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Directors Report of Zodiac Clothing Company Ltd.

Mar 31, 2014

The Directors hereby present the 30th Annual Report with the Audited Statements of Accounts for the Financial Year ended 31st March 2014.

1. Business:

Operational Revenue & Profits – During the financial year ended 31st March 2014, the operational revenue of the company on a Standalone basis increased to Rs. 34,906 lakhs from Rs. 31,584 lakhs (Net of Excise duty for both years to Rs. 34,851 lakhs from Rs. 30,763 lakhs, i.e. an increase of Rs. 4,088 lakhs i.e. 13.28%) Profit Before Tax was Rs. 2,217 lakhs vs. Rs. 1,598 lakhs in the previous year, while the net Profit After Tax for the financial year ended 31st March 2014 was Rs. 1,493 lakhs vs. Rs. 1,105 lakhs in the previous year.

On a Consolidated basis the operational revenue of the company increased to Rs. 41,111 lakhs from Rs. 36,818 lakhs (Net of Excise to Rs. 41,056 lakhs from Rs. 35,997 lakhs, i.e. an increase of Rs. 5,059 lakhs i.e. 14.05%). The Consolidated Profit Before Tax rose to Rs. 3,053 lakhs vs. Rs. 2,016 lakhs the previous year, the Net Profit being Rs. 2,200 lakhs vs. Rs. 1,401 lakhs the previous year.

The volatility faced during the year in consumer demand (impacting the branded business) and exchange rate fluctuations (impacting both the branded business and the design-driven international business), has been unprecedented.

The turnover has been volatile in the branded business (from 42% - 46% plus in certain months, to minus 9% - 14% in some months) due to the political, economic and social situation in the country; this has impacted all channels (with November/December 2013 and January 2014 being extremely subdued). There is also a base effect here, because turnover last year post-Diwali grew very sharply.

The branded business showed an increase of 13% (like-to-like, i.e. eliminating the Excise set off because Excise Duty was withdrawn from March 2013). Given the market scenario, and the fact that the company continues to not discount or offer soft terms on the Zodiac, ZOD! and Z3 brands, that is no mean achievement. Sales at mark down expressed as a percentage of total sales during the year was insignificant. This was a direct consequence of very tight stock control and extensive use of business intelligence and other analytics solutions. There has been growth across the MBO/National Chains/Own Retail (which grew both like-to-like, as well as overall, i.e. including new stores). The share of pie of MBOs and National Chains has increased, although in rupee terms, all channels grew.

As of 31st March 2014, the company had 113 stores. 11 new stores were opened and 2 were closed during the year, a net increase of 9 stores. 2 existing stores were refurbished. In keeping with its strategy of connecting direct to consumers (versus a franchise network where the company would be in the wholesale business and not in the retail business). The company has continued to invest in its own retail store chain with conservative aggression.

Own store sales, although growing, did not grow as per expectations due to the volatility in demand and the cost of negative sentiment, as also the country''s political, economic and social problems. There was extreme volatility month-to-month, making planning extremely challenging.

The competition (our segment) presents a mixed picture, despite their policy of discounting on easy terms and freebies, which has resulted in their sales growth being higher in some cases.

The business with National Chains ( 17%) as well as MBOs ( 18%) grew in double digits in percentage terms. Own Retail grew at 10% over last year, the share of pie being 54.82% vs 56.68% last year. Total Branded Sales were up by 13.31%.

For Q1 2014-15 the order books for all 3 brands, Zodiac, ZOD! and Z3 look very healthy based on bookings for Summer 2014.

The outlook for the branded business, including the Company''s own retail stores, looks most promising in the medium to long term, with a stable, business- friendly government at the helm after 3 decades.

In the design driven international business, the exchange rate has fluctuated from Rs. 68.36 (High August 2013) to Rs. 53.71 (low May 2013) and ended the year at Rs. 59.92 per USD, which kind of volatility was unseen hitherto. Despite this, the order books have been healthy consistently. The quantity exported from India was plus 2% (Value Rs. 156 crores, i.e. plus 13%, and in USD terms, USD 26.7 million plus 3%). From the UAE the quantity exported was fat., and in terms of Value AED 419 lakhs, (3% increase), and USD 114 lakhs, (3% increase). The order books for the design driven international business continue to be healthy.

We have been able to successfully re-build relations with our customer in Latin America, but we have still to make a breakthrough with new customers there. The situation in the UK, which had hit rock bottom, seems to be slowly correcting itself with substantial growth (from the turnover with them in the last few years) evolving from a large customer in the UK. Overall, the EU is still subdued, but we have been able to increase business substantially with a major account in Germany, with whom business had fallen to insignificant levels. The situation in the US is stable.

This business has been extremely challenging due to the economic situation in the company''s markets. The EU is still feeble, the UK is on the road to recovery, and the US is improving better than other markets, but in fits and starts and not at any remarkable pace. There was also an impact of the extremely volatile exchange rate, inflation in India and the increase in prices of cotton fabric. The more favourable exchange rates (for a brief period) during the year were captured, to some extent, by virtue of the company''s Forex Policy, and this business was more profitable.

In order to recognise the impact of fluctuation in foreign currency rates arising out of derivative instruments acquired to hedge highly probable transactions and firm commitments in appropriate accounting periods, the company has been consistently applying the principles of hedge accounting set out in the Accounting Standard 30. "Financial Instruments: Recognition and Measurement" issued by the Institute of Chartered Accountants of India, whereby the impact of net unrealised losses (or gains) of derivative instruments are carried as Hedging Reserve to be ultimately set off in the Statement of Profit & Loss when the underlying transaction is recognised.

2. Results Of Operations:

financial results:

(Rs. in lakhs)

Standalone Consolidated 2013-14 2012-13 2013-14 2012-13

Total Revenue from operations (Net) 34,851 30,763 41,056 35,997

PROFIT BEFORE TAXATION 2,217 1,598 3,053 2,016

Provision for Taxation:

Current Tax 642 406 771 528

Deferred Tax 82 86 82 86

PROFIT AFTER TAXATION 1,493 1,106 2,200 1,402

Balance of Profit Brought forward 10,258 10,036 15,834 15,480

Transfer from General Reserves - - - 0

Profit Available for Appropriation 11,784 11,142 18,067 16,882

With effect from 1st April 2013, non-derivative financial liabilities in the form of Preshipment Export Credit on Foreign Currency (PCFC) borrowings have also been designated as hedging instruments to hedge the highly probable forecast sales in foreign currency, consequent to a decision of the Board, in consultation with the Auditors. This resulted in a PCFC loss of Rs. 84 lakhs being carried to Hedging Reserves at the end of the year, instead of being accounted for in the Profit & Loss Account, as in the past. We believe this reflects the true result more faithfully.

As a direct fallout of the 2008 crisis the company formed a task force to relook at all the existing systems and processes, in many cases rebuilding them from scratch, with a significant use of next generation information technology. We are pleased to inform you that this has yielded positive results.

The Standalone PBT increased by Rs. 619 lakhs, through cost reduction/control, despite the increase in rentals and other consequential costs (in pursuance of the focus on own retail). This is most heartening, given the market situation.

The inadequacy of workers in the UAE Unit has been resolved to a large extent. The impact of this would become visible in the next few quarters.

Finance costs (Standalone) as a percentage of turnover have risen marginally, 0.62% (lY 0.53%). This is because of the high forward premiums paid to hedge our foreign currency borrowings under Buyers Credit and FCNRB, in line with company policy to minimise risk.

Tax expenses have also risen because last year''s income contained a higher element of dividend from subsidiaries (which was tax free from the Indian subsidiary and at a lower rate of 15% from the overseas subsidiary), which dividend has been lower this year. The operating profitability has increased significantly, which is very gratifying.

- Excluding property re-classified as non- current investment in the current year

3. Subsidiary Companies:

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit & Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

4. Cash flow Statement:

In conformity with the provisions of Clause 32 of the listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31st March 2014 is annexed hereto.

