Mar 31, 2018
Dear Members,
The Directors present the 39th Annual Report together with the Audited Financial Statements of the Company for the financial year ended 31st March, 2018.The Managementâs Discussion and Analysis Report as required pursuant to Listing Regulations 2015 forms part of this Report.
Financial Results
The Companyâs financial performance during the year ended 31st March, 2018 as compared to the previous year, is summarised below:
(Rs. in Crore)
2017-18 |
2016-17 * |
|
Sales / Revenue from Operations (Net of Excise Duty) ** |
3033.40 |
2468.21 |
Earnings Before Interest, Tax and Depreciation (EBITDA) |
180.76 |
148.40 |
Less: Finance Costs |
188.62 |
167.32 |
Profit / (Loss) before Depreciation and Tax |
(7.96) |
(18.92) |
Less: Depreciation |
66.25 |
64.47 |
Less: Impairment Losses |
14.86 |
0.00 |
Profit / (Loss) before tax |
(88.97) |
(83.39) |
* Previous year figures have been regrouped where necessary and have been re-stated as per Ind AS.
** Effective July 01, 2017, sales are recorded net of GST whereas earlier sales were recorded gross of excise duty which formed part of expenses. Hence revenue from operations for the year 2017-18 are not comparable with the previous year corresponding figures.
Indian Accounting Standard (Ind AS)
Your Company has adopted Indian Accounting Standards (âInd ASâ) for the accounting period beginning on 1st April, 2017 pursuant to Ministry of Corporate Affairs Notification dated 16th February, 2015, notifying the Companies (Indian Accounting Standard) Rules, 2015. Accordingly, the Financial Statements for the year ended on 31st March, 2018 have been prepared in accordance with Ind AS, prescribed under Section 133 of the Companies Act, 2013 (âthe Actâ) read with the relevant rules issued thereunder and the other recognized accounting practices and policies to the extent applicable. The Financial Results for all the periods of 2017-18 presented have been prepared in accordance with Ind AS.
Review of Operations
In FY 18 Garden Silk Mills Ltd. has delivered strong volume growth and maintained a leadership position in the major segments of its business activities i.e. Polyester Chips and POY / FDY (including processed yarn).
Improved domestic and export demand led to about 23% year-on-year growth in total revenue from operations at Rs. 3033.40 Crore as compared to Rs. 2468.21 Crore in the previous year. Income from exports for FY 18 was higher by about 46% at Rs. 589.37 Crore compared to Rs. 404.56 Crore in the previous year.
Despite a challenging and competitive business environment, your Company achieved Operating EBITDA (earnings before interest, tax and depreciation) of Rs. 180.76 Crore as compared to Rs. 148.40 Crore in the previous year. On a consolidated basis, EBITDA for FY 18 increased by 23% to Rs. 187.44 Crore from Rs. 150.71 Crore in the previous year.
Total sale of chips in volume was higher at 160,771 MT for the year 2017-18 as compared to 142,165 MT in the previous year. In value terms also your Company achieved higher sale of chips for FY18 at Rs. 1,112.04 Crore as compared to Rs. 918.68 Crore in the previous year. Higher exports were a key contributor to this performance.
We achieved higher production of chips (including melt), during 2017-18 at 319,979 MT as compared to 277,714 MT in the previous year. In yarn segment, your Company achieved higher production of spun polyester filament yarn (POY/FDY) at 176,630 MT for FY 18 as compared to 155,142 MT in FY 17. Equated (standardised) production for both POY and FDY reached record highs.
The volume of sales of polyester filament yarn (PFY) including processed yarn in FY 18 also increased at 182,429 MT as against 148,427 MT in the previous year FY 17. Sale of PFY (including processed yarn) in value terms also increased in FY 18 at Rs. 1,808.32 Crore as compared to Rs. 1,502.65 Crore in FY 17.
During the year, the demand for Fabrics remained subdued, mainly because of the impact of GST implementation on Textiles. The wholesale / retail trade took itâs time to come to terms with the tax and procedures imposed on them for the first time.
The Companyâs improved EBITDA performance has been possible despite extremely tight working capital conditions in the face of 30% increase in raw material costs and rising fuel prices.
With the arrival of GST the company has achieved a level playing field with industry players having sales tax exemptions in Union Territories. This has materially helped our performance in the domestic market and polyester yarn margins generally improved for the company. Yet, the local markets still remain weak as the fragmented and unorganised downstream textile sector has not fully adjusted to the requirements mandated by GST. Our profitable exports to quality customers have demonstrated Gardenâs adaptability and global competitiveness, and have reduced pressure of low margin sales in the domestic market.
The Companyâs spinning plants achieved record utilisation levels and CP throughput was the highest in last five years. All continuous plants (except for CP3 which remains shut) are running at close to 100% and steps are being taken to further improve output with still better energy efficiencies. Overall spinning and CP efficiencies, first-grade production and efficiency were very high in the year under review. High energy costs are a matter of some concern and were a significant contributor to the increase in overall manufacturing expenses for FY 17-18.
The Company is continuously working on increasing/modifying its supplier base to reduce cost and lead time and ensure uninterrupted supply of raw materials and other inputs. The Company simultaneously reviews its policies and practices to adjust the inventory level of both raw materials and finished goods to reduce the impact of volatility in raw material prices while ensuring availability of sufficient stock for optimum production plans and supply of finished goods. Your Company maintains its focus on cost reduction at the manufacturing level via its continuous improvement program.
Your Company continues to have a clear price and product leadership in its key specialty yarn product segments: especially cationic, fine-denier and spandex-covered yarns. It is also an important player in mother-yarn and nylon yarns. It continues to be perceived in the market as a premium producer of quality chips, yarn and fabric even for its commodity products.
Dividend
Considering the loss incurred by the Company, your Directors do not recommend any dividend on equity shares for the financial year 2017-18.
Transfer to Reserves
In absence of distributable profits / earnings, it is not proposed to transfer any amount to reserves for the financial year 2017-18.
Change in the Nature of Business, if any
Garden Silk Mills Ltd. is one of Indiaâs leading man-made-fibre based textile companies. It is a vertically integrated manufacturer of a wide range of Polyester Chips, Polyester Filament Yarns (PFY), Preparatory Yarns, Woven (Grey) Fabric as well as Dyed and Printed Sarees and Dress Materials. During the year under review, there was no change in the nature of business of the Company.
Going Concern Status
The Company has term loans, working capital loans and other financing arrangements from various banks and other lenders. These lenders have declared their arrangements with the Company as non-performing asset since the Company has defaulted in repayment of principal, interest and other penal dues. The Companyâs net-worth as at the year-end is negative mainly due to accumulated losses. Although the Company has shown an improvement in its operating income for the year, the Company continues to face significant pressure on its financial resources. The Company is in discussions with its consortium of lenders for financial restructuring arrangement including identifying a suitable investor. The lenders have expressed optimism about the successful closure of above resolution in a time-bound manner and the company has thus accordingly prepared financial results on a going-concern basis.
Consolidated Financial Statements
As stipulated by Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (âListing Regulations, 2015â), the Company has prepared Consolidated Financial Statements in accordance with the applicable accounting standards as prescribed under the Companies (Accounts) Rules, 2014 of the Companies Act, 2013 (âthe Actâ). The Consolidated Financial Statements reflects the results of the Company and that of its subsidiary. As required under Regulation 34 of the Listing Regulations, 2015, the Audited Consolidated Financial Statements together with the Independent Auditorsâ Report thereon is annexed and forms part of this Report.
Share Capital
The Paid-up Equity Share Capital of the Company as on 31st March, 2018 was Rs. 42.08 Crore. There was no public issue, rights issue, bonus issue or preferential issue etc. during the year. The Company has not issued shares with differential voting rights, sweat equity shares, nor has it granted stock options. As on 31st March, 2018, none of the directors of the Company hold instruments convertible into equity shares of the Company.
Subsidiary, Joint Venture and Associate Companies
The Company has one wholly owned overseas subsidiary namely GAIA International FZE, U.A.E.. GAIA International FZE is a free zone establishment and is registered with the Ajman Free Zone, Ajman, U.A.E. The Company is registered to carry out the business of trading in textile and ready-made garments including import and export.
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement in Form AOC-1, containing salient features of the financial statement of the Companyâs subsidiary is forming part of the Consolidated Financial Statements.
Directors and Key Managerial Personnel
The Board of Directors consists of 10 (ten) members, of which 5 (five) are Independent Directors. The Board also comprises of one woman Independent Director.
As per the provisions of Section 152(6) of the Companies Act, 2013 and the Companyâs Articles of Association, Shri Alok P. Shah (DIN: 00218180) shall retire from the Board by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment as a Director of the Company. The Board recommends his re-appointment.
The term of office of Shri Yatish C. Parekh, as an Independent Director, will expire on 31st March, 2019. The Board of Directors, on recommendation of the Nomination and Remuneration Committee has recommended re-appointment of Shri Yatish C. Parekh, as an Independent Director of the Company for a second term of 5 (five) consecutive years on the expiry of his current term of office. The members are requested to approve his appointment in the ensuing annual general meeting.
The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence prescribed under the Act and the Listing Regulation.
During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company, other than sitting fees and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company.
The information as required to be disclosed under regulation 36(3) of SEBI Listing Regulations, 2015 in case of re-appointment of the directors is provided in the Notice of the ensuing annual general meeting.
There was no other change in the directors and KMP during the year under review. Detailed information on the directors is provided in the Corporate Governance Report.
Managerial Remuneration
The remuneration paid to the Directors is in accordance with the Remuneration Policy formulated in accordance with Section 178 of the Companies Act, 2013.
Disclosures of the ratio of the remuneration of each director to the median employeeâs remuneration and other details as required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided as Annexure C.
