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Directors Report of Celebrity Fashions Ltd.

Mar 31, 2015

Dear Members,

The Directors hereby present the 26th Annual Report along with the audited statements of the Company for the year ended 31st March 2015.

Outlook and Financial Highlights

The revival in demand in major markets such as US and Europe enabled India to witness a double digit growth in export of ready-made garments from FY 2014 to FY 2015. Export of readymade garments from India has grown faster than those shipped from China for a bulk of 2014. India’s garment exports were growing at the rate of over 15% and this is a clear cut indication that India is emerging as one of the top sourcing and compliant destinations for the buyers in the World.

The other fundamentals which would boost export of readymade garments is the government’s focus on "Make in India" theme facilitating exports, export incentives from the government and increase in manufacturing costs in China. The shift in demand for garment from China to India due to rise in labour and power costs have made production in China expensive compared to India. With an encouraging scenario on the global front, the industry would still face challenges in terms of availability of skilled labour and stringent labour laws of the Country.

Your Company recorded total revenues of Rs.205.87 crs as against Rs.235.31 crs last year. During the year under review, your Company relocated one of its manufacturing facilities and consolidated its operations in its existing facilities thereby causing reduction to capacities. However with improved operational efficiencies and greater control on costs, the Operational EBITDA margins stood at Rs.13.84 crs as compared to Rs.10.36 crs previous year; Other Income were at Rs.3.58 crs against Rs.1.36 crs.

The Company re-aligned its Depreciation Policy in accordance with Schedule II, Companies Act, 2013. Consequently, with effect from 1st April 2014, the carrying value of assets is now depreciated over its revised remaining useful life. Where the remaining useful life of the assets are NIL as on 1st April 2014, carrying value of assets amounting to Rs.1.12 crs have been adjusted against opening reserves.

Consequent to the above, the Net losses for the year were at Rs.2.29 crs against Rs.1.63 crs previous year, (before extraordinary income of rupees 9.97 crs)

Rs. In Crs FY 2014-15 FY 2013-14

Revenue From operations 205.87 235.31

Gross Profit / (Loss) before interest 13.84 10.36 and depreciation

Interest 9.33 6.92

Profit / (Loss) before depreciation 4.51 3.44 and tax

Depreciation 6.80 5.07

Profit / (Loss) before Extra- (2.29) (1 63) Ordinary Income

Extra-Ordinary Income - 9.97

Profit / (Loss) before tax (2.29) 8.34

Provision for Taxation - -

Profit / (Loss) after tax (2.29) 8.34

Balance brought forward from (61.76) (70.10) previous year

Less: Value of Assets with Expired (1.12) - Life written off

Balance carried to Balance Sheet (65.17) (61.76)

Finance and Accounts

There is no provision for Income Tax, due to the losses incurred by the Company in the earlier years. The Company has recognized Deferred Tax Asset in unabsorbed depreciation and accumulated losses to the extent of corresponding deferred tax liability on the difference between the book balance and written down value of fixed assets under Income Tax.

The net worth of the Company as on 31st March 2014 has turned positive under the provisions of Sick Industries Companies Act. Accordingly, the Company filed for discharge under the purview of SICA before BIFR. BIFR vide its order dated 04th August 2014 has discharged the Company from the purview of BIFR.

The Company has not accepted any deposits within the meaning of Section 73 of the Companies Act 2013.

During the year under review, the Board of Directors of your Company at their Meeting held on 13th November 2014, have decided to delete the name of the wholly owned subsidiary Company Celebrity Clothing Limited from MCA records. Accordingly Celebrity Clothing Limited has filed with Ministry of Corporate Affairs (MCA) for striking off its name from the MCA records under FTE mode on 23rd December 2014 and the name has been removed from the records of MCA. Hence the requirement of presenting annual report of CCL does not arise. Also the shares of Celebrity Clothing Limited held by your Company stands cancelled pursuant to the same.

The Accounts of the Company have been prepared on the basis of 'going concern concept’. Your Company continued to focus on cash generation. The focus on managing optimal levels of inventory, sound business performance, operating efficiencies and cost savings across the organization to mitigate the problem and to improve the financial health of the Company.

Share Capital

The Company made preferential allotment of 26,50,000 Equity Shares at the face value of Rs.10/- per share to the promoter, Mr. V. Rajagopal during year under review towards his contribution to Equity. The object of this issue is for working capital purposes and to improve the net worth position of the Company.

The above preferential allotments were approved by the Shareholders in the ExtraOrdinary General Meeting held on 16th July 2014.

