Home  »  Company  »  Surat Textile Mi  »  Quotes  »  Directors Report
Enter the first few characters of Company and click 'Go'

Directors Report of Surat Textile Mills Ltd.

Mar 31, 2015

Dear Members,

The Directors have the pleasure of presenting the Sixty-ninth Annual Report on the business and operations of the Company, together with the Audited Statements of Accounts for the year ended 31st March, 2015.

Financial Results

The Company's performance during the financial year ended 31st March, 2015 as compared to the previous financial year, is summarized below.

(Rs. in crores)

2014-15 2013-14

Total Revenue from Operations 129.84 182.70 (Net)

Earning Before Interest, 5.54 4.36 Depreciation and Tax (EBIDTA)

Less: FinanceCosts 0.70 1.35

Depreciation 1.26 1.31

Profit before Tax 3.58 1.70

Less: Tax Expense 1.02 0.54

Profit after Tax 2.56 1.16

Review of Operations

Your Company achieved turnover of Rs.127.55 crore as compared to Rs.181.51 crore in the previous year. The decline in turnover was primarily on account of lower capacity utilization, over supply situation in the domestic market and lower demand growth.

Our focus on operational efficiency with better working capital management and better network helped us to remain competitive and improve our EBIDTA.

Profit before interest, depreciation and tax was higher at Rs.5.54 crore as compared to Rs.4.36 crore thereby registering a growth of about 27%. The profit after tax was also higher at Rs.2.56 crore as compared to the profit of Rs.1.16 crore in the previous year.

During the FY 2014-15, your Company faced several challenges. Crude prices saw a sharp decline which triggered reduction in prices of PTA and MEG prices. This resulted in inventory losses. Moreover, demand for polyester was subdued in the domestic as well as global markets. The operating margins were adversely affected owing to oversupply of finished product, more particularly in polyester chips and yarn segments resulting in lower margins and capacity utilization.

The sale of chips was lower at 9034 MT for the year 2014-15 as compared to 13064 MT in the previous year. The total sale of polyester filament yarn (PFY) was lower at 1861 MT as compared to 3429 MT in the previous year.

The overall production of Chips was at 10062 MT during the year 2014-15 as compared to 15363 MT achieved in the previous year. Whereas the production of PFY during the year remained lower at 1682 MT as compared to 3314 MT in the previous year. The Company had to curtail the production during the year due to volatility of raw material prices and to reduce the inventory loss.

Your Company also focused on margin improvement by optimum allocation of its resources through cost reduction at manufacturing level. The operating margins, however, remained under pressure.

The Company during the last quarter of the FY 2014-15 discontinued the manufacturing activity at its Synthetic Fibre Spinning (SFS) plant at Village Vareli, Taluka Palsana, Dist. Surat, which had become unviable due to competitive market conditions.

Dividend

In order to strengthen the reserves of the Company, your directors consider it prudent to plough back the profits and not to recommend any dividend for the financial year 2014-15.

Transfer to Reserve

It is not proposed to transfer any amount to reserves out of the profits earned during the financial year 2014-15.

Nature of Business

The Company is engaged in the business of manufacturing polyester chips and differentiated partially oriented yarn (POY). The Company is a regular supplier of bright, cationic, micro denier, and fine denier yarns in the market.

During the year under review, there was no change in the nature of business of the Company.

Share Capital

The Issued, Subscribed and Paid-up equity share capital as on 31st March, 2015 was Rs.2220.64 Lacs. During the year under review, the Company has not issued shares with differential voting rights, nor granted stock options nor sweat equity. As on 31st March, 2015, none of the Directors of the Company holds equity shares in the Company.

Disclosures in respect of voting rights not directly exercised by employees

There are no shares held by trustees for the benefit of employees and hence no disclosure under Rule 16(4) of the Companies (Share Capital and Debentures) Rules, 2014 has been furnished.

Directors and Key Managerial Personnel

Pursuant to the provisions of Section 149 of the Companies Act, 2013, which came into effect from 1st April, 2014, Shri Harishchandra Bharucha was appointed as an independent director at the 68th Annual General Meeting of the Company on 23rd July, 2014. The terms and conditions of appointment of Shri Bharucha as an independent director are as per Schedule IV of the Companies Act, 2013. Shri Bharucha has submitted a declaration that he meets the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and there has been no change in the circumstances which may affect his status as independent director during the year.

Shri Yogesh C. Papaiya was appointed as the Whole-time Director designated as Executive Director & Chief Financial Officer (CFO) of the Company for a period of 5 (five) years with effect from 11th August, 2014, subject to the approval ofthe members.

Shri Ketan Jariwala and Smt. Anita Mandrekar were appointed as Additional Directors (Independent) on the Board with effect from 11th August, 2014 and 28th May, 2015 respectively.

The Company has received notice under Section 160 of the Companies Act, 2013 along with the requisite deposit proposing the appointment of Shri Ketan Jariwala and Shri Anita Mandrekar.

The resolutions seeking approval of the Members for the appointment of Shri Yogesh C. Papaiya, Shri Ketan Jariwala and Smt. Anita Mandrekar have been incorporated in the Notice of the ensuing Annual General Meeting ofthe Company along with brief details about them.

Pursuant to the provisions of Section 152 ofthe Companies Act, 2013, Shri Yogesh C. Papaiya (DIN: 00023985), Director, retires by rotation at the forthcoming Annual General Meeting, and being eligible offers himself for re-appointment.

During the year, the non-executive directors ofthe Company have no pecuniary relationship of transactions with the Company.

Shri M. R. Momaya, Managing Director, Shri Yogesh C. Papaiya, Wholetime Director and CFO and Ms. Hanisha Arora, Company Secretary and Compliance Officer were designated as "Key Managerial Personnel" of the Company pursuant to Section 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Familiarisation programme for Independent Directors

Pursuant to the provisions of Clause 49 of the Listing Agreement, the Company has formulated a programme for familiarizing the Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company etc. through various initiatives. The details of the aforementioned programme is available on the Company's website www.surattextilemillsltd.com.

Declaration by Independent Directors

Declaration given by Independent Directors meeting the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 is received and taken on record.

Finance

Your Company has repaid Secured Rupee Term Loan from banks to the tune of Rs.47.05 Lacs during the year. No fresh Term Loan was availed by the Company during the year.

Corporate Governance

Your Company is fully compliant with the Corporate Governance guidelines, as laid out in Clause 49 of the Listing Agreement. All the Directors (and also the members ofthe Senior Management) have affirmed in writing their compliance with and adherence to the Code of Conduct adopted by the Company. The details of the Code of Conduct are furnished in the Corporate Governance Report attached as Annexure G to this Report.

The statutory auditors of the Company have examined the requirements of Corporate Governance with reference to Clause 49 of the Listing Agreement and have certified the compliance, as required under Clause 49 of the Listing Agreement. The Certificate in this regard is attached to this Report.

Directors' Responsibility Statement

Pursuant to Section 134(5) ofthe Companies Act, 2013, the Board of Directors of the Company, to the best of their knowledge and ability, confirm that:

i. in the preparation of the annual accounts, the applicable accounting standards have been followed and there 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 as at the end of the financial year and of the profit of the Company for that period;

iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act 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 such internal financial controls are adequate and operating effectively;

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.

Policy on directors' appointment and remuneration

The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Director, Senior Management and their remuneration.