5. Consolidated financial Statements:

In accordance with the requirements of Accounting Standards AS-21 notified under the Companies (Accounting Standard) Rules 2006, the Consolidated Accounts of the company and its subsidiaries are annexed to this Report.

6. Rating:

ICRA (an associate of Moody''s Investor Service) has reaffirmed the Company''s rating of A1 for its short term fund based/non fund based facilities, which have been increased to Rs. 8,000 lakhs (Rs. 7,000 lakhs earlier). ICRA has also reaffirmed the company''s rating of A1 for Commercial Paper (Rs. 2,000 lakhs)

A1 is the highest credit quality rating assigned by ICRA to short term debt instruments, which carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1 to reflect their relatively stronger credit quality.

7. CAPEX:

Capex on Standalone Rs. 1,113 lakhs v/s 1,196 lakhs was incurred predominantly on the new company-run stores (Rs. 541 lakhs), factory building at Bangalore (Rs. 287 lakhs), new equipment (Processing) at Bangalore (Rs. 160 lakhs), Corporate Head Quarters (Rs. 91 lakhs) and others (Rs. 34 lakhs)

Rental deposits (Rs. 1,688 lakhs total as of FY14) are not booked as Capex.

On a Consolidated basis, the Capex was Rs. 1,629 lakhs as against Rs. 1,387 lakhs last year.

8. LIQUIDITY:

The Debt Equity Ratio as on 31st March 2014 was 0.22 on a Standalone basis and 0.20 a Consolidated basis.

The cash and bank balances/cash equivalents along with liquid investments (free reserves - on consolidated basis) were Rs. 3,549 lakhs in March 2014, as against Rs. 2,924 lakhs last year.

9. SHARE CAPITAL:

During the year under review, there has been no change in the paid up share capital of the company.

10. APPROPRIATIONS:

Dividends – Your Directors have recommended a dividend of Rs. 4.50 per Equity Share of Rs. 10/- each on 1,93,89,998 Equity Shares (previous year Rs. 3.50 per Equity Share of Rs. 10/- each on 1,93,89,998 Equity Shares). The total dividend amount (when approved by the shareholders) including dividend distribution tax would be Rs. 1,021 lakhs, (previous year Rs. 759 lakhs). Dividend (including dividend distribution tax) as a percentage of Profit After Tax is 68.39% on a Standalone basis and 46.41% on a Consolidated basis.

Transfer to Reserves: Your Directors propose to transfer Rs. 153 lakhs to the General Reserve. An amount of Rs. 10,610 lakhs is proposed to be retained in the Profit & Loss Account.

11. CORPORATE GOVERNANCE:

The company has complied with all the requirements regarding Corporate Governance as required under the revised Clause 49 of the listing Agreement with the Stock Exchange(s). The report on Corporate Governance, Management Discussion and Analysis, as well as the Auditors Certificate on the compliance of Corporate Governance form part of the Annual Report.

12. QUALITY:

The company continues to pursue its policy of quality, productivity, value addition and innovation, by striking a balance between skilled labour and state-of-the-art equipment/tools. We continue to aggressively pursue cost control to address the challenges presented by the economic conditions in India and worldwide.

13. BRANDING:

The Zodiac, ZOD! and Z3 brands were neither discounted nor offered on soft terms, underscoring the increasing strength of the brands by virtue of the brands'' continuing focus on value added innovation and consistent pursuit of higher quality. New approaches in sales and marketing efforts, as well as in the choice of media for advertising have been adopted to address the evolving demographic profle of potential consumers. The Company continues its focus on digital as a medium to reach today''s consumers.

14. INFORMATION UNDER SECTION 217(1) (E) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988:

(A) Conservation of Energy

The company has truly embraced technology and innovation in its approach to energy efficiency, which is a key focus area for the organisation. Continuous monitoring of existing systems by audits and up gradation using latest technology like motion sensors, occupation sensors, light level sensors, in addition to energy efficient light motors and equipment, have resulted in a considerable drop in the electrical consumption on a like- to-like basis, despite the unit rates going up, as well as an increase in the number of equipment. Out-of-the-box thinking with regard to the various requirements for processes, combined with technology has resulted in reduction of process cycles, which has increased productivity and resulted in significant conservation of energy.

(b) pollution Control

The company is very sensitive about the environment. Its belief in running its business in an ecologically responsible manner has not only become a way of life, but also one of its business goals. The quest for excellence resulted in a natural teaming up with the best in the field of air and water. The company has done joint research with leading equipment manufacturers abroad and installed state-of- the-art, made-to-order equipment. This has resulted in the productivity in the sections focused on jumping by as much as 50% and cost per shirt processed on those operations coming down by 50%. The additional benefit is that water consumption has dropped. We are accelerating towards our goal of becoming water positive.

(C) Technology, Absorption, Adaptations & innovation – Not applicable.

(d) foreign Exchange Earnings and Outgo:

Total Foreign Exchange Earned Rs. 15,625 lakhs

Total Foreign Exchange Outgo Rs. 7,102 lakhs

15. CORPORATE SOCIAL RESPONSIBILITY:

The company recognises Corporate Social Responsibility is a vital part of corporate activity and, therefore, continues to strive to promote social contribution activities as a good corporate citizen, in order to realise a better society. Besides, it also continues to work to minimise environmental effects and utilise resources towards the development of a sustainable society that is in harmony with the environment. The company continues to implement its social responsibility in line with the approved policy of the Board of Directors dated 24th June 2009, towards contributions not related to the business of the company. This is within the limit approved by the shareholders. The company has constituted a Corporate Social Responsibility Committee in line with Section 135 of the Companies Act, 2013 to undertake activities as specified in Schedule VII of the Companies Act, 2013.

16. DIRECTORS:

The company had, pursuant to the provisions of Clause 49 of the listing Agreement entered into with the Stock Exchanges, appointed Mr. M.l.

Apte, Mr. S.M. Datta, Dr. Heinrich Dieckmann, Mr. S.R. Iyer, Mr. Y.P. Trivedi and Mr. Bernhard Steinruecke as Independent Directors of the Company. As per Section 149 (4) of the Companies Act, 2013. Effective from 1st April 2014, the company is required to have at least one half of its total number of Directors as Independent Directors. Accordingly, all the said Directors are being appointed as Independent Directors to hold Office as per their tenure of appointment mentioned in the Notice of the forthcoming Annual General Meeting of the company.

In accordance with the provisions of he Companies Act, 2013, Mr. A.Y. Noorani, Director of the Company retires by rotation at the ensuing Annual General Meeting and, being eligible, has offered himself for re-appointment. A brief resume of Mr. A.Y. Noorani, as required by Clause 49 of the listing Agreement with the Stock Exchanges, is provided in the Notice convening the Annual General Meeting of the Company.

17. DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956, and based on the representations received from the operating management, the Directors hereby confirm:

(i) that in the preparation of the annual accounts for the financial year ended 31st March 2014, the applicable Accounting Standards have been followed, along with proper explanation relating to material departures;

(ii) that 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 the year under review;

(iii) that the Directors 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 the assets of the company and for preventing and detecting fraud and other irregularities;

(iv) that the Directors have prepared the accounts for the financial year ended 31st March 2014 on a ''going concern'' basis.

18. HUMAN RESOURCE MANAGEMENT:

The role of Human Resources continues to remain vital and strategic to the company. Employee recruitment and management is a key focus, and processes and policies are in place to attract and retain employees of a high calibre. The company recognises the need for continuous growth and development of its employees to meet their objectives for a career path to equip them to meet growing organisational challenges.

Industrial relations have continued to be harmonious at all units throughout the year. Measures for safety of employees, welfare and development continue to receive top priority.

19. ZODIAC EMPLOYEES'' STOCK OPTION PLAN 2006:

In terms of the Employees Stock Option Plan 2006, the Company had granted 2,91,000 stock options at an exercise price of Rs. 255.40 on 27th December 2006, and 2,67,350 options at an exercise price of Rs. 346.00 on 20th January 2011 (each option carried an entitlement of one equity share of the face value of Rs. 10/- each). During the year under review, the Company has neither granted any option nor allotted any equity shares under the said scheme. Disclosures, as required by SEBI (ESOS & ESPS) Guidelines 1999 is attached as Annexure 1 to this Report.

