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Directors Report of Faze Three Ltd.

Mar 31, 2015

Dear Shareholders,

The Directors are presenting the 30th Annual Report of your Company and the Audited Financial Statements for the year ended 31st March 2015.

1. FINANCIAL RESULTS:

(Rs. in Lacs) Particulars For the Year For the Year ended ended 31.03.2015 31.03.2014

Revenue from Operations 21762.07 23068.95

Other Income 231.14 253.37

Profit before Depreciation & Amortization, Finance Cost and Exceptional Items 1806.10 2549.02

Less:

Depreciation & Amortization 492.05 494.49

Finance Cost 1418.45 1475.66

Exceptional Items 325.79 716.79

Profit / (Loss) before taxation (430.19) (137.91)

Provision for taxation (incl. deferred tax) - 15.48

Profit/ (Loss) for the year carried to Balance Sheet (430.19) (153.39)

2. OPERATIONS:

During the year under review, the Company's revenue from operations stood at Rs. 21762.07 Lacs as against Rs. 23068.95 Lacs in the previous year. The Loss Before Tax stood at Rs. 430.19 Lacs. The Company has suffered a Net Loss of Rs. 430.19 Lacs for the financial year ended 31.03.2015.

The Company had operational profit of Rs. 1806.10 Lacs as compared to Rs. 2549.02 Lacs in the previous year. The reduction of operational profit is due to reduction in turnover of the Company by 6% as compared to previous year.

As reported in earlier years the company is having liabilities towards Foreign Currency Convertible Bonds of US $ 8 Mln and towards invocation of Corporate Guarantee given by the Company to its Wholly owned subsidiary company M/s. Pana Textil GmbH of Euro 4.4 Mln, which is under liquidation process. Company has provided the liabilities in the books of accounts towards applicable annual charge & forex fluctuation on the said liabilities as claimed by the Bank from time to time. Due to the said provisions the company's profitability has been adversely affected.

3. DIVIDEND:

Due to financial losses, your company has not recommended any dividend for the year.

4. RESERVES:

The Company has not transferred any amount to reserves due to losses in current financial year.

5. DEPOSITS:

The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014, or under Chapter V of the Companies Act, 2013.

6. RELATED PARTY TRANSACTIONS:

All transactions entered into with related party as defined under Section 188(3) of the Companies Act, 2013 and Clause 49 of the Listing agreement during the financial year were in the ordinary course of business and on arms length pricing basis and do not attract the provisions of Section 188 of the Companies Act, 2013. There were no materially significant transactions with related parties during the financial year which were in conflict with the interest of the Company. Suitable disclosure as required by the Accounting Standards (AS18) has been made in the notes to the Financial Statements. The Company has proposed to take approval of shareholders regarding related party transactions entered into by the Company during financial year and propose to be enter into with related parties in next financial year through Special Resolution.

7. INTERNAL FINANCIAL CONTROLS:

The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

8. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

For the financial year under review as stipulated in Clause 49 of the Listing Agreement entered into with the Stock Exchange, Management Discussion and Analysis Report is Annexed thereto.

9. CORPORATE GOVERNANCE:

The Company is adhering to good corporate governance practices in every sphere of its operations. The Company has taken adequate steps to comply with the applicable provisions of Corporate Governance as stipulated in Clause 49 of the Listing Agreement entered into with the Stock Exchange. A separate report on Corporate Governance is Annexed thereto.

10. BOARD MEETINGS:

During the year under review, the Company has conducted 8 (Eight) Board Meetings on 1st April, 2014, 28th April, 2014, 9th May, 2014, 29th May, 2014, 14th August, 2014, 14th November, 2014, 29th December, 2014 and 13th February, 2015.

11. AUDIT COMMITTEE:

The Audit Committee comprises of four members namely Mr. Vasudeva Rao (Chairman), Mr. Rajiv Rai Sachdev, Mr. Ajay Anand and Mr. Sanjay Anand. All the recommendations made by the Audit Committee were accepted by the Board.

The Audit Committee met 4 (Four) times in the year on 29th May, 2014, 14th August, 2014, 14th November, 2014 and 13th February, 2015.

12. REMUNERATION COMMITTEE:

The Company has constituted a Remuneration Committee pursuant to Section 178(1) of the Companies Act, 2013 and has defined the policy on Director's appointment and payment of remuneration including criteria for determining qualifications, positive attributes and independence of a Directors.