The Company does not pay any remuneration to the Non-Executive / Independent Directors of the Company other then siffing fees for attending the meetings of the Board and Committees of the Board. Remuneration to the Whole-time Director is governed by the relevant provisions of the Act and approvals.

The details pertaining to criteria for determining qualifications, positive attributes, independence of a Director, remuneration policy and other related matters have been provided in the Corporate Governance Report. The Company has displayed the remuneration policy on its website www.surattextilemillsltd.com in terms of Clause 49(VIII)(C)(3) of the Listing Agreement.

The Disclosures pursuant to sub-rule (1) of Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are set out in Annexure C and forms part ofthe Board's Report.

Nomination and Remuneration Committee

A nomination and Remuneration Committee is in existence in accordance with the provisions of sub-section (3) of Section 178 Kindly refer section on Corporate Governance, under the head,

'Nomination and Remuneration Committee' for matters relating to constitution, meeting, functions of the Committee and the remuneration policy formulated by this Committee.

Audit Committee

An Audit Committee is in existence in accordance with the provisions of Section 177 of the Companies Act, 2013. Kindly refer to the section on Corporate Governance, under the head, 'Audit Committee' for matters relating to constitution, meetings and functions of the Committee. During the year there were no instances where the Board had not accepted the recommendation of the Audit Committee.

Internal Auditors

Pursuant to the provisions of Section 138 of the Companies Act,

2013, the Board of Directors of the Company has appointed M/s Aadil Aibada & Associates, Chartered Accountant as Internal Auditors of the Company, for the financial year 2015-16.

Statutory Auditors

Pursuant to the provisions of Section 139 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules, 2014, M/s Natvarlal Vepari & Co., Chartered Accountants, were appointed as the statutory auditors of the Company from the conclusion of the 68th annual general meeting of the Company held on 23rd July, 2014 till the conclusion of the Seventy-one annual general meeting to be held in the year 2017, subject to ratification of their appointment at every annual general meeting.

The appointment of M/s Natvarlal Vepari & Co. Chartered Accountants will be placed before the members at this Annual General Meeting for ratification.

Secretarial Audit

Pursuant to provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Shri Kunjal Dalal, Proprietor K. Dalal & Co., Practicing Company Secretaries, Surat to conduct the Secretarial Audit of the Company for the financial year ended 31st March, 2015.

The Secretarial Audit Report (in Form MR-3) is attached as Annexure-D to this Report.

Auditors Report

As regards the comments in the Auditors' Report, the relevant notes to the Accounts are self explanatory and may be treated as information / explanation submitted by the Board as contemplated under provisions of the Companies Act, 2013.

The report of the Statutory Auditor and Secretarial Auditor does not contain any adverse observation or qualification requiring explanation or comments from the Board under Section 134(3) of the Companies Act, 2013.

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014, as amended by notifications / circulars issued by the Ministry of Corporate Affairs from time to time and as per the recommendation of the Audit Committee, the Board of Directors at their meeting dated 31st May, 2014, appointed M/s P. M. Nanabhoy & Co., Cost Accountants, as the Cost Auditors of the Company for the Financial Year 2014-15.

In respect of Financial Year 2015-16, the Board, based on the recommendation of the Audit Committee, has approved the appointment of M/s P. M. Nanabhoy & Co., Cost Accountants, as the Cost Auditors of the Company on a remuneration of Rs.60,000. As required under the Companies Act, 2013, the remuneration payable to the Cost Auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member's ratification for the remuneration payable to M/s P. M. Nanabhoy & Co., Cost Auditors is included at item No.7 of the Notice convening the Annual General Meeting.

Particulars of Employees and Related disclosure

During the financial year 2014-15, none of the employees of the Company are in receipt of remuneration prescribed in terms of the provision of Section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014. There were 81 permanent employees as on 31st March, 2015.

Public Deposits

During the year under review, your Company did not accept any deposits in terms of Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposit) Rules, 2014. As on April 1, 2014, no amounts were outstanding which were classified 'Deposits' under the applicable provisions of Companies Act, 1956 and hence the requirement for furnishing of details of deposits which are not in compliance with the Chapter V of the Companies Act, 2013 is not applicable.

Conversation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The Company continued its efforts towards effective utilization of energy for reduction in power consumption. The Company is constantly exploring the use of alternate sources of energy that are commensurate with the scale of present operation and the type of product being manufactured. During the year under review, there was no major capital investment on energy conservation equipment.

Information required pursuant to the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 in respect of Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are set out in the Annexure A forming part ofthis Report.

Adequacy of Internal Financial Control

The Company has in place adequate internal financial controls with reference to financial statements. Periodic audits are undertaken on continuous basis covering all the major operations. Reports of internal auditors are reviewed by management from time to time and desired actions are initiated to strengthen the control and effectiveness of the system. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

The Internal Financial Control with reference to financial statements as designed and implemented by the Company are adequate. During the year under review, no material or serious observation has been received from the Internal Auditors of the Company for inefficiency of such controls.

Risk Management Policy

The Board of Directors of the Company has formed a risk management policy to frame, implement and monitor the risk management plan for the Company. The Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. It regularly analyses and takes corrective actions for managing / mitigating the same. The audit committee has additional oversight in the area of financial risks and controls. Your Company's risk management framework ensures compliance with the provisions of Clause 49 of the Listing Agreement. The details of Risk Management as practiced by the Company forms part of this Report.

Corporate Social Responsibility (CSR) Initiatives

As required under Section 135 of the Companies Act, 2013 the CSR committee comprising Shri Ketan Jariwala, Independent Director as the Chairman of the Committee, Shri Harishchandra Bharucha, Independent Director and Shri Yogesh C. Papaiya, Whole-time Director as its members.

The CSR committee has laid down the policy which includes the activities covered under the Companies (Corporate Social Responsibility Policy) Rules, 2014.

The main focus areas covered in the policy includes Education, Health care, social welfare and environment safety etc. The details of amount spent on CSR activity undertaken during the year by the Company are given in the Annexure B to this Report. The CSR policy of the Company is also hosted on the website of the Company, www.surattextilemillsltd.com.

Particulars of contracts or arrangements with related parties

All transactions entered by the Company with Related Parties during the financial year 2014-15 were in the Ordinary Course of Business and at Arm's Length pricing basis. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a conflict with the interest of the Company at large. All Related Party Transactions are placed on a quarterly basis before the Audit Committee for approval and before the board for consideration and noting. None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.

Pursuant to section 134 of the Companies Act, 2013 and Rules made thereunder, particulars of transactions with related parties as required under section 188(1) of the Companies Act, 2013, read with Rule 8(2) of Companies (Accounts) Rules, 2014 is annexed with this Report in Form AOC-2 as Annexure E Suitable disclosures as required under AS-18 have been made in Note 28 of the Notes to the financial statements.

The policy on related party transactions as approved by the Board is uploaded on the Company's website www.surattextilemillsltd. com. The Company's management ensures total adherence to the approved Policy on Related Party Transactions to establish Arm's Length Basis without any compromise.

Board Evaluation

The Board of Directors has carried out an annual evaluation of its own performance, Board committee and individual directors pursuant to the provisions of the Companies Act, 2013 and the corporate governance requirements as prescribed by Securities and Exchange Board of India ("SEBI") under Clause 49 of the Listing Agreements ("Clause 49").

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of the criteria such as the Board composition and structure, effectiveness of board processes, information and functioning etc.

The performance of the committee was evaluated by the board after seeking inputs from the committee members on the basis of the criteria such as the composition of committee, effectiveness of committee meetings, etc.