The Company is obtaining a certificate from the Auditors stating that ESOP has been implemented in accordance with SEBI (ESOS and ESPS) Guidelines, 1999, and the resolution of the Company passed in the Annual General Meeting held on 31st August 2006.

20. COMPLIANCE WITH THE CODE OF CONDUCT:

The Code of Conduct adopted by the Company for its Board of Directors and its Managerial Personnel has been uploaded on the company''s website. The declaration of compliance with the Code of Conduct has been received from all Board Members and the Managerial Personnel. A certificate to this effect from Mr. A.Y. Noorani, Vice Chairman and Managing Director, forms part of this Report.

21. FIXED DEPOSIT:

The company has not accepted any Fixed Deposits from the public under Section 58A of the Companies Act, 1956.

22. COMPANY''S WEBSITE:

The Financial Statements, Annual Report including Corporate Governance Report, Shareholding Pattern etc. are displayed interest with the other information on the company''s website viz. www.zodiaconline.com.

23. DONATIONS:

During the financial year, the company has contributed a sum of Rs. 96 lakhs to various deserving causes, as part of its Corporate Social Responsibility.

24. INSURANCE:

All the properties/assets including buildings, furniture/fixtures, etc. and insurable interests of the company are adequately insured. The international debtors who avail of credit are also insured, despite their fawless record, as a measure of abundant precaution.

25. AUDITORS:

The Auditors M/s. Deloitte Haskins and Sells, llP, Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and, being eligible, have offered themselves for re- appointment. The Audit Committee and Board of Directors recommend the re-appointment of M/s. Deloitte Haskins & Sells, llP, Chartered Accountants, as Statutory Auditors of the Company.

26. COST AUDITOR:

Pursuant to the provisions under Section 233B of the Companies Act, 1956, M/s. N. Ritesh & Associates, Cost Accountants, has been appointed as Cost Auditors of the company for the financial year 2014-15.

27. AUDIT COMMITTEE:

In accordance with Section 292A of the Companies Act, 1956 and Clause 49 of the listing Agreement, the Company has constituted an Audit Committee, which consists of three Non-Executive Independent Directors of the Company viz Mr. S.R. Iyer (Chairman of the Audit Committee), Mr. Y.P. Trivedi and Mr. M.l. Apte (Members). The Audit Committee functions in terms of the powers and role delegated by the Board of Directors keeping in view the provisions of Section 292A of the Companies Act, 1956 and Clause 49 of the listing Agreement, have been described separately under the head Audit Committee in Report of Corporate Governance.

28 PARTICULARS OF EMPLOYEES:

The information required under Section 217(2A) of the Companies Act, 1956 and the Rules made there under, in respect of employees of the Company is provided in the Annexure forming part of this Report.

30. ACKNOWLEDGEMENTS:

Your Directors would like to express their grateful appreciation for the assistance, support and co-operation received from the customers, shareholders, the Government, other statutory bodies, Banks, Solicitors, Distributors, Suppliers and other business associates.

Your Directors also place on record their sincere appreciation for the significant contribution made by employees at all levels through their steadfast commitment, and look forward to their valuable support in harvesting the medium to long term opportunities evolving, both in India and globally.

For and on behalf of the Board

Place : Mumbai: M.Y. NOORANI

Dated : May 27, 2014 Chairman


Mar 31, 2013

To, The Members of Zodiac Clothing Company Limited.

The Directors hereby present the 29th Annual Report with the Audited Statements of Accounts for the Financial Year ended 31st March 2013.

1. BUSINESS:

Turnover & Profits - During the financial year ended 31st March 2013, the operational revenue of the company on a standalone basis was flat at Rs. 31,584 lakhs vs. Rs. 31,595 lakhs in the previous year. The Profit Before Tax was Rs. 1598 lakhs vs Rs. 1,404 lakhs in the previous year, while the net Profit After Tax for the financial year ended 31st March 2013 was Rs. 1106 lakhs vs. Rs. 1,098 lakhs in the previous year (the tax provision being higher due to deferred tax).

The volatility faced during the year in consumer demand (impacting the branded business) and exchange rate fluctuations (impacting both the branded business and design-driven international business), have been unprecedented.

The branded business showed an overall marginal increase. The growth of the company''s own retail business was in double digits with like-to-like store growth of just under 10%. Given the market scenario, and the fact that the company does not discount or offer soft terms on the Zodiac, Z3 and ZOD! brands, this is no mean achievement. This has covered ground lost due to weakness in business in the independent retailers'' channel, as well as in the national chains. The share of pie of own retail has increased approximately 10% in the current year.

The design-driven international business has been extremely challenging due to the economic situation in the company''s markets in the EU, the UK and the US. This has been further destabilised by the sharp exchange rate fluctuation and the increase in prices of cotton fabric in the second half of the year. The company has met with some success in increasing its business in its hitherto smaller markets, as well as entering some new markets, which show early promise.

The industry has been excluded from the purview of Excise from March 2013, as a result of which the export segment is greatly benefited, because they have been spared the cost and onerous job of coping (without the simplified procedure) with the compliance of Excise formalities needlessly.

The design-driven international business, notwithstanding lower volumes, increase in fabric prices during the second half of the year, higher depreciation and the benefit of the Rupee depreciation being eroded by stubborn inflation and customers insisting on lower USD prices, has remained profitable.

The Forex Policy has also contributed somewhat to the substantial reduction in exchange loss during the current year, despite extreme volatility of the exchange rates.

The Standalone PBT increased by 14%, through cost reduction/control, despite the increase in rentals (in pursuance of the focus on own retail), and the proviso for discarded assets (the non-viable stores closed during the year), which is heartening, given the market situation

As of 31st March 2013, the company had 105 stores. 11 new stores were opened and 10 were closed during the year, a net increase of 1 store. (All stores are company-owned, not franchised). The company''s strategy of investing in growth of its own retail business is being pursued steadfastly.

The outlook for the Branded business, including the Company''s own retail stores, continues to look most promising in the medium to long term.

2. RESULTS OF OPERATIONS:

FINANCIAL RESULTS:

(Rs. in Lakhs)

Standalone Consolidated

2012-13 2011-12 2012-13 2011-12

Total Revenue from operations 31,584 31,595 36,818 38,540

PROFIT BEFORE TAXATION 1,598 1,404 2,016 2,203

Provision for Taxation:

Current Tax 406 322 528 444

Deferred Tax 86 (16) 86 (16)

PROFIT AFTER TAXATION 1,106 1,098 1402 1,775

Balance of Profit Brought forward 10,036 9,689 15,480 14,613

Transfer from General Reserves - - - 7

Profit Available for Appropriation 111,42 10,787 16,882 16,395

* Excluding property re-classified as non-current investment in the current year.

3. SUBSIDIARY COMPANIES:

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Statement of Profit and Loss and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

4. CASH FLOW STATEMENT:

In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31st March 2013 is annexed hereto.

5. CONSOLIDATED FINANCIAL STATEMENTS:

In accordance with the requirements of Accounting Standards AS-21 notified under the Companies (Accounting Standard) Rules 2006, the Consolidated Accounts of the company and its subsidiaries are annexed to this Report.

6. RATING:

ICRA (an associate of Moody''s Investor Service) has reaffirmed the Company''s rating of A1 for its short term fund based/non fund based facilities, which have been maintained at Rs. 70 crores.

A1 is the highest credit quality rating assigned by ICRA to short term debt instruments, which carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1 to reflect their relatively stronger credit quality.

7. CAPEX :

Capex (on standalone) was incurred predominantly on the new company run Stores (Rs. 389 lakhs), balancing machinery and equipment (Rs. 207 lakhs), refurbishing of the Corporate Headquarters (Rs. 435 lakhs), as well as on building & others (Rs. 165 lakhs). Rental deposits (Rs. 1,447lakhs) are not booked as Capex.

