DIRECTORS’ REPORT To, The Shareholders, 1. Your Directors submit their Report and the Audited Accounts for the financial year from 01.10.2014 to 30.09.2015 ended on 30th September, 2015. 2. Brief description of the Company's working during the year/State of Company's affair : During the year under review, your Company has recorded gross income of Rs.331.59 Crores as compared to Rs.344.13 Crores in the previous year and the Net loss after tax of Rs.45.48 Crores as compared to Net Loss of Rs.34.13 Crores in the previous year. Your Company's performance review of the business /operations are covered in detail in the Management Discussion and Analysis Report, which is forming part of this Report. The consolidated financial statements for the year ended 30th September, 2015 of the Company and its subsidiary together with the Auditors Report thereon are attached. 3. Change of Financial Year : As per the provisions of Section 2(41) and other applicable provisions of the Companies Act, 2013 and Rules made thereunder, the Company has taken necessary steps to change the next financial year covering a period of 6 months i.e. from 1st October, 2015 to 31st March, 2016. 4. Share Capital and Preference Shares : During the year under review, the Company has increased Authorised Share Capital from Rs.7 crores to Rs.27 Crores. The Paid up Capital of the Company has been increased from Rs.6,49,93,080 to Rs.26,49,93,080 pursuant to allotment of 2 crores Non-cumulative, Non-convertible, Redeemable preference shares of Rs.10/- each amounting to Rs.20 crores to Messrs. Shapoorji Pallonji & Company Private Limited, Promoter, on Private Placement basis. None of the Directors of the Company hold equity or preference shares. 5. Dividend and Transfer to Aeserve : Due to the loss sustained by the Company and to preserve funds for the operations, no dividend for the year is proposed by the Board of Directors. No amount has been transferred to the Reserves. 6. Material changes and commitments : There were no material changes and commitments 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. 7. Subsidiary Company : Your Company had formed a Subsidiary Company viz., 'Gokak Power & Energy Limited' on 17th January, 2012 and obtained a Certificate of Commencement of Business on 26th March, 2012. The main object of the subsidiary company is generation, transmission, distribution, trading of hydro power and other renewal and non-renewal sources of energy. The significant portion of power generation is used for captive consumption of Holding Company. The Audited Statements of Accounts along with the Report of Board of Directors of Gokak Power & Energy Ltd., together with the Auditors' Report for the financial year from 01.10.2014 to 30.09.2015 are appended separately to this Annual Report. While preparing Consolidated Financials Statements of the Company, financials of its Subsidiary company viz., Gokak Power & Energy Ltd., have been consolidated as per Accounting Standard AS-21 issued by The Institute of Chartered Accountants of India, which forms part of the Annual Report. 8. Knitwear Business : Members are aware that the company has already taken permission from the shareholders as required under section 192 (a) of the Companies Act, 1956 and corresponding section 110 of the Companies Act, 2013 to sell the Knitwear business as a going concern. As the deal did not materialize with the reasonable price and the buyer, presently, the Company is reviving its knitwear business. 9. Management Discussion and Analysis Aeport : 9.1 Industry Structure and Development : The past year has been a challenging year for the Textile Industry with lots of ups and downs. Inspite of the above, the industry has been able to maintain its steady performance during the year under review. The recoveries in US, European and Asian economies is good for the Industry and will boost the exports to these economies. Textile Industry has played a key role in the country's progress over the years and the situation is likely to gain momentum in the times ahead. The Industry continues to hold a dominant position in country's economic structure because of its huge contribution towards employment generation. No industry is free from normal business risk and concerns. Indian Textile Industry continues to face stiff competition from China, Bangladesh, Sri Lanka and other emerging economies. The relative competitiveness of Industry is dependent upon the raw cotton prices, exchange rates and prevalent interest rates regime. The primary raw material for the manufacturing of yarn is cotton with share of around 60% of total cost. Cotton being an agriculture produce, its supply and quality are subject to forces of nature i.e. Monsoon. Any increase in the prices of raw cotton will make the things difficult for the Textile Industry resulting weak demand and thin margins. Thus availability of raw cotton at the reasonable prices is crucial for the spinning industry. Raw material costs have fairly stabilized during the year under review and are expected to remain stable. The recovery of the textile industry seems to be round the corner as domestic demand is expected to pick up this year on account of improved economic sentiments. Inspite of the adverse market conditions prevailing in various businesses in which the Company operates, the overall performance of the Company during the year has improved compared to that of the previous year. 9.2 Opportunities and Treats : There is confidence of a revival in global the economic outlook in the coming years though this view is not presently supported by economic fundamentals driven by higher economic growth in the advance economies and constrained by moderate growth in emerging markets. A 'Make in India' campaign has been unveiled by the Prime Minister. The Make in India' scheme also puts in place the systems to address in a timely manner queries of potential investors. At present, the