DIRECTORS' REPORT Dear Shareholders, 1) Your Directors have pleasure in presenting their 21st Annual Report and the Audited Accounts for the Financial Year ended March 31, 2016 together with the Auditor's Report thereon. 2) Transfer to Reserve The Company has not transferred any amount to reserves during the year. 3) Review of Operations On a Standalone basis, the Total Income for the year ended March 31, 2016 stood at Rs. 33,745 Lacs as against Rs. 36,558 Lacs for the previous year ended March 31, 2015. The Company earned a profit of Rs. 2,360 Lacs from ordinary activities before tax, for the year ended March 31, 2016 as against a profit of Rs. 3,240 Lacs, for the Financial Year ended March 31, 2015. After providing for tax, the Company reported a net profit of Rs. 1,652 Lacs for the year ended March 31, 2016 as against a profit of Rs. 2,072 Lacs for the Financial Year ended March 31, 2015. On a Consolidated basis, the Total Income for the Financial Year ended March 31, 2016 was Rs. 33,746 Lacs as against Rs. 36,571 Lacs for the previous year ended March 31, 2015. The Company has earned a profit before tax of Rs. 2,358 Lacs, from ordinary activities for the Financial Year ended March 31, 2016 as against a profit of Rs. 3,252 Lacs for the Financial Year ended March 31, 2015. After providing for tax, the Company reported a net profit of Rs. 1,649 Lacs for the Financial Year ended March 31, 2016 as against a net profit of Rs. 2,084 Lacs for the Financial Year ended March 31, 2015. Backward integration cum expansion project Your Company undertook a backward integration project to integrate the manufacturing processes and to reduce dependence on vendors of yarn and weaved fabric. The expansion Project is intended to replace the outsourcing of raw materials (yarn and fabric) and enable the Company to achieve higher levels of integration of Spinning, Weaving and Printing activities and thereby improve the margins. The expansion Project comprises as under: • Enhancing the Spinning (40128 Spindles) & Weaving Capacity (112 new looms) • Installation of "Ready for Dyeing" (RFD) Machinery • Enhancement of Printing Capacity (by 78 Lac meter p.a.) The cost of the project is estimated at Rs. 300 Crores, which is being funded by a combination of debt and internal accruals. The project has been approved by both the Central and Maharashtra Governments under the Technology Upgradation Fund Scheme-(TUFs) for receipt of capital subsidy and interest subsidy. The Weaving, Printing & Processing facility had been commissioned in March 2016 and the Spinning facility is expected to be commissioned by 2nd Quarter of FY 2016-17. 4) Share Capital The paid up Equity Share Capital of the company is Rs. 25.43 Crore. During the year under review, the Company has neither issued any shares nor granted any Stock Options nor any Sweat Equity Shares. The term of 9% Redeemable Cumulative Non-Convertible Preference Shares has been extended by a further period of 5 years. i.e. upto (December 2, 2020) with an option for early repayment after 18 months from the date of the extension at the option of Preference Shareholder. 5) Dividend Your directors are pleased to recommend a dividend on the shares of the Company, as per the details given below, for the Financial Year ended March 31, 2016. • Equity Shares A dividend of Rs. 1.40/- per Equity Share of Rs. 7/- each (@ 20%). 6) Deposits During the year under review, the Company has neither accepted nor renewed any deposits. 7) Particulars of Loans, Guarantee or Investments During the year under review, the company has not made any investments, advanced any loans or provided any guarantee under the provision of Section 186 of the Companies Act, 2013. 8) State of Company's Affairs and business Review The details of the Company's affairs including its operations are more specifically given in the Management Discussion and Analysis Report, which is appended to this report. 9) Corporate Social Responsibility Corporate Social Responsibility (CSR) has been an integral part of the way in which the company conducts its business. The Company has made a conscious effort to involve communities in its development journey and has received appreciation from stakeholders, which gives us a sense of pride and encouragement to continue to perform better. The Company has contributed and spent an amount of Rs. 61.52/- Lacs towards the CSR activities of the Company during the Financial Year 2015-16. The Company has undertaken CSR activities as per the CSR policy of the Company read with Schedule VII of the Companies Act, 2013. In accordance with the provisions of Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 made thereunder, the Annual Report on the CSR activities of the Company alongwith the CSR initiatives undertaken during the Financial Year 20152016 is enclosed to this report as "Annexure 1". The constitution of the Corporate Social Responsibility Committee and its terms of reference are more particularly stated in the Corporate Governance Report which forms a part of this Report. The Corporate Social Responsibility Policy of the Company is hosted on the website of the Company at www.morarjeetextiles.com . 