DIRECTORS' REPORT: Dear Shareholders, The Directors have pleasure in presenting the Twenty Fourth Annual Report of the Company together with the Audited Balance Sheet as at 31st March, 2015 and the Profit and Loss Account for the year ended on that date Dividend: In order to promote the growth of the company as well as to fulfill the aspirations of the stakeholders, the promoters have in writing waived their entitlement on the profit distribution in the form of dividend if any declared by the company for the year 2014-15. Accordingly the Board after considering all these aspects has recommended a dividend for the year under review at the rate of Rs.0.50 per Equity Share only on the portion of the paid up equity capital held by the public as on 31st March 2015. No amount has been transferred to General Reserve from the profits for the year 2014-15. Operations: There is substantial improvement in the overall performance during the year under review in comparison to previous year. The company has achieved an increase of around 13% in the sales figures and around 26% in the net profits before tax in comparison to previous year. However the growth in the sales of the Retail division barring sales under FIFA licentiate rights is lower than anticipated for the year and consequently the company had to absorb the losses generated by the Retail business activities. Because of this the overall profit recorded by the company is lower than the projections for the year under review. The Macro economic conditions in the country have shown signs of recovery and optimistic throughout the year. However the situations continued to remain grim all over the world barring few countries. This does not augur well for the textile and garment sector which depends maximum on exportsales for their revenue. But timely initiatives taken by government, value addition by many units as well as reasonably stable price ranges prevailed over a long period during the year has given a major boost in the demand for goods in the domestic market. This has helped the company to achieve growth in the sales except in the retail division where the company needs to give further thrust in the development of product ranges as well as the market network. The company continued the revamping task undertaken in the previous year in order to strengthen the operations of the Retail division to make it a profitable business. Many unviable outlets were discontinued including the outlets opened under Large Format Stores (LFS) models like Reliance/Maya etc. In its place the company has started new counters through other LFS like Wall Mart, Shoppers Stop, Lifestyle and Arvind Megamart. Another major step taken by the company during the year is the expansion of business through on line sales network like Flip kart, Jabbong, Myntra etc. Further the company is also using other social network to expand the reach of the products to the actual users. The company has also plans to expand the sales network through other media like Television channels and other social media. Finally regarding the pending EPCG License issue, the company is actively pursuing the matter with DGFT office to resolve the matter at the earliest. Export Sales: The overall export performance for the year is not as per the estimates made by the company. This is mainly due to prevailing unfavorable economic and market conditions for clothing and other apparels in the European market and other parts of the world. Hence the company continued to remain focused maximum in the local market. The exports were mainly sent in the form of finished fabrics to neighboring countries like Bangladesh. The company is exploring the possibility of increasing the volume of fabric shipments to Bangladesh which again depends upon the global economic conditions as Bangladesh mainly caters to the export market. The company continues its efforts to find the possibility of developing new markets in African and Far East countries. However much depends upon the positive changes in the global economic conditions particularly in the US and European economies. The objective of the company is to achieve the target of exporting 50% of its capacity to the overseas customers with better value addition. Further efforts are continued to align with some reputed brands in the overseas market to promote the exports in large volume. The company continues to follow the business promotion programme by taking active participation in various international Fairs/ exhibitions as well as selling garments by using the brand and logos of some important sports events. The company has executed new agreements with some reputed football clubs in Europe to enhance the scope of the sales. As India is better placed than other competitors in the global markets, the prospects are good in terms of better unit value realization and volume. The company has developed better products particularly in the printed and embroidery varieties as there is better scope for increasing the volume based business on regular basis. In view of these, company continues to follow its plans to increase the exports business in sizable volume in the future. FIFA 2014 (Foot Ball World Cup - Brazil): As stated in the last year the company had developed and produced wide range of garments with FIFA brand LOGOS embossed on the garments by using licentiate rights acquired for India. The overall response was encouraging though this was one of the first attempts by any company in India. Even for the company this was the first experience and the outcome was encouraging. In view of this the company has now executed fresh new agreements with other reputed football clubs. Expansion: As stated in the last year, the management has not undertaken any new projects during the year under review. Accordingly there will not be any major expansion plan for some period except addition of some balancing equipments and replacement of old machineries and equipments. The remaining portion of the retail expansion plan as proposed in the Rights issue offer documents will be undertaken gradually over a period of time in the next few years depending upon the market conditions. Human Resources & Industrial Relations: The Company treats its "human resources" as one of its most important assets. The Company continuously invests in attraction, retention and development of talent on an ongoing basis. A number of programs that provide focused people attention are currently underway. Your Company thrust is on the promotion of talent internally through job rotation and job