DIRECTORS' REPORT Your Directors are pleased to present the Thirtieth Annual Report on the operations and performance of your Company, together with audited financial statements and auditors' report for the year ended March 31, 2015. Prospects Growth and efficiency initiatives during the year During the year 2014-15 the company made significant progress on various initiatives relating to its Manufacturing and Distribution business. Some of the initiatives that helped bring additional clarity and operating efficiencies in the business model include • 'Vector Flow', software based on the principle of Theory of Constraints, was implemented in the Bed Linen unit which helped improve overall raw material usage efficiencies, increase capacity utilization and enhance On-Time-In-Full Order deliveries. • Warehouse consolidation and Corporate Office consolidation in the North Americas. This is expected to bring in efficiencies in operating costs from the next year. • Enhancing our branded portfolio through innovative licensing models in the North Americas. • In the process of implementing the SAP ERP system in the US - which will help drive visibility and overall efficiency. • Focus on Private Label manufacturing in European markets to enhance overall business offering. • Focus Brand Bellora at large Box retail formats in the US markets. • Acquired the remaining 30% stake in its European subsidiary G.B.Spa from its minority partner and quickly realigned market focus. • Implementation of a comprehensive Risk Management Structure for the Enterprise • Implementation of an Internal Financial Control (IFC) system to help address overall control requirements and build scalability • The long term credit rating (CRISIL rating) of the company was upgraded from BBB + ve to A -ve and helped drive efficiencies in funding Subsidiary Companies As on March 31, 2015, the Company had the following subsidiaries: Himatsingka Wovens Private Limited, Himatsingka America Inc., Divatex Home Fashions Inc., DWI Holdings Inc., Giuseppe Bellora S.p.A. Himatsingka Singapore Pte. Limited and Twill & Oxford LLC. There has been no material change in the nature of business of these subsidiaries. As required under section 129(3), the Company has prepared consolidated financial statements which form a part of the Annual Report. The consolidated financial statements presented by the Company include the financial results of its subsidiary companies. Further, a statement containing the salient features of the financial statements of its subsidiaries in form AOC-1 is annexed to this report as Annexure 1 Pursuant to section 136 of the Companies Act, 2013, the audited financial statements of the subsidiaries are available on the Company's website at <http://www.himatsingka.com/financial-information.html>. The Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are kept for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Company will make available the annual accounts of the subsidiary companies and the related information to any member of the Company who may be interested in obtaining it. As required under the Clause 49 of the Listing Agreement, the Company has drafted a policy for determining material subsidiaries. The policy has been disclosed in the Company's website and can be found at <http://www.himatsingka.com/> corporate-governance.html. Research and development Research and development continues to provide valuable support to our exports and has helped us to keep pace with a dynamically changing market. We continue to give in-house research and innovation the highest priority. Environment, safety, energy conservation and technology absorption Safety and environmental protection remain a key area of focus for the Company. Investments are continuously made in projects that reduce / treat waste and increase energy efficiencies. We regularly upgrade our effluent treatment and water recycling plants to keep abreast with technological advancements. By avoiding carcinogenic azo class dyes, we ensure eco-friendly production and worker safety. Our endeavor has been to maximize the efficient use of energy and ensure the safe and responsible discharge of residual wastes, while minimizing any adverse environmental impact and waste generation. 2. Dividend: Your directors have recommended a dividend of 40% (Rs.2.00 per equity share), subject to approval by the shareholders at the Annual General Meeting. The Company proposes to transfer an amount of Rs.400 lakhs to the Debenture Redemption Reserve. 4. Extract of Annual Return: In accordance with the Section 92(3) and as required under the section 134(3)(a), the extract of the Annual Return of the Company for the year ended 31st March, 2015 is annexed here to as Annexure 2 in the prescribed form MGT-9. 5. Number of meetings of the Board: The details of the meetings of the Board and the details of the attendance of the directors in the meetings are provided in the Corporate Governance Report. 6. Directors' Responsibility Statement As required by the provisions of Section 134(3)(c) of the Companies Act, 2013, the Directors' Responsibility Statement is attached as Annexure 3, forming part of this report. 7. Declaration by Independent Directors The Company has received from each of its Independent Directors, the declaration as stipulated under Section 149(7) of the Companies Act, 2013, confirming that the director meets the criteria of independence as laid down under section 149(6) of the Companies Act, 2013. 