During the year, the Capex aggregated Rs. 1,196 lakhs (as against Rs. 1,852 lakhs last year) on a standalone basis and Rs. 1,387 lakhs (as against Rs. 2,150 lakhs last year) on a consolidated basis.

8. LIQUIDITY:

The Debt Equity Ratio as on 31st March 2013 was 0.26 on a standalone basis and 0.22 on a consolidated basis.

The cash and bank balances/cash equivalents along with liquid investments (free reserves - on consolidated basis) were Rs. 2,924 lakhs in March 2013, as against Rs. 2,209 lakhs last year.

9. INCREASE IN SHARE CAPITAL:

During the year under review, the paid-up share capital of the company has increased from Rs. 19,27,02,980/- to Rs. 19,38,99,980/- as a result of allotment of 119,700 shares issued under the ESOP Scheme.

10. APPROPRIATIONS:

Dividends - Your Directors have recommended a final dividend at Rs. 2/- per Equity Share of Rs. 10/- each on 1,93,89,998 Equity Shares (previous year Rs. 2/- per Equity Share of Rs. 10/- each on 1,92,70,298 Equity Shares). The company had distributed an interim dividend of Rs. 1.50 per equity share during the year (previous year Rs. 1.00 per equity share). The total dividend (interim and final) amount (when approved by the shareholders) including dividend distribution tax would be Rs. 759 lakhs, (previous year Rs. 641 lakhs). Dividend (including dividend distribution tax) as a percentage of profit after tax is 69%.

Transfer to Reserves: Your Directors propose to transfer Rs. 125 lakhs (11% of the net profit for the year) to the General Reserve. An amount of Rs. 10,258 lakhs is proposed to be retained in the Statement of Profit and Loss.

11. CORPORATE GOVERNANCE:

The process of sharpening of, and consistent improvement in the already high standards of Corporate Governance continues. As required under the revised Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed note on Corporate Governance is annexed to this Report. The company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors'' Certificate confirming compliance of the Corporate Governance requirements by the company is attached to the Report on Corporate Governance.

12. QUALITY:

The company continues to pursue its policy of quality, productivity, value addition and innovation. To combat the economic situation globally, cost control measures are being pursued vigourously.

13. BRANDING:

Zodiac, Z3 and ZOD! brands were neither discounted nor offered on soft terms, underscoring the increasing strength of the brands by virtue of the brands'' continuing focus on value added innovation and consistent pursuit of higher quality. This has resulted in the company''s product extensions continuing to gain ground.

The industry has been excluded from the purview of Excise from March 2013. The benefit for the Branded segment will become evident in terms of volume growth over a period of time. The export segment is greatly benefited, because they have been spared the cost and onerous job of coping (without the simplified procedure) with the compliance of Excise formalities needlessly.

14. INFORMATION UNDER SECTION 217(1) (E) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988:

(A) Conservation of Energy

Energy efficiency has been a key focus area for the organisation. Regular audits to fine tune already tight systems put in place has resulted in a further drop in energy consumption, despite the unit rates going up, as well as increase in the number of equipment.

Special emphasis is given to the major contributors of energy consumption - heating, cooling and lighting. Working closely with specialists in each field, the company is constantly striving to outperform not only industry standards, but its own already- achieved benchmarks.

Innovative solutions like microprocessor based equipment and controls, LED, web monitoring, highly efficient steam systems, etc. used in conjunction with each other, as well as in combination with still-evolving technologies like solar, have already resulted in the reduction of minimum electricity demand at the plants.

(B) Pollution Control

The company is very sensitive about the environment. Its belief in running its business in an ecologically responsible manner has not only become a way of life, but also one of its business goals.

This quest for excellence resulted in a natural teaming up with the best in the field of air and water. After a lot of R&D and application of these technologies in its process, the company has under- implementation solutions, which will result in the drop of water consumed in its manufacturing process by over 50%. The eventual goal is to become "water positive".

(C) Technology, Absorption, Adaptations & Innovation : Not applicable

(D) Foreign Exchange Earnings and Outgo:

Total Foreign Exchange

Earned Rs. 13,890 lakhs

Total Foreign Exchange

Outgo Rs. 5,687 lakhs

15. CORPORATE SOCIAL RESPONSIBILITY:

The company continues to lay emphasis on discharging its social responsibility in line with the policy renewed by the Board of Directors on 24th June 2009 for contribution by way of Charitable Funds not related to the business of the company. This is within the limit approved by the shareholders.

16. DIRECTORS:

In accordance with the provisions of the Companies Act, 1956, and the Articles of Association of the Company, Mr. S.R Iyer, Mr. Bernhard Steinruecke and Mr. M.L. Apte, Directors of the Company, shall retire by rotation at the ensuing Annual General Meeting and, being eligible, have offered themselves for re-appointment. A brief resume of Mr. S.R Iyer, Mr. Bernhard Steinruecke and Mr. M.L. Apte, Directors, as required by Clause 49 of the Listing Agreement with the Stock Exchanges, is provided in the Notice convening the Annual General Meeting of the Company.

17. DIRECTORS'' RESPONSIBILITY STATEMENT:

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

(i) that in the preparation of the annual accounts for the financial year ended 31st March 2013, the applicable accounting standards have been followed along with proper explanation;

(ii) that 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 the year under review;

(iii) that the directors 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 the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts for the financial year ended 31st March 2013 on a ''going concern'' basis.

18. HUMAN RESOURCE MANAGEMENT:

The company''s belief that its people are the primary source of its sustainable competitive advantage, drives its consistent emphasis on HRD. The performance driven culture is bearing fruit. Cordial employee relations, in keeping with tradition, are being pursued vigorously with the variable component also including rewards for contribution to the profitability of the company. The Board wishes to place on record its appreciation to all the employees of the company for their sustained efforts and immense contribution to the high level of performance and efficiency of the business during the year.

19. ZODIAC EMPLOYEES'' STOCK OPTION PLAN 2006:

At the Annual General Meeting held on August 31, 2006, the shareholders of the Company had approved the grant of 5,00,000 Stock Option to employees of the Company and its subsidiaries / Directors of the Company (other than Promoter Directors or their relatives).

The Company granted 2,91,000 stock options and 2,67,350 stock options on 27th December 2006 and 20th January 2011 at an exercise price of Rs. 255.40 and Rs. 346.00 per equity share respectively (each option carried an entitlement of one equity share of face value of Rs. 10/- each). Both grants were duly approved by the Compensation Committee/Board of Directors.

During the year under review, the Company allotted 119,700 equity shares, including the bonus entitlement thereon, (to eligible Directors and Employees of the Company under Zodiac Clothing Company Limited - Employees Stock Option Plan - 2006) on receipt of valid applications along with the necessary application money. The said allotment was done successfully on receipt of confirmation given by National Securities Depository Limited and Central Depository Services (India) Ltd. The Company has also received trading permission from The BSE Limited and National Stock Exchange of India Limited in respect of 119,700 equity shares allotted under ESOP. The particulars with regard to the stock options as on March 31, 2013 as required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 are enclosed as Annexure 1 to this Report. The Company has obtained a certificate from the auditors stating that ESOP has been implemented in accordance with SEBI (ESOS and ESPS) Guidelines, 1999 and the resolution of the Company passed in the Annual General Meeting held on August 31, 2006.

20. COMPLIANCE WITH THE CODE OF CONDUCT:

The Code of Conduct adopted by the Company for its Board of Directors and its Managerial Personnel has been uploaded on the company''s website. The declaration of compliance with the Code of Conduct has been received from all Board Members and the Managerial Personnel. A certificate to this effect from Mr. A.Y. Noorani, Vice Chairman and Managing Director, forms part of this Report.

21. MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis of the Company is provided under the separate section and forms part of this report.

22. FIXED DEPOSIT:

The Company has not accepted any Fixed Deposits from the public under Section 58A of the Companies Act, 1956.

23. COMPANY''S WEBSITE:

The Financial Statements, Annual Report including Corporate Governance Report, Shareholding Pattern etc. are displayed interse with the other information on the company''s website viz. www.zodiaconline. com.