enlargement. The Industrial relations with the employees at the Company's plant at MIDC, TTC Industrial Area, Pawne Village, Navi Mumbai and in the other locations continue to remain healthy and cordial. Share capital: During the year under review, the company has not any issued any class of shares like shares with preferential rights or sweat equity shares and accordingly there is no change in the Subscribed and Issued capital. Suditi Employee Stock option Plan 2011 (Suditi ESOP 2011): The company had granted options to the employees in the year 2013 under the Suditi Employee Stock Option Plan 2011. Each option is equal to one share at par (Rs.10/- each) being the price fixed for exercising the right. To facilitate the employees to exercise their right to buy the options granted to them, the Company has divided the total options granted on certain prescribed basis over a period of 5 years. The share arising on exercise of the options shall be subject to a lock in period of 1 year from the date of allotment. The two parts of the grant has been vested till the date of 31st March 2015. The details are as follows: The disclosure of the details is as follows:- (a) Options granted & Accepted; 219500 (b) The pricing formula; At par (c) Options vested; 58075 (d) Options exercised; Nil (e) The total number of shares arising as a result of exercise ofoption; Nil (f) Options lapsed; 59200 (g) Variation of terms of options; NA (h) Money realised by exercise of options; Nil (i) Total number of options in force; 219500 (j) Employee wise details of options granted to;- (i) Senior managerial personnel; 206000 (ii) Any other employee who receives a grant in any oneyear of option amounting to 5% or more of option grantedduring that year. Nil (iii) identified employees who were granted option, duringany one year, equal to or exceeding 1% of the issuedcapital (excluding outstanding warrants and conversions) of the company at the time of grant; Nil (k) Diluted Earnings per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ['Earnings Per Share']. No options are exercised till date. Based on the options vested EPS is Rs.58/. (l) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed. The impact on account of this will reduce the profits by Rs.970433/- and accordingly on proforma basis the company's basic and diluted earnings would have been Rs.0.59 and Rs.0.58 respectively. (m) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock. NA (n) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information: (i) Risk-free interest rate, 8.52% (ii) Expected life, 5 years (iii) Expected volatility, 4.72% (iv) Expected dividends, Rs. 0.50 per share (v) The price of the underlying share in market at the time of option grant.] Rs.7.68 Meetings: A calendar of Meetings is prepared and circulated in advance to the Directors. During the year six Board Meetings and Four Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. 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, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and Compliance Committees. The details have been explained in the Corporate Governance Report. Declaration by an Independent Director(s) and re-appointment, if any: A declaration by an Independent Director(s) that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 is enclosed as Annexure II. An independent director shall hold office for a term up to five consecutive years on the Board of a Company, but shall be eligible for reappointment for next five years on passing of a special resolution by the Company and disclosure of such appointment in the Board's report. Remuneration Policy: The Board has, on the recommendation of the Nomination & Remuneration Committee follows a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report. Managerial Remuneration: A) Details of the ratio of the remuneration of each director to the median employee's remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. (Enclosed as Annexure III). B) Details of the every employee of the Company as required pursuant to 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The statement showing the requisite information pursuant to the Companies (Appointment of Managerial Personnel) Rules 2014 is not annexed herewith as there are no employees covered by the above rules. C) Any director who is in receipt of any commission from the company and who is a Managing Director or Whole-time Director of the Company shall receive any remuneration or commission from any Holding Company or Subsidiary Company of such Company subject to its disclosure by the Company in the Board's Report. Nil D) There are no disclosures to be made as the directors except the Chairman & Managing Director, are not in receipt of any remuneration or stock options other than sitting fees and reimbursement of expenses incurred for attending the meeting. The details are furnished separately in the corporate governance report. Details of Subsidiary/Joint Ventures/Associate Companies: The company has incorporated two subsidiaries only during the month of March 2015 and the subsidiaries are yet to commence their business operations. The subsidiaries have obtained the commencement approval from the Registrar of companies-Maharashtra only in the month of April 2015 and other necessary legal formalities are yet to be obtained for commencing the business operations. Hence there are no details pursuant to sub-section (3) of section 129 of the Act, to be given in the statement containing the salient feature of the financial statement of a company's subsidiary or subsidiaries, associate company or companies and joint venture or ventures. Deposits: The Company has not accepted any deposits within the meaning of Section 73 & 76 of Companies Act, 2013 and the rules made there under. Energy, Technology and Foreign Exchange: The particulars relating to conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo as required under Section 134 (3) (m) of the Companies Act, 2013 is given in the Annexure I forming part of this report. Directors & the Key Managerial Personnel: In accordance with the provisions of section 152 & 161 as well as Rule 3 of The Companies (Appointment and Qualification of Directors) Rules, 2014, the company has appointed Smt. Sanjula Sanghai as additional Director to represent as Women Director on the Board. As an Additional director she holds office upto the date of Annual General meeting and seek re-election to the Board in the forthcoming Annual General Meeting. Further Shri. Pawan Agarwal, Chairman & Managing Director retire by rotation