The board and the Nomination and Remuneration Committee ("NRC") reviewed the performance of the individual directors on the basis of the criteria such as the contribution of the individual directors to the Board and committee meetings. In addition, the Chairman of the Board was also evaluated on the key aspects of his role.

The details of the policy on evaluation of Board's performance is available on the Company's website www.surattextilemillsltd. com.

Meetings of the Board

During the year, 5 Board Meetings and 4 Audit Committee Meetings were convened and held. Directors actively participated in the meetings and contributed valuable inputs on the matters brought before the Board of Directors from time to time.

The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and as per Clause 49 of the Listing Agreement. The details of the meetings are furnished in the Corporate Governance Report.

Independent Directors' Meeting

In compliance with the requirements of Schedule IV of the Companies Act, 2013 and Clause 49(II)(B)(6) of the Listing Agreement a meeting of the Independent Directors was held on 23rd March, 2015, without the participation of the Executive Directors or management personnel. The independent Directors carried out performance evaluation of Non-Independent Directors and the Board of Directors as a whole, performance of Chairman of the Board, the quality, content and timelines of flow of information between the Management and Board, based on the performance Evaluation framework ofthe Company.

The criteria for performance evaluation have been detailed in the Corporate Governance Report forming part of this report.

Vigil Mechanism / Whistle Blower Policy

Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 ofthe Listing Agreement, the Board of Directors has adopted vigil mechanism in the form of Whistle Blower Policy through which its Directors, Employees and Stakeholders can report their genuine concerns about unethical behaviours, actual or suspected fraud or violation of the Company's code of conduct or ethics policy. The said Policy provides for adequate safeguards against victimization and also direct access to the higher levels of supervisors.

Your Company hereby affirms that no Director / employee has been denied access to the Chairman ofthe Audit Committee and that no complaints were received during the year. Brief details about the policy are provided in the Corporate Governance Report, forming part to this Report.

Extract of Annual Return

Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013, Extract of the Annual Return in Form MGT-9, for the financial year ended 31st March, 2015 made under the provisions of Section 92(3) ofthe Act is attached as Annexure F which forms part ofthis Report.

DisclosuresunderSection 134(3)(l) ofthe Companies Act, 2013

There were no material changes and commitment which could affect the Company's financial position has occurred between the end of financial year ofthe Company and the date of this Report.

Disclosure of orders passed by the regulators or courts or tribunal

No significant and material orders have been passed by any Regulators or Court or Tribunal which can have an impact on the going concern status and the Company's operations in future.

Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013

The Company has not granted any loans, guarantees and investments in the financial year ended 31st March, 2015.

Material Subsidiary

During the year ended 31st March, 2015, the Company does not have any material listed / unlisted subsidiary companies as defined in Clause 49 of the Listing Agreement. The details of the policy on determining material unlisted subsidiary of the Company is available on the Company's website www. surattextilemillsltd.com.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has in place an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The Company has constituted an Internal Complaint Committee ('ICC') as required by the said Act with 3 members including 1 member representing Non Governmental Organisation (NGO). The Company is strongly opposed to sexual harassment and employees are made aware about the consequences of such acts and about the constitution of ICC. During the year under review, no complaints were filed with the Committee under the provisions ofthe said Act.

Service of documents through electronic means

All documents, including the Notice and Annual Report shall be sent through electronic transmission in respect of members whose email IDs are registered in their demat account or are otherwise provided by the members. A member shall be entitled to request for physical copy of any such documents.

Indian Economy & Industry Scenario

According to the latest world economic outlook of IMF, India will surpass China in terms of growth to become the fastest growing large economy in the world.

The Mid-year update of the UN World Economic Situation and Prospects (WESP), related recently said, India's economy is projected to grow by 7.6 per cent this year and 7.7 per cent in 2016, overtaking China. China is projected to grow by 7 per cent in 2015 and 6.8 per cent next year.

India's growth is expected to be at least 8 per cent in the current financial year on account of initiative taken by the government to boost investment and growth. With India's economy mostly domestic driven, internal risks far outweigh external risks.

The Indian economy is showing signs of turnaround. The Indian economy is coming out of some tough times in recent years with a steep decline in growth, stubbornly high inflation and a wide current account deficit, but the situation is now improving.

Key reforms in the business environment, to labour market and to infrastructure will bring economic growth back to the higher levels seen in the recent past, create good jobs and improve well-being for all Indians.

While lower crude oil prices would ensure saving on input cost like MEG and PTA, which are the derivatives of crude oil, the poor demand is likely to restrict revenue growth.

Stronger rupee against most other currencies over the previous year will negatively impact the international operations like export of goods / import of raw materials.

Polyester markets faced challenges during the year because of raw material price volatility and over-capacity situation in the industry. Steep decline in raw material prices during the third quarter, put pressure on the margins.

The outlook for the industry for the coming year looks positive as the demand growth is expected to slowly catch-up with the supply.

Risk and concerns

The PFY industry is very competitive with players ranging from large vertically integrated players with very low variable costs to small flexible players who can rapidly respond to market changes in terms of both price and product mix.

An economic slow down- both domestic and global - may have adverse effect on the growth of the PFY industry. Raw material prices fluctuate in line with international prices and will continue to have an impact on the company's performance as raw materials constitute about 75 percent ofthe Company's net sales. Increased differentiated products as well as a reduced working capital facility will help reduce risks.

Large capacity addition by new and existing players may out-pace demand growth which will lead to price instability and pressure on profit margins. Yet, as demand growth resumes its historical trajectory it is a matter of time before healthy margins are restored.

Your company, like any other enterprise, is exposed to business risk which can be an internal as well as external risk. One of the key risks faced by the company in present scenario is the wide and frequent fluctuations in the prices of its raw materials. Major raw materials i.e. PTA and MEG are the derivative of crude and Crude Oil remain highly volatile whole year on account of various international political and economical reasons which are beyond our control.

Inflationary tendency in the economy and deterioration of macro economic indicators, coupled with below normal rain can impact the spending power of the consumer which can affect the volume of business as well as the operating performance of the Company.

Business Outlook:

The growth in demand is expected in the medium term to rely on high consumption in the domestic market. Your Company is committed to build business with long term goal based on your Company's intrinsic strength in terms of product quality and customer network.

Large additions to PTA capacity are expected this financial year that should result in more competitive PTA costs that will improve both domestic and export sales and margins, other things being same.

The introduction of GST should see a level playing field between your Company and other companies which are tax exempt. This should further improve margins for your Company in the long run, other things being same.

The Company will continue to focus on specialty and differentiated products in yarn and chips segment.

Internal Control System and their Adequacy

The Internal Control System provides for well documented policies / guidelines, authorizations and approval procedures. Considering the nature of its business and size of operations, your Company through its Internal Auditors carries out periodic audit based on the plan approved by the Audit Committee. The summary of the Internal Audit observations and status of implementation are submitted to the Audit Committee. The status of implementation of the recommendations is reviewed by the Audit Committee on a regular basis and desired actions are initiated to strengthen the control and effectiveness of the system. Concerns, if any, are reported to the Board.

Health, safety and environment

Your Company continued its focus in creating an aesthetic, environment-friendly industrial habitat in its factory units, mobilizing support and generating interest among staff and labour for maintaining hygienic and green surrounding. The Company continues to focus on maintenance and performance improvement of related pollution control facility at its manufacturing locations. Your Company recognizes protection and management of environment as one of its highest priority and every effort is made to conserve and protect the environment.