10) Business Risk Management The Company has constituted a Risk Management Committee for identifying and evaluating the risks associated with the Business of the Company and to minimize them. The details of Committee and its terms of reference are set out in the Corporate Governance Report. The Committee periodically reviews the risk management practices and actions deployed by the management with respect to the identification, impact assessment, monitoring, mitigation and reporting of key risks while trying to achieve its business objectives. The Company has a Risk Management framework to identify and evaluate business risks and opportunities. This framework seeks to create transparency, minimize adverse impact of risks on business objectives and enhance the Company's competitive advantage. The business risk framework defines the risk management approach across the enterprise at various levels, including documentation and reporting. The framework has different risk models which help in identifying the risk trends and their exposure and potential impact analysis at the Company level. 11) Internal Control System and their adequacy The Company has an Internal Control System commensurate with the size, scale and complexity of its operations and well-documented procedures for various processes which are periodically reviewed for changes warranted due to business needs. The Internal Auditor continuously monitors the efficiency of the internal controls/compliance with the objective of providing to Audit Committee and the Board of Directors, an independent, objective and reasonable assurance of the adequacy and effectiveness of the organisation's risk management, control and governance processes. This system of internal control facilitates effective compliance of Section 138 of Companies Act, 2013 and the Listing Regulations. To maintain its objectivity and independence, the Internal Auditor reports to the Chairman of the Audit Committee. The Internal Auditor monitors and evaluates the efficacy and adequacy of the internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company. Based on the report of internal auditor, process owners undertake corrective actions in their respective areas and thereby strengthen the controls. Significant audit observations and corrective actions thereon are presented to the Audit Committee. 12) Vigil Mechanism/ Whistle Blower Policy The Vigil Mechanism/Whistle Blower Policy has been put in place for the Directors and Employees to report their genuine concerns about unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct. The mechanism provides for adequate safeguards against the victimization of Director(s) and Employee(s) who avail of the mechanism. Directors and Employees may make protected disclosure under the policy to the Compliance Committee constituted by the Company to administer the internal code of business conduct. In exceptional cases, Directors and Employees have direct access to the Chairman of the Audit Committee. Further no personnel have been denied access to the Compliance Committee/ Chairman of the Audit Committee, as the case may be. No complaints were received in this regard during the year under review. 13) Subsidiary/ Joint Venture Companies The Company does not have any subsidiary Company. However, the Company has two Joint Ventures as under i. Morarjee Castiglioni (India) Private Limited ii. Just Textiles Limited A Statement containing the salient features of the Financial Statement of said Joint Ventures is annexed in the prescribed Form AOC-1 to this Report as "Annexure 2". A policy on material subsidiaries has been formulated and hosted on the website of the Company at www. morarjeetextiles.com . 14) Directors and Key Managerial Personnel On the recommendation of the Nomination and Remuneration Committee, Mr. R. K. Rewari (DIN: 00619240) was re-appointed as the Managing Director of the Company at the Board meeting held on February 1, 2016 for a period of 3 years with effect from February 1, 2016 pursuant to Section 196, 197 of the Act and the rules made thereunder read with Schedule V of the Act. The re-appointment of Mr. R. K. Rewari is subject to the approval of the shareholders of the Company at the ensuing Annual General Meeting ("AGM") as per the details given in the Notice of the AGM. The Board recommends his appointment to the shareholders at the ensuing AGM. Mr. Mahesh S. Gupta, Director of the Company is liable to retire by rotation and being eligible, has offered himself for re-appointment. The Board recommends his re-appointment to the