24. DONATIONS:

During the financial year, the Company has contributed a sum of Rs. 106 lacs to various Charitable and Educational Institutions.

25. INSURANCE:

All the properties/assets including buildings, furniture/fixtures, etc. and insurable interests of the Company are adequately insured. The international debtors enjoying credit facilities are also insured, despite their flawless record, as a measure of abundant precaution.

26. AUDITORS:

The Auditors M/s. Deloitte Haskins and Sells, Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and, being eligible, have offered themselves for re-appointment. The Audit Committee and Board of Directors recommend the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company.

27. COST AUDITOR:

Pursuant to the provisions under Section 233B of the Companies Act, 1956. M/s. N. Ritesh & Associates, Cost Accountants, has been appointed as Cost Auditors of the Company for the financial year 2013-14.

28. AUDIT COMMITTEE:

In accordance with Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement, the Company has constituted an Audit Committee, which consists of three Non-Executive Independent Directors of the Company viz Mr. S.R Iyer (Chairman of the Audit Committee), Mr. YP Trivedi and Mr. M.L Apte (Members). The Audit Committee functions in terms of the powers and role delegated by the Board of Directors keeping in view the provisions of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement, have been described separately under the head Audit Committee on Report of Corporate Governance.

29. PARTICULARS OF EMPLOYEES:

The Particulars of Employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended, forms part of this Report and have been annexed herewith.

30. SOURCE OF SHAREHOLDERS'' FUNDS EMPLOYED FOR THE YEAR 2012 - 2013 CONSOLIDATED

31. ACKNOWLEDGEMENTS:

Your Directors would like to express their grateful appreciation for the assistance, support and co-operation received from the customers, shareholders, the Government, other statutory bodies, banks, solicitors, distributors, suppliers and other business associates.

Your Directors also place on record their sincere appreciation for significant contribution made by employees at all levels through their dedication, commitment, and look forward to their valuable support in vigourously pursuing the medium to long term goals of the company.

For and on behalf of the Board

Place : Mumbai M. Y. NOORANI

Dated : May 29, 2013 Chairman


Mar 31, 2012

To,The Members of Zodiac Clothing Company Limited.

The Directors hereby present the 28th Annual Report with the Audited Statements of Accounts for the Financial Year ended 31st March 2012.

1. BUSINESS:

Turnover & Profits - During the financial year ended 31st March 2012, the operational revenue of the company on a standalone basis increased 7% to Rs. 31,595 lakhs vs. Rs. 29,526 lakhs in the previous year. The Profit Before Tax was Rs. 1,404 lakhs vs Rs. 3,074 lakhs in the previous year, while the net Profit After Tax for the financial year ended 31st March 2012 was Rs. 1,098 lakhs vs. Rs. 2,330 lakhs in the previous year.

Despite the volatility due to spikes and troughs in sales, the upward revision in prices necessitated by Excise/ cotton fabric prices continuing to be high, the overall branded business showed a modest increase. Within this, the company's own retail business has grown in healthy double digits, with like-to-like stores also showing growth.

The budgeted expenditure was based on the growth projected due to which higher rentals for stores, (with several new stores being in gestation), high prices of cotton fabric and personnel costs impacted the margins.

The design-driven international business from mdia has grown marginally, given the adverse impact of the volatility of the Rupee, the mark to market of Forex (in accordance with the relevant Accounting Standards) and the demand situation, adversely affected the major markets, viz, the EU/ the UK and the USA. Buyers who tried to combat lower demand with lower prices, led to a situation where some quantum of orders were not accepted.

The MTM of Forex referred to above, cotton fabric prices continuing to remain high till the last quarter, personnel costs being amortized over a modest increase in sales resulted in pressure on margins.

As of 31st March 2012, the company had 103 stores, 28 new stores were opened and 9 were closed during the year, a net increase of 19 stores. 3 existing stores were refurbished. (All stores are company-owned, not franchised).The company's strategy of investing in growth of its own retail business is being pursued steadfastly. The growth pattern, although inconsistent across the extreme volatility during the year, continues to be most promising for the branded business as well as for the company-run retail stores in the medium to long term.

2. RESULTS OF OPERATIONS:

FINANCIAL RESULTS:

(Rs. in Lakhs)

Standalone Consolidated

2011-12 2010-11 2011-12 2010-11

Total Revenue from operations 31,595 29,526 38,540 35,778

PROFIT BEFORE TAXATION 1,404 3,074 2,203 4,178

Provision for Taxation:

Current Tax 322 621 444 737

Deferred Tax (16) 123 (16) 123

PROFIT AFTER TAXATION 1,098 2,330 1,775 3,318

Short Provision for Taxation - - - (1)

Profit for the Year 1,098 2,330 1,775 3,319

Balance of Profit Brought forward 9,689 8,339 14,613 12,351

Transfer from General Reserves - - 7 -

Profit Available for Appropriation 10,787 10,669 16,395 15,670

3. SUBSIDIARY COMPANIES:

In accordance with the general circular issued by the Ministry of Corporate Affairs, Government of India, the Balance Sheet, Profit and Loss Account and other documents of the subsidiary companies are not being attached with the Balance Sheet of the Company. However, the financial information of the subsidiary companies is disclosed in the Annual Report in compliance with the said circular. The Company will make available the Annual Accounts of the subsidiary companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and that of the respective subsidiary companies. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies.

4. CASH FLOW STATEMENT:

In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31st March 2012 is annexed hereto.

5. CONSOLIDATED FINANCIAL STATEMENTS:

m accordance with the requirements of Accounting Standards AS-21 notified under the Companies (Accounting Standard) Rules 2006, the Consolidated Accounts of the company and its subsidiaries are annexed to this Report.

6. RATING:

ICRA (an associate of Moody's Investor Service) has reaffirmed the Company's rating of Al for its short term fund based/non fund based facilities, which have been increased from Rs. 51.5 crores to Rs. 70 crores, for the financial year 2012-13.

Al is the highest credit quality rating assigned by ICRA to short term debt instruments, which carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of Al to reflect their relatively stronger credit quality.

7. CAPEX:

Capex (on standalone) was incurred predominantly on the new company run Stores (Rs. 893 lakhs), balancing machinery and equipment (Rs. 342 lakhs), refurbishing of the Corporate Headquarters (Rs. 521 lakhs), as well as on energy conservation (Rs. 96 lakhs). Rental deposits (Rs. 115 lakhs) are not booked as Capex.

During the year, the Capex aggregated Rs. 1,852 lakhs (as against Rs. 1,787 lakhs last year) on a standalone basis and Rs. 2,150 lakhs (as against Rs. 3,318 lakhs last year) on a consolidated basis.

8. LIQUIDITY:

The Debt Equity Ratio as on 31st March 2012 was 0.29 on a standalone basis and 0.24 on a consolidated basis.

The cash and bank balances/cash equivalents along with liquid investments (free reserves - on consolidated basis) were Rs. 2,209 lakhs in March 2012, as against Rs. 2,922 lakhs last year.

9. INCREASE IN SHARE CAPITAL:

During the year under review, the Authorized Capital has increased from Rs. 20,00,00,000/- (Rupees Twenty Crores only) divided into 2,00,00,000 (Two Crore) Equity Shares of Rs. 10/- (Rupees Ten) each to Rs. 30,00,00,000/- (Rupees Thirty Crores only) divided into 3,00,00,000 (Three Crores) Equity Shares of Rs. 10/-(Rupees Ten) each.

The paid-up share capital of the company has also increased from Rs. 12,82,10,640/- to Rs. 19,27,02,980/- as a result of allotment of 6,410,532 bonus shares and 38702 shares issued under the ESOP Scheme.