Industrial Relation / Human Resources

The Company continuously works to nurture this environment to keep its employees highly motivated, result oriented and adaptable to changing business environment. Your Company's value proposition is based on providing value to our customer, through innovation and by consistently improving efficiency at all levels.

Your Company maintained healthy, cordial and harmonious industrial relations at all levels during the year under review. Your Directors wish to place on record their appreciation for the dedicated and commendable services rendered by the employees of the Company. There were 81 permanent employees as on 31st March, 2015.

CAUTIONARY STATEMENTS

Statements made in this report forming part of the disclosure related to Management, Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be 'forward-looking statements' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could influence the Company's operations include economic developments within the country, demand and supply conditions in the industry, input prices, changes in government regulations, tax laws, and other factors such as litigation and industrial relations.

Acknowledgement

The Directors of the Company wish to express their appreciation for the continued co-operation of the Central and State Governments, bankers, financial institutions, customers, dealers and suppliers and all the valuable assistance received from the shareholders. The Directors also wish to thank all the employees of the Company for their contribution, support and continued co-operation through out the year.

For and on behalf of the Board

M. R. Momaya Surat, 28th May, 2015 Managing Director


Mar 31, 2013

Dear Shareholders,

The Directors present the Sixty-seventh Annual Report together with the audited accounts of the Company for the year ended 31st March 2013.

Financial Results

(Rs.in Lacs) 2012-13 2011-12

Revenue from Operations (Net) 21776.61 18841.79

Other Income 416.59 2896.21

Profit before interest, depreciation and tax 1511.57 3190.92

Finance Costs 22.86 285.36

Profit before Depreciation and Tax 1488.71 2905.56

Depreciation 148.60 154.54

Profit before Tax 1340.11 2751.02

Provision for Tax 582.89 772.99

Profit for the year 757.22 1978.03

Dividend

In order to strengthen the reserves of the Company, your directors consider it prudent to plough back the profits and not to recommend any dividend for the financial year 2012-13

Overview and Review of Operations

Overall, the year was extremely challenging for your Company. In a challenging environment your Company has delivered broad-based competitive growth and margin improvement

Your Company achieved a gross turnover of Rs.242.57 crores as compared to Rs.207.62 crores in the previous year, an increase of about 17%. The sale of Polyester Chips increased by 28% at Rs.156.76 Crore as compared to Rs.122.59 Crore during the previous year. The sale of Yarn (including spun yarn) for the year 2012-13 was lower at Rs.72.57 Crore as compared to Rs.83.81 Crore in the previous year, primarily due to lower demand growth and competitive pressure. Earnings before interest tax and depreciation (excluding other income) was higher at Rs.10.95 crore as against 2.95 crore in the previous year.

In quantity terms, the sale of chips was higher at 15159 MT as compared to 13227 MT in the previous year. The total sale of yarn was lower at 4434 MT as compared to 5906 MT in the previous year

Your Company achieved higher production of chips during the year at 18304 MT as compared to 15653 MT achieved in the previous year. The production of PFY during the year was lower at 4322 MT as compared to 5884 MT achieved in the previous year. The lower production was primarily on account of subdued market conditions, demand recession and price fluctuations in raw materials during the year

During the year under review your Company discontinued the manufacturing activity at its Silvassa plant which had become unviable due to competitive market conditions and the prevailing circumstances Consequent to the closure of business operations at the said location, the Company has disposed off the fixed assets of the said division

Your Company also sold part of its property under development held under stock in trade which contributed to the Operating Income of the Company.

Apart from investing surplus funds in business the Company continued to pursue related business opportunities during the year, by building up its stock in trade of art and artifacts and actively pursuing its construction business activity.

Overview of Economy

The growth in GDP during 2012-13 is estimated at 5% as compared to a growth rate of 6.25% in 2011-12. According to Central Statistical Organization (CSO). In 2002-03, the GDP had grown at 4% since then the Indian Economy has been expanding at over 6%, the highest rate being 9.6% in 2006-07.

Manufacturing growth in 2012-13 is also expected to drop to 1.9% in this fiscal, from 2.7% last year.

The Indian economy is expected to rebound in 2014, boosted by lower inflation and interest rate cuts from the Reserve Bank of India. Some temporary factors like easing commodity prices are helping inflation to decline.

The Indian economy is approaching an inflation point, with GDP growth having bottomed out and corporate earnings having stabilized, it is expected that economic momentum and earnings will improve from current levels.

Industry Scenario

The year was characterized by global slowdown, weak retail demand at home, rising input cost coupled with lower growth in industrial production continuing high rate of inflation and depreciation of the rupee.

The growth in sales / earning was primarily driven by higher volume and price realization during the year. Margins came under pressure due to excess supply and slower domestic demand growth.

There was an overall drop in PTA and MEG prices declined by 9% and 10% respectively. The global textile industry faced subdued demand during the past year due to volatile economic situations in the US and Europe and geo-political disturbances in Africa and the Middle East regions.

Prices of Polyester products declined during the year as buyers turned cautious given the slow downstream demand and opted to cut losses by controlling inventory.

During FY 2012-13, the downstream polyester demand remained depressed, amidst subdued global markets due to high polyester inventories, lower margins and steep decline in the feed stock prices

The prices of MEG and PTA went down in first quarter. Despite of capacity additions in fibre and filament and no new PTA and MEG capacities, prices did not show much improvement. The average price of PTA and MEG were of US$ 1098 and US$ 1043 due to lower demand

Opportunities, Threats and Challenges

Large fluctuations in crude oil prices and the consequent impact on raw material and polyester prices hurt growth. Large volatility in the international markets especially on the downside will have adverse temporary effects on the polyester industry

Capacity additions by new and existing players may have a temporary effect on your Company''s margins.

The substantial expansion in production capacity of PFY by the major producers and with the rationalization of import duty structure, the PFY prices are expected to remain under pressure.

The Company perceives threat from imports and consequent pressure on domestic prices, apart from the increase in cost of raw materials and other inputs due to spurt in crude oil prices

The Company is facing challenge in terms of higher production cost due to high power cost and other inputs. It is expected that with the better working capital management, the Company would be able to generate better cash flows.

A sluggish downstream demand could impact the Company''s business

Inconsistent raw material supply and price volatility could impact production.

Business Outlook

We expect your company will outperform the industry in terms ot sales and profit growth over the medium term. In our opinion in the absence of a severe slowdown in the economy, the sluggishness would be temporary, especially for the POY industry, for which the global economic forecast for the next couple of years is healthy.

Witnessing the increased consumer need for polyester a number of players are expanding / increasing polyester polymer and yarn capacity market. While utilization rates in the industry may temporarily fall as a consequence, your Company is confident of maintaining healthy operating rates owing to its special position in the market.

The introduction of GST should see a level playing field between your Company and other companies who are tax-exempt. This should further improve margins for your Company other things being same

While there are near-term concerns around slowing market growth and inflationary pressures on consumers, we are confident of the medium- to-long term growth prospects of textile sector and remain focused on delivering consistent and competitive growth with sustainable operating margin improvement.

At the operating level, despite competitive business environment and sluggish demand growth, your Company posted better performance The pricing and demand scenario is expected to remain muted in the near term and may result in pressure on the margins

Internal Control

Your Company has adequate internal control procedures commensurate with the size of operations and the nature of the business. These controls ensure efficient use and protection of Company''s financial and non-financial resources. Regular internal audit and checks ensure that responsibilities are executed effectively. The Audit Committee of the Board of Directors reviews the adequacy and effectiveness of internal control systems and suggests improvement for strengthening them, from time to time.