The Remuneration Committee comprises of two members namely Mr. Vasudeva Rao (Chairman) and Mr. Rajiv Rai Sachdev. All the recommendations made by the Committee were accepted by the Board.

13. SUBSIDIARY COMPANY:

The Company's Wholly owned subsidiary company M/s. Pana Textil GmbH has filed an insolvency petition in the German Court. The German court has completed the insolvency proceedings and the company is in the process of liquidation.

14. EXTRACT OF ANNUAL RETURN:

The details forming part of extract of the annual return in Form MGT - 9 is Annexed to this report.

15. DIRECTORS' RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your directors make the following statement in terms of Section 134 (3) (c) of the Companies Act, 2013:

(i) that in the preparation of the Annual Financial Statements for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) that such accounting policies as mentioned in Notes to Financial Statements have been selected and applied consistently and made judgments and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2015 and of the loss of the Company for the year ended on that date;

(iii) that proper and sufficient care 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;

(iv) that the Annual Financial Statements have been prepared on a going concern basis;

(v) that the proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

(vi) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

16. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION ETC. & FOREIGN EXCHANGE EARNINGS AND OUTGOINGS:

The information as required under Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of The Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings and outgoings is annexed to this report.

17. RISK MANAGEMENT POLICY:

The Company has in place a mechanism to inform Board of Directors about the Risk assessment and risk minimization procedures and periodical reviews to ensure that risk is controlled by the Management through the means of a properly laid-out framework.

18. CORPORATE RESPONSIBILITY STATEMENT (CSR):

The company is not required to comply with section 135 of Companies Act, 2013 along with rules made in this behalf as company is having negative Networth and is incurring losses since last 4 years.

19. PERFORMANCE EVALUATION OF BOARD:

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, Remuneration and other Committees. The same is found to be satisfactory.

20. DECLARATION FROM INDEPENDENT DIRECTORS:

The Company has received necessary declaration from Independent Director of the Company Mr. Vasudeva Rao. Under Section 149(7) of the Companies Act, 2013, he meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013.

21. STATUTORY AUDITORS:

M/s. Thakur Vaidyanath Aiyar & Co., Chartered Accountants, Mumbai (Firm Rgn. No. 000038N) being eligible offer themselves for re-appointment. M/s. Thakur Vaidyanath Aiyar & Co. has confirmed that the appointment will be within the prescribed limits specified in Section 139 of the Companies Act, 2013. Members are requested to appoint the auditors.

22. SECRETARIAL AUDIT:

Pursuant to the provisions of Section 204 of Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Sanjay Dholakia & Associates, Practicing Company Secretary to undertake Secretarial Audit. The Report is annexed to this Annual Report.

23. OBSERVATIONS – AUDITOR & SECRETARIAL AUDITOR:

Statutory Auditor:

As regards to qualifications contained in the Auditors Report, the Auditor's views are self-explanatory. The Board of Directors shall take necessary steps towards depreciation calculation as per Companies Act, 2013 in the following Financial year.

Secretarial Auditor:

As mentioned in the report, the Company was required to appoint a Chief Financial Officer (CFO as KMP) and a Woman Director on the Board. Your Directors would like to inform you that the Company is still in the process of appointing the same.

24. COST RECORDS:

Pursuant to the directives of the Central Government under the provisions of Section 148(1) of Companies Act, 2013, Company has maintained cost records and included the same in Books of Accounts.

25. ACKNOWLEDGMENT:

Your Directors wish to place on record their appreciation for the co-operation extended by all the employees, Bankers, Financial Institutions, various State and Central Government authorities and Stakeholders.

For and on behalf of the Board

FOR FAZE THREE LIMITED

Place: Mumbai

Date : 30th May, 2015 Ajay Anand

Chairman & Managing Director


Mar 31, 2014

Dear Members,

The Directors present the 29th Annual Report of the Company together with its Audited Statement of Profit and Loss for the year ended March 31, 2014 and the Balance Sheet as on that date:

FINANCIAL RESULTS (Rs. Lacs)

Particulars For the Year For the Year ended ended 31.03.2014 31.03.2013

Revenue from Operations (net) 23068.95 18880.50

Other Income 253.37 525.28

Profit before interest, tax, depreciation

& amortization, finance cost and exceptional 2549.03 772.17 items

Depreciation & amortization expenses 494.49 489.87

Finance Cost/Interest 1475.66 1469.99

Exceptional items 716.79 917.30

Profit/(Loss) Before Tax (137.91) (2104.99)

Less: Tax Expenses

Deferred Tax 15.48 45.96

Profit/ (Loss) After Tax (153.39) (2150.95)

COMPANY OPERATIONS

The revenue from operations stood at Rs. 23,068.95 Lacs as against Rs. 18,880.50 Lacs during the previous year. The revenue from other income stood at Rs. 253.37 Lacs as against Rs. 525.28 Lacs during the previous year.