Consequent to the above, the Equity Share Capital of the Company increased by Rs.2.65 crs.

Dividend

In view of the accumulated losses, no dividend is being recommended.

Cash flow Statement

In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31st March 2015 is annexed hereto.

Related Party Transactions

All the transactions with the Related Parties are in the Ordinary Course of Business and on Arm’s length basis. The details on Related Party Transactions have been disclosed in the notes to accounts. Your Company has framed a policy on Related Party Transaction and the same has been displayed on the Company’s website: www.celebritygroup.com

The details of related party transactions pursuant to clause (h) of sub-section (3) of section 134 of the Act is enclosed in form no. AOC-2 as Annexure - II

Corporate Governance Report

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI.

The report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms a part of the Annual Report.

The requisite certificate from the Auditor, M/s CNGSN & Associates LLP confirming the compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges forms a part of this report.

Management’s Discussion and Analysis Report

A detailed review on the operations and performance of the Company along with the outlook is presented separately under the Management Discussion and Analysis Report which forms part of this Annual Report.

Compliance with Code of Conduct

Your Company has put in place a Code of Conduct for its Board Members and Senior Management Personnel. Declaration of Compliance with Code of Conduct has been received from all the Board Members and Senior Management Personnel. A Certificate to this effect from Mr. Charath Ram Narsimhan, Managing Director forms part of this Report.

Corporate Social Responsibility (CSR)

As there have been carry forward losses, provisions of section 135 pertaining to corporate social responsibility are not applicable to the Company.

The particulars relating to CSR committee and policy have been detailed in Corporate Governance Report.

Establishment of Vigil Mechanism

Your Company has in place a vigil mechanism pursuant to which a Whistle Blower Policy has been adopted by the Board Members. The Whistle Blower Policy covering all employees and directors is hosted on the Company’s Website @ www.celebritygroup.com

Directors

During the year under review your company has come out of the purview of BIFR. Hence continuance of Mr Ramji Sinha as Special Director inducted by BIFR is withdrawn.

Pursuant to Section 152 of the Companies Act 2013, Mrs. Rama Rajagopal retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for reappointment.

All Independent Directors have give declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of the Listing Agreement.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as "Annexure - III"

Meeting of Board

The particulars relating to the meeting of Board of Directors has been detailed in the Corporate Governance Report which forms part of the report

Key Managerial Personnel

To comply with requirement of Section 203 of the Companies Act, Mr. Charath Narsimhan Managing Director, Mrs. L. Visalakshi, CFO and Mr. K.Senthil Kumar, Company Secretary have been designated as the Key Managerial Personnel of the Company.

Remuneration Policy

The particulars relating to remuneration policy has been detailed in Corporate Governance Report which forms part of the report.

Particulars of Loan, Guarantees or Investments

The Company has not given any loans or guarantees covered under the provision of section 186 of the Companies Act, 2013. The details of the investments made by the company are given in the notes to the financial statements.

Material changes & Commitment, if any affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statement relate and the date of the Report- Nil

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Appointment & Remuneration Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

Report as per Section 134 read with Rule 8 sub rule 5 of Companies Accounts Rules 2014:

Change in nature of business, if any: Nil

Details of Director or KMP appointed or resigned: Nil (only designated)

Name of Companies which become or cease to be its subsidiaries, JV or associate during the year - Celebrity Clothing Ltd

Details relating to deposits covered under Chapter V of Companies Act 2013: Nil

Details of deposits which are not in compliance with the requirements of Chapter V of Companies Act 2013: Not Applicable

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:

The Company was not in receipt of any orders from the regulator / courts / tribunals impacting the going concern status of future operation of the Company. The Company was in receipt of the notice / order from statutory authorities during the year for claim not acknowledged by the company as debts. The details of the same have been provided in Note 29 of the financial statements.

Internal control systems and their adequacy:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board & to the Chairman & Managing Director. The Internal Auditor monitors and evaluates the efficacy and adequacy of 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 audit function, process owners undertake corrective action in their respective areas and there by strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board

Business Risk Management:

Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement, the company has constituted a business risk management committee. The details of the committee and its terms of reference are set out in the corporate governance report which form part of the Boards report.

At present the company has not identified any element of risk which may threaten the existence of the company.