Risk Management

Your Company is exposed to the risk of price fluctuation on major raw materials - PTA and MEG. While in regular course of business price fluctuations are passed on to the customers, sudden price reductions can result in freezing up of sales and consequent inventory losses

The Company mitigates the impact of price risk on finished goods with Company''s strong reputation for quality, product differentiation and service to the customers with better marketing network. Capacity additions by new and existing players may have a temporary effect on your Company''s margins.

The Company is exposed to risks from market fluctuations of foreign exchange, interest rates, commodity prices, business risk, compliance risks and people risks.

The Company is exposed to risks attached to various statutes and regulations including the Competition Act, 2002. The Company is mitigating these risks through regular reviews of legal compliances, through internal as well as external compliance audits.

Health, Safety and Environmental Measures

The Company continues to focus on maintenance and performance improvement of related pollution control facilities like effluent treatment plant and waste disposal facility at its manufacturing locations. The Company recognizes protection and management of environment as one of its highest priorities and every effort is made to conserve and protect the environment.

Cautionary Statement

Statements in this report on Management''s Discussion and Analysis describing the Company''s objectives, projections, estimates and expectations may be "forward looking statement" within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results might differ materially from those either expressed or implied

Directorate

In accordance with the provisions of the Companies Act, 1956 and the Company''s Articles of Association, Shri M. R. Momaya, Director, retire by rotation and being eligible, offers himself for re-appointment at the ensuing Annual General Meeting.

Fixed Deposits

The Company has not accepted or renewed any deposits during the year. There are no outstanding and overdue deposits as at 31st March, 2013.

Energy, Technology and Foreign Exchange

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as required, to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Directors) Rules, 1988 is annexed herewith and forms part of this report.

Human Resources and Industrial Relations

Your Company recognizes human resources as the backbone of its long term success. Your Company maintains a cordial relationship with its employees. It emphasis on safe work practices and productivity improvement is unrelenting.

Your Company also associates itself with several social causes and empowers its employees to contribute to the society and carries out regular CSR activities reaching out to the less privileged

Particulars of Employees

None of the employees of the Company are in receipt of remuneration prescribed under Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975

Insurance

The properties and insurable assets and interests of your Company, like building, plant and machinery and stocks, among others, are adequately insured.

Auditors

Messrs Natvarlal Vepari & Co., Chartered Accountants, the Statutory Auditors of the Company shall retire at the conclusion of forthcoming Annual General Meeting, and have confirmed their eligibility for re- appointment in accordance with Section 224(1 B) of the Companies Act, 1956. The Board proposes the re-appointment of Messrs Natvarlal Vepari & Co., Chartered Accountants, Surat, as Statutory Auditors of your Company based on the recommendation of the Audit Committee, to hold office from the conclusion of the ensuing Annual General Meeting until the conclusion of the next Annual General Meeting

Resolution seeking your approval on the item is included in the Notice convening the Annual General Meeting

The observation made in the Auditors'' Report are self-explanatory and therefore, do not call for any further comments under Section 217(3) of the Companies Act, 1956.

Cost Auditors

n terms of the provisions of Section 233B of the Companies Act, 1956, the Board of Directors of your Company have on the recommendation of the Audit Committee, appointed M/s P.M. Nanabhoy & Co., Cost Accountant as Cost Auditors, Mumbai to conduct the cost audit of your Company for the financial year ending 31st March, 2014, subject the approval of the Central Government.

The Audit Committee has received a certificate from the cost auditors, certifying their independence and arm''s length relationship with your Company. In accordance with the Cost Audit (Report) Rules, 2001, the report was filed on 31.12.2012 vide SRN No. S19715051 with Ministry of Corporate Affairs, New Delhi.

Cash Flow Analysis

The Cash Flow Statement for the year under reference in terms of clause 32 of the Listing Agreement with the stock exchanges forms part of the Annual Report.

Directors'' responsibility statement:

Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956 with respect to Directors'' Responsibility Statement, it is hereby confirmed that:

(i) in the preparation of the annual accounts for the year ended 31st March, 2013, the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

(ii) such accounting policies have been selected and applied consistently and such judgments and estimates have been made as 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 ended on 31 st March, 2013 and of the profits of the Company for that period;

(iii) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding of the assets of the Company and for preventing and detecting fraud and other irregularities; and

(iv) the statement of accounts for the year ended on 31st March, 2013 have been prepared on a going concern basis.

Corporate Governance

Your Company has taken adequate steps to ensure that the requirements of Corporate Governance as laid down in Clause 49 of the Listing Agreement are complied with

A separate report on Corporate Governance along with the Auditors'' Certificate on compliance with the Corporate Governance as stipulated in Clause 49 is set out in this Annual Report and forms part of this report.

The Auditors of the Company have certified that conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement are complied by the Company and their Certificate is annexed to the Report on Corporate Governance

Appreciation

Your Directors take this opportunity to offer their sincere thanks to various departments of the Central and State Governments, government agencies, banks, shareholders, customers, employees and other related organizations, who through their continued support and co-operation, have helped your Company''s progress.

By Order of the Board of Directors

Sanjay S. Shah

Surat, 3rd May, 2013 Managing Director


Mar 31, 2012

To the Members of Surat Textile Mills Limited

The Directors are pleased to present their 67th report on the business and operations of your Company together with the Audited Statement of Accounts for the year ended 31st March 2012.

Summarised Financial Results

(Rs in Lacs)

2011-12 2010-11

Revenue from Operations

(Net of excise duty) 18841.79 27162.09

Other Income 2896.21 115.67

Profit before interest, depreciation and tax 3190.92 1639.08

Interest and Finance Charges 285.36 385.35

Profit before Depreciation and Tax 2905.56 1253.73

Depreciation 154.54 167.88

Profit before Tax 2751.02 1085.85

Provision for Tax 772.99 248.20

Profit for the year 1978.03 837.65

Dividend

In order to strengthen the reserves of the Company, your directors consider it prudent to plough back the profits and not to recommend any dividend for the financial year 2011-12.

Review of Operations

During the year under review, your Company achieved revenue from operations of Rs 188.42 Crore as compared to Rs 160.43 Crore (net of trading sales of Rs 111.19 Crore) in the previous year.

In view of the volatility in raw material prices prevailed throughout the year, your Company considered it appropriate to discontinue the trading activities in the current year and focused on its core business operations.

Your Company achieved sale of Polyester Chips of Rs 122.59 Crore as compared to Rs 97.47 Crore during the previous year, an increase of about 26%. The Company maintained its sale of Polyester Filament Yarn (PFY) at Rs 72.69 Crore for the year as compared to Rs 72.94 Crore in the previous year. The sale of Spun Yarn was adversely affected due to subdued marked conditions and competitive pressures.

The production of PFY during the year was at 5884 MT as compared to 7310 MT achieved in the previous year. The lower production was primarily on account of subdued market conditions, demand recession and price fluctuations in raw materials during the year. The production of chips during the year was also marginally lower at 15653 MT as compared to 16225 Mt achieved in the previous year.

Fluctuation in raw material prices coupled with competitive pressures continued to hamper the profitability of the Company. Moreover, the increase in the cost of major inputs could not be entirely passed on to the customers.