8. Nomination and Remuneration Policy The Company has formed a Nomination and Remuneration Committee as required under the Section 178 of the Companies Act, 2013. The Committee has formulated a policy as required under Section 178(3) of Companies Act, 2013 stipulating the criteria for determining qualifications, positive attributes and independence of a director and also the criteria relating to the remuneration for the directors, key managerial personnel and other employees. The aforesaid policy is annexed to the Board's report as Annexure 4. 9. Auditors and Auditors' Reports Statutory Audit The Company at its 29th Annual General Meeting held on 23rd September, 2014 appointed M/s Deloitte Haskins and Sells, Chartered Accountants to hold office till the conclusion of 32nd Annual General Meeting, subject to ratification by the members at every AGM. The report of Statutory Auditors (appearing elsewhere in the Annual Report) does not have any qualifications/ adverse remarks. Secretarial Audit The Company had appointed Mr. Vivek Bhat, Company Secretary in Practice, Bengaluru, to conduct the secretarial audit as required under Section 204 of the Companies Act, 2013. The secretarial audit report given by Mr. Vivek Bhat is appended as Annexure 5 to the Board's Report. In the abovementioned report, Mr. Vivek Bhat has made the following comment: "The company could not spend the eligible profit on Corporate Social Responsibility measures. However the Company has constituted the CSR Committee and its constitution was as per the regulation." Board's Response During the year, the Company has constituted a Corporate Social Responsibility (CSR) committee and has also devised the CSR policy as required under Section 135 of the Companies Act, 2013 and the relevant rules made thereunder. As per the provisions, the total amount to be spent by the Company on CSR activities for the FY 2014-15 was Rs.89.83 lakhs. During the year, an amount of Rs.1 lakh was spent by the Company. The remaining amount has not been spent as the company was involved with engaging a credible agency and building a framework of CSR. The Company has subsequently through its CSR committee, shortlisted certain projects for CSR and will expend the appropriate amounts to facilitate the activity. 10. Particulars of loans, guarantees, investments and securities made The particulars of loans made, guarantees given, investments made and securities provided as per the provisions of Section 186 of the Companies Act, 2013 and the relevant rules made thereunder are given in the notes to the standalone financial statements. 11. Particulars of contracts or arrangements with related parties All transactions entered into by the Company with its related parties are at arm's length and in the ordinary course of business. However, the list of material related party transactions as per the Company's policy on related party transactions, as required under rule 8(2) of Companies (Account) Rules, 2014, is annexed to the Board's Report as Annexure 6. The Company has also formulated a policy on dealing with Related Parties Transactions as required under Clause 49 of the Listing Agreement. The same is available in the Company's website at <http://www.himatsingka.com/corporate-governance>. html. 12. Material changes No material changes or commitments affecting the financial position of the Company have occurred after the closure of the financial year till the date of this report. 13. Conservation of energy, Technology absorption & Foreign exchange The details of conservation of energy, technology absorption and foreign exchange are annexed to the Board's Report as Annexure 7. 14. Risk Management The Company has developed and implemented a comprehensive risk management policy and framework to counter and mitigate the various risks encountered by the Company. The details of the same are given in the Risk Management section elsewhere in this Annual Report. 15. Corporate Social Responsibility During the year, the Company has constituted a Corporate Social Responsibility (CSR) committee. The committee consists of the following directors: • Dr. K R S Murthy • Mr. A K Himatsingka • Mr. D K Himatsingka • Mr. Shrikant Himatsingka The Committee has devised the CSR policy as required under Section 135 of the Companies Act, 2013 and the relevant rules made thereunder. As per the provisions, the total amount to be spent by the Company on CSR activities for the FY 2014-15 was Rs.89.83 lakhs. During the year, an amount of Rs.1 lakh was spent by the Company. The details of the CSR policy and the CSR spending have been elaborated in the Annexure 8 to this report. 16. Board Performance Evaluation The Company has, during the year, conducted an evaluation of the Board as a whole, its committees and the individual directors including the independent directors as stipulated in the Nomination and Remuneration policy adopted by the Company. The evaluation was carried out through different evaluation forms which covered among others the evaluation of the composition of the Board/ committee, its effectiveness, activities, governance, and with respect to the chairman and the individual directors, their participation, integrity, independence, knowledge, impact and influence on the Board. The independent directors of the Company also convened a separate meeting and evaluated the performance of the Board, the non-independent directors and the chairman. 