Government of India allows 100% Foreign Direct Investment (FDI) under the automatic route in the textile sector, subject to all applicable regulations and laws, which effectively backs the Make in India program for the textile and garment industry. Under the 'Make in India' initiative, investment opportunities for foreign companies and entrepreneurs are available across the entire value chain of synthetics, value-added and specialty fabrics, fabric processing set-ups for all kinds of natural and synthetic textiles, technical textiles, garments, and retail brands. Changes in China's Textile Policy severely affected the country's export to that country. In spite of the above, we are of the firmed opinion that the future of the Textile Industry is quite promising. We hope that with the recoveries in economies of U.S.A and European Union will propel the growth of the Textile Industry. Ever growing retailing sector and increased purchasing power of both urban and rural people, are still present in the economy and will lead to the growth of the Industry. The shifting of orders from China to India, due to various favourable factors will also help the Industry to increase its global share. 9.3 Segment-wise product-wise performance : Company has successfully introduced wider product range. In particular, fine counts for Home textile and Shirting segments were successfully introduced and performing good. Specialty yarns like fluorescent yarns, flame retardant yarns were introduced and are doing well. Dyed yarn sale is maintaining consistent position. Export to Middle east, Europe, South Africa is been initiated and is been going consistently. Melange yarns for Undergarment and Night ware manufacturing industry were introduced successfully and are consistently doing well. 9.4 Business outlook : The Company is taking all efforts to improve the quality of production and new products which yields better returns. Broadening the Product and Customer base is the Theme followed for Business growth. Through exports, Company is also increasing its presence in International market. Company is also seriously looking out for Joint Ventures for Business growth in the areas of home textiles. Company has successfully introduced many new raw materials like coolmax, thermolite, kermel apart from bamboo, modal, lyocel. It has been decided to introduce at least 1 product in every six months. 9.5. Aisks and Concerns : The company has drawn and put in place a comprehensive Risk Management Policy to asses and mitigate various risks. The Company wide awareness of risk management policies and practices is being inculcated to minimize the adverse effect of risks on the operating results and the subject of management of risks are being approached in a planned and co-ordinated manner. The acceptability of cotton as premium product can only enhance value perception of the yarn and knitwear we produce. The Company is accelerating this process by moving up the value chain by well researched and designed products. Company has taken several steps to introduce high performance fibres to move up in the value chain and in-house research in developing these products commercially has been a success. 9.6. Internal Control Systems and their adequacy : The Company has a benefit of internal control systems developed over years which ensured that all transactions are satisfactorily recorded and reported and all assets are protected against loss from an unauthorized use or otherwise. The internal control systems are supplemented by an internal audit system carried out by independent firms of Chartered Accountants and a periodical review by the management. The Audit Committee of the Board meets at a regular interval and advises on significant issues raised by, both, the Internal Auditors and the Statutory Auditors. The process of internal control and systems, statutory compliance, risk analysis and its management and information technology are woven together to provide a meaningful support to the management process. The system adopted, especially relating to internal control systems are adequate and commensurate with the nature of its business and size of its operations, though continues efforts are being made to strengthening the same. 9.7 Material developments in Human Aesources / Industrial Aelations front : In the past few years, as the job market has opened widely, the demand for talents has been continuously rising and continuous learning has therefore become inevitable. As such, the Company continued thrust on Human Asset Management and Development activity. In order to cope with this requirement for talent, apart from locating talents from outside market whereever necessary, the Company also focused on the activity of nurturing and developing its human capital from within, by the process of training and upgrading competence level. On the Industrial Relations front, a cordial relationship has been maintained with the workmen and their Union and there has not been any loss of man hours in the manufacturing units. Your Company has put in place a series of HRD measures including appraisal of employees, recognition and reward for good work, developing career plans, training etc., In the context of the changing business scenario, professional competence and skills are being nurtured keeping the growth perspective in mind. Your Company has successfully introduced Internal Auditors for ISO 9001 from the workmen category which was a very successful effort put in by the Management. Apart from this, a team of workers have been formed as change agents who are very active in training other co-workers in many aspects of shop floor functioning. These efforts have started yielding intangible results and it is expected that continuation of such efforts will start yielding tangible results too, in future. 