The details of remuneration paid to the Directors including Executive Directors of the Company are given in Form MGT-9 forming part of the Directors Report.
Corporate Governance
Your Company reaffirms its commitment to Corporate Governance and is fully compliant with the conditions of Corporate Governance stipulated in Clause âCâ of Schedule V on Annual Report pursuant to Regulation 34(3) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A separate section of disclosure on Corporate Governance and a certificate from M/s Sharp and Tannan, Chartered Accountants, Statutory Auditors of the Company in this regard, are annexed hereto and forms part of the Report. The auditorâs certificate for the year 2017-18 does not contain any qualification, reservation, adverse remark or disclaimer.
All Board members and Senior Management personnel have affirmed compliance with the Code of Conduct for the year 2017-18. A declaration to this effect signed by the Managing Director of the Company is contained in this Annual Report. The Managing Director and CFO have certified to the Board with regard to the financial statements and other matters as required under regulation 17(8) of the SEBI Listing Regulations, 2015.
Audit Committee
The Audit Committee of the Company comprises of three Independent Directors. The composition of directors and other details are provided in the Corporate Governance Report of the Company.
All the recommendations made by the Audit Committee during the year were accepted by the Board. During the year under review, neither the statutory auditors nor the secretarial auditors has reported to the Audit Committee under Section 143(12) of the Companies Act, 2013, any instances of fraud committed against the Company by its officers or employees, the details of which would need to be mentioned in the Directorsâ Report.
Pursuant to the provisions of Section 177 of the Companies Act, 2013 and Listing Regulations, 2015, the Company has established a vigil mechanism through the Committee, wherein the genuine concerns can be expressed by the employees and directors. The Company has also provided adequate safeguards against victimization of employees who expressed their concern. The Company has provided the details of the vigil mechanism in the Whistle Blower Policy in their Corporate Governance Report and also posted these on the website of the Company.
Corporate Social Responsibility Committee
The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013, comprising of three Directors including Independent Director.
For the current financial year 2017-18, as the average profits for the last three years is negative, the requirements for spending based on average profits is not applicable. However, the Company has voluntarily spent an amount of Rs.0.91 Lacs towards various education promotion and social welfare related programs during the year.
The CSR Committee will further continue to identify the project which can be covered under the CSR guidelines in compliance with the CSR objectives and policy of the Company.
The report as per Section 135 of the Companies Act, 2013 read with Companies (Corporate Social Responsibility Policy) Rules, 2014 is attached as Annexure B to this Report.
Auditors and Auditorsâ Report
Pursuant to the provisions of section 139 of the Companies Act, 2013, the members of the Company at the 38th Annual General Meeting held on 20th September, 2017 appointed M/s. Sharp & Tannan Associates, Chartered Accountants (Firm Registration No.109983W) as statutory auditors of the Company from the conclusion of 38th Annual General Meeting till the conclusion of 43rd Annual General Meeting, covering one term of five consecutive years, subject to ratification by the members at each intervening Annual General Meeting.
In view of the amendment to the said section 139 through the Companies (Amendment) Act, 2017 notified on 7th May 2018, ratification of auditorâs appointment is no longer required. However, as required under section 142 of the Companies Act, 2013, resolution at item No.3 of the Notice of AGM is proposed for approval of members for authorising the Board of Directors of the Company to fix Auditorsâ remuneration for the year 2018-19. The members are requested to approve the same.
The Notes on financial statement referred to in the Auditorsâ Report are self-explanatory and do not call for any further comments. The Statutory Auditorsâ Report for the year 2017-18 does not contain any qualification, reservation, adverse remark or disclaimer made by Statutory Auditor. There is no incident of fraud requiring reporting by the auditors under Section 143(12) of the Companies Act, 2013.
Cost Auditors
Pursuant to Section 148 of the Companies Act, 2013, read with the Rule 14 of the Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records of the Company are required to be audited. The Directors, on the recommendation of the Audit Committee, appointed M/s Smit Manubhai & Associates, Cost Accountants, (Firm Registration Number 2502), to audit the cost accounts of the Company for the financial year ending 31st March, 2019 on a remuneration of Rs. 1.75 Lacs plus out of pocket expenses and applicable taxes. The remuneration payable to the Cost Auditor is required to be ratified by the shareholders at the ensuing AGM.
Secretarial Auditor and Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company has appointed, Shri Kunjal Dalal of K. Dalal & Co., Practicing Company Secretaries, (CP No.3863), Surat to conduct the Secretarial Audit of the Company. Secretarial Audit Report for the year 2017-18 issued by him in the prescribed form MR-3 is annexed to this Report. The said secretarial audit report does not contain any qualification, reservations or adverse remark or disclaimer made by the Secretarial Auditor.
Internal Auditors
Pursuant to the provisions of Section 138 of the Companies Act, 2013, the Board of Directors of the Company have appointed Shri Piyush Patel, Chartered Accountant (ICAI Membership NNo.116769) as Internal Auditor of the Company, for the financial year 2018-19.
The audit committee of the Board of Directors in consultation with the Internal Auditor formulates the scope, functioning, periodicity and methodology for conducting the internal audit.
Directorsâ Responsibility Statement
Pursuant to the requirements of Section 134(3)(c) read with Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability confirm that:
a) in the preparation of the annual accounts for the year ended 31st March, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;
b) 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, 2018 and of the loss of the Company for the year ended on that date;
c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) they have prepared the annual accounts on a going concern basis;
e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, cost and secretarial auditors and external consultant(s) and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Companyâs internal financial controls were adequate and effective during FY 18.
Number of meetings of the Board
Five Board Meetings were duly convened and held during the year. The Directors actively participated in the meetings and contributed valuable inputs on the matters brought before the Board from time to time. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013 and Listing Regulations. Detailed information is given in the Corporate Governance Report.
Board evaluation
Pursuant to the provisions of the Companies Act, 2013 and Regulation 17(10) of Listing Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance and that of its statutory committees viz. Audit Committee, Stakeholder Relationship Committee, Nomination and Remuneration Committee and Corporate Social Responsibility Committee and that of the individual Directors. The evaluation of each of the directors was done, inter-alia, on the basis of their advisory role and contribution in the decision making.
The Nomination and Remuneration Committee has defined the evaluation criteria for the Performance Evaluation of the Board, its Committees and individual Directors. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.
Independent Directorsâ Meeting
In compliance with the requirements of Schedule IV of the Companies Act, 2013, a meeting of the Independent Directors was held on 20th February, 2018, 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 Company, the quality, contents and timelines of flow of information between the Management and Board, based on the performance evaluation framework of the Company.
Declaration of Independent Directors
All the Independent Directors have given a declaration that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and there is no change in their status of independence. As required under Section 149(7) of the Companies Act, 2013, the said declaration was placed in the Board Meeting held on 30th May, 2018.
Familiarisation Programme
The Company has put in place an induction and familiarisation programme for all its Directors including the Independent Directors so as to associate themselves with the nature of the industry in which the Company operates. Directors are periodically advised about the changes effected in the Corporate Laws, Listing Regulations with regard to their roles, rights and responsibilities as Director of the Company. The familiarisation programme for Independent Directors in terms of the provisions of Regulation 46(2)(i) of Listing Regulations, is uploaded on the website of the Company.
Contracts or Arrangement with Related Parties
All contracts / arrangements / transactions entered by the Company during the financial year with Related Parties were in its Ordinary Course of Business and on armsâ length basis.
Pursuant to section 177 of the Companies Act, 2013 and regulation 23 of SEBI Listing Regulations, 2015, all Related Party Transactions were placed before the Audit Committee for its approval.
There were no materially significant transactions with related parties during the financial year under review, which were in conflict with the interest of 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.
Your Directors draw attention of the members to Note No.31 to the financial statements which sets out related party disclosures.
As required under Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has formulated a policy on Related Party Transactions which has been put up on the website of the Company. The Companyâs management ensures total adherence to the approved Policy on Related Party Transactions to establish Armâs Length Basis without any compromise.
Secretarial Standards
Pursuant to the approval given on 10th April, 2015 by the Central Government to the Secretarial Standards specified by the Institute of Company Secretaries of India, the Secretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings (SS-2) came into effect from 1st July, 2015. The said standards were further amended w.e.f. 1st October, 2017. The Company is in compliance with the same.
Significant or Material Orders
During the year under review, there were no significant and material orders passed by the regulators or court or tribunals, which may impact the going concern status and its operations in future.
Material changes and commitments
There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year and the date of this Report.
Prevention of Sexual Harassment of women at workplace
The Company has formulated a policy in respect of Sexual Harassment of women at workplace as per the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. There was no complaint received by the Company during the financial year 2017-18 under the aforesaid Act.
Risk Management
Your Company recognizes that risk is an integral part of business and is committed to managing the risks in proactive and efficient manner. Your Company periodically assesses the risks in the internal and external environment along with treating the risks and incorporates risk management plans in its strategy, business and operational plans.
The Audit Committee and the Board are appraised of the significant risks and mitigations efforts made by the Management in its quarterly meetings.
The business plan for the future are devised and approved by the Board keeping in mind the risk factors which can significantly impact the performance of the particular business. All major capital expenditures commitments are subject to scrutiny by the Board and investments are permitted only on being satisfied about its returns or utility to the Company. There are no risks which in the opinion of the Board threaten the existence of the Company.
Insurance
The Company has taken all the necessary steps to insure its properties and insurable interests, as deemed appropriate and also as required under the various legislative enactments.
Particulars of Employees and Related Disclosures
The details of remuneration of directors, KMPs and employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this Report as Annexure I. However, as per the provisions of Section 136(1) of the Companies Act, 2013, the Annual Report is being sent to the Members and others entitled thereto, excluding the information on employees remuneration particulars as required under Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Members may write to the Company in this regard.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
Particulars in respect of conservation of energy, technology absorption, foreign exchange earnings and outgo, as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 are set out in a separate statement Annexure A attached hereto and forms part of the Report.