Familiarisation Programme for Independent Director:

The Board members are provided with necessary documents / brochures, reports and internal policies to enable them to familiarize with the Company’s procedures and practices. The details of such familiarization programmes for the Independent Directors are posted on the website of the Company (for details, please visit www.celebritygroup.com)

Auditors

M/s. Anil Nair & Associates and M/s. CNGSN Associates LLP, Chartered Accountants, Chennai are the Auditors of the Company. They were appointed in the 25th Annual General Meeting of the Company till the conclusion of third consecutive Annual General Meeting of the Company and subject to ratification by the shareholders at every Annual General Meeting. A motion for ratification will be placed before the Members of the Company in the 26th Annual General Meeting for their approval.

M/s Anil Nair & Associates have applied for re-evaluation of certificate from ICAI and the process is on-going. As on the date of signing this Balance Sheet, the Chartered Accountant Firm, M/s Anil Nair & Associates is yet to the receive the certificate from the Peer Review Board. Consequently as a matter of abundant prudence, M/s Anil Nair & Associates have abstained from signing the Balance Sheet of the Company. The Annual Accounts of the Company including its Balance Sheet, Statement of Profit and Loss along with Cash Flow Statement have been audited and signed by M/s CNGSN & Associates, LLP.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Bhaskar, Company Secretary in Practice, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed as "Annexure - IV".

Cost Auditor

Since the Company is not in the purview of Cost Audit, the appointment of Cost Auditor under the requirement of the provisions under Section 148 of the Companies Act, 2013 is not required for the financial year 2015-16.

Management response with respect to Statutory Auditor’s / Secretarial Auditor Qualification:

The Report of Statutory Auditors on the Financial Statements of the Company for the financial year ending 31st March 2015 and Secretarial Audit Report for the financial year 2014-15 contains qualifications. The response from the Management with respect to the qualifications is appended below:

a) The delays in remitting the unclaimed dividend amounts to Investor Education and Protection Fund were due to delays in receipt and reconciliation of data from the Bank. Immediately upon receipt of data, the Company has remitted the amount of Rs.33,799/- to Investors Education and Protection Fund.

b) During the year under review, the Company has arrived at an out-of-court settlement with its tenant and has entered into a fresh lease deed and memorandum of understanding. The Company has recognized a rental income of Rs.1.26 crs pertaining to previous year and the same has been included under Other Income. Along with the same, the Company has recognized the rental income for the Current Year during the last quarter of the financial year The service tax amounts of Rs.30 lakhs on the rental income were pending to be remitted as on 31st March 2015. The Company is taking steps to remit the same at the earliest.

c) In accordance with the re-structuring package sanctioned to the Company by State Bank of India, an amount of Rs.18.22 crs was to be repaid by 31st March 2015 from the sale of proceeds of one of properties of the Company. Pending disposal of the property, the amount of Rs.18.22 crs remained unpaid to State Bank of India. The Company is taking necessary steps for disposal of the property and for repayment of term loans. As at 31st March 2015, interest on working capital and term loans amounting to Rs.1.10 crs were pending to be serviced since February 2015. The Company has serviced the same in April 2015.

d) The accumulated losses of the Company have exceeded 50% of its networth as on 31st March 2015. The accounts of the Company have been prepared on Going Concern’ basis. Your Company’s Management Team constantly strives to mitigate the problems, improve the financial health of the Company by controlling the losses and the Company foresees signs of revival.

Listing Fee

The equity shares of your company are listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Your Company has paid the applicable listing fee to the Stock Exchanges up to date.

Personnel

The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions during these tough times.

Policy on Prevention of Sexual Harassment of Woman at Workplace:

Your Company has in place a Policy on Prevention, Prohibition and Redressal of Sexual Harassment and Non-discrimination at Work Place in line with the requirements of Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

An Internal Compliants Committee (ICC) was set up to redress complaints received regarding sexual harassment and discrimination at workplace.

During the year ended March 31, 2015, the ICC has received no complaints pertaining to sexual harassment / discrimination at work place.

Directors Responsibility Statement

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that:

i) In the preparation of the annual accounts, the applicable accounting standards have been followed with explanation related to material departures if any.

ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 the year under review.

iii) The directors have 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) The directors have prepared the annual accounts on a going concern basis.

v) 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.

vi) The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

Conservation of Energy / Technology Absorption / Foreign Exchange

i. Conservation of Energy:

The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption: Not applicable.

iii. Foreign Exchange Earning and Outgo:

Total Foreign exchange earned (FOB Value) Rs.160.44 crs

Total Foreign exchange outgo Rs. 48.80 crs

Appreciation

The Directors are sincerely thankful to you - the esteemed shareholders, customers, business partners and State Bank of India for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround.