9.8 Cautionary Statement : The statements in this report on 'Management Discussion and Analysis' describing the Company's objectives, estimates, expectations or projections, outlook etc., may constitute 'forward looking statements' within the meaning of the applicable securities laws and regulations. Actual results may differ from such expectations, projections etc., whether express or implied. These statements are based on certain assumptions and expectations of future events over which the Company has no direct control. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements on the basis of any subsequent developments, information or events. 10. Deposits : During the year under review, your Company has not accepted any deposits within the meaning of Section 73 of the Companies Act, 2013 and Rules framed there under and there is no outstanding deposits. 11. Directors and Key Managerial Personnel : Mr.H.S.Bhaskar, Whole time Director, Mr.Govinda R Kadekar, Chief Financial Officer have resigned from the services of the Company with effect from 13th July, 2015 and 17th August, 2015 respectively. Mr.Sachin Kulkarni has been appointed as the Whole time Director with effect from 13th July, 2015 Mr.Vasant Sanzgiri (DIN 01757117) Director is due to retire by rotation at the forthcoming Annual General Meeting and being eligible, offer himself for re-appointment. During the year, Ms.Zarine K Commissariat (DIN 07146151) was appointed as Non-independent Woman Director with effect from 31st March, 2015. Particulars of Directors who are proposed to be appointed/re-appointed at the ensuing Annual General Meeting are furnished as a separate statement Annexed to the Explanatory Statement of the Notice. None of the Directors are disqualified from being appointed as Directors as specified in terms of Section 164 of the Companies Act, 2013. 12. Meetings : During the year, eight 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. A calendar of Meetings is prepared and circulated in advance to the Directors. 13. 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 Committee, Nomination & Remuneration Committee. 14. Declaration by Independent Directors : The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of Independence as prescribed under Section 149(6) of the Companies Act, 2013 and under Clause 49 of the Listing Agreement. Independent Directors are familiarized with their roles, rights and responsibilities in the Company through presentation made to them from time to time. 15. Remuneration Policy : The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. Remuneration Policy of the Company acts as a guidelines for determining, inter-alia, qualification, positive attributes and independence of a Director, matters relating to the remuneration, appointment, removal and evaluation of the performance of the Director, Key Managerial Personnel and Senior Management. The Remuneration Policy is stated in the Corporate Governance Report. Disclosure under section 197 (12) of the Companies Act, 2013 read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure III to this Report. 16. Particulars of Employees : Pursuant to the Section 136 of the Companies Act, 2013 and Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 During the year 2014-15, the Company has not employed anyone with a remuneration of Rs.60 lakhs or more per annum. 17. Details of Subsidiary/Joint Ventures/Associate Companies : Pursuant to sub-section (3) of section 129 of the Act, the statement containing the salient feature of the financial statement of a company's subsidiary viz., Gokak Power & Energy Limited has been disclosed in Form No. AOC-1 as Annexure I to this report. The Company do not have joint ventures/associate companies. The Audited financial statements, Directors' Report of subsidiary company viz. Gokak Power & Energy Limited is attached and forming part of this Annual Report. 18. Auditors and Auditors Report : During 8th Annual General Meeting held on 29th December, 2014, Messrs. Kalyaniwalla & Mistry Chartered Accountants had been appointed as Statutory Auditors upto the 11th Annual General Meeting to be held in the year 2017 subject to ratification of their appointment by the Members at every Annual General Meeting. The ratification of appointment of Auditors by the shareholders is sought at the ensuing Annual General Meeting. The Auditors' Report does not contain any qualification. Notes to Accounts and Auditors remarks in their report are self-explanatory and do not call for any further comments. 19. Disclosure about Cost Audit : As per the Cost Audit Orders, Cost Audit was not applicable to the Company's products/ business for the Financial Year 2014-15. However, the Cost Audit is applicable for the year 2015-16. In terms of the provisions of Section 148 and all other applicable provisions of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, Messrs. A G Anikhindi & Co., Cost Accountants have been appointed as Cost Auditors to conduct the audit of cost records of your company for the financial year 2015-16. The remuneration proposed to be paid to them requires ratification of the shareholders of the Company. In view of this, your ratification for payment of remuneration to Cost Auditors is being sought at the ensuing Annual General Meeting. 20. Secretarial Audit Report: In terms of Section 204 of the Companies Act, 2013 and Rules made there under, the Company has appointed Mr.B S Srinivas, Practising Company Secretary to conduct Secretarial Audit of the Company. The report of the Secretarial Auditors in Form No. MR-3 is enclosed as Annexure IV to this report. The report is self-explanatory and do not call for any further comments. There is no qualification in the Report. 