10. APPROPRIATIONS:

Dividends - Your Directors have recommended a final dividend on expanded capital (pursuant to allotment of Bonus Shares) at Rs. 21- per Equity Share of Rs. 10/- each on 19,270,298 Equity Shares (previous year Rs. 5/- per Equity Share of Rs. 10/- each on 12,821,064 Equity Shares). The company had distributed an interim dividend of Re.l/- per equity share during the year. The total dividend (interim and final) amount (when approved by the shareholders) including dividend distribution tax would be Rs. 641 lakhs, (previous year Rs. 745 lakhs). Dividend (including dividend distribution tax) as a percentage of profit after tax is 58.37% Transfer to Reserves: Your Directors propose to transfer Rs. 110 lakhs (10.01% of the net profit for the year) to the General Reserve. An amount of Rs. 10,037 lakhs is proposed to be retained in the Profit & Loss Account.

11. CORPORATE GOVERNANCE:

The process of sharpening of, and consistent improvement in the already high standards of Corporate Governance continues. As required under the revised Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed note on Corporate Governance is annexed to this Report. The company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors' Certificate confirming compliance of the Corporate Governance requirements by the company is attached to the Report on Corporate Governance.

12. QUALITY:

The company continues to pursue its policy of quality, productivity, value addition and innovation. To combat the economic situation globally, cost control measures are being pursued vigorously.

13. BRANDING:

The company's competitors continued their strategy of consistently discounting for the better part of the year. This resulted in the Zodiac, Z3 and ZOD! brands continuing to strengthen vis-a-vis the competition, since none of the three brands was discounted, and since the company continued to add value in terms of quality and fashion content. The Company's suits business is gaining ground by virtue of offering a product of truly international standards.

The introduction of Excise from March 2011 has now played out for a full financial year. It is reassuring that the consumer has absorbed the price revision due to both Excise and cotton prices.

14. INFORMATION UNDER SECTION 217(1) (E) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988:

(A) Conservation of Energy

In the process of becoming more efficient with regard to the conservation of energy, the following steps have been commissioned:

(i) We have consciously moved away from the standard "central processing unit- model of computers to thin clients. The saving per machine is around 47 watts of electricity and this change has been effected over the entire organization.

(ii) m tandem with this, the central servers have been upgraded to high-end servers, which automatically sense the computer traffic and adjust the clock speed accordingly. Consumption of electricity by the servers has fallen sharply.

(iii) Automation of various production operations are being done on a continuous basis, which result in the number of operations dropping, resulting in significant drop in the number of machines being used and consequently reducing the dependency on energy.

The new corporate office is also energy efficient. The windows allow plenty of light in during the working hours. The light fixtures are connected to sensors, which control the intensity of lights coming on and off. Recognizing the fact that the maximum consumption in any building is lighting and air conditioning, we have installed motion sensors, which switch on and switch off the circuits depending on movement and occupancy. This reduces the load on the energy requirements.

(B) Pollution Control

- Besides our boilers being eco-friendly and energy-friendly, we have also installed heat recovery systems enabling the boiler to be fired for a shorter period resulting in saving of furnace oil, which in turn makes the whole process more eco-friendly.

- Our high-end water treatment systems have been further upgraded with more high-tech treatment equipment, which has made our company more eco-friendly.

- We have also installed sewage treatment plants, which keep the sewage treated and flowing in a loop via flushing only and have achieved a "zero discharge" of sewage. This has reduced water consumption.

(C) Technology, Absorption, Adaptations &

Innovation: Not applicable

(D) Foreign Exchange Earnings and Outgo:

Total Foreign Exchange

Earned Rs. 14,002 lakhs

Total Foreign Exchange

Outgo Rs. 5,205 lakhs

15. CORPORATE SOCIAL RESPONSIBILITY:

The company continues to lay emphasis on discharging its social responsibility in line with the policy renewed by the Board of Directors on 24th June 2009 for contribution by way of Charitable Funds not related to the business of the company. This is within the limit approved by the shareholders.

16. DIRECTORS:

In accordance with the provisions of the Companies Act, 1956, and the Articles of Association of the Company, Mr. Y. P. Trivedi, Dr. Heinrich D. Dieckmann and Mr. MY. Noorani, Directors of the Company, shall retire by rotation at the ensuing Annual General Meeting and, being eligible, have offered themselves for re-appointment. A brief resume of Mr. Y. P. Trivedi, Dr. Heinrich D. Dieckmann and Mr. MY. Noorani, Directors, as required by Clause 49 of the Listing Agreement with the Stock Exchanges, is provided in the Notice convening the Annual General Meeting of the Company.

17. DIRECTORS' RESPONSIBILITY STATEMENT:

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

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

(ii) that 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 the year under review;

(iii) that the directors 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 the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts for the financial year ended 31st March 2012 on a' going concern' basis.

18. HUMAN RESOURCE MANAGEMENT:

The company's belief that its people are the primary source of its sustainable competitive advantage, drives its consistent emphasis on HRD. The performance driven culture is bearing fruit. Cordial employee relations, in keeping with tradition, are being pursued vigorously with the variable component also including rewards for contribution to the profitability of the company. The Board wishes to place on record its appreciation to all the employees of the company for their sustained efforts and immense contribution to the high level of performance and efficiency of the business during the year.

19. ZODIAC EMPLOYEES' STOCK OPTION PLAN 2006:

At the Annual General Meeting held on August 31, 2006, the shareholders of the Company had approved the grant of 5,00,000 Stock Option to employees of the Company and its subsidiaries / Directors of the Company (other than Promoter Directors or their relatives).

The Company granted 2,91,000 stock options and 2,67,350 stock options on 27th December 2006 and 20th January 2011 at an exercise price of Rs. 255.40 and Rs. 346.00 per equity share respectively (each option carried an entitlement of one equity share of face value of Rs. 10/- each). Both grants were duly approved by the Compensation Committee/Board of Directors.

During the year under review, the Company allotted 38,702 equity shares, including the bonus entitlement thereon, (to eligible Directors and Employees of the Company under Zodiac Clothing Company Limited - Employees Stock Option Plan - 2006) on receipt of valid applications along with the necessary application money. The said allotment was done successfully on receipt of confirmation given by National Securities Depository Limited and Central Depository Services (India) Ltd. The Company has also received trading permission from The BSE Limited and National Stock Exchange of India Limited in respect of 38,702 equity shares allotted under ESOP. The particulars with regard to the stock options as on March 31, 2012 as required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are enclosed as Annexure 1 to this Report. The Company has obtained a certificate from the auditors stating that ESOP has been implemented in accordance with SEBI (ESOS and ESPS) Guidelines, 1999 and the resolution of the Company passed in the Annual General Meeting held on August 31, 2006.

20. COMPLIANCE WITH THE CODE OF CONDUCT:

The Code of Conduct adopted by the Company for its Board of Directors and its Managerial Personnel has been uploaded on the company's website. The declaration of compliance with the Code of Conduct has been received from all Board Members and the Managerial Personnel. A certificate to this effect from Mr. A.Y. Noorani, Vice Chairman and Managing Director, forms part of this Report.

21. MANAGEMENT DISCUSSION AND ANALYSIS:

The Management Discussion and Analysis of the Company is provided under the separate section and forms part of this report.

22. FIXED DEPOSIT:

The Company has not accepted any Fixed Deposits from the public under Section 58A of the Companies Act, 1956.

23. COMPANY'S WEBSITE:

The Financial Statements, Annual Report including Corporate Governance Report, Shareholding Pattern etc. are displayed interse with the other information on the company's website viz. www.zodiaconline. com.

24. DONATIONS:

During the financial year, the Company has contributed a sum of Rs. 83.15 lacs to various Charitable and Educational Institutions.

25. INSURANCE:

All the properties/assets including buildings, furniture/fixtures, etc. and insurable interests of the Company are adequately insured. The international debtors enjoying credit facilities are also insured, despite their flawless record, as a measure of abundant precaution.

26. AUDITORS:

The Auditors M/s. Deloitte Haskins and Sells, Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and, being eligible, have offered themselves for re- appointment. The Audit Committee and Board of Directors recommend the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company.

27. COST AUDITOR:

Pursuant to the provisions under section 233B of the Companies Act, 1956, M/s N. Ritesh & Associates, Cost Accountants has been appointed as Cost Auditors of the Company for the financial year 2012-13.

