DIRECTORS' REPORT To the Members, Your Directors present the TENTH Annual Report together with the Audited Statement of Accounts for the year ended 31st March, 2015 DIVIDEND As explained in detail under performance review, your company has incurred loss for the year and hence the Board is unable to recommend a dividend for the financial year ended 31st March, 2015. PERFORMANCE REVIEW The Indian Textile Industry performed reasonably well during the fiscal year 2013-14 and continued the trend in the first two quarters of 2014-15 also. But, from the 3rd quarter of 2014-15, the industry went into tailspin due to a number of factors. One of the major causes was crash in the raw material prices globally by almost 50% and the Indian cotton prices were no exception. Spinning Mills, specially Export Oriented Mills like ours, who are obliged to carry several months requirement of raw cotton for quality reasons incurred substantial value losses on such inventories. The other important factor was significant changes in Chinese procurement policies and substantial reduction in Chinese import of cotton yarn. Consequently, yarn prices also fell significantly leading to lack of parity between cotton and cotton yarn prices. The cotton yarn exports from India into China also dropped by nearly 23%. These factors had a bearish effect on both demand and sales realization resulting in the mills carrying large unsold inventories and incurring losses. Moreover, the situation in respect of fine and superfine yarns which are our company's main product lines continues to suffer from both lack of demand and sales realization which is below the cost of production. Salaries & Wages continued to rise during the year besides hike in power cost, thereby rendering the cost of manufacturing prohibitive. Your company's total revenues sharply came down to Rs.186.71 crores from Rs.286.74 crores in the previous year due to substantial reduction in exports of outsourced yarns for reasons mentioned above. The operating profit came down to Rs.10.99 crores from Rs.22.94 crores in the previous year. After meeting finance cost of Rs.10.89 crores, the profit before depreciation, amortization and tax expenses was at Rs.10 lacs only and net loss after provision of depreciation and deferred taxation at Rs.3.06 crores. As regards performance of Aluva Unit in the current year, your Directors regret to inform that it continues to incur substantial losses. As already informed, ever rising high cost of salaries and wages as compared to industry norms has resulted in an unviable and untenable situation. To ensure survival of this unit, it is imperative that these costs are brought down to be at par with the industry. CORPORATE GOVERNANCE REPORT, MANAGEMENT DISCUSSION AND ANALYSIS AND OTHER INFORMATION REQUIRED UNDER THE COMPANIES ACT, 2013 AND LISTING AGREEMENT As per Clause 49 of the Listing Agreement entered into with the Stock Exchanges, Corporate Governance Report with Auditors Certificate thereon and Management Discussion and Analysis are attached and form part of this report. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement of Section 134 (5) of the Act, and based on the representations received from the management, the directors hereby confirm that : i) In the preparation of the annual accounts for the financial year 2014-15, the applicable accounting standards have been followed and there are no material departures; ii) 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 loss of the company for the financial year. iii) 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 Act. They confirm that there are adequate systems and controls for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities. iv) they have prepared the annual accounts on a going concern basis. v) they have laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and operating effectively; and vi) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review, in accordance with the provisions of the Companies Act, 2013 and Company's Articles of Association, Shri Mahesh C Thakker retires by rotation at the ensuing Annual General Meeting and, being eligible, offer himself for reappointment. The Board recommends the same for your approval. Smt. Pamela Anna Mathew has been inducted as an Additional Director effective from 17.03.2015 and hold office only up to the date of forthcoming Annual General Meeting of the company. Based on the recommendation of Nomination and Remuneration Committee, the Board recommends and seeks shareholders approval for appointment of Smt. Pamela Anna Mathew as an Independent Director for a period of 5 years. Pursuant to the provisions of Section 203 of the Act, the appointment of Shri. B.K Patodia, Chairman and Managing Director,Shri. A.K. Warerkar Chief Financial Officer and Shri. E.K Balakrishnan, Company Secretary were formalized by the Board at its meeting held on 15.5.2014 as the Key Managerial Personnel of the Company. AUDITORS AND SECRETARIAL AUDIT Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the rules framed thereunder, M/s. M S Jagannathan & Visvanathan, Chartered Accountants, Coimbatore, were appointed as Statutory Auditors of the Company from the conclusion of the 9th Annual General Meeting (AGM) of the Company held on 19th September, 2014 till the conclusion of the 12th Annual General Meeting to be held in the year 2017, subject to ratification of their appointment at every AGM Further, pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made thereunder, the Company has appointed Shri. MRL Narasimha, Company Secretary in Practice to undertake the Secretarial Audit of the Company. The same is attached as Annexure I and forms an integral part of this Report There are no disqualification, reservations or adverse remarks or disclaimers in the Auditors and Secretarial Auditors Report CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Information