17. Directors The Board of Directors at its meeting held on February 11, 2015 appointed Mr. Dilip J Thakkar, Dr. K R S Murthy, Mr. Berjis Desai, Mr. Rajiv Khaitan as additional directors (independent) and Ms. Jayashree Poddar as an additional director (Executive, with effect from March 1, 2015). Pursuant to provisions under section 160 and 161 of the Companies Act, 2013 the same has to be ratified by the shareholders in the ensuing Annual General Meeting, and it is proposed to appoint the Independent Directors for a period of 5 years. In accordance with the provisions of the Companies Act, 2013, and Articles of Association of the Company, Mr. A K Himatsingka retires by rotation and being eligible, offers himself for re-appointment. His re-appointment will be placed as one of the agenda in the ensuing Annual General Meeting. 18. Composition of Audit Committee The Company has constituted an Audit Committee as required under the Companies Act, 2013. The committee consists of the following directors: • Mr. Dilip J Thakkar • Dr. K R S Murthy • Mr. Rajiv Khaitan During the year, there have been no incidents where the Board has deviated from the recommendations made by the committee. As a conscious and vigilant organization, Himatsingka Seide Limited believes in the conduct of the affairs of its constituents in a fair and transparent manner, by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In its endeavour to provide its employee a secure and a fearless working environment, the Company has established a "Whistle Blower Policy" as required under the Companies Act, 2013 and the same is also available in the Company's website. Mr. Ashok Sharma, Company Secretary, has been designated as the Chief Compliance Officer under the policy and the employees can report any instance of unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or ethics policy to him. In exceptional cases, where the Whistle Blower is not satisfied with the outcome of the investigation and the decision, she/ he can make a direct appeal to the Chairman of the Audit Committee and the contact details of the Chairman is also given in the Policy. During the year, no complaints were received under this mechanism. c) The percentage increase in median remuneration of the employees is 16.32% d) The number of permanent employees in the rolls of the Company is 2,885 e) The average increase in the remuneration of the employees was 15.50% during the year while the Company's profit before tax grew by 85.84% from Rs.5,879.37 lakhs to Rs.10,934.04 lakhs. The revenues for the same period saw a marginal dip of 3.59% to Rs.94,840.76 lakhs from Rs.98,368.70 lakhs of the previous year. The remuneration of the Key Managerial personnel (KMP) during the year grew by 65.50%. The increase in the remuneration is in correlation to the performance of the Company. The comparison of the remuneration of each KMP against the performance of the Company is given below: The average increase in the salaries of employees other than managerial personnel during the year was 15.50% and the average increase of the remuneration of managerial personnel was 65.50%. The increase in the remuneration of managerial personnel is in correlation to their individual performance and to the performance of the Company. The key parameters for the variable component of remuneration availed by the directors are the amount of responsibilities taken, performance of the business, specific contribution made by the director to the overall performance of the Company. During the year, there were no employees whose remuneration was higher than that of the highest paid director. Statement of particulars of employees as required under rule 5(2) of the Companies (Appointment and Remuneration) Rules, 2014 21. Corporate Governance We comply with the corporate governance code as prescribed by the stock exchanges and SEBI. You will find a detailed report on corporate governance as part of this annual report. The auditor's certificate on compliance with the mandatory recommendations on corporate governance is annexed to this report. 22. Insurance The Company's assets are prone to risks / peril. The major risks / peril are adequately insured. 23. Public Deposits The Company has not accepted any deposits from the public during the year within the meaning of the Companies Act, 2013. 24. Cost Auditors The Companies (Cost Records and Audit) Rules, 2014, has exempted the mandatory cost audit requirements in respect of units located in Special Economic Zones (SEZ) and for 100% Export Oriented Units (EOU). In view of this, there is no requirement to furnish cost audit of cost records of the Company for its units at Hassan (SEZ) and Doddaballapur (EOU). Acknowledgement Your Directors wish to place on record their appreciation of the continuous efforts made by all employees in ensuring excellent all-round operational performance. We also wish to thank our Customers, Vendors, Shareholders and Bankers for their continued support. Your Directors would like to express their grateful appreciation to the Central Government and Government of Karnataka for their continued co-operation and assistance. For and on behalf of the Board Dilip J Thakkar Chairman Date: July 23, 2015 Place: Bengaluru |