Nomination and Remuneration Policy
The Board has adopted, on recommendation of the Nomination and Remuneration Committee, a policy for selection and appointment of Directors, Senior Management and their remuneration.
The Policy, inter-alia, includes criteria for determining qualifications, positive attributes, independence of a director, and expertise and experience required for appointment of Directors, KMP and Senior Management.
As per the Policy, the remuneration / compensation to the Whole-time Directors shall be recommended by the Nomination and Remuneration Committee to the Board for its approval. However, the remuneration compensation to Whole-time Directors shall be subject to the approval of the shareholders of the Company and Central Government, wherever required. Further, the Non-Executive Directors shall be entitled to the fees for attending meetings of Board and Committees within the limits prescribed in the Companies Act, 2013.
Particulars of the Companyâs Remuneration Policy and information required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014 as set out in Annexure D, forms part of this Report. A brief detail of the Policy is also given in the Corporate Governance Report.
Fixed Deposits
During the year under review, your Company has not accepted or renewed any Deposit, within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014 and as such, there are no outstanding deposits in terms of the Companies (Acceptance of Deposits) Rules, 2014. Hence, the requirement of furnishing details of deposits which are not in compliance of Chapter V of the Act, is not applicable.
Annual Return
An extract of Annual Return pursuant to the provisions of Section 192 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished in form MGT-9 in Annexure G of this Report.
Loans, Investments and Guarantees by the Company
Details of Loans, Guarantees and Investments covered under the provision of Section 186 of the Companies Act, 2013 are given in the Notes to the Financial Statement.
Green Initiative
Electronic copy of the Annual Report 2017-18 and the Notice of the 39th Annual General Meeting are sent to all members whose email addresses are registered with the Company / depository participant(s). For members who have not registered their email addresses, physical copies are sent in the permitted mode.
Your Directors would like to draw your attention to Section 20 of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, as may be amended from time to time which permits paperless compliances and also service of notice / documents (including annual report) through electronic mode to its members. To support this green initiative, we hereby once again appeal to all those members who have not registered their e-mail addresses so far are requested to register their e-mail address in respect of electronic holding with their concerned Depository Participants and/ or with the Company.
Business Responsibility Report
The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the financial year ended 31st March, 2018.
Appreciation
Your Directors wish to acknowledge the co-operation and assistance extended to the Company by the Companyâs Bankers and State & Central Government agencies. Your Directors also wish to place on record their appreciation of the contribution made by employees at all levels.
Your Directors also acknowledge with gratitude the support of the shareholders, other investors, customers, dealers, agents and suppliers for their continued faith and support which has helped the Company to sustain its growth even during these challenging times.
For and on behalf of the Board of Directors
Praful A. Shah
Chairman & Managing Director
Mumbai, 30th May, 2018 DIN: 00218143
Mar 31, 2016
The Directors hereby present their 37th Annual Report together with the audited accounts of your Company for the year ended 31st March, 2016.
Summarized Financial Results
The Company''s performance during the financial year ended 31st March, 2016 on standalone basis, as compared to the previous financial year, is summarized below.
(Rs. in crores)
|
2015-16 |
2014-15 |
Total Revenue (Net) |
2385.32 |
2648.44 |
Earnings before interest, tax and depreciation (EBITDA) |
102.82 |
116.62 |
Less: Finance Costs |
177.25 |
183.24 |
Depreciation |
66.82 |
76.13 |
Profit / (Loss) before Tax |
(141.25) |
(142.75) |
(Add)/Less: Provision for Tax |
(0.64) |
0.00 |
Profit / (Loss) after Tax |
(140.61) |
(142.75) |
Transfer to Reserve
In absence of distributable profits / earnings, it is not proposed to transfer any amount to reserves for the financial year 2015-16.
Dividend
Considering the loss incurred by the Company, your Directors do not recommend any dividend on equity shares for the financial year 2015-16.
Nature of Business
Garden Silk Mills Ltd. is one of India''s leading man-made fibre-based textile companies. It is a vertically integrated manufacturer of a wide range of Polyester Chips, Polyester Filament Yarns (PFY), Preparatory Yarns, Woven (Grey) Fabric as well as Dyed and Printed Sarees and Dress Materials. During the year under review, there was no change in the nature of business of the Company.
Review of Operations
At a standalone level, the gross revenue from operations ofyour Company for FY 2016 declined by about 9.2% to Rs.2567.31 crore from Rs.2846.89 crore in the previous year. This was primarily due to a fall in prices across polyester chain in tandem with the fall in crude oil prices. The fall in selling prices was directly related to the fall in raw material prices, which in turn corresponded to the fall in crude oil prices; however, the price of finished goods declined at faster rate compared with the prices of related raw materials.
Your Company achieved higher volume of sale of chips for FY 2016 at 127,419 MT compared to 102,031 MT in the previous year. In value terms, the sale of chips for FY 2016 was marginally higher at Rs.845.57 crore as compared to Rs.842.85 crore in the previous year. With better capacity utilization, the overall production of chips and polyester melt was higher at 273,577 MT during the year 2016 as compared to 244,053 MT achieved in the previous year.
The total sale of polyester filament yarn (PFY) improved marginally by about 3% at 154,042 MT as compared to 149,222 MT in the previous year. The production of PFY during the year was maintained at 152,134 MT as compared to 152,275 MT in the previous year. Sale of yarn (including processed yarn) declined to Rs.1519.01 crore as compared to '' 1726.71 crore in the previous year due to fall in prices. In processed yarn segment, FDY market saw better demand during FY 2016 with the Company concentrating on finer deniers and also nylon FDY sales. Processed yarn saw lower sales, since demand for texturized yarns was sluggish.
Efficiency in our chip and yarn plant were at their best ever in the year under review. Productivity of some spinning lines was also enhanced by replacing certain 8-end winders with 16-end winders. An information technology innovation that allows online monitoring of utility data has resulted in reduced costs which should see payoffs in the coming year. Wherever possible coal heating has replaced higher-cost FO and gas heating.
In the weaving segment, your Company achieved grey cloth production of 223.31 lac meters for FY 2016 as compared to 292.89 lac meters in the previous year. The Company had to curtail the production during the year to avoid inventory losses due to volatility of prices of raw material as well as finished goods.
The weaving industry was affected by under-invoiced Chinese imports into the country estimated to be over 50,000 MT per month. Our grey (woven) fabric division suffered as a consequence; however, it was able to maintain profitability due to increased specialties and margins. Your Company continued to maintain its price and product leadership in the polyester weaving industry and we expect this should continue in FY 2017 as well.
Our finished fabric division last year saw a number of large customers shrink sales owing to their financial and market conditions. Sales of high-end natural products fell but a factory restructuring has reduced costs. We have added 25 new authorized showrooms (franchisees) in FY 2016 whose benefits should accrue in the near future. We are also emphasizing export potential, though from a low base.
The overall sale of fabrics for the FY 2016 remained at Rs.184.33 crore as compared to Rs.221.69 crore in the previous year.
Despite a competitive and challenging business environment, the income from export for FY 2016 stood at Rs.339.45 crore compared to Rs.417.45 crore in the previous year.
Exports have also been affected by global slowdown and excess capacity in China resulting in flooding of its textile products in the international markets coupled with intense competition among Indian yarn and chips producers.
The Earnings before interest, tax and depreciation (EBITDA) for the FY 2016 was Rs.102.82 crore as compared to Rs.116.62 crore in the previous year.
The operating margins of the Company have been relatively weak over the last four years. This has been due to large volatility in prices of raw materials and finished goods, sluggish domestic demand growth (especially rural), weak global conditions, large capacity additions by industry players and dumping of goods from China.
In line with volume of business and better working capital management, your Company was able to reduce the Interest cost in FY 2016 from Rs.183.24 crore to Rs.177.25 crore. The Finance charges for the year 2015-16 includes Rs.24.55 crores as mark-to-market (notional) exchange loss on Long Term Export Advance received in March, 2015. (USD-INR: March 16 at 66.255 vs receipt at 62.34)
The overall financial performance of the Company was subdued leading to negative PAT.
Overview of Economy
The Indian economy exhibited significant resilience during the year in contrast to a vulnerable global economy. According to most forecasts, India''s GDP growth was expected to have been around 7.5% for the FY 2016. Yet, industrial growth has been extremely poor, with the IIP growth in FY 2016 at 2.45% (2.0% for manufacturing) vs 2.8% (2.3%) in the previous year. In particular, consumer non-durables grew at -1.8%.
India is anticipated to grow at 7.6% in FY 2017, according to the World Bank, retaining its position as the fastest growing major economy in the world. China is forecast to grow at 6.7% after 6.9% last year, while Brazil and Russia are projected to remain in deeper recessions than forecast earlier. The outlook assumes rural income and spending will rebound with a return to normal monsoon rainfall after two years poor rain. The Company anticipates the improved economic conditions will begin to positively impact the polyester industry via improved demand and greater utilization levels.
Industry Scenario
The Indian textile industry is a mainstay of the economy. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The industry contributes approximately 5 percent to India''s gross domestic product (GDP), and 14 percent to overall Index of Industrial Production (IIP). India is a major net textile exporting nation and thus a crucial foreign exchange earner as well. The Indian domestic textile market is around USD 110 billion per annum and expected to be the fastest growing major textile market in the world.