During the year under review, the Company earned a profit of Rs. 2,549.03 Lacs before interest, tax, depreciation & amortization, finance cost and exceptional items as against of Rs. 772.17 Lacs in the previous year. However, the Company has suffered a net loss of Rs. 153.39 Lacs as against the loss of Rs. 2,150.95 Lacs during the previous year.

The Company's revenue from Exports has increased from Rs. 15,589.73 Lacs to Rs. 19,135.22 Lacs, a significant growth of 23% from previous year.

DIVIDEND

In view of the losses reported by the Company, your Directors have not recommended any dividend.

PERFORMANCE REVIEW

The FY 2012-13 has been an extremely challenging year for the Company. The slow recovery of the US economy, continued crisis in the Euro-zone and the slowdown in the Chinese economy, especially low exports of textiles, have put pressure on the overall economy. These, coupled with the steep increase in input cost, labour cost and inflationary trends in the markets have adversely affected the industry as well as the Company. A weaker Rupee against the dollar has helped the company to have better sales realization against the export orders and reduced the impact of various challenges in the Industry. However, the increased cost of borrowings and provision for foreign exchange loss on revaluation of FCCB liabilities have adversely affected the company's profits.

BUSINESS OVERVIEW

The GDP growth in India during the year is estimated to have been around 4.7%. Inflation was at very high levels during the first half of the year, but has gradually come down to 6% by the end of the year. The Indian Rupee's recent depreciation against the US$ has not been helpful in getting the economy back on growth path. However, the ushering in of a stable Government, post elections, has revived sentiments and lifted investor confidence which would pave the way for growth in the current financial year.

During the year 2013, the textile industry registered a growth of 13.91% in US$ terms and 27.04% in Rupee terms. Textiles exports have touched US$ 41.58 billion in 2013-14 as against US$ 36.50 billion FY 2012-13. The share of textiles export in the Indian Exports Basket significantly increased from 12.15% to 13.26% in USD during 2013-14 as against overall Indian export growth of 4.37%.

The Indian home furnishing industry is facing tough competition from China. However, the Industry has sustained itself through focus, primarily on value added products, which makes it popular and distinct across the global markets. With changing needs, innovations and also increasing customer demands, the home furnishing industry has expanded with many new players entering the market, but India still maintains its stronghold in the global home furnishing market.

In spite of the adverse market conditions prevailing in the global market and various businesses in which the Company operates, the overall performance of the Company during the year has significantly improved compared to that of the previous year. The overall sales of the company has increased by 24% and the exports have increased by 23% which is a noteworthy performance considering the subdued global textile markets. With the global economy expected to recover moderately, particularly on account of performance in some advanced economies, the economy and industry is looking forward to better growth prospects in 2014-15 and in turn the Company is expecting to sustain its growth and perform better in the current financial year.

SUBSIDIARY COMPANY:

The Ministry of Corporate Affairs has issued direction under section 212 (8) of the Companies Act, 1956 vide general circular No. 2/ 2011 dated February 8, 2011 and in accordance with the same, the Balance Sheet, the Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company.

As reported last year, the Company's wholly owned subsidiary company of M/s Pana Textil GmbH has filed an insolvency petition in the German Court. The German court has completed the insolvency proceedings and the company is in the process of liquidation.

FIXED DEPOSITS

Your Company has not accepted any deposits from public, and no amount of principal or interest was outstanding on the date of the Balance Sheet.

DIRECTORS

Mr. Rajiv Rai Sachdev is a Non-Executive Non-Independent Director, retires at the ensuing Annual General Meeting of the Company, being eligible offer himself for re-appointment. A Brief resume of Mr. Rajiv Rai Sachdev is forming part of the Corporate Governance Report.

Mr. Ajay Anand is the one of Promoters of the Company. The Board of directors appointed him as Additional Director on the Board of the Company w.e.f. 1st October 2013 and appointed as Managing Director w.e.f. 1st April 2014.