Date : 21st May 2015 For and on Behalf of the Board Place : Chennai V. Rajagopal Chairman


Mar 31, 2014

Dear Members,

The Directors hereby present the 25th Annual Report along with the audited statements of the Company for the year ended 31st March 2014.

FY 2013-14 FY 2013-14

Revenue From operations 235.31 186.37

Gross Profit / (Loss) before 10.36 6.26 interest and depreciation

Interest 6.92 4.35

Profit / (Loss) before 3.44 1.91 depreciation and tax

Depreciation 5.07 6.59

Profit / (Loss) before (1 63) (4.68) Extra-Ordinary Income

Extra-Ordinary Income 9.97 -

Profit / (Loss) before tax 8.34 (4.68)

Provision for Taxation

Profit / (Loss) after tax 8.34 (4.68)

Balance brought forward (70.10) (65.42) from previous year

Balance carried to Balance Sheet (61.76) (70.10)

Indian Export Performance saw tremendous rebound in textile exports. The exports of garments from India have grown by 15.5% year on year to USD 14.94 bn in FY 2013- 14 according to sources.

Improving textile and apparel demand from large markets and benefit acrruing from a falling rupee have improved the performance of garment exporters. Rupee depreciation improved the competitiveness of Indian exporters in global textile trade mainly over China, Bangladesh and Vietnam. Sri Lanka is emerging as a competitor with an edge in currency competitiveness. Rupee depreciated the most during June to September 2013 against US Dollar and remained the most volatile. But the currency gains were partly offset by continued high inflation and bargain hunting by overseas buyers.

Your Company recorded total revenues of Rs.235 crs for the financial year ending 31st March 2014 as compared to Rs.186 crs previous year. The operating margins were at Rs.10.36 crs as compared to Rs.6.26 crs last year. The increase in revenues and incremental realisation on account of depreciation of INR against US Dollar contributed to incremental margins during the year under review.

The loss before extra-ordinary gain was at Rs.1.63 crs as compared to Rs.4.68 crs previous year. During the year, your company had an extra-ordinary gain of Rs.9.97 crs being the gain on settlement of dues with one of the banks under One-Time Settlement Scheme. The net profits after extra-ordinary income stood at Rs.8.34 crs during the year under review.

Finance and Accounts

There is no provision for Income Tax, due to the losses incurred by the Company in the earlier years. The Company has recognized Deferred Tax Asset in unabsorbed depreciation and accumulated losses to the extent of corresponding deferred tax liability on the difference between the book balance and written down value of fixed assets under Income Tax.

The Company has not accepted any deposits within the meaning of Section 58A and 58AA of the Companies Act 1956.

The Company''s networth was eroded as on 31st March 2010 under the provisions of Sick Industrial Companies Act (SICA). Accordingly the company filed for reference with the Board for Industrial and Financial Reconstruction (BIFR) under section 15(1) of SICA. The reference was considered by BIFR and upon submissions made and material on record, BIFR has declared the Company as Sick Industrial Company u/s 3(1)(o) of SICA vide its order dated 19th April 2011. BIFR appointed State Bank of India (SBI) as the Operating Agency (OA) and issued directions to submit a Rehabilitation Scheme as per section 18 of SICA.

State Bank of India sanctioned a Re-structuring Package to the Company vide its Sanction Letter dated 16th November 2012. The package included Conversion of portion of Term loans into Equity and 1% Cumulative Redeemable Preference Shares, re-schedulement of Term loan repayments and interest concessions.

SBI converted Rs.7.47 crs of Term loans into Equity Shares and Rs.25.10 crs of Term loans into 1% Cumulative Redeemable Preference Shares during September / October 2013.

HDFC Bank opted for a One-Time Settlement (OTS) of dues; accordingly the Company settled the dues of HDFC Bank under OTS and the net gain of Rs.9.97 crs upon settlement has been recognized under extra-ordinary income in the Statement of Profit and Loss.

The Draft Rehabilitation Scheme is pending for approval before Honorable BIFR.

The net worth of the Company as on 31st March 2014 has turned positive under the provisions of Sick Industries Companies Act.

The Accounts of the Company have been prepared on the basis of ''going concern concept''. Your Company''s Management Team constantly strives to mitigate the problems, improve the financial health of the Company by controlling the losses and the Company foresees strong signs of revival.

Share Capital

The Company issued 74,69,100 Equity Shares of Rs.10/- each to State Bank of India (SBI) pursuant to conversion of Term loans during September 2013. During the same period the Company issued 2,51,04,500 1% Cumulative Redeemable Preference Shares of Rs.10/- each to SBI against conversion of Term loans into Preference Shares.