shareholders at the ensuing AGM. Ms. Karina Vaz resigned as the Company Secretary with effect from April 1, 2015 and Mr. Sanjeev S. Sengar was appointed as the Company Secretary and Compliance officer of the Company with effect from September 1, 2015. All the Independent Directors of your company have given their declarations that they meet the criteria of Independence as laid down under Section 149(6) of the Companies Act, 2013 and the Listing Regulations. The Company has complied with the requirements of having Key Managerial Personnel as per the provisions of Section 203 of the Act. 15) Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for the selection and appointment of Directors, Key Managerial Personnel, Senior Management and their remuneration etc. The Remuneration policy of the Company is more particularly stated in the Corporate Governance Report which forms a part of this Report. 16) Board Evaluation During the year, pursuant to Section 134, 149 and Schedule IV of the Companies Act, 2013 and Regulation 17 of the Listing Regulations, the Board had adopted a formal mechanism for evaluating its own performance and that of its Committees and individual Directors, including the Chairperson of the Board. The exercise was carried out through a structured evaluation process covering various aspects of the Board's functioning such as composition of the Board & Committees, experience & competencies, performance of specific duties & obligations, governance issues etc. A Separate exercise was carried out to evaluate the performance of the individual Directors including the Chairperson of the Board, who were evaluated on parameters such as attendance, contribution at the meetings and otherwise, independent judgment etc. The evaluation of all the Directors including Independent Directors was carried out by the entire Board, except for the Director being evaluated. Performance evaluation of the Board, Chairperson and the Non-Independent Directors was carried out by the Independent Directors in their meeting held on February 1, 2016. The members of the Nomination and Remuneration Committee at their meeting held on February 1, 2016, evaluated the performance of every Director of the Company. The Directors were satisfied with the evaluation results, which reflect the overall engagement of the Board and its Committees and on the basis of the Report of the said evaluation, the present term of appointment of the Independent Directors shall be continued with the Company. 17) Meetings of the Board During the year under review, the Board of Directors of the Company met four times and the gap between two consecutive board meetings was within the limits prescribed by the Companies Act, 2013 and Listing Regulations. The details of the meetings are more specifically given in the Corporate Governance Report which forms a part of this Report. 18) Committees of the Board The details of all the Committees of the Board including the Audit and CSR Committee along with their terms of reference, composition and meetings held during the year, are provided in the Report on Corporate Governance which forms part of this Report. 19) Directors' Responsibility Statement Pursuant to Section 134 (5) of the Companies Act, 2013 ("the Act"), we hereby state that: i) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures, in any; ii) your Directors 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 March 31, 2016 and its profit for the year ended on that date; iii) your Directors have taken proper and sufficient care towards 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) your Directors have prepared the annual accounts for the year ended March 31, 2016 on a going concern basis; v) your Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; vi) your Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 20) Related Party Transactions The Related Party Transactions that were entered into during the Financial Year were on an arm's length basis and in the ordinary course of business. There were no material Related Party Transactions entered into by your Company during the year. The details of Related Party Transactions are disclosed in Form AOC-2 which is enclosed as "Annexure 3" The Related Party Transactions are placed before the Audit Committee and also before the Board for their approval, wherever required. Prior omnibus approvals of the Audit Committee were obtained for the transactions that were of repetitive nature. The transactions entered into pursuant to the omnibus approval of the Audit Committee were placed before the Audit Committee for their review on a quarterly basis. The Company has framed a policy on Related Party Transactions for the purpose of identification and monitoring of such transactions. The policy governing related party transactions is hosted on the Company's website at www. morarjeetextiles.com . 