Most of the company''s products feed the polyester filament yarn and yarn-based textile industry. The PFY industry has been the fastest growing textile category both worldwide and in India though India has experienced an unexpected slowdown over the last four years. Fortunately, however, despite a very weak performance for consumer non-durables in 2015 and 2016, Indian polyester filament yarn industry growth improved to 5.0% in 2016 (projected) versus 3.5% in the previous year (PCI). Growth for the next two years has been forecast at 6.5% which is expected to improve utilization levels and margins in the industry and for the Company.
The recent years have witnessed very high volatility in prices across polyester chain, in line with the crude oil prices. The last two years in particular have witnessed substantial falls in raw material price which affected demand and resulted in inventory loses throughout the polyester chain. However, the presently low crude oil and raw material prices are expected to stimulate consumer demand due to lower final product prices.
Continuous backward integration by PFY producers in order to reduce the cost of yarn production, had deeply affected the merchant sales of existing polyester chips manufacturers. Further, the dumping of Chinese fabric and apparel imports into Indian markets also affected the demand for locally produced fabric and therefore yarn and chips as well. Under the circumstances, chips and yarn manufacturers have been compelled to price their products at very low margins to protect utilization levels. Yet, demand for both chips and yarn is expected to grow leading to improved margins and profits in time.
Opportunities, Challenges, Threats, Risks and Concerns
There are several challenges faced by the textile industry in terms of inflexible labour laws, poor infrastructure, and competition from low-cost neighboring countries. Dumping of goods from China remains a persistent problem. The Company is working with industry associations to counter the dumping. The Company''s strategic location in the heart of the textile industry of Surat and close to major ports minimizes infrastructural problems. Its thermal power plants keep its power costs significantly lower than grid power costs.
The Company''s high debt and interest cost pose a challenge as well. It is presently engaged with its bankers toward a debt-rework.
In the textile and garments industry, the preferences of the customers undergo rapid changes. Moreover the consumer is always seeking something new. The Company has an experienced marketing and design team and is well-positioned to respond to changing and discerning customer needs. In fact, we believe that our innovation and product development capabilities are a core competency that will provide significant opportunities in times to come.
The Company is exposed to currency fluctuations with respect to its raw material imports as well as its finished product exports. Our hedging policies minimize this risk. We do carry a foreign exchange risk on our foreign borrowings but this presently appears small.
The proposed operationalization of Trans-Pacific Partnership (TPP) Agreement among twelve Pacific Rim countries may adversely impact textile as well as apparel exports of our Company. Yet, recent protectionist tendencies within the USA make it probable that the TPP may not be passed in a hurry.
The government had last year started a Merchandise Exports from India Scheme. This allows duty free credits scrips to be transferred or used for payment of a number of duties, including the basic custom duty. Chips has been included under MEIS (2% rate). This has improved the viability of chips exports. Further, a request to include draw texturised Yarn into MEIS and also increase in existing export benefit from its current level is under consideration by the government.
Import of raw materials has been minimized owing to better negotiations with local PTA suppliers who have undertaken capacity expansions. Another large PTA plant is expected to come on-stream in the current financial year further improving the supply conditions for PTA in India and boosting global competitiveness for polyester companies.
Business Outlook
After four years of poor rural demand, the industry is widely expecting improved polyester demand on the back of a good monsoon and greater fiscal transfers to rural areas this year.
Over the next two years we expect business conditions to improve for your Company owing to higher utilization levels and better margins. This is partly owing to moderate industry growth in volume in the next two years at around 6.5% p.a. (PCI). Yet, while the supply overhang will remain for some time to come, the major reason we are hopeful about the Company''s prospects are the breakthroughs we are hoping to make in the specialty chip, yarn and fabric businesses.
Domestic and global markets are uncertain at present. Yet, a trend toward greater aspirational (vs need-based) buying in India, as well as a requirement for stringent quality standards globally are providing some useful opportunities for your company''s quality orientation and its innovative products.
The Company has emerged as a leader in specialty chips for polyester film industry as well as in cationic, fine denier, melange, mother yarn, nylon and spandex-based yarns.
Two divisions at CP and Spinning location at Jolva have been merged for administrative purposes to reduce cost of manpower, stores and procurement. The draw warping department at Vareli has been shifted to form a single department at Jolva which will reduce energy and overhead costs. The sizing division is also being shifted from Vareli to Jolva to reduce energy costs. The benefits of these efforts will take shape in the ongoing fiscal year.
Good utilization and availability of thermal power plants (TPP) and coal heaters are keeping energy costs low. Coal prices are at historically low rates which are keeping operating costs down. Company has shifted from gas and FO based captive power to Coal Based Captive Power to reduce costs.
The actual impact of GST on our industry is not yet known as details are not out. But it is hoped that there will be equalization in tax treatment between cotton and polyester products which would help demand. Globally, polyester is systematically replacing cotton in its share of textiles and with the tax equalization the same is anticipated in India as well.
In finished fabrics segment the Company is exploring the new areas like servicing garment industry by supplying bulk quantity with consistent quality and further tapping unexplored export markets like the Middle East, Far East, UK, Canada etc., particularly for our high-value natural (cotton, viscose) products.
Material changes and commitments
There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year and the date of this Report.
Share Capital and disclosure
The Issued, Subscribed and Paid-up equity share capital as on 31st March, 2016 was Rs.4208.25 Lacs. There was no public issue, rights issue, bonus issue or preferential issue etc. during the year. The Company has not issued shares with differential voting rights, sweat equity shares, nor has it granted stock options. As on 31st March, 2016, none of the Directors of the Company hold instruments convertible into equity shares of 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.
Presentation of financial statements
Your Company prepares its financial statements in compliance with the requirements of the Companies Act, 2013 and the Generally Accepted Accounting Principles (GAAP) in India. The financial statements have been prepared on historical cost basis.
The estimates and judgments relating to the financial statements are made on a prudent basis, so as to reflect in a true and fair manner, the form and substance of transactions and reasonably present the Company''s state of affairs, loss and cash flows for the year ended 31st March, 2016. The financial statements of the Company have been disclosed as per Schedule III of the Companies Act, 2013.
Subsidiary, Joint Venture and Associate Companies
The Company had two wholly owned overseas subsidiaries namely GAIA International FZE, Dubai and Garden Exim Pte. Ltd., Singapore at the beginning of FY 2015-16. GAIA INTERNATIONAL FZE is a free zone establishment and is registered with the Ajman Free Zone, Ajman, U.A.E. The Company is registered to carry out the business of trading in textile and ready-made garments including import and export.
There being no business activity in Garden Exim Pte. Ltd. since its incorporation, the Company submitted its application for winding up / striking off its name from the records of Accounting and Corporate Regulatory Authority (ACRA), Singapore, the regulator. The said application has been approved by the regulator w.e.f. 22nd March, 2016.
The financial statements of the subsidiary companies are not attached with this Annual Report. The Company will make available the annual accounts of the subsidiary companies and the related information to any member of the Company who may be interested in obtaining the same in accordance with the Section 136 of the Companies Act, 2013. The annual accounts of the subsidiary companies will also be kept open for inspection at the Registered Office of the Company and are also available on the Company''s website. Your Company does not have any Joint Venture and Associate Company. The policy for determining Material Subsidiaries formulated by the Board of Directors is disclosed on the Company''s website.
Consolidated Financial Statements
The directors also present the audited consolidated financial statements incorporating the duly audited financial statement of the subsidiaries and as prepared in compliance with the Companies Act, 2013, applicable Accounting Standards and SEBI Listing Regulations, 2015 as prescribed by SEBI.
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of Subsidiaries is given in Form AOC-1 and forms an integral part of this Report marked as ''Annexure E''.
Finance
During the year FY 2016, your Company repaid term loan from banks and financial institutions aggregating to Rs.8311.78 Lacs. Your Company also availed Rs.3382.48 Lacs out of the term loan sanctioned in the earlier year. The consortium of banks headed by Bank of Baroda continued their support in renewing working capital facilities and other facilities during the year. The account remained standard throughout the year 2015-16.
The outlook for the current fiscal is clearly positive compared to the position last year. Yet, in view of the challenging industry scenario, the Company and its lenders are considering a long-term debt-rework. The problems facing the Company have been acknowledged to be due to external circumstances. Consequently, majority of polyester players are going through a difficult period.
Deposits
During the year, the Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014 and as such, there are no outstanding deposits in terms of the Companies (Acceptance of Deposits) Rules, 2014.
Report on Corporate Governance
As per Regulation 34(3) read with Schedule V(c) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate section on Corporate Governance practice followed by the Company, together with a certificate from the Company''s Auditors confirming compliance forms an integral part of this Report.
All Board members and Senior Management personnel have affirmed compliance with the Code of Conduct for the year 2015-16. A declaration to this effect signed by the Managing Director (CEO) of the Company is contained in this Annual Report. The Managing Director and CFO have certified to the Board with regard to the financial statements and other matters as required under regulation 17(8) of the SEBI Listing Regulations, 2015. Certificate from Auditors of the Company regarding compliance of conditions of corporate governance is annexed to this report marked as ''Annexure G''.
Extract of Annual Return and other disclosures
Pursuant to the provisions of Section 134(3)(a) of the Companies Act, 2013 read with Rule 8 of Companies (Accounts) Rules, 2014 and Rule 12 of Companies (Management and Administration) Rules, 2014, Extract of Annual Return in Form MGT-9, for the financial year ended 31st March, 2016 made under the provisions of Section 92(3) of the Act is attached as ''Annexure F'' which forms part of this Report.
Directors and Key Managerial Personnel
In accordance with the provisions of Section 152(6)(c) of the Companies Act, 2013 and the Company''s Articles of Association, Shri Suhail P. Shah (DIN: 00719002), Director retires by rotation at the forthcoming Annual General Meeting and, being eligible offers himself for re-appointment. The Board recommends his re-appointment for the consideration of the Members of the Company at the ensuing Annual General Meeting.
