company. Disruption in the supply or violent changes in the cost structure would affect the profitability of the company; - Government's periodical announcements for liberalised tariff concessions offered to least developed countries like Bangladesh, Nepal, Bhutan and other countries under South Asian Free Trade Area (SAFTA) is also an area concern. However, the future for the textile Industry looks promising, buoyed by strong domestic consumption as well as export demand. Free trade with Asian countries and proposed agreements with EU Countries will also help to boost exports. Also the west has started taken India seriously as a potential supplier of polyester yarn apart from china. Rising government focus and favorable policies to support the Industry has led to growth in the Industry. Internal Control and Management Systems: Your company has an adequate internal control system. There is a system of continuous internal audit which aims at ensuring effectiveness and efficiency of systems and operations. Your company has the benefit of internal control systems which have been developed over the years and which has ensured that all transactions are satisfactorily recorded and reported and all assets are protected against loss from unauthorised use or otherwise. The process of Internal control and systems, statutory compliance, risk analysis and its management and information technology are taken together to provide a meaningful support to the management process also continuous efforts are being made to strengthen the system. Acknowledgement Your Directors place on record their sincere gratitude for the assistance, guidance and co-operation the Company has received from all stake holders. The Board further places on record its appreciation for the dedicated services rendered by the employees of the Company. For and on behalf of the Board Sd/- Ashok K. Khemani (Managing Director) DIN:00053623 Sd/- Nand K. Khemani (Director) DIN: 00053671 Place : Mumbai Date : 16th April, 2016 |