28. AUDIT COMMITTEE:

m accordance with Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement, the Company has constituted an Audit Committee, which consists of three Non-Executive Independent Directors of the Company viz Mr. S.R Iyer (Chairman of the Audit Committee), Mr. Y.P Trivedi and Mr. M.L Apte (Members). The Audit Committee functions in terms of the powers and role delegated by the Board of Directors keeping in view the provisions of Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement, have been described separately under the head Audit Committee on Report of Corporate Governance.

29. PARTICULARS OF EMPLOYEES:

The Particulars of Employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975, as amended forms part of this Report and have been annexed herewith.

31. ACKNOWLEDGEMENTS:

Your Directors would like to express their grateful appreciation for the assistance, support and co- operation received from the customers, shareholders, the Government, other statutory bodies, banks, solicitors, distributors, suppliers and other business associates.

Your Directors also place on record their sincere appreciation for significant contribution made by employees at all levels through their dedication, commitment, and look forward to their valuable support in vigorously pursuing the medium to long term goals of the company.

For and on behalf of the Board

Place: Mumbai: M. Y. NOORANI

Dated: May 29, 2012 Chairman


Mar 31, 2010

We are happy to present the 26th Annual Report together with the Audited Accounts of the Company for the year ended 31st March, 2010.

1. BUSINESS:

Turnover & Profits - During the financial year ended 31st March 2010, the income of the company on a standalone basis was virtually flat at Rs.28,725 lakhs vs. Rs. 28,605 lakhs in the previous year. The profit before tax increased by 37.12% to Rs. 3,280 lakhs vs. Rs.2,392 lakhs in the previous year, while the net profit after tax for the financial year ended 31st March 2010 increased by 39% to Rs.2,105 lakhs, vs. Rs.1,514 lakhs in the previous year. The net profit of Rs.2,105 lakhs is impressive even when compared to 2007-08s (a great year) profit of Rs. 2.016 lakhs.

The different business segments, i.e. the design driven international business from India as well as the branded business and the companys own retail, have performed reasonably well, considering the turmoil in the international markets and the subdued consumer sentiment, both internationally and in India. What is noteworthy is the companys focus on profitability has yielded results, which are visible, both in the PBT and PAT rising sharply.

Although the top line across the business segments was flat, this in itself was an achievement despite the situation described above, and by the fact that the company did not discount its products in any of the segments. The revenue pattern during the year has been sporadic, with periods showing revival of growth in consumer demand across markets, and other periods where demand reverted to the pattern seen during the lows between November 2009 and March 2010.

During the year, the company opened 8 new stores and renovated 3 stores (all stores are company- run, not franchised) in keeping with its strategy of investing in the growth potential of retail. 4 unviable stores were closed during the year. Despite the sporadic nature of sales during the year, the company firmly believes that the return to sustained growth is palpable, and consequently continues to vigorously pursue its target of profitable growth (increasing the retail presence being a vital ingredient of this target) with financial discipline, cost control, global sourcing and conservative hedging of its forex exposure.

2. RESULTS OF OPERATIONS

FINANCIAL RESULTS (Rupees in Lakhs)

Standalone Consolidated

2009-10 2008-09 2009-10 2008-09 Sales & other Income 28725 28605 33385 34085

PROFIT BEFORE TAXATION 3280 2392 3887 3452

Provision for Taxation

Current Tax 1144 827 1243 902 Deferred Tax 7 14 7 14

Fringe Benefit Tax - 37 - 37 PROFIT AFTER TAXATION 2129 1514 2637 2499

Short Provision for Taxation 24 1 18 3

Profit for the Year 2105 1513 2619 2496

Balance of Profit Brought forward 7146 6496 10713 9132

Profit Available for Appropriation 9251 8009 13332 11628

3. SUBSIDIARY COMPANIES:

The audited Statement of Accounts of the companys subsidiaries, viz., Multiplex Collapsible Tubes Ltd., India; Zodiac Clothing Co. S.A., Switzerland; Zodiac Clothing Co. (UAE) LLC, Dubai , Zodiac Clothing Co. Inc., U.S.A. and Zodiac Properties Limited, Dubai, together with the Report of the Directors and the Auditors, as required under Section 212 of the Companies Act, 1956, are attached to this Report.

4. CASH FLOW STATEMENT:

In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31 st March 2010 is annexed hereto.

5. CONSOLIODATED FINANCIAL STATEMENTS:

In accordance with the requirements of Accounting Standards AS-21 notified under the Companies (Accounting Standard) Rules 2006, the Consolidated Accounts of the company and its subsidiaries are annexed to this Report.

6. RATING:

During the year, ICRA (an associate of Moodys Investor Service) has reaffirmed the Companys rating of Al + for its short term fund based/non fund based facilities, which have been enhanced from Rs. 45.25 crore to Rs.51.5 crore. The company has also been assigned an Al + rating for its issue of commercial paper for Rs.20 crore.

Al is the highest credit quality rating assigned by ICRA to short term debt instruments, which carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of Al + to reflect their relatively stronger credit quality.

7. CAPEX

Capex was incurred predominantly on the new company run Stores (Rs.467 lakhs), balancing machinery and equipment (Rs.240 lakhs), refurbishing of the Corporate Headquarters, as well as energy conservation (Rs.398 lakhs) and pollution control equipment (Rs.148 lakhs), besides rental deposits (Rs.925 lakhs).

During the year, the Capex aggregated Rs. 1,254 lakhs (as against Rs. 1,414 lakhs last year) on a standalone basis and Rs.1,371 lakhs (as against Rs. 2,708 lakhs last year) on a consolidated basis.

8. LIQUIDITY:

The Debt equity ratio as on 31st March 2010, was 0.17 on a consolidated basis. We maintained sufficient care to meet our strategic objectives from internal accruals, which have adequately covered the requirement of funds. The cash and bank balances (consolidated) were Rs. 2922 lakhs in March 2010 as against Rs. 2,711 lakhs last year.

9. INCREASE IN SHARE CAPITAL:

During the year, the paid-up share capital of the company has increased from Rs.8,38,65,260/- to Rs.8,39,26,760/- as a result of allotment of 6150 shares of Rs. 10.00 each under the ESOP Scheme.

10. APPROPRIATIONS:

Dividends - We recommend a dividend of Rs. 7.00 per equity share (70% on par value of Rs. 10.00 per share). The total dividend amount (if approved by the shareholders) including dividend distribution tax would be Rs. 687 lakhs, (previous year Rs. 638 lakhs). Dividend (including dividend distribution tax) as a percentage of profit after tax is 32.64%.

Transfer to Reserves - We propose to transfer Rs.2,25,00,000 (10.69% of the net profit for the year) to the general reserve. An amount of Rs. 8339 lakhs is proposed to be retained in the Profit & Loss Account.

11. BONUS SHARES

The Board of Directors, in their meeting held on 6th July 2010, have recommended a Bonus issue in the ratio of one share for every two shares held, on the record date, subject to the shareholders approval in the ensuing AGM.

12. CORPORATE GOVERNANCE:

The process of sharpening of and consistent improvement in the already high standards of Corporate Governance continues. As required under the revised Clause 49 of the Listing Agreement with the Stock Exchanges, a detailed note on Corporate Governance is annexed to this Report. The company is in full compliance with the requirements and disclosures that have to be made in this regard. The Auditors Certificate confirming compliance of the

Corporate Governance requirements by the company is attached to the Report on Corporate Governance.

13. QUALITY:

Quality, productivity, value addition and innovation continued to be sharp focus areas. The subdued market conditions have resulted in customers seeking excellence in these areas, fulfillment of which have been rewarded with stable and profitable business during these turbulent times. De-risking of the business at various stages has contributed to more efficient operations.

14. BRANDING:

In the prevailing business environment the companys competitors brands weakened considerably due to their being aggressively discounted. By comparison, the Zodiac and z3 brands, strengthened considerably vis-a-vis the competition, to a large extent because none of the three brands, i.e. Zodiac, ZOD! and z3 were discounted. This, while resulting in a subdued top line, contributed to the brands enhanced strength as well as the strong bottom line. The product extension of suits and shoes to the Zodiac brand has received most encouraging response from the consumers.