During the year under review, Shri Rajen P. Shah, Non-Executive Director resigned from the Board of Directors of the Company with effect from 1st July, 2015. Further, Shri J. P. Shah, Independent Director also resigned from the Board of Directors of the Company with effect from 8th August, 2015. The Board of Directors wish to place on record their appreciation for the contribution made by Shri Rajen P. Shah and Shri J. P. Shah to the Board and the Company during their tenure as Directors.
On the recommendations of the Nomination and Remuneration Committee, the Board appointed Shri Deepak N. Shah as an Additional Director w.e.f. 5th December, 2015. We seek your confirmation for his appointment as Independent Director for a term upto5 (five) consecutive years i.e. from the date of the 37th AGM of the Company on non-rotational basis.
During the year under review, due to realignment of role and responsibilities, Shri Alok P. Shah resigned as Joint Managing Director of the Company w.e.f. 31st May, 2016. Further, considering his experience, leadership qualities and operational capabilities, the Board of Directors of the Company on recommendation of Nomination and Remuneration Committee appointed him as Whole-time Director designated as Executive Director, CFO and Chief Operating Officer (COO) for a period of 3 years w.e.f. 1st June, 2016. Shri Alok Shah has been associated with the Company for more than 15 years as a member of the Board. Shri Alok Shah has contributed immensely towards the operations of the Company.
Shri Praful A. Shah, Managing Director, Shri Alok P. Shah, Joint Managing Director and CFO and Shri Kamlesh B. Vyas, 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. During the year under review, there was no change in key managerial personnel of the Company.
The necessary resolutions for re-appointment of Shri Praful A. Shah as Chairman and Managing Director of the Company for a period of 3 years w.e.f. 1st September, 2016 and revisions in remuneration of Shri Suhail P. Shah w.e.f. 1st June, 2016 up to the remainder of his tenure ending on 30th November, 2018 are placed for members'' approval.
Declaration of Independent Directors
All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Regulation 16(l)(b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and there is no change in their status of independence.
Number of meetings of the Board
During the year, 5 Board Meetings and 4 Audit Committee Meetings were convened and held. The details thereof are given in the Corporate Governance Report. The 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.
Independent Directors'' Meeting
In compliance with the requirements of Schedule IV of the Companies Act, 2013, a meeting of the Independent Directors was held on 10th February, 2016, 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 Company, the quality, contents and timelines of flow of information between the Management and Board, based on the performance evaluation framework of the Company.
Familiarization Programme to Independent Directors
The Company provides suitable familiarization programme to Independent Directors so as to associate themselves with the nature of the industry in which the Company operates. Directors are periodically advised about the changes effected in the Corporate Laws, Listing Regulations with regard to their roles, rights and responsibilities as Director of the Company. The details of the familiarization programme have been disclosed and updated from time to time on the Company''s website.
Committees of the Board
The Board of Directors has the following Committees:
1. Audit Committee
2. Remuneration and Nomination Committee
3. Committee of Directors (Stakeholders'' Relationship Committee)
4. Corporate Social Responsibility Committee
The details of the committees along with their composition, number of meetings and attendance at the meetings are provided in the Corporate Governance Report.
Directors'' Responsibility Statement
As required under Clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, the directors to the best of their knowledge and belief state that:
a) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;
b) 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 as at March 31, 2016 and of the loss of the Company for the year ended on that date;
c) the Directors 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;
d) the Directors have prepared the annual accounts on a going concern basis;
e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and
f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.
Board evaluation
Pursuant to the provisions of the Companies Act, 2013, the Board has devised a policy on evaluation of performance of Board of Directors, Committees and Individual directors. The policy is also in compliance to Regulation 19 read with Schedule II, Part D of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
The Nomination and Remuneration Committee has defined the evaluation criteria for the Performance Evaluation of the Board, its Committees and individual Directors.
In accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out a formal annual evaluation of its performance and that of its Committees and individual Directors. The evaluation of each of the directors was done, inter-alia, on the basis of their advisory role and contribution in the decision making. Further, the evaluation of the Board as a whole and all the Committees of the Directors was done, inter-alia, on the basis of the overall directions and guidance provided to the senior executives and supervision over their performance.
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.
Related Party Transactions
All transactions entered by the Company with Related Parties 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.
During the year 2015-16, pursuant to section 177 of the Companies Act, 2013 and regulation 23 of SEBI Listing Regulations, 2015, all Related Party Transactions were placed before the Audit Committee for its approval.
Pursuant to section 134 of the Companies Act, 2013 and Rules made there under, 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, there being no ''material'' related party transactions as defined under regulation 23 of SEBI Listing Regulations, 2015, there are no details to be disclosed in Form AOC-2 in that regard.
During the year under review, the Board of Directors have revised the existing Related Party Transaction policy in line with the recently introduced SEBI (LODR) Regulations, 2015 and Companies (Meetings of Board and its Powers) Second Amendment Rules, 2015.
The policy on related party transactions as approved by the Board is uploaded on the Company''s website. The Company''s management ensures total adherence to the approved Policy on Related Party Transactions to establish Arm''s Length Basis without any compromise.
Suitable disclosures as required under AS-18 have been made in Note 31 of the Notes to the financial statements.
Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo
Information required pursuant to the provisions of Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) 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 of this Report.
Audit Committee
The Audit Committee of Directors comprises of Shri Yatish Parekh (Chairman of the Committee), Shri Arunchandra N. Jariwala and Shri Sunil Sheth. All the recommendations made by the Audit Committee during the year were accepted by the Board of Directors of the Company. The terms of reference and other details of the Audit Committee are available in the Corporate Governance Report forming part of this annual report.
Nomination and Remuneration Policy
On recommendation of Nomination and Remuneration Committee, the Board of Directors have approved a Nomination and Remuneration Policy for the appointment and remuneration of the director, key managerial personnel (KMP) and other employees. The key objectives of the Policy are to lay down the criteria for appointment and remuneration of Directors, Key Managerial Personnel and Executives at Senior Management level and recommend to the Board their appointment, and also to formulate criteria for evaluation of performance of Independent Directors and the Board and to devise a policy on Board diversity. The Policy, inter-alia, includes criteria for determining qualifications, positive attributes, independence of a director, and expertise and experience required for appointment of Directors, KMP and Senior Management.
As per the Policy, the remuneration / compensation to the Whole-time Directors shall be recommended by the Nomination and Remuneration Committee to the Board for its approval. However, the remuneration compensation to Whole-time Directors shall be subject to the approval of the shareholders of the Company and Central Government, wherever required. Further, the Non-Executive Directors shall be entitled to the fees for attending meetings of Board and Committees within the limits prescribed in the Companies Act, 2013. The Nomination and Remuneration Policy is available on the company''s website.
Vigil Mechanism / Whistle Blower Policy
Your Company believes in promoting a fair, transparent, ethical and professional work environment. The Board of Directors of the Company pursuant to the provisions of Section 177 of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, has framed ''Whistle Blower Policy'' for Directors and employees of the Company for reporting the genuine concerns or grievances or cases of actual or suspected, fraud or violation of the Company''s code of conduct and ethics policy. The Whistle Blower Policy of the Company has been posted on the website of the Company.
Risk Management
Pursuant to the provisions of Section 134(3)(m) of the Companies Act, 2013 and Regulation 21 of SEBI (LODR) Regulations, 2015, your Company has voluntarily constituted a Risk Management Committee to formulate a policy for risk management for implementing and monitoring the risk management plan of the Company. This framework seeks to create transparency, minimize adverse impact on the business objectives and enhance the Company''s competitive advantage.
Your Company recognizes that the risk is an integral part of business and is committed to managing the risks in proactive and efficient manner. Your Company periodically assesses the risks in the internal and external environment along with treating the risks and incorporates risk management plans in its strategy, business and operational plans.
The business plan for the future are devised and approved by the Board keeping in mind the risk factors which can significantly impact the performance of the particular business. All major capital expenditures commitments are subject to scrutiny by the Board and investments are permitted only on being satisfied about its returns or utility to the Company. There are no risks which in the opinion of the Board threaten the existence of the Company.
Insurance
The Company has taken all the necessary steps to insure its properties and insurable interests, as deemed appropriate and also as required under the various legislative enactments.
Transfer of Unpaid Dividend to the Investor Education and Protection Fund (IEPF)
In terms of the provisions of Section 125 of the Companies Act, 2013 read with the Companies (Declaration and Payment of Dividend) Rules, 2014, all unclaimed / unpaid dividend up to FY 2007-08 has been transferred to the Investor Education and Protection fund. Unclaimed / un-encashed dividend for the FY 2008-09 is due for transfer to IEPF on 29th September,
2016. Those members who have not yet claimed / encashed the same, are requested to claim the same at the earliest before transfer to IEPF.
Statutory Auditors & Audit Report
M/s Natvarlal Vepari & Co., Chartered Accountants (Firm Registration No.l23626W) the auditors of your Company, hold office up to the conclusion of the forth coming Annual General Meeting (AGM) of the Company. Pursuant to the provisions of Section 139(2) of the Companies Act, 2013 read with Companies (Audit and Auditors) Rules, 2014, M/s Natvarlal Vepari & Co. are eligible for appointment as Auditors. Your Company has received a written confirmation from M/s Natvarlal Vepari & Co., Chartered Accountants to the effect that their appointment, if made, would satisfy the criteria provided in Section 141 of the Companies Act, 2013 for their appointment. The Board recommends the appointment of M/s Natvarlal Vepari & Co., Chartered Accountants as the Auditors of the Company from the conclusion of the ensuing AGM to the conclusion of the next AGM.
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 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 on recommendation of the Audit Committee, the Board of Directors appointed M/s Manubhai & Co., Cost Accountants, (CP No.2502) as Cost Auditors to audit the cost accounts of the Company for the Financial Year 2016-17.