During the year under review, your Company disposed off some of its surplus land and building thereon. The sale proceeds were utilized towards repayment of the loan from promoters. The net surplus realized on disposal of such assets forms part of other income.

The overall volume of Company's manufacturing activity of Cotton Spun Yarn and doubling of polyester / cotton / viscose yarn at its plant located at Silvassa and the margins from such activity remained under pressure during the year. This was primarily on account of high price of cotton single yarn and other input costs coupled with poor demand growth of the product and un-remunerative price realization. Under the circumstances, the management has decided to partially shift the machineries to another location in order to put it in use and to dispose of the remaining freehold land along with building, plant and machinery and other assets of such undertaking in one or more trenches from time to time. The Company has obtained the shareholders' approval through postal ballot process to give effect to the aforesaid transaction.

Overview of Economy

India's economic growth rate slipped to 5.3 per cent in the fourth quarter of 2011-12, lowest in nearly 9 years due to poor performance of the manufacturing and farm sectors. The Gross Domestic Product (GDP) growth in January-March quarter of 2010-11 was 9.2 per cent. GDP in 2011-12 also moderated to 6.5 per cent from 8.4 per cent in the 2010-11. As per RBI's credit policy, growth is likely to improve moderately in 2012-13 while inflation has moderated; risks to inflations are still on the upside.

Growth in emerging markets, especially China and India is slowing beyond what was earlier anticipated. In spite of a deep in growth, the world economy is unlikely to lapse into another recession. The growth slowdown has been driven by a sharp fall in investment, some moderation in private consumption and a fall in next external demand. The path of inflation in 2012-13 could remain sticky around current levels due to high oil prices, large suppressed inflation, exchange rate pass through, hike in freight etc. On the macro economy level the GDP growth for 2012-13 have been estimated at 7.6% /- 0.25% and the fiscal deficit is targeted at 5.1% of GDP.

Chinese Yuan appreciated about 3.4% in the current fiscal as compared to Rupee which depreciated 24.70% making textile products more competitive in the export market, while at the same time making imports more costly. In China average wage cost is increasing over the years. Further higher ageing population is expected to cause wage inflation to rise at an even brisker pace.

Industry Scenario

The Indian textile industry is currently passing through a turbulent phase. With the global downturn ravaging economies, the textile sector is one of the worst hit. The prospect of synthetic textile industry in short term is linked with the domestic demand growth viz-a-viz the movement of crude oil prices in international markets.

The production growth in case of PFY was low due to sluggish demand. In Polyester Chips, the domestic supply has increased with the start-up of new C.P. Plants and outstrips demand. This has put pressure on sales and margins.

In the budget 2012-13, the Central Excise Duty has been raised to 12% from the existing level of 10%. Inflation continued to play a vital role in the economic growth. The increase in raw material prices and input costs during the year has been the major cause of concern.

Raw material price of PTA and MEG were hovering around USD 1400 and USD 1200 per metric ton respectively during April, 2011. The prices started to taper down from September, 2011 and reached a low of around USD 1100 and USD 1000 per metric ton.

As per CRISIL research, demand growth for Polyester Staple Fiber (PSF) and Viscose Staple Fiber (VSF) is expected to be moderate, while consumption of Partially Oriented Yarn (POY) and Viscose Filament Yarn (VFY) is expected to decline due to overall slowdown in textile consumption in both the domestic and global markets. Feedstock [PTA (Purified Terephthalic Acid) and MEG (Mono Ethylene Glycol)] prices are expected to remain firm in 2011-12 and soften in 2012-13 following the anticipated correction in naphtha and ethylene prices.

Opportunities, Threats and Challenges

The average per capita consumption of fabrics in India is much lower than its neighbouring countries. India has the advantage of large growing domestic market and a good GDP growth.

Revised TUF scheme would motivate the players in the industry to make further investments looking to the opportunity available both in the overseas and domestic markets.

The polyester industry is dependent on the international prices of crude oil, which directly impacts the price of both our key raw materials PTA and MEG. In the domestic market uncertain supply of raw material and price volatility could have an adverse impact on the performance of the Company.

Slowing down of Indian economy in general and the lower demand growth may further reduce the growth of the industry. Price realization of PFY is partly dependent on cotton yarn prices. If demand of finished products stagnates, margins in the Company's product i.e. Chips and PFY will be affected, given the large capacities in place.

The continuing demand sluggishness and oversupply situation does not indicate an immediate upswing in the performance of Polyester industry. However, with a lot of global feedstock capacities expected to go onstream, this may result in a softening of feedstock prices and improvement in margins.

The Company is facing challenge in terms of higher production costs due to high power cost, fuel oil and other inputs etc. as compared to its peers in the neighboring states.

There is also a threat of high inflation rate as the prices of commodities have been increasing. Textile being a labour intensive industry, rising labour and skilled human resource costs can put pressure on margins. Large fluctuations in crude oil prices and the consequent impact on raw material and polyester prices hurt growth. Large volatility in the international markets especially on the down side will have adverse temporary effects on the polyester industry.

For sale of chips and yarns outside of Gujarat State, the Company has a disadvantage compared with sales tax exempted units in Silvassa and Daman. The Government intends to introduce GST to overcome this situation and provide level playing field. Untill then the disadvantage will continue.

Slowdown in India's major export market viz. USA and Europe, resulting into consolidation of sourcing; thereby affecting the small players in terms of loss of business.

Business Outlook

The growth in demand is expected in the medium term to rely on high consumption in the domestic market. Your Company is committed to build business with long term goal based on your Company's intrinsic strength in terms of product quality and customer network.

Your Company is pursuing cost control measures, increased productivity, improving efficiencies in manufacturing areas and a thrust in sale and better price realization with better product mix. However, the performance of the Company would be largely dependent on the overall industrial and economic scenario.

On account of newer capacities of POY and Chips coming into operation in the domestic market in recent times, coupled with competition arising out of cheap imports, the domestic supply position in the Polyester Yarn and Chips segment is likely to be competitive and margins will remain under pressure.

The introduction of GST in the coming years should see a level playing field between your Company and other companies which are tax- exempt. This should further improve margins for your Company in the long run, other things being same.

The demand for polyester filament yarn is growing briskly. However, the current year will see a large increase in POY capacity, well in excess of demand. This will put a pressure on POY margins, which are expected to be lower than last year.

The Company will continue to focus on specialty and differentiated products in yarn and chips segment.

Internal Control

The Company has an adequate internal audit system commensurate with its size and nature of operations. All the major business processes are currently run on the ERP system. The internal control system is supported by the internal audit process. The internal audit department review and ensures that the audit observations are acted upon. The Audit Committee of the Board reviews the internal audit report and the adequacy and effectiveness of internal control.

Risk Management

The Company is exposed to risks from market fluctuations of foreign exchange, interest rates, commodity prices, business risk, compliance risks and people risks.

The Company is exposed to the risk of price fluctuation on raw materials as well as finished goods in all of its products. The Company proactively manages these risks in inputs through forward booking, inventory management, proactive management of vendor development and relationships. The Company's strong reputation for quality, product differentiation and services, the existence of a powerful brand image and a robust marketing network mitigates the impact of price risk on finished goods.

The Company is exposed to risks attached to various statutes and regulations including the Competition Act, 2002. The Company is mitigating these risks through regular reviews of legal compliances, through internal as well as external compliance audits.