The above conversion was in accordance with the Rehabilitation Scheme sanctioned by SBI to your Company.

State Bank of India, in its Sanction letter dated 16th November 2012 has stipulated that Promoters should cause equity infusion of Rs.7 crs in phases toward their contribution.

The first tranche of Rs.3.50 crs was received during the FY 2012-13 and your Company was in receipt of the balance Rs.3.50 crs during February/March 2014.

The Company made preferential allotment of 1,50,000 Equity Shares at the face value of Rs.10/- per share to the promoter, Mr. V. Rajagopal and 33,50,000 Equity Shares at the face value of Rs.10/- per share to M/s Leman Diversified Fund, a Foreign Institutional Investor during March 2014 towards their contribution to Equity.

Further the Promoters / Directors had infused funds towards the One-Time Settlement of dues with HDFC Bank. The Company made preferential allotment of 13,50,000 Equity Shares at the face value of Rs.10/- per share to the promoter, Mr. V. Rajagopal and 10,00,000 Equity Shares at the face value of Rs.10/- per share to the Managing Director, Mr. Charath Ram Narsimhan towards their contribution to Equity.

The above preferential allotments were approved by the Shareholders in the Extra- Ordinary General Meeting held in March 2014.

Consequent to the above, the Equity Share Capital of the Company increased by Rs.13.32 crs and the Preference Share Capital increased by Rs.25.10 crs

Dividend

In view of the accumulated losses, no dividend is being recommended.

Personnel

The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions during these tough times.

Directors

During the year under review, BIFR inducted Mr. Ramji Sinha as a Special Director of the Company.

Pursuant to Section 152 of the Companies Act 2013, Mrs. Rama Rajagopal retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for reappointment.

Auditors

M/s Anil Nair & Associates, Chartered Accountants, Chennai and M/s CNGSN & Associates, Chartered Accountants, Chennai, the Joint Auditors of the Company, retire at the ensuing Annual General Meeting and are eligible for reappointment.

Cost Auditor

Pursuant to the provisions under Section 233B of the Companies Act, 1956 your Company has appointed M/s. Rafiq & Associates, as Cost Auditor of your Company for the financial year 2014-15.

Corporate Governance Report and Management Discussion and Analysis Statement

A report on Corporate Governance is attached to this Report as also a Management Discussion and Analysis statement.

Particulars as per Section 217 of the Companies Act, 1956

A) Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956 and based on the representations received, your Directors hereby confirm that:

i. In the preparation of the Annual Accounts for the year ended 31st March 2014, the applicable Accounting Standards have been followed and there are no material departures;

ii. The Directors have selected such accounting policies and applied them consist- ently 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;

iii. The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detect- ing fraud and other irregularities;

iv. The Directors have prepared the Annual Accounts on a going concern basis.

B) During the year under review, there were no employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011.

C) The information pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given below:

i. Conservation of Energy:

The operations of the Company are not energy-intensive. However, wherev- er possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption:

Not applicable.

iii. Foreign Exchange Earning and Outgo:

Total Foreign exchange earned (FOB Value) Rs.186.12 crs

Total Foreign exchange outgo Rs. 76.18 crs

Appreciation

The Directors are sincerely thankful to you - the esteemed shareholders, customers, business partners and State Bank of India for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround.

For and on Behalf of the Board Dated : 5th May 2014 V. Rajagopal Place : Chennai Chairman


Mar 31, 2013

Dear Shareholders,

The Directors hereby present the 24th Annual Report along with the audited state- ments of the Company for the year ended 31st March 2013.

Financial Highlights

Rs. In Crs

FY 2012-13 FY 2011-12

Revenue From operations 186.37 190.38

Gross Proft / (Loss) before interest 6.26 9.85 and depreciation

Interest 4.35 16.36

Proft / (Loss) before depreciation and 1.91 (6.51) tax

Depreciation 6.59 7.16

Proft / (Loss) before Extra-Ordinry (4.68) (13.67)

Income

Extra-Ordinary Income

Proft / (Loss) before tax (4.68) (13.67)

Provision for Taxation

Proft / (Loss) after tax (4.68) (13.67)

Balance brought forward from previous (65.41) (51.74) year

Balance carried to Balance Sheet (70.10) (65.41)

India continue to be a major sourcing destination for buyers across the globe. India''s share of the world''s textile and apparel exports stands at 4.5 per cent. It is estimated that due to the increasing shift of textile and apparel production to Asian nations and the deteriorating export-competitiveness of China, this fgure will grow to 8 per cent by 2020, with a total exports value of $82 billion. This growth, from 4.5 per cent to 8 per cent of world trade, will open up huge potential for Indian players. Although the Apparel Exports Market is looking up in the front end, the business and pricing conditions continue to remain tough. The competition from Indonesia, Bangladesh, Vietnam and Turkey is intense due to their low cost of manufacturing.