The Cost Auditor has given a Certificate to the effect that the appointment, if made, will be within the prescribed limits specified under Section 141 of the Companies Act, 2013. The Audit Committee has obtained a certificate from the Cost Auditor certifying their independence and arm''s length relationship with the Company.
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 approval for the remuneration payable to the Cost Auditor is forming part of the Notice convening the Annual General Meeting for their ratification.
Secretarial Auditor & Secretarial Audit Report
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Shri Kunjal Dalai, proprietor of K. Dalai & Co., Practicing Company Secretary (CP No. 3863), Surat to undertake the Secretarial Audit of the Company for the Financial Year 2015
16. The Secretarial Audit Report is annexed as ''Annexure D'' and forms an integral part of this Report. The report of the 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.
Internal Auditors
Pursuant to the provisions of Section 138 of the Companies Act, 2013, the Board of Directors of the Company has appointed Shri Piyush Patel, Chartered Accountant (ICAI Membership No.116769) as Internal Auditor of the Company. The audit committee of the Board of Directors in consultation with the Internal Auditor formulates the scope, functioning, periodicity and methodology for conducting the internal audit.
Corporate Social Responsibility (CSR) Initiatives
As required under Section 135 of the Companies Act, 2013 the CSR committee comprising Shri Yatish Parekh, Independent Director as the Chairman of the Committee, Shri Arunchandra N. Jariwala, Independent Director and Shri Suhail P. Shah, 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 Company has been contributing in the development of the surrounding areas of its plant and office. The Company supports and contributes in activities relating to promotion of education, sports, medical and health care, vocational skill development and livelihood enhancement and programmes and activities relating to environment sustainability 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.gardenvareli.com.
Particulars of Employees and related disclosures
The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of this report. However pursuant to first proviso to Section 136(1) of the Companies Act, 2013, this Report is being sent to the Shareholders excluding the aforesaid information. Any shareholder interested in obtaining said information, may write to the Company Secretary at the Registered Office of the Company and the said information is available for inspection at the Registered Office of the Company.
Anti-Sexual Harassment Policy
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. The Company has zero tolerance on Sexual Harassment at workplace. No complaint was received from any employee during the financial year 2015-16 and hence no complaint is outstanding as on 31st March, 2016 for redressal. Your Company has laid down Anti Sexual Harassment policy and it is made available on the website of the Company.
Particulars of Loans, Guarantees and Investments
During the year under review, your Company has not directly or indirectly -
a) Given any loan to any person or other body corporate other than usual advances envisaged in a contract of supply of materials, if any;
b) Given any guarantee or provided security in connection with a loan to any other body corporate or person; and
c) Acquired by way of subscription, purchase or otherwise, the securities of any other body corporate.
Significant and material orders passed by the regulators or courts
During the year under review, there were no significant and material orders passed by the Regulators or Court or Tribunal, which can impact the going concern status of the Company and its operations in future.
Indian Accounting Standards (IND AS) IFRS Converged Standards
The Ministry of Corporate Affairs vide its notification dated 16/02/2015 has notified the Companies (Indian Accounting Standard) Rules, 2015. In pursuance of this notification, the Company is required to adopt IND AS with effect from 1st April, 2017 with the comparatives for the period ending on 31st March, 2017.
Green Initiative
Your Directors would like to draw your attention to Section 20 of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, as may be amended from time to time which permits paperless compliances and also service of notice / documents (including annual report) through electronic mode to its members. To support this green initiative, we hereby once again appeal to all those members who have not registered their e-mail addresses so far are requested to register their e-mail address in respect of electronic holding with their concerned Depository Participants and/ or with the Company.
Statutory Information
The Disclosure required under Section 197(12) of the Companies Act, 2013 read with the Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as ''Annexure C'' and forms an integral part of this Report. The Company had 4,948 permanent employees as at 31st March, 2016.
None of the directors or Managing Directors of the Company received any remuneration or commission from Subsidiary Companies of your Company.
The details of remuneration paid to the Directors including Executive Directors of the Company are given in Form MGT-9 forming part of the Directors Report.
The Business Responsibility Reporting as required by Regulation 34(2) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is not applicable to your Company for the financial year ending 31st March, 2016.
Reward, Recognition & Quality Systems Certification
During the year, your Company achieved Certificate of Recognition as "Three Star Export House" awarded by the Office of Dy. Director General of Foreign Trade, Ministry of Commerce & Industry, Government of India on achieving the required Export targets.
Our IT department works closely with our departments to give them a data-driven edge. One initiative called 3P System (Parameters-Performance - Properties) won a prestigious award: "IDC insight awards 2015" for excellence in transformation category in December 2015 at Hyderabad. Also this Project was in top three nominations in "Digital India Summit Awards-2016" in Good for Business - Manufacturing category in March 2016 at New Delhi.
During the year 2014-15, the Company''s CP Division got certified OSHAS 18001:2007 by Bureau Veritas. Our quality, health and safety processes are now continuously monitored, assessed and improved to meet internationally recognized standards.
Each raw-material and product is tested extensively and all manufacturing processes are continually optimized with a strong commitment to energy efficiency, occupational health, environmental responsibility and safety.
The Company''s Vareli Plant enjoys the unique distinction of being the first in polyester weaving industry to achieve ISO 9002:1994 certification by Bureau Veritas Quality International (BVQI). The processes certified are Draw-Warping and Texturizing, Twisting, Sizing, Warping and Weaving. The scope of audit includes "Manufacture of Woven Greige Fabrics and Processed Yarns".
The manufacturing of Texturized, Flat Polyester Filament, Polyester Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are also ISO 9001:2000 certified by BVQI.
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.
On a periodical basis, the Board also engages the services of professional experts in the said field in order to ensure that adequate financial controls and systems are in place.
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 surroundings. The Company continues to focus on maintenance and performance improvement of pollution control facilities 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.
The Company has its own Effluent Treatment Plant (ETP) at its Vareli Complex for processing the effluents generated in fabric processing. Further, the Company has ETP at Jolva complex to take care of the effluents generated from its CP, Spinning, Thermal Power and other plants.
The Company obtained necessary approvals from concerned Government Department / Pollution Control Board and all required environment clearances / safety clearances / stipulations are complied with at both Plant facilities of the Company.
Industrial Relations / Human Resources
Your Company maintained healthy, cordial and harmonious industrial relations at all levels during the year under review.
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 Directors wish to place on record their appreciation for the dedicated and commendable services rendered by the employees of the Company.
Cautionary Statement
Statements in this Directors'' Report and Management Discussion and Analysis describing the Company''s objectives, projections, estimates, expectations, or predictions may be ''forward-looking statements'' within the meaning of applicable securities laws and regulations. Actual results could differ materially from those express or implied. Important factors that could make difference to the Company''s operations include raw material availability and its prices, cyclical demand and pricing in the Company''s principle markets, changes in Government regulations, Tax regimes, economic developments, within India and the countries in which the Company conducts business and other ancillary factors.
Appreciation
Your Directors wish to acknowledge the co-operation and assistance extended to the Company by the Company''s Bankers and State & Central Government agencies. Your Directors also wish to place on record their appreciation of the contribution made by employees at all levels.
Your Directors also acknowledge with gratitude the support of the shareholders, other investors, customers, dealers, agents and suppliers for their continued faith and support which has helped the Company to sustain its growth even during these challenging times.
For and on behalf of the Board of Director
Praful A. Shah
Chairman & Managing Director
Mumbai, 28th May, 2016. DIN: 00218143
Mar 31, 2015
Dear Shareholders,
The Directors hereby present the Thirty-sixth 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 on standalone basis, as compared to the previous financial year,
is summarized below.
(Rs in crores)
Particulars 2014-15 2013-14
Total Revenue 2648.44 3081.27
Earning before interest,depreciation
and tax(EBIDTA) 116.62 66.69
Less: Finance Costs 183.24 158.22
Depreciation 76.13 92.37
Profit/(Loss)beforeTax (142.75) (183.90)
(Add)/Less:ProvisionforTax 0.00 (39.45)
Profit / (Loss) after Tax (142.75) (144.45)
Dividend
Considering the loss incurred by the Company, your Directors do not
recommend any dividend on equity shares for the financial year 2014-15.
Transferto Reserve
In absence of distributable profits / earnings, it is not proposed to
transfer any amount to reserves for the financial year 2014-15.
Nature of Business
The Company belongs to the GARDEN VARELI Group which is a leader in the
Indian Textile Industry with particular strength in polyester filament
based textiles, both yarn and fabric. The Company is also a leading
player in polyester chips for both textile and film applications. The
Company is known to be a differentiated producer of chips, Partially
Oriented Yarn (POY), Fully Drawn Yarn (FDY), Draw Texturised Yarn, Draw
Warped Yarn, Draw Twisted Yarn, greige fabric, as well as printed and
dyed fabric. The Company is a regular supplier of bright, cationic,
micro denier, fine denier yarn, mother yarn and dope-dyed yarn in the
market.
There was no change in the nature of business of the Company during the
year under review.
Review of Operations
The Company''s standalone total revenue for the year 2014-15 was Rs.
2648.44 crore as compared to Rs. 3081.27 crore for the previous year, a
decline of about 14%. The fall in sales was due to lower utilization
rates due to excess capacity in the face of subdued market conditions.
The entire industry operated at a lower utilization rate owing to a
large capacity addition by the largest producer of PFY.