21. Corporate Social Responsibility : During the year 2013-14, as per the provisions of Section 135(1) of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has formed Corporate Social Responsibility Committee of the Directors comprising of Mr.Kaiwan Kalyaniwalla, Mr.Pradip N. Kapadia and Mr.Vasant Sanzgiri to formulate and recommend to the Board, a Corporate Social Responsibility Policy which shall indicate the activities to be undertaken by the Company as specified in Schedule VII to the Companies Act, 2013. Due to net loss, your Company has not earmarked any amount on CSR Activities. However, since inception, the Company is spending on afforestation, schools and hospitals, and continued to support causes of public utility both directly and indirectly in the field of education, medical relief, relief of poverty and promotion of sports and art. Your Company is re-cycling all the process waste and manufacture quality yarns and other products for both local and export markets which greatly helped in reduction of carbon-emission. Your Company has always strived to increase its output to input ratio which once again reduces carbon-emission. 22. Internal Audit & Controls : The Company continues to engage Internal Auditors. 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. 23. Vigil Mechanism/ Whistle Blower Policy : The Company has Whistle Blower Policy/Vigil Mechanism to deal with instances of fraud and mis-management, if any. The policy has been uploaded on the website of the Company at www.gokakmills.com under Investor Corner. 24. Aisk Management Policy : The company has drawn and put in place a comprehensive Risk Management Policy to asses and mitigate various risks. The details of which is covered under Management Development and Analysis Report forming part of this Report. 25. Extract of Annual Aeturn : 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 is forming a part of this Annual Report as Annexure V . 26. Particulars of loans, guarantees or investments under section 186 of the Companies Act, 2013: Particulars of Loans, Guarantees or Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 27. Particulars of contracts or arrangements with related parties : All related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business. During the year under review, there were no materially significant related party transactions with the Promoter, Directors, Key Managerial Personnel or the Designated Persons which may have a potential conflict with the interest of Company at large except power purchase from the subsidiary company for captive consumption and sale. All related party transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for transactions which are of a foreseen and repetitive nature. The particulars of contracts or arrangements entered into by the Company with related parties referred to in sub-section (1) of section 188 of the Companies Act, 2013 has been disclosed in Form No. AOC-2 as Annexure II to this report. The policy on dealing with Relate Party Transactions as approved by the Board is disclosed on the Company's website www.gokakmills.com . The related party transactions with details are furnished in the Notes forming a part of the accounts 28. Corporate Governance : A detailed report on Corporate Governance is annexed as a part of this Annual Report and the Management Discussion and Analysis report forms part of this report. A Certificate on compliance of conditions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement issued by Mr.B.S.Srinivas, Practising Company Secretary is annexed to the Report on Corporate Governance. 29. Statutory Disclosures : (a) There are no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status and Company's operations in future. (b) Details in respect of adequacy of internal financial controls with reference to the Financial Statements are given in the Management3 Discussion and Analysis Report forming part of this Report. 30. Obligation of company under the Sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013 : The Company has adopted a policy as per the provisions of Sexual harassment of women at workplace (prevention, prohibition and redressal) Act, 2013 and Rules made thereunder for prevention, prohibition and redressal of complaints of sexual harassment at workplace. During the year under review, no complaints on sexual harassment were received. 33. Directors' Responsibility Statement : Pursuant to the provisions of Section 134(3)(c) of the Companies Act, 2013 and based on the representations received from the operating management, the Directors hereby confirm :- a. that in the preparation of the annual accounts for the financial year from 01.10.2014 to 30.09.2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; b. that they 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 at the end of the financial year and of the profit or loss of the Company for that period; c. that they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. that they have prepared the annual accounts for the financial year from 01.10.2014 to 30.09.2015 on a 'going concern' basis e. that they have 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. that they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 34. Listing of Shares : The equity shares of the Company are listed on the Bombay Stock Exchange Limited, Mumbai. The Company has paid the Annual Listing Fees for the year 2015-2016 to the Stock Exchange. 35. Acknowledgements : Your Company continues to occupy a place of respect amongst the many stakeholders it is associated with, most of all, our valued customers. The Directors commend the continued commitment and dedication of employees at all levels. The Directors also wish to acknowledge the co-operation extended by workmen and its Union. Your Directors thank all other stakeholders including Financial Institutions, Banks and suppliers of various goods and services for their valuable and sustained support, encouragement and look forward to receive similar support and encouragement in the years ahead. For and on behalf of the Board of Directors Ashok Barat Chairman Mumbai 23 rd November, 2015. Registered Office : No.24, 29th Main BTM Layout II Stage Bangalore - 560 076. |