Your Company has recorded total revenues of Rs.186 crs for the fnancial year ending 31st March 2013 as compared to Rs.190 crs previous year. The operating margins are at Rs.6.25 crs as compared to Rs.9.85 crs last year. The increase in operating costs clubbed with reduction in turnover has contributed to lower margins for the current year.

Your Company was not able to gain on the fall in the Rupee against the USD until November 2012 on account of the USD-INR Option Contracts entered by the Company during 2007-08. With these contracts having come to an end in October 2012, your Company is expected to beneft by realising the full value of INR against USD.

The Young Management Team in place constantly strives to mitigate the problems, improve the fnancial health of the Company by controlling the losses and the Company foresees strong signs of revival.

Finance and Accounts

There is no provision for Income Tax, due to the loss incurred by the Company during the year. The Company has recognized Deferred Tax Asset in unabsorbed depreciation and accumulated losses to the extent of corresponding deferred tax liability on the difference between the book balance and written down value of fxed assets under Income Tax.

The Company has not accepted any deposits within the meaning of Section 58A and 58AA of the Companies Act 1956.

The Company''s networth was eroded as on 31st March 2010 under the provisions of Sick Industrial Companies Act (SICA). Accordingly the company fled for reference with the Board for Industrial and Financial Reconstruction (BIFR) under section 15(1) of SICA. The reference was considered by BIFR and upon submissions made and material on record, BIFR has declared the Company as Sick Industrial Company u/s 3(1)(o) of SICA vide its order dated 19th April 2011. BIFR appointed State Bank of India (SBI) as the Operating Agency (OA) and issued directions to submit a Rehabilitation Scheme as per section 18 of SICA.

State Bank of India has sanctioned a Re-structuring Package to the Company vide its Sanction Letter dated 16th November 2012. The package includes Conversion of portion of Term loans into Equity and 1% Cumulative Redeemable Preference Shares, re-schedulement of Term loan repayments and interest concessions. SBI as submitted the Package for approval before Hon''ble BIFR. The approval from HDFC Bank on the

Re-structuring Package is awaited.

The Term loan obligations of State Bank of India in accordance with the Sanction letter dated 16th November 2012 have been met in full. However the interest commitments of Rs.4.01 crs against Working Capital Loans and Term loans is pending to be serviced from August 2012.

With HDFC Bank yet to approve the re-structuring package, the Company has defaulted in repayment of Term loans amounting to Rs.2.51 crs and Interest commitments of Rs.2.57 crs. The term loan repayment is pending from February 2012, while the interest commitment remains unpaid since February 2011. The Accounts of the Company have been prepared on the basis of ''going concern concept'' despite negative networth as on 31st March 2013 in view of the various strategic initiatives that the Company is exploring and also considering the Rehabilitation Scheme submitted to Banks / BIFR. The Management is confdent of being able to continue and operate the business and bring positive results in future. Share Capital

State Bank of India, in its Sanction letter dated 16th November 2012 has stipulated that Promoters should cause equity infusion of Rs.7 crs in phases toward their contribution. Accordingly your Company was in receipt of Rs.3.50 crs as frst tranche of the equity infusion during October / November 2012.

The Company made preferential allotment of 14,00,000 Equity Shares at the face value of Rs.10/- per share to M/s Celebrity Connections, a partnership frm wherein the promoters Mr. V. Rajagopal and Mrs. Rama Rajagopal are the only partners and 21,00,000 Equity Shares at the face value of Rs.10/- per share to M/s Davos International Fund, a Foreign Institutional Investor during January 2013 towards their contribution to Equity. The allotment was approved by the Shareholders in the Extra- Ordinary General Meeting held in October 2012.

Consequent to the above, the Share Capital of the Company has increased by Rs.3.50 crs.

Dividend

In view of the business loss for the year, no dividend is being recommended.

Personnel

The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions during these tough times.

Directors

During the year under review, Mr. S. Surya Narayanan has resigned from the post of

Managing Director. The Board places on record its appreciation for his tremendous contribution during his tenure.

Consequent to his resignation, Mr. Charath Ram Narsimhan, the group Chief Executive Offcer has been elevated to the post of Managing Director. Pursuant to Section 255 of the Companies Act 1956, Mr. N.K. Ranganath and Mrs.