Despite lower revenues, the operating profit (earning before interest,
depreciation and tax) for the year 2014-15 was higher at Rs. 116.62 crore
as compared to Rs. 66.69 crore in the previous year. This was possible
despite a challenging year that saw an oil-price driven crash in raw
material prices leading to concomitant inventory losses and weak market
sentiment. Our emphasis on increased product differentiation, along
with record operational efficiencies, timely exports and careful
working capital management helped us to remain competitive and improve
our EBITDA. However, the high and increased interest cost resulted in
another year of loss for the Company. The net loss for the year stood
at Rs. 142.75 crore as compared to Rs. 144.45 crore in the previous year.
The sale of chips was lower at 102,031 MT for the year 2014-15 as
compared to 124,620 MT in the previous year. The total sale of
polyester filament yarn (PFY) was marginally lower at 149,222 MT as
compared to 152,200 MT in the previous year.
The overall production of Chips was at 244053 MT during the year
2014-15 as compared to 266831 MT achieved in the previous year. Whereas
the production of PFY during the year was higher at 152275 MT as
compared to 148949 MT in the previous year. In the weaving segment,
grey cloth production for the year 2014-15 was higher at 292.89 lacs
mtrs as compared to 275.86 lacs mtrs. during the previous year. The
Company had to curtail the production during the year to avoid
inventory losses due to volatility of prices of raw material as well as
finished goods. Production was also hampered by a shortage of PTA due
to plant maintenance by local PTA suppliers in the early part ofthe
financial year.
Your Company''s performance was assisted by never-before achieved
operational efficiency, first quality production and wastage levels
across its yarn plants. Coal, which is the major fuel for the company
reduced in price by over 8% during the year. This, coupled with
increased substitution of gas with coal was a major cause of cost
reduction across our chips and yarn divisions.
Owing to the over-competitive local market, the company also
increasingly focussed on the international market. Subsidiaries and
their financial position
During the year under review, GAIA International FZE, Wholly Owned
Overseas Subsidiary was incorporated on 8th July, 2014. The subsidiary
commenced its operation during the year 2014-15. The subsidiary
achieved a turnover ofRs. 333.29 Lacs and incurred net loss of Rs. 20.09
Lacs for the year ended 31st March, 2015.
Garden Exim Pte Ltd, another Wholly Owned Overseas Subsidiary was
incorporated on 23rd October, 2014. The subsidiary has not commenced
its operation during the year 2014-15. The subsidiary incurred net loss
ofRs. 4.74 Lacs for the year ended 31st March, 2015.
The consolidated total revenue of the Company for the year 2014-15 was
Rs. 2648.69 crore. The operating Profit (earning before interest,
depreciation and tax) was at Rs. 116.60 crore. The loss for the year
2014-15 was Rs. 143 crore.
Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5
of the Companies (Accounts) Rules, 2014, the statement containing the
salient features of the financial statements of the Company''s
Subsidiaries (in Form AOC-1) is forming part of the Consolidated
Financial Statements. Pursuant to Section 136 of the Companies Act,
2013 ("the Act") the Company is exempted from attaching to is Annual
Report, the Annual Report ofthe Subsidiary Company.
The financial statement of the subsidiary company is kept open for
inspection by the shareholders at the Registered Office of the Company.
The Company shall provide the copy of the financial statement of its
subsidiary company to the shareholders upon their request free of cost.
It is also available on the website of the Company.
The financial year 2014-15, being the first year that consolidated
financial statement are presented, comparative figures for the previous
year have not been presented in accordance with the transitional
provisions of AS-21 consolidated financial statement.
Changes in Share Capital
During the year under review, your Company allotted 1,949,860 equity
shares ofRs. 10 each fully paid up at a premium of Rs. 25.90 per share to
the promoters / promoter group on exercise of option for conversion
ofthe 1,487,147 0.001% Optionally Convertible Cumulative Preference
Shares (OCCPS) issued on preferential basis pursuant to the SEBI (ICDR)
Regulation, 2009. As a result of such allotment, the paid up equity
share capital of the Company increased from 40132665 equity shares of Rs.
10 each aggregating to Rs. 40,13,26,650 to 42082525 equity shares of Rs. 10
each aggregating to Rs. 42,08,25,250.
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, the shareholding of the Directors in the
Company has been disclosed in the Corporate Governance Report which
forms part ofthis report.
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.
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.
Directors
Induction
On the recommendations of the Nomination and Remuneration Committee,
the Board appointed Shri Sunil S. Sheth as an Independent Director of
the Company with effect from 13th August, 2014. Shri Sunil Sheth had a
long tenure as Member of the Board and retired by rotation at the AGM
held on 30th July, 2014 and did not seek re-appointment. However, in
the interest of maintaining continuity and providing guidance during
challenging time, the Nomination and Remuneration Committee and the
Board of Directors of the Company requested Shri Sunil Sheth to accept
the Board position once again. Shri Sheth accepted the request. We
seek your support in confirming the appointment of Shri Sunil Sheth in
the ensuing AGM.
Smt. Anita Mandrekar was appointed as an Additional Directors
(Independent) on the Board with effect from 30th May, 2015
respectively. We seek your confirmation for her appointment as
Independent Directors for a term up to 5 (five) consecutive years i.e.
from the date ofthe 36th AGM ofthe Company on non-rotational basis.
The resolutions seeking approval of the Members for the appointment of
Shri Sunil S. Sheth and Smt. Anita Mandrekar have been incorporated in
the Notice ofthe ensuing Annual General Meeting ofthe Company along
with brief details about them. The Company has received notice under
Section 160 of the Companies Act, 2013 along with the requisite deposit
proposing the appointment of Shri Sunil S. Sheth and Smt. Anita
Mandrekar.
The Independent Directors of the Company have declared that they meet
the criteria of Independence in terms of Section 149(6) of the
Companies Act, 2013 and that there is no change in their status of
independence.
Resignation
During the year under review, Shri Madanlal Lankapati, independent
Director resigned from the Board of Directors ofthe Company with effect
from 30th March, 2015. The Board of Directors wish to place on record
their appreciation for the contribution made by Shri Lankapati to the
Board and the Company during his tenure as a Director.
Re-appointments
Pursuant to the provisions of Section 152 of the Companies Act, 2013,
Shri Alok P. Shah (DIN: 00218180) will retire at the ensuing Annual
General Meeting, and being eligible, seek re-appointment. The Board
recommends his re-appointment.
The Companies Act, 2013, provides for the appointment of Independent
Directors. Sub-section (10) of Section 149 of the Companies Act, 2013
provides that Independent Directors shall hold office for a term of up
to five consecutive years on the board of a company and shall be
eligible for re-appointment on passing of a special resolution by the
shareholders of the Company. Accordingly, all the Independent Directors
except for Shri Sunil Sheth who was appointed as additional Director on
13th August, 2014 were appointed by the shareholders at the general
meeting held on 30th July, 2014. Further, sub- section (13) of Section
149, provides that the provisions of retirement by rotation as defined
in sub-section (6) and (7) of Section 152 of the Companies Act, 2013
shall not apply to such IDs. Hence, none of the Independent Directors
retire at the ensuing AGM.
During the year, the non-executive directors of the Company have no
pecuniary relationship of transactions with the Company.
Key Managerial Personnel
At the Board Meeting held on 28th May, 2014 Mr. Praful A. Shah,
Managing Director, Mr. Alok P. Shah, Joint Managing Director and CFO
and Mr. Kamlesh B. Vyas, Company Secretary and Compliance Officerwere
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.
Board Evaluation
Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of
the Listing Agreement, the Board has carried out an annual performance
evaluation of its own performance and that of its committees viz. Audit
Committee, Stakeholder Relationship Committee, Nomination and
Remuneration Committee and Corporate Social Responsibility Committee
and that of the individual directors. The manner in which the
evaluation has been carried out has been explained in the Corporate
Governance Report.
Nomination and Remuneration Policy
The Board has adopted, on recommendation of the Nomination and
Remuneration Committee, a policy for selection and appointment of
Directors, Senior Management and their remuneration.
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 and also posted on the website of the Company,
www.gardenvareli.com.
Declaration by Independent Directors
As per the provisions of Section 149 of the Companies Act, 2013 read
with Clause 49 of the Listing Agreement, there were three Non-Executive
Independent Directors - Shri Arunchandra N. Jariwala, Shri J. P. Shah
and Shri Yatish Parekh. The Company has received the necessary
declaration from each Independent Directors in accordance with Section
149(7) ofthe Companies Act, 2013, that he/she meets the criteria of
independence as laid out in the sub section (6) of Section 149 of the
Companies Act, 2013 and Clause 49 of the Listing Agreement. Further the
two new Additional Directors appointed by the board of Directors ofthe
Company have also submitted similar Declarations.
Directors'' Responsibility Statement
Pursuant to Section 134(5) ofthe Companies Act, 2013, the Board of
Directors ofthe Company, to the best of their knowledge and ability,
confirm that:
i. in the preparation ofthe annual accounts, the applicable accounting
standards have been followed and there are no material departures;
ii. they have selected such accounting policies and applied them
consistently and made judgments and estimates that are reasonable and
prudent so as to give a true and fair view of the state of affairs of
the Company 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.
Extract ofAnnual 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)
of the Act is attached as Annexure F which forms part of this Report.
Particulars of loans, guarantees or investments under Section 186 of
the Companies Act, 2013
During the year under review, your Company has invested in 1 Equity
Share of GAIA International FZE, Dubai of 185000 AED equivalent to Rs.
30.26 Lacs and 10000 Equity Shares of Garden Exim Pte Ltd, Singapore of
1 USD equivalent to Rs. 6.24 Lacs towards share capital of the
subsidiaries.
Corporate Governance
The report on Corporate Governance and the certificate from the
Statutory Auditors regarding compliance with the conditions of
Corporate Governance have been furnished in the Annual Report and forms
part of the annual report.