21) Auditors A. Statutory Auditors and Audit Reports The Statutory Auditors, M/s. Manubhai & Shah LLP, Chartered Accountants, retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received a confirmation letter from the Auditors to the effect that their re-appointment, if made, will be within the limits prescribed under of the Companies Act, 2013 and that they are not disqualified to be appointed under the Act. As required under SEBI Listing Regulations 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 Board recommends their reappointment as the Auditors of the Company for the Financial Year 2016-2017. The Auditor's Report on the Standalone and Consolidated Financial Statements of the Company for the Financial Year 2015-2016, did not contain any qualifications, reservations or adverse remarks and is self explanatory. The Directors of your Company further confirm that no frauds or instances of mis-management were reported by the Statutory Auditor under Section 143(12) of the Companies Act, 2013. B. Cost Auditors and Cost Audit Reports Pursuant to Section 148 of the Companies Act, 2013, the Board of Directors, on the recommendation of the Audit Committee, appointed M/s. Phatak Paliwal & Co., as the Cost Auditors of the Company for the Financial Year 2016-2017. The remuneration of the Cost Auditor has also been approved by the Board of Directors on the recommendation of Audit Committee and the requisite resolution for ratification of remuneration of Cost Auditors by the members has been set out in the Notice of the 21st Annual General Meeting of your Company. The Company has received a certificate from the Cost Auditor M/s. Phatak Paliwal & Co. certifying their independence and arm's length relationship with the Company in accordance with the provisions of the Companies Act, 2013. C. Secretarial Audit and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 the Company has appointed Ms. Kala Agarwal, Company Secretary in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit report issued by Ms. Kala Agarwal is annexed herewith and marked as "Annexure 4" to this report, which is self explanatory. 22) Corporate Governance Report and Management Discussion Analysis The Corporate Governance Report and the Management Discussion & Analysis Report, together with the Certificate received from the Statutory Auditors of the Company regarding compliance of the conditions of Corporate Governance as stipulated in the Listing Regulations, form an integral part of this report. 23) Extract of Annual Return The extract of the Annual Return in form MGT-9 is annexed herewith as "Annexure 5" to this report. 24) Particulars of Employees The information required pursuant to Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, is annexed to this report. In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled thereto, excluding the said information which will be made available for inspection by the members at the Registered Office of the company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any member is interested in inspecting the same, such a member may write to the Company Secretary in advance. 25) Energy Conservation and Technology Absorption The information on Conservation of Energy and Technology absorption under Section 134(3)(m) of the Act read with the Companies (Accounts) Rules, 2014 is Annexed herewith as "Annexure 6". 26) Foreign Exchange Earnings and Outgo During the year under review, foreign exchange earnings were Rs. 14,584.82 Lacs and outgoings were Rs. 9,700.76 Lacs making the Company a net foreign exchange earner with net inflow of Rs. 4884.06 Lacs. 27) Significant and Material Orders There were no significant and material orders passed by any Regulators or Courts or Tribunals during the year ended March 31, 2016 impacting the going concern status and Company's operations in future. 28) Prevention of Sexual Harassment of Women at Workplace The Company has zero tolerance towards sexual harassment at workplace and has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. The Company has constituted an Internal Complaints Committee (ICC) to redress the complaints received regarding sexual harassment. During the Financial Year under review, the Company has not received any complaints of sexual harassment. 29) Acknowledgements The Directors take this opportunity to express their deep sense of gratitude to the banks, Central and State Governments and their departments and the local authorities for their continued guidance and support. We would also like to place on record our sincere appreciation for the commitment, dedication and hard work put in by every member of the Company and for the continuous cooperation and support of Customers, Suppliers, Executives, Staff and workers at all levels. On behalf of the Board For Morarjee Textiles Limited Urvi A. Piramal Chairperson Place : Mumbai Date : May 3, 2016 |