Nidhi Reddy retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment. Auditors

M/s Anil Nair & Associates, Chartered Accountants, Chennai and M/s CNGSN & Associates, Chartered Accountants, Chennai, the Joint Auditors of the Company, retire at the ensuing Annual General Meeting and are eligible for reappointment.

Cost Auditor

Pursuant to the provisions under Section 233B of the Companies Act, 1956 your Company has appointed M/s. Rafq & Associates, as Cost Auditor of your Company for the fnancial year 2013-14.

Corporate Governance Report and Management Discussion and Analysis Statement

A report on Corporate Governance is attached to this Report as also a Management Discussion and Analysis statement.

Particulars as per Section 217 of the Companies Act, 1956

A) Pursuant to the requirement of Section 217 (2AA) of the Companies Act, 1956 and based on the representations received, your Directors hereby confrm that:

i. In the preparation of the Annual Accounts for the year ended 31st March 2013, the applicable Accounting Standards have been followed and there are no material departures;

ii. The 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 at the end of the fnancial year and of the proft or loss of the Company for that period;

iii. The Directors have taken proper and suffcient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. The Directors have prepared the Annual Accounts on a going concern basis.

B) During the year under review, there were no employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011.

C) The information pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given below:

i. Conservation of Energy:

The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption: Not applicable.

iii. Foreign Exchange Earning and Outgo:

Total Foreign exchange earned (FOB Value) Rs.165.44 crs

Total Foreign exchange outgo Rs. 48.40 crs

Appreciation

The Directors are sincerely thankful to you – the esteemed shareholders, customers, business partners and commercial banks for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround. The Directors thank the Banks, particularly State Bank of India for all their sustained support throughout the journey of the Company.

For and on Behalf of theBoard

Dated : 3rd May 2013 V.Rajagopal

Place : Chennai, Chairman


Mar 31, 2012

The Directors hereby present the 23rd Annual Report along with the audited statements of the Company for the year ended 31st March 2012.

Overview

Countries are increasingly eliminating their trade barriers and international trade now truly spans the globe. Products and services

come from everywhere and go everywhere. This, as well as the liberalization of large financial flows, makes countries very dependent on what happens in the international economy. India has some leeway to get reforms back on track with its long-term growth prospects firm, according to the resources.

India's textile and apparel exports may have missed the $33-billion target in 2011-12 fiscal despite a weak rupee, as demand from biggest market Europe dwindled due to the sovereign debt crisis.

The country's apparel shipment inched up by just 1.5 per cent to 1.28 billion in February, the third worst monthly performance this fiscal, as the crisis in Europe intensified. Apparel exports between April and February, however, rose 19 per cent in dollar terms to $12.14 billion due to an initial pick-up and a 16 per cent depreciation of the rupee against the dollar that made overseas dispatches more remunerative. Apparel exports account for nearly half of the total shipments by the textile and garments industry.

The government expected the exports to rise in 2011-12 as demand seemed to have returned after the global financial turmoil in 2008, but the debt crisis in Europe erupted, jeopardizing shipment prospects. EU and the US, the worst affected nations in the current debt crisis, together account for around 65% of India's textile exports.

The textile industry accounts for around 14 percent of industrial and more than 10 percent of the country's total exports. It is the largest jobs generator after agriculture, employing around 35 million people across various segments.

To prop up the cash-strapped textiles sector, the Industry has requested for the restructuring of loans as well as interest subsidy to the garments and knit-wear sectors grappling with the economic slowdown of their biggest export markets that forced a sudden plunge of product prices after two successive years of relentless rise in raw material costs.

With the Reserve Bank of India rejecting the proposal, the fortune of the Exporters is again reserved.

Financial Highlights - Rs. In Crs

FY 2011-12 FY 2010-11

Revenue From operations 190.38 188.45

Gross Profit / (Loss) before interest 9.85 3.31

and depreciation

Interest 16.36 14.06

Profit / (Loss) before depreciation (6.51) (10.75)

and tax

Depreciation 7.16 8.76

Profit / (Loss) before Extra-Ordinary (13.67) (19.51)

Income

Extra-Ordinary Income - -

Profit / (Loss) before tax (13.67) (19.51)

Provision for Taxation

Profit / (Loss) after tax (13.67) (19.51)

Balance brought forward from (51.75) (134.63)

previous year

Less: Accumulated losses - 102.39

written off pursuant to Scheme of

Arrangement

Balance carried to Balance Sheet (65.42) (51.75)

The Company's revenues stood at Rs.190 crs as against Rs.188 crs previous year. The operational margins have improved drastically despite of marginal increase in revenues mainly on account of various strategic initiatives undertaken by your company including adding of new premium clients, reign of business mix both on geographical as well as on product lines, rationalization of capacities, tight cost control mechanisms and better deployment of resources.