Conservation of Energy, Technology Absorption, Foreign Exchange
Earnings and Outgo
Energy conservation is a key component of the Company''s continuous
improvement program. Power, heat and steam are key inputs for the
Company requiring careful and prudent management across levels in the
organization. During the year under review, there was no major capital
investment on energy conservation equipment.
The particulars as required under 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 furnished in
Annexure A to this Report.
Particulars of Employees and Related disclosure
The information as required under the provisions of Section 197(12) of
the Companies Act, 2013 and Rule 5 of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, are set out in
Annexure G hereto, which forms part of this report. As on 31st March,
2015 there were 5639 permanent employees.
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, the Statutory Auditors of the
Company, hold office upto the conclusion of this Annual General
Meeting. However, their appointment as Statutory Auditors of the
Company is subject to ratification by the Members at every Annual
General Meeting.
The Company has received confirmation from the firm regarding their
consent and eligibility under Sections 139 and 141 of the Companies
Act, 2013 read with the Companies (Accounts) Rules, 2014 for
appointment as the Auditors of the Company.
As required under Clause 41 of the Listing Agreement, the Auditors have
also confirmed that they hold a valid certificate issued by the Peer
Review Board of the Institute of Chartered Accountants of India.
The Audit Committee and the Board of Directors have recommended the
appointment of the Auditors for the financial year 2015-16. Necessary
resolution for ratification of appointment of the said Auditors is
included in the Notice ofAnnual General Meeting for seeking approval of
members.
Cost Auditors
Pursuant to the provisions of Section 148 of the Companies Act, 2013
read with 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 28th May,
2014, appointed M/s Manubhai & Associates, 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 Manubhai & Associates, Cost Accountants, as the Cost Auditors of
the Company. A resolution for ratification of the payment to be made
for such appointment is included in the notice of the ensuing Annual
General Meeting.
Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act, 2013,
and The Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014, the Board of Directors of the Company has
appointed M/s K. Dalai & Co., a firm of Company Secretaries in Practice
to undertake the Secretarial Audit of the Company for the year 2014-15.
The report of the Secretarial Auditor is annexed to this report as
Annexure D which is self explanatory and give complete information.
Comments on the Auditors Report
The Audit Report on the financial statements for the year ended on 31st
March, 2015 and observations/comments/remarks etc. made by statutory
auditors of the Company read with the Notes to Financial Statements are
self-explanatory.
With regard to the observation made by the Auditors at Point No.ix of
the Annexure to the Auditors'' Report regarding the delay in payment of
interest for the quarter January-March, 2015, we would like to inform
that the same has been paid during the quarter April-June 2015.
Internal Auditors
Pursuant to the provisions of Section 138 of the Companies Act, 2013,
the Board of Directors of the Company has appointed Shri Piyush Patel,
Chartered Accountant (ICAI Membership No.116769) as Internal Auditor of
the Company. The audit committee of the Board of Directors in
consultation with the Internal Auditor formulates the scope,
functioning, periodicity and methodology for conducting the internal
audit.
Related Party Transactions
The Company has formulated a policy on dealing with Related Party
Transactions. The policy is disclosed on the website of the Company.
All transactions entered into with Related Parties as defined under the
Companies Act, 2013 and Clause 49 of the Listing Agreement during the
financial year were in the ordinary course of business and on arm''s
length basis and do not attract the provisions of Section 188 of the
Companies Act, 2013. During the year, the Company had not entered into
any contracts / arrangements / transactions with related parties which
can be considered as material in nature. The related party transactions
are disclosed under Note 30 of the Note to Financial Statements for the
financial year 2014-15.
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.
Corporate Social Responsibility Committee
The Company has constituted a Corporate Social Responsibility (CSR)
Committee in accordance with Section 135 of the Companies Act, 2013.
The CSR committee was constituted by the Board of Directors of the
Company comprising of three directors including Independent Directors.
The Company has incurred loss during the last three financial years,
therefore the provisions with respect to amount to be spent towards the
CSR activity is not applicable. However, the Company has voluntarily
incurred expenditure on CSR related activity during the year. The
details in terms of the Companies (Corporate Social Responsibility
Policy) Rules, 2014, are appended to this Report as Annexure B .
Audit Committee
An Audit Committee is in existence in accordance with the provisions of
Section 177 of the Companies Act, 2013. The Audit Committee of the
Company comprises of four Independent Directors. The composition of
directors and other details are provided in the Corporate Governance
Report of the Company. During the year, there were no instances where
the Board has not accepted the recommendation ofthe Audit Committee.
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.
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 the
Corporate Governance Report.
Insurance
The properties and insurable interests of your Company like buildings,
plant and machinery, stocks etc. are adequately insured by the Company.
Finance
Your Company has repaid / prepaid Secured Rupee Term Loan availed from
banks / financial institutions, to the tune of Rs. 207.13 Crore during
the year. The Company also availed term loan aggregating to Rs. 33.05
Crore from the banks / financial institutions during the year.
Cash and cash equivalent as at March 31, 2015 was Rs. 45.37 crore. The
Company continues to focus on judicious management of its working
capital. Receivables, Inventories and other working capital parameters
were kept under strict check through continuous monitoring. The working
capital requirement of the Company continues to be funded by a
consortium of banks led by Bank of Baroda.
The Company has also taken steps to refinance some of its loans at a
lower interest rate with the support of its bankers.
Your Company has entered into a Long Term Advance Payment and Supply
Agreement (ASPA) with one of its export customers. Under the ASPA,
your Company has received Long Term Advances against Exports to the
tune of USD 66.48 Million which will be adjusted against exports to
that Customer over 10 years.
Payment of remuneration / commission to Directors from holding or
subsidiary companies
None of the managerial personnel i.e. Managing Director and Whole Time
Director/s of the Company are in receipt of remuneration / commission
from the holding or subsidiary company of the Company.
Meetings ofthe Board
During the year, 6 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 members
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
ofthe Independent Directors was held on 18th March, 2015, without the
participation ofthe 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 Company, the quality, contents and
timelines of flow of information between the Management and Board,
based on the performance evaluation framework of the Company.
The criteria for performance evaluation have been detailed in the
Corporate Governance Report forming part of this report.
Familiarisation programme for Independent Directors
Pursuant to the provisions of Clause 49 ofthe Listing Agreement, the
Company has formulated a programme for familiarizing the Independent
Directors with the Company, their roles, rights, responsibilities in
the Company, nature ofthe industry in which the Company operates,
business model ofthe Company etc. through various initiatives.
Quarterly updates on relevant statutory changes encompassing important
laws are regularly circulated to the Directors.
The detail of such familiarization programmes for Independent Directors
are posted on the website of the Company at www.gardenvareli.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 of which 2 members as the
employees and 1 member representing 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 tiled with the Committee under
the provisions of the said Act.
Material Subsidiary
During the year ended 31st March, 2015, the Company does not have any
material listed / unlisted subsidiary companies as detined 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.gardenvareli.com.
Disclosures under Section 134(3)(l) ofthe Companies Act, 2013
There were no material changes and commitment which could affect the
Company''s tinancial position have occurred between the end oftinancial
year ofthe Company and the date ofthis Report.
Vigil Mechanism /Whistle Blower Policy
Pursuant to Section 177(9) ofthe Companies Act, 2013 read with Rule 7
ofthe Companies (Meetings of Board and its Powers) Rules, 2014 and
Clause 49 ofthe Listing Agreement, the Board of Directors had approved
the Policy on Vigil Mechanism / Whistle Blower and the same was hosted
on the website ofthe Company.
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 attached as Annexure B to
this Report and also available on the Company''s website
www.gardenvareli.com.
Unclaimed and Unpaid Dividends
As on 31st March, 2015 an aggregate amounts of Rs. 48.97 Lacs is lying in
the unpaid equity dividend account ofthe Company in respect ofthe
dividend for the tinancial year 2007-08,2008-09,2009-10 and 2010-11.
Members who have not yet received / claimed their dividend entitlements
are requested to contact the Company or the Registrar and Transfer
Agents of the Company.
Investor Education and Protection Fund
In terms of Section 205C ofthe Companies Act, 1956, read with the
Investor Education and Protection Fund (Awareness and Protection of
Investor) Rules, 2001 (which are still applicable as the relevant
sections under the Companies Act, 2013 are yet to be notitied), the
Company has credited during the year ended 31st March, 2015 an
aggregate amount ofRs. 10.51 lacs, which pertains to the dividend for the
year 2006-07 and remained unpaid or unclaimed for a period of 7 years
from the date of declaration, to the Investor Education and Protection
Fund (IEPF).
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.
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
audits 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 weakness in the design or operation was 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.
Acknowledgement
Your Directors take this opportunity to thank the customers, suppliers,
bankers, business partners / associates, financial institutions and
various regulatory authorities for their consistent support /
encouragement to the Company.
Your Directors are thankful to the esteemed shareholders for their
continuous support and the confidence reposed in the Company and its
management.
For and on behalf of the Board
Praful A. Shah
Chairman & Managing Director
Surat, 5th June, 2015
Mar 31, 2014
Dear Shareholders,
The Directors are pleased to present the Thirty-fifth Annual Report
together with the audited accounts of the Company for the financial
year ended 31st March, 2014.
Financial Results
(Rs. in crores)
2013-14 2012-13
Revenue from operations 3081.27 3703.77
Profit before interest,
depreciation and tax 66.69 91.60
Less: Finance Costs 158.22 148.93
Depreciation 92.37 93.54
Profit/(Loss) before Tax (183.90) (150.87)
(Add)/Less: Provision for Tax (39.45) (50.17)
Profit/(Loss) after Tax (144.45) (100.70)
Dividend
Considering the loss incurred by the Company, your Directors do not
recommend any dividend on eguity shares for the year.
Review of Operations
The year 2013-14 witnessed a severe