The Board of Directors had re-appointed Mr. Sanjay Anand as Whole Time Director of the Company and the same was approved by the members of the Company at their meeting held on 29th September 2013. The Company had an application to the Central Government for payment of remuneration and the same was not been considered for approval and his re-appointment was not regularized. Hence, the Board of Directors has appointed Mr. Sanjay Anand as Whole time Director of the Company w.e.f. 1st April 2014 under the provisions of Section 196, 198, 203 and read with Schedule V of the Companies Act, 2013.

Mrs. Rashmi Anand , Whole Time Director of the Company resigned from the Board w.e.f. 17th June 2013. The Board wishes to place on record its appreciation for the contribution made by Mrs. Rashni Anand in the growth of the Company and wishes her the best for her future endeavors.

As per the provision of Section 149 and other applicable provisions, if any, of the Companies Act, 2013, Mr. Vasudeva Rao, is proposed to be appointed as Independent Directors of the Company for a period of five years effecting from 1st April 2014 to 31st March 2019.

Your approval for their appointment of aforesaid Directors have been sought in the Notice convening the Annual General Meeting of the Company.

AUDITORS

M/s Thakur Vaidyanath Aiyar & Co. Chartered Accountants, Firm Registration No. 000038N, retire at the forthcoming Annual General Meeting and are eligible for reappointment. The retiring Auditors have furnished a Certificate of their eligibility for re-appointment under section 139 (1) of the Companies Act, 2013 (corresponding to section 224 (1B) of Companies Act 1956) and have indicated their willingness to continue. Members are requested to appoint the auditors and fix their remuneration.

AUDITORS' REPORT:

The Auditors' Report to the Shareholders does not contain any reservation, qualification or adverse remark.

COST AUDITORS AND COST AUDIT REPORT:

Pursuant to the directives of the Central Government under the provisions of Section 148 of Companies Act 2013 (corresponding to section 233B of the Companies Act, 1956), qualified Cost Auditors have been appointed to conduct cost audits relating to several products manufactured by the Company.

REFERENCE TO BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR)

The Company has filed a Reference under the provisions of Section 15A of the Sick Industrial (Special Provisions) Act, 1985 with Board for Industrial and Financial Reconstruction (BIFR) based on the Audited Financial Accounts of the Company for year ended 31.03.2012. BIFR has accepted the application and issued a Reference No. 48/2012. The said reference is pending before BIFR.

FOREIGN CURRENCY CONVERTIBLE BONDS

The Company had issued Foreign Currency Convertible Bonds of US$ 8.00 million on 26.12.2006, which were due for redemption on 27.12.2011. The company could not redeem the said bonds on due date. The Company has made relevant provisions regarding principal, interest and revaluation of liability in the Statement of Profit & Loss.

LEGAL SUITS

As reported last year, four winding petitions were filed against the Company in the Bombay High Court. The proceedings of all four petitions are pending before the Hon'ble High Court and the Company is strongly contending the cases in the High Court.

PARTICULARS OF EMPLOYEE

There are no employees drawing salary as required to be mentioned under Section 217 (2A) of the Companies Act, 1956 read with Companies (Particulars of Employees) Rules, 1975.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars required under Section 217 of the Companies Act, 1956 read with the Companies (Disclosure of Particulars in the Report of Board of Directors) Rules, 1988 is given in Annexure to this Report.

DIRECTOR'S RESPONSIBILITY STATEMENT

The Directors confirm that:

(i) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent 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 had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provision of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) The directors had prepared the annual accounts on "going concern basis".

CORPORATE GOVERNANCE

A separate section on Corporate Governance is included in the Annual Report and the Certificate from the Company's auditors confirming the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with the Stock Exchanges is annexed thereto.

ACKNOWLEDGMENT

The Board places on record its deep appreciation of the devoted services of the loyal workers, executives and other staff of the Company, who have contributed to the performance and the Company's continued inherent strength. It also extends its gratitude to the Central and various State Governments, the investors, the bankers, financial institutions and district level authorities for the support extended to the Company from time to time. Shareholders' appreciation of the management's efforts expressed at the general meetings of the Company and otherwise, is a great fillip in the untiring effort for better performance year after year.

For and on behalf of the Board

Place: Mumbai

Date: 29.05.2014 Ajay Anand Chairman & Managing Director



 
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