Finance and Accounts

There is no provision for Income Tax, due to the loss incurred by the Company during the year. The Company has recognized Deferred Tax Asset in unabsorbed depreciation and accumulated losses to the extent of corresponding deferred tax liability on the difference between the book balance and written down value of fixed assets under Income Tax.

The Company has not accepted any deposits within the meaning of Section 58A and 58AA of the Companies Act 1956.

The Company was in receipt of interest subsidy of Rs.2.52 crs under Technology Up gradation Fund (TUF) Scheme during the year and the same has been deducted from Interest on Term loan in the Financial Statements.

The Company's net worth was eroded as on 31st March 2010 under the provisions of Sick Industrial Companies Act (SICA). Accordingly the company filed for reference with the Board for Industrial and Financial Reconstruction (BIFR) under section 15(1) of SICA. The reference was considered by BIFR and upon submissions made and material on record, BIFR has declared the Company as Sick Industrial Company u/s 3(1)(o) of SICA vide its order dated 19th April 2011. BIFR issued directions to the lenders and to the Company to submit a Rehabilitation Scheme as per section 18 of SICA.

The Term loan obligations and Interest Commitments have been met in full with respect to the State Bank of India in accordance with the Terms and Conditions of the Sanction letter. However the Company has defaulted in repayments of Term loans amounting to Rs.0.22 crs and Interest Commitments amounting to Rs.1.55 crs with respect to HDFC Bank's Borrowings. The Term loan repayment is pending since February 2012 while the interest commitment remains unpaid since January 2011.

The Company submitted its Draft Rehabilitation Proposal (DRS) to the Operating Agency, State Bank of India and is awaiting the sanction of the Second Re-structuring Package.

The Cut-off Date for the DRS is 31st March 2011 as per the Orders of BIFR and the Company has sought certain reliefs / concessions in Term loans / interest rates with the lenders.

The Accounts of the Company have been prepared on the basis of 'going concern concept' despite negative net worth as on 31st March 2012 in view of the various strategic initiatives that the Company is exploring and also considering the Rehabilitation Scheme submitted to Banks / BIFR. The Management is confident of being able to continue and operate the business and bring positive results in future.

Share Capital

There is no addition to the share capital during the year.

Dividend

In view of the business loss for the year, no dividend is being recommended.

Personnel

The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions during these tough times.

Directors

Pursuant to Section 255 of the Companies Act 1956, Mr. N.K. Ranganath and Mrs. Nidhi Reddy retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for reappointment.

Auditors

M/s Anil Nair & Associates, Chartered Accountants, Chennai and M/s CNGSN & Associates, Chartered Accountants, Chennai, the Joint Auditors of the Company, retire at the ensuing Annual General Meeting and are eligible for reappointment.

Corporate Governance Report and Management Discussion and Analysis Statement

A report on Corporate Governance is attached to this Report as also a Management Discussion and Analysis statement.

Particulars as per Section 217 of the Companies Act, 1956

A) Pursuant to the requirement of Section 217 (2AA) of the Companies

Act, 1956 and based on the representations received, your Directors hereby confirm that:

i. In the preparation of the Annual Accounts for the year ended 31st March 2012, the applicable Accounting Standards have been followed and there are no material departures;

ii. The 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 at the end of the financial year and of the profit or loss of the Company for that period;

iii. The Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv. The Directors have prepared the Annual Accounts on a going concern basis.

B) During the year under review, there were no employees covered under the provisions of Section 217(2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Amendment Rules, 2011.

C) The information pursuant to Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is given below:

i. Conservation of Energy:

The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis.

ii. Technology absorption:

Not applicable.

iii. Foreign Exchange Earning and Outgo:

Total Foreign exchange earned (FOB Value) Rs.181.35 crs Total Foreign exchange outgo Rs. 66.44 crs

Appreciation

The Directors are sincerely thankful to you - the esteemed shareholders, customers, business partners, financial / investment institutions and commercial banks for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround. The Directors thank the Banks, particularly State Bank of India for all their sustained support throughout the journey of the Company.

For and on Behalf of the Board

V. Rajagopal

Chennai, 15th May 2012 Chairman

 
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