Health, Safety and Environmental Measures Your Company is conscious of the importance of environmentally clean and safe operations. Your Company's policy requires the conduct of all operations in such manner so as to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

Cautionary Statement

Statements in this report on Management's Discussion and Analysis describing the Company's objectives, projections, estimates and expectations may be "forward looking statement" within the meaning of applicable laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results might differ materially from those either expressed or implied.

Directorate

In accordance with the provisions of the Companies Act, 1956 and the Company's Articles of Association, Shri Y. C. Papaiya, Director, retire by rotation and being eligible, offers himself for re-appointment at the ensuing Annual General Meeting.

The Board at its meeting held on 8th May, 2012, appointed Shri Sanjay S. Shah as an additional director who will hold office as Director up to the date of the forthcoming Annual General Meeting. A notice in writing has been received from a member of the Company under section 257 of the Companies Act, 1956, signifying his intention to propose Shri Sanjay S. Shah as a candidate for the office of Director of the Company.

In the subsequent Board Meeting held on 30th May, 2012, the Board had, subject to the approval of shareholders in the forthcoming General Meeting, appointed Shri Sanjay S. Shah, as Managing Director of the Company for a term of five years effective from 30th May, 2012 to 29th May, 2017. On the recommendations of Remuneration Committee the Board has fixed the remuneration of Shri Sanjay S. Shah for a period of five years. Your Directors commend the resolutions for the appointment and remuneration of Shri Sanjay S. Shah for your approval.

Shri M. R. Momaya, Wholetime Director of the Company requested the Members of the Board to relinquish him from the responsibilities of Wholetime Director and submitted his resignation to the Members of the Board. Shri M. R. Momaya will however continue to be a Member of the Board as non-executive Director.

Smt. Shilpa P. Shah, Wholetime Director of the Company submitted her resignation as Member of the Board with effect from 30th May, 2012.

While accepting Smt. Shilpa Shah's resignation, the Members of the Board placed on record their sincere appreciation of the valuable services rendered by her during her tenure as a Director of the Company.

Finance and Accounts

The observations made by the Auditors in their Report have been clarified in the relevant notes forming part of the Accounts which are self-explanatory. The Schedule VI of the Companies Act, 1956 has been revised by the Ministry of Corporate Affairs vide its notification dated February 28, 2011. The notification is in force and is applicable for all Balance Sheets and Statement of Profit and Loss to be prepared for the financial year commencing on or after April 1, 2011. Therefore, the previous period figures have been regrouped / re-cast wherever necessary.

Fixed Deposits

The Company has not accepted any public deposits within the meaning of Section 58A of the Companies Act, 1956 and, as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

Energy, Technology and Foreign Exchange

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgo as required, to be disclosed in terms of Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Directors) Rules, 1988 is annexed herewith and forms part of this report.

Human Resources and Industrial Relations

Your Company recognizes human resources as the backbone of its long term success and has tried continuously to provide a challenging work environment thereby adding value to their professional growth. Our relationship with the employees continuous to remain cordial at all units.

Particulars of Employees

Information as per section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 forms a part of this report and will be sent on demand to the shareholders. Any shareholder interested in obtaining a copy of the said statement may write to the Company Secretary.

Insurance

The properties and insurable assets and interests of your Company, like building, plant and machinery and stocks, among others, are adequately insured.

Auditors

Messrs Natvarlal Vepari & Co., Chartered Accountants, who are Statutory Auditors of the Company hold office upto the forthcoming Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the Financial Year 2012- 13. As required under the provisions of the Section 224(1B) of the Companies Act, 1956, the Company has obtained written confirmation from Messrs Natvarlal Vepari & Co. that their appointment if made would be in conformity with the limits specified in the Section.

The Notes on Financial Statements referred to in the Auditors' Report are self-explanatory and do not call for any further comments.

Cost Auditors

As per the requirement of the Central Government and pursuant to the provisions of Section 233B of the Companies Act, 1956, the audit of the cost accounts relating to textiles is being carried out every year. The Central Government has approved the appointment of M/s P.M. Nanabhoy & Co., Cost Accountants as Cost Auditors, Mumbai for conducting cost audit for the financial year 2011-12. The cost audit report in respect of financial year 2011-12 will be filed on or before the due date. The cost audit report for the Financial Year 2010-11 which was due to be filed with the Ministry of Corporate Affairs on 30th September, 2011 was filed on 21st September, 2011.

Cash Flow Analysis

The Cash Flow Statement for the year under reference in terms of clause 32 of the Listing Agreement with the stock exchanges forms part of the Annual Report.

Directors' responsibility statement:

Pursuant to the requirements under Section 217(2AA) of the Companies Act, 1956 with respect to Directors' Responsibility Statement, your Directors report that

(i) in the preparation of the annual accounts for the year ended 31st March, 2012, the applicable accounting standards have been followed along with proper explanations relating to material departures, if any;

(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 as at 31st March, 2012 and of the profits of the Company for the year ended on that date;

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

(iv) the annual accounts have been prepared on a going concern basis.

Reports on Corporate Governance

Your Company continuous to be committed to good Corporate Governance aligned with good practices. Your Company is in compliance with the standards set out by Clause 49 of the Listing Agreement with the Stock Exchanges.

A separate report on Corporate Governance along with the Auditors' Certificate on compliance with the Corporate Governance as stipulated in Clause 49 is set out in this Annual Report and forms part of this report.

Appreciation

Your Directors place on record their appreciation for the continued support and co-operation received from customers, suppliers, dealers, banks and government authorities. The Board also, expresses its appreciation for the understanding and support extended by the shareholders and employees of the Company.

By Order of the Board of Directors

Sanjay S. Shah

Surat, 30th May, 2012. Managing Director


Mar 31, 2010

The Directors have pleasure in presenting the Sixty-fourth Annual Report on the business and operations of the Company together with the audited accounts for the year ended 31st March 2010. Summarised Financial Results

(Rs. in Lacs) 2009-10 2008-09 Gross Sales and 26023.92 17521.73 Job Charges Income Profit before interest, 1448.81 892.83 depreciation and tax Financial Charges 399.72 7.67 Profit before Depreciation and Tax 1049.09 885.16 Depreciation 182.41 182.29 Profit before Tax 866.68 702.87 Provision for Tax 146.00 82.00 Net Profit for the year 720.68 620.87

Dividend

In order to strengthen the reserves of the Company and with a view to ensure sufficient liquidity to take advantage of the growth potential, your directors consider it prudent not to recommend a dividend.

Review of Operations

During the year under review, sales of polyester filament yarn increased to Rs. 6824.81 lacs, compared to Rs. 6556.70 lacs achieved in the previous year; however the sale of polyester chips was lower at Rs. 8130.91 lacs as compared to Rs. 9604.39 lacs for the previous year. The gross turnover was higher during the year also on account of trading activities by leveraging on the Companys in-house expertise in the import and procurement of raw materials for the polyester industry.

Despite increase in business volume, the overall contribution and margins remained under pressure due to fluctuation in raw material prices coupled with competitive pressures on the business activity.

Increase in the cost of major inputs, consequent to the rise in international crude oil prices, affected the performance of the Company, as the increase could not be entirely passed on to the customers.

During the year under review, your Company discharged its obligation towards payment of interest on soft loan availed from the promoter.