at the forthcoming Annual general meeting and being eligible offer himself for reappointment. Shri. Pawan Agarwal Chairman & Managing Director whose term as Managing Director expired on 31st Janauary 2015 has been reappointed as Managing Director with effect from 1st February 2015 by the Board subject to approval of members in the forthcoming Annual General Meeting. Further the company is in the process of appointing a Chief Financial Officer (CFO) to take over the functions of CFO which hitherto is held by Chairman & Managing Director. Directors' Responsibility Statement: The Directors hereby confirm:- i) That in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; ii) 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 and loss of the Company for that period; iii) 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; iv) That the Directors have prepared the annual accounts on a 'going concern' basis; v) That 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; vi) That the directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. Corporate Governance: A separate section on Corporate Governance and a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement with the Stock Exchanges, form part of the Annual Report. Cost Audit: The Company has appointed M/s. NNT & Co, (Reg. No. 100911), Cost Accountants as the Cost Auditor to audit the cost records maintained by the Company for the year 2014-15. However in view of the new Companies (Cost Records & Audit) Rules 2014 and amendment thereof, the management is of the view that the company is now out of the purview of the Cost Audit Report Rules. In view of this, the company has not appointed any Cost Auditor for the year 2015-16. Auditors: Pursuant to Section 139 of the Companies Act, 2013 M/s. Chaturvedi & Co., (ICAI Firm Registration No.302137E) Chartered Accountants had been appointed as the Statutory Auditors of the Company at AGM held on 12th September 2014 to hold office till the conclusion of the AGM to be held in the calendar year 2017 subject to ratification by the members at each annual general meeting. Accordingly the resolution proposing ratification of appointment of M/s. Chaturvedi & Co. as statutory auditors of the company for financial year 2015-16, pursuant to Section 139 of the Companies Act, 2013 is annexed and forms part of the notice of annual general meeting. Secretarial Audit Report: In terms of Section 204 of the Act and Rules made there under, Shri. Shivhari Jalan Practicing Company Secretary has been appointed as Secretarial Auditors of the Company. The report of the Secretarial Auditors is enclosed as Annexure separately to this report. The report is self-explanatory and does not call for any further comments other than the explanation given on the appointment of Chief Financial Officer. Internal Audit & Controls: The Company has engaged SGCO & Co as its Internal Auditor. During the year, the Company continued to implement their suggestions and recommendations to improve the control environment. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations. Vigil Mechanism: In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been made available to each and every stakeholder. Risk management policy: A statement indicating development and implementation of a risk management policy for the Company including identification therein of elements of risk, if any, that in the opinion of the Board may threaten the existence of the company as given separately in the Corporate Governance Report. Extract of Annual Return: As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 forms part of this Annual Report as ANNEXURE IV. Material changes and commitments, if any, to report affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report: There are no such material changes and commitments to report under this head. 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 such significant and material orders passed by any regulators to report under this head. Details in respect of adequacy of internal financial controls with reference to the Financial Statements: The company has set up vigilant internal control mechanism to ensure that the financial statements prepared are true, fair and transparent. The company has set up strong internal audit department apart from Management committee to ensure that all the financial transactions executed are in compliance with applicable laws and regulations and in line with the budget plans. Any variations or deviations are appropriately dealt with by the internal Audit department as well as by the Audit committee. According to the management the present mechanism followed in the company is adequate and effective. The details are also stated in the Management discussion and analysis report annexed herewith and form part of this report. Particulars of loans, guarantees or investments under section 186: There are no loans/guarantee or security provided during the year 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. Accordingly the 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. Corporate Social Responsibility (CSR): The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is not applicable to the company. Transfer of Amounts to Investor Education and Protection Fund: The Company did not have any funds lying unpaid or unclaimed for a period of seven years. Therefore there were no funds which were required to be transferred to Investor Education and Protection Fund (IEPF). Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and uploaded the details of unpaid and unclaimed amounts lying with the Company, as on the date of last AGM (12.09 2014), with the Ministry of Corporate Affairs. Listing with Stock Exchange: The Company confirms that it has paid the Annual Listing Fees for the year 2015-16 to BSE where the Company's Shares are listed. Appreciation: Your Company and its Directors wish to place on record their sincere appreciation for the support and assistance extended by different Central and State Government Departments and Agencies, Banks and Financial Institutions, Insurance companies, Customers and Vendors. Your Directors are thankful to the esteemed shareholders for their continued support and confidence reposed in the company and its management. Your Directors also wish to place on record their deep sense of appreciation to all the employees of the Company for their outstanding contribution towards the operations of the Company. For and on behalf of the Board of Directors PAWAN AGARWAL CHAIRMAN & MANAGING DIRECTOR Date: 29.05.2015 Place: Mumbai |