15. INFORMATION UNDER SECTION 217(1) (E) OF THE COMPANIES ACT, 1956, READ WITH COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS) RULES 1988:

(A) Conservation of Energy

- Installed specially designed, energy efficient lighting in the production facilities (with special reflectors, ensuring blanket lighting) with substantial reduction of consumption of energy.

Using state of the art machines which help to reduce power consumption dramatically and, at the same time, are efficient and eco-friendly.

(B) Pollution Control

All boilers in the factory used for steam generation are 96% efficient and are of the latest technology available in the market. This is very eco-friendly as the exhaust parameters are controlled to the maximum.

- Effluents from the processes are treated in the effluent treatment plants and further treated in the post treatment section with ultraviolet filters and reverse osmosis technology, enabling recycling.

- Sewage water is treated in separate sewage treatment plants and the treated water is used for gardening purposes.

(C) Technology, Absorption, Adaptations & Innovation

Not applicable

(D) Foreign Exchange Earnings and Outgo

Total Foreign Exchange

Earned Rs. 14,848 lakhs

Total Foreign Exchange

Outgo Rs 4,463 lakhs

16. CORPORATE SOCIAL RESPONSIBILITY :

The company continues to lay emphasis on discharging its social responsibility. At the meeting of the Board of Directors held on 24th June 2009, the Board renewed the proviso for contribution by the company by way of Charitable Funds not related to the business of the company. This is within the limit approved by the shareholders.

17. DIRECTORS:

In accordance with the provisions of the Companies Act, 1956, and the Articles of Association of the company, Mr. M.Y. Noorani, Mr. S.R.Iyer and Mr. Bernhard Steinruecke, Directors of the Company, shall retire by rotation at the ensuing Annual General Meeting and, being eligible, have offered themselves for re-appointment. A brief resume of Mr. M.Y. Noorani, Mr. S.R.Iyer and Mr. Bernhard Steinruecke, Directors as required by Clause 49 of the Listing Agreement with the Stock Exchanges, is provided in the Notice convening the Annual General Meeting of the Company.

18. DIRECTORS RESPONSIBILITY STATEMENT:

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

(i) that in the preparation of the annual accounts for the financial year ended 31st March, 2010, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(ii) that 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 the year under review;

(iii) that the directors 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 the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the directors have prepared the accounts for the financial year ended 31st March, 2010 on a going concern basis.

19. HUMAN RESOURCE MANAGEMENT:

The companys belief that its people are the primary source of its sustainable competitive advantage, drives its consistent emphasis on HRD. The performance driven culture is bearing fruit. Employee relations, in keeping with tradition, continued to be cordial during the year. The Board wishes to place on record its appreciation to all the employees of the company for their sustained efforts and immense contribution to the high level of performance and efficiency of the business during the year.

20. ZODIAC EMPLOYEES STOCK OPTION PLAN 2006:

At the Annual General Meeting held on August 31, 2006, the shareholders of the Company have approved the grant of 5,00,000 Stock Option to employees of the Company and its subsidiaries / Directors of the Company (other than Promoter Directors or their relatives). On December 27, 2006 the company granted 2,91,000 stock options (each option carried entitlement for One equity share of the face value of Rs. 10 /- each) to eligible Non Promoter Directors and employees at an exercise

price of Rs. 255.40 per equity share, which was duly approved by the Compensation Committee / Board of Directors. During the year under review, the Company allotted 6150 shares (to eligible Directors and Employees of the Company under Zodiac Clothing Company Limited - Employees Stock Option Plan - 2006) on receipt of valid applications along with the necessary application money. The allotment was done successfully on receipt of confirmation given by National Securities Depository Limited vide letter dated 13.2.2010 for 4050 shares and vide letter dated 13.4.2010 for 1700 shares and by Central Depository Services Ltd. vide letter dated 4.5.2010 for 400 shares. The Company has also received the trading permission from The Bombay Stock Exchange Limited and National Stock Exchange of India Limited in respect of 4050 shares allotted under ESOP vide letter dated 19.2.2010 (BSE) and 22.2.2010 (NSE). The particulars with regard to the stock options as on March 31, 2010 as required to be disclosed pursuant to Clause 12 of SEBI (Employees Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines 1999 are enclosed as Annexure 1 to this Report. The company has obtained a certificate from the auditors stating that ESOP has been implemented in accordance with SEBI (ESOS and ESPS) Guidelines, 1999 and the resolution of the Company passed in the Annual General Meeting held on August 31, 2006.

21. COMPLIANCE WITH THE CODE OF CONDUCT:

The company has evolved and adopted a Code of Conduct for its Board of Directors and its managerial personnel in line with the best practices of good Corporate Governance. The company amended its Code of Conduct on Insider Trading at its Board of Directors meeting held on 31st January 2009 and the same has been uploaded on the companys website. The declaration of compliance with the Code of Conduct has been received from all Board Members and the managerial personnel. A certificate to this effect from Mr. A.Y. Noorani, Vice Chairman and Managing Director, forms part of this Report.

22. MANAGEMENT DISCUSSION AND ANALYSIS:

A detailed review of operations, performance and future outlook of the company is given separately under the head Management Discussion and Analysis.

23. FIXED DEPOSIT:

We have not accepted any Fixed Deposits within the meaning of Section 58A of the Companies Act,

1956 and, as such, no amount of principal or interest was outstanding as of the Balance Sheet date.

24. ELECTRONIC FILING:

SEBI has stipulated electronic filing of the Annual Report including Corporate Governance Report, Shareholding Pattern etc., on the website of SEBI i.e. www.sebiedifar.nic.in. The statements of your company can be accessed at this website. These statements are also displayed on the companys website viz. www.zodiaconline.com

25. LISTING FEES:

The equity shares of the Company are listed on The Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Company has paid the listing fees to the above Stock Exchanges up to date. The Companys Equity Shares are traded in the dematerialized segment for all investors compulsorily and the Company has entered into agreements with Central Depository Services India Limited and National Securities Depository Limited for trading in electronic form.

26. AUDITORS:

The Auditors M/s. Deloitte Haskins and Sells, Chartered Accountants, retire at the ensuing Annual General Meeting of the Company and, being eligible, have offered themselves for re- appointment. The Audit Committee and Board of Directors recommend the re-appointment of M/s. Deloitte Haskins & Sells, Chartered Accountants, as Statutory Auditors of the Company.

27. AUDIT COMMITTEE:

In accordance with Section 292A of the Companies Act, 1956 and Clause 49 of the Listing Agreement, the Company has constituted an Audit Committee, which consists of three Non-Executive Independent Directors of the Company viz Mr. S. R. Iyer (Chairman of Audit Committee), Mr. Y.R Trivedi and Mr. M. L. Apte (Members). The Audit Committee functions in terms of the role and powers delegated by the Board of Directors keeping in view the provisions of Section 292 A of the Companies Act, 1956 and Clause 49 of the Listing Agreement.

28. PARTICULARS OF EMPLOYEES:

The Particulars of Employees required to be furnished under Section 217(2A) of the Companies Act, 1956, read with the Companies (Particulars of Employees) Rules, 1975 forms part of this Report. However as per the provisions of Section 219(1) (b)(iv) of the Companies Act, 1956, the Report and Accounts are being sent to all shareholders, excluding the statement of Particulars of Employees. Any shareholder interested in obtaining a copy, may write to the Company Secretary at the Registered Office of the Company.

29. SOURCE OF SHAREHOLDERS FUNDS EMPLOYED FOR THE YEAR 2009-2010 - CONSOLIDATED

30. ACKNOWLEDGEMENTS:

The Board would like to place on record its sincere appreciation for the wholehearted support and contribution made by its customers, its shareholders, and all its employees globally, as well as the various Government Departments, Bankers, Solicitors, Distributors, Suppliers and other business associates towards the conduct of efficient and effective operations of our company.

For and on behalf of the Board

M.Y. NOORANI Chairman

Mumbai:

Dated: July 6, 2010

 
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