Successful implementation of Sanctioned Scheme

With the successful implementation of the sanctioned scheme, the net worth being positive and the accumulated losses of the Company completely wiped out as on 31st March, 2009, your Company ceased to be "Sick Industrial Company" under Section 3(1 )(o) of Sick Industrial Companies (Special Provisions) Act, 1985 and was discharged from the purview

of SICA by BIFR vide its Order dated 18th December, 2009. As on 31st March, 2010 the net worth of the Company further increased to Rs. 3169.63 lacs.

Overview of Economy

The countrys economy grew by 7.4% in 2009-10, compared to 6.7% expansion in the previous fiscal, when it came under the ripple effect of the global financial melt down. Growth is projected to recover to 8-9% in the next two years. The recovery of Indian GDP could be even faster than what is projected. But the rising interest rates, rupee appreciation and continued low growth in high-income nations could cause hurdles to the recovery. Indias recovery could also be impacted by volatility in capital inflows and high inflation.

Industry Scenario

In polyester chips, the domestic supply has increased and outstrips demand largely. This has put considerable pressure on sale and margins. The raw material prices are expected to go up and likely to put further pressure on margins. The Company hopes to counter this effect by improved product mix. In respect of spun yarn activity, the operating margins are likely to remain under pressure due to lower sales realisation.

Opportunities, Threats and Challenges

Low per capita consumption of polyester in India is still way behind the world average. This provides an opportunity for future growth in the Indian Polyester Industry. The Company perceives threat from imports and consequent pressure on domestic prices, apart from the increase in prices of raw materials and other inputs due to any spurt in crude oil prices.

Your Company is gearing up to meet the challenges through continuous improvement in quality, reduction in costs, better marketing arrangements for higher value added products.

Business Outlook

The recent budget proposals have withdrawn the stimulus package by roll back of excise duty earlier reduced for the overall growth of the manufacturing sector, putting further pressure on the Company.

Your Company is pursuing cost cutting measures and focusing on increased productivity, better product mix, introduction of new products and a thrust in sales and better price realisation. However, the performance of the Company in the coming months, would be largely dependent on the overall industry scenario.

Your Company continues to leverage its in-house expertise in the area of procurement and import of raw materials for polyester industry and expand that line of business activities as well.

Internal Control

Your Company has an adequate and effective internal control system to ensure that assets and interests of the Company are safeguarded and reliability of accounting data and accuracy are ensured with proper checks and balances.

The internal control system is improved and modified continuously to meet the changes in business conditions, statutory and accounting requirements. The Audit Committee of the Board of Directors, Statutory Auditors and the business heads are periodically appraised of the internal audit findings and the corrective actions taken. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of internal controls systems and suggests improvements for strengthening them.

Risk Management

The Company is exposed to the risk of price fluctuation on raw materials as well as finished goods in all its products. The Company proactively manages these risks in inputs through better inventory management, vendor development and relationship. The Company mitigates the impact of price risk on finished goods with Companys strong reputation for quality, products differentiation and service to the customers with better marketing network.

Environment and safety

The Company is conscious of the importance of environmentally clean and safe operations. The Companys policy requires the conduct of all operations in such manner so as to ensure safety of all concerned, compliance of statutory and industrial requirements for environment protection and conservation of natural resources to the extent possible.

Cautionary Statement

Statements in this report on Managements Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be forward looking within the meaning of applicable securities, laws and regulations. These statements are based on certain assumptions and expectation of future events. Actual results may differ materially from those expressed in the statement. important factors that could influence the Companys operations include overall global economic conditions, domestic manufacturing sector growth, foreign exchange stability and stable credit environment.

The Company assumes no responsibility in respect of forward looking statements herein which may undergo changes in future on the basis of subsequent developments, information or events.

Directors

In accordance with the Articles of Association of the Company Mr. S. M. Vig retire by rotation at the 64th Annual General Meeting and, being eligible, offers himself for re-appointment.

Mrs. Shilpa P. Shah was appointed as an additional director by the Board at its meeting held on 28th April, 2010. Mrs. Shah holds office until the conclusion of the ensuing annual general meeting and is eligible for re-appointment. The Company has received notice from a member under Section 257 of the Companies Act, 1956, proposing her candidature for the office of Director, liable to retire by rotation. The Directors recommend her appointment.

Mr. C. K. Koshy, appointed as special director by the BIFR on the Companys Board of Directors, stands discharged w.e.f. BIFR order dated 18th December, 2009. While taking note of the withdrawal of nomination of Mr. Koshy, the directors place on record their sincere appreciation of the valuable services rendered by him during his tenure as a special Director on the Board of the Company.

Pursuant to clause 49 of the Listing Agreement, the particulars of Directors seeking appointment/ re-appointment at the forthcoming annual general meeting are provided in the notes forming part of the Notice of Annual General Meeting.

Fixed Deposits

The Company has not accepted any public deposits within the meaning of Section 58A of the Companies Act, 1956 and, as such, no amount on account of principal or interest on public deposits was outstanding as on the date of the Balance Sheet.

Energy Conversion, Technology Absorption and Foreign Exchange Earnings and Outgo

Your Company makes every effort to conserve energy required for all its operations. The information required under Section 217(1)(e) of the Companies Act, 1956, read with the Companies (Disclosure of Particulars in the Report of the Directors) Rules, 1988 with respect to conversation of energy, technology absorption and foreign exchange earnings / outgo is annexed hereto as annexure A and forms part of this Report.

Employee relations

Relations between the employees and the management of the Company across all the locations continued to be cordial during the year.

None of the employees of the Company is in receipt of remuneration prescribed under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975. Auditors

Messrs Natvarlal Vepari & Co., the Statutory Auditors retire at the forthcoming Annual General Meeting and are eligible for re-appointment. The Company has received the certificate from the retiring auditors to the effect that the appointment, if made, will be in accordance with the limits specified in Section 224(1 B) of the Companies Act, 1956.

The Notes on Accounts referred to in the Auditors Report are self-explanatory and therefore do not call for any further comments.

Cost Auditors

As per the requirement of Central Government and pursuant to Section 233B of the Companies Act, 1956 your Company carries out an audit of cost records relating to textiles every year. Subject to the approval of the Central Government, the Company has appointed Messrs P. M. Nanabhoy & Co., cost accountants, as auditors to audit the cost accounts of the Company for the financial year 2010-11.

Cash Flow Analysis

The Cash Flow Statement for the year under reference in terms of Clause 32 of the Listing Agreement with the stock exchanges forms part of the Annual Report.

Directors responsibility statement:

Pursuant to sub-section (2AA) of Section 217 of the Companies Act, 1956, in relation to financial statement for the year 2009-10, the Board of Directors of the Company hereby state and confirm that:

i) in the preparation of the Annual Accounts, the applicable accounting standards have been followed and that there are no material departures therefrom;

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 of the Company for that period;

iii) the Directors have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding

the assets of the Company and for preventing and detecting fraud and other irregularities; and

iv) the Directors have prepared the annual accounts on a going-concern basis.

Corporate Governance

As required by Clause 49 of the Listing Agreement, a separate report on Corporate Governance along with a certificate from the Statutory Auditors regarding compliance of the conditions of Corporate Governance is annexed and forms part of this report.

Acknowledgement

Your Directors place on record their appreciation for the continued support and co-operation received from customers, suppliers, dealers, banks, Board for Industrial & Financial Reconstruction, and government authorities. The Board also, expresses its appreciation for the understanding and support extended by the shareholders and employees of the Company.

By Order of the Board of Directors M. R. Momaya Surat, 29th May, 2010. Whole-time Director

 
Subscribe now to get personal finance updates in your inbox!