required under section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is given in the Annexure II forming part of this report CORPORATE SOCIAL RESPONSIBILITY Even though the provisions of Companies Act, 2013 regarding Corporate Social Responsibility are not attracted to the Company yet the company has been, over the years, pursuing as part of its corporate philosophy, an unwritten CSR policy voluntarily which goes much beyond mere philanthropic gestures and integrates interest, welfare and aspirations of the community with those of the Company itself in an environment of partnership for inclusive development BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration of the various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties obligations and governance. The performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process. FAMILIRISATION PROGRAMME FOR DIRECTORS At the time of appointing a Director, a formal letter of appointment is given to him, which interalia explains the role, function, duties and responsibilities expected of him as a Director of the Company. The Director is also explained in detail the Compliance required from him under the Companies Act, 2013, Clause 49 of the Listing Agreement and other relevant regulations and affirmation taken with respect to the same. The Chairman along with the Management has also one to one discussion with the newly appointed Director to familiarize with the company's operations. NUMBER OF MEETINGS OF THE BOARD The details of the number of meetings of the Board held during the Financial Year 2014-15, forms part of the Corporate Governance Report INDEPENDENT DIRECTORS DECLARATION The Non Executive Independent Directors fulfill the conditions of independence specified in Section 149 (6) of the Companies Act, 2013 and Rules made there under and meet with requirement of Clause 49 of the Listing Agreement entered into with the stock Exchanges. A formal letter of appointment to Independent Director as provided in Companies Act, 2013 and the Listing Agreement has been issued and disclosed on the website of the Company viz. www.gtntextiles.com PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY Details of loans, guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the Notes to Financial Statements VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has a vigil mechanism / whistle Blower policy for Directors and employees to report genuine concerns or grievances. The Whistle Blower policy has been posted on the website of the Company (www.gtntextiles.com). INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has an effective internal control and risk mitigation system, which has consistently assessed and strengthened with standard operating procedure. Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Audit Committee of the Board of Directors, statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions taken. To maintain its objectivity and independence, the internal audit function reports to the Chairman of the Audit Committee RISK MANAGEMENT The Risk Management is a very important part of business. The main aim of risk management is to identify, monitor and take precautionary measures in respect of the events that may pose risks for the business. The Company is having a business risk management framework in place, which defines the risk management approach of the company and includes periodic review of such risks and mitigating controls and reporting mechanism of such risks. NOMINATION & REMUNERATION POLICY The Board of Directors has framed a policy which lays down a frame work in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. RELATED PARTY TRANSACTIONS The transactions entered with related parties for the year under review were on arm's length basis and in the ordinary course of business. The disclosure under form AOC-2 for transactions with related party during the year under review is attached as Annexure III. The Company has developed a Related Party Transactions framework for the purpose of identification and monitoring of such transaction. A Statement giving details of Related party transactions are placed before the Audit Committee as also to the Board for review and approval on a quarterly basis. DEPOSIT FROM PUBLIC The Company has not accepted any deposits from public and as such no amount on account of principal or interest on deposit from public was outstanding as on the date of the Balance sheet EXTRACT OF ANNUAL RETURN The extract of Annual Return in Form MGT-9 as per Section 92 (3) of the Companies Act, 2013 and Rule 12 (1) of Companies (Management & Administration) Rules, 2014 is annexed hereto as Annexure IV and forms part of this report. PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 134 (3) (q) OF THE COMPANIES ACT, 2013 READ WITH RULE 5 (1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 The information required pursuant to Section 134 (3) (q) of the Companies Act, 2013 read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is 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 obtaining a copy thereof, such Member may write to the Company in this regard PERSONNEL & INDUSTRIAL RELATIONS Industrial Relations were cordial and satisfactory. There were no employees whose particulars are to be given in terms of Section 134(3)(q) of the companies Act,2013 read with Rule 5(2) and 5(3) of the companies (Appointment and Remuneration of Managerial personnel) Rules, 2014 ACKNOWLEDGEMENT Your Directors place on record their gratitude to Central Bank of India, State Bank of India, Export-Import Bank of India, State Bank of Travancore, Bank of India and Axis Bank Limited and the concerned Departments of the State and Central Government, valuable customer, Employees and Shareholders for their assistance, support and co-operation to the Company. For and on behalf of the Board B.K PATODIA Chairman Place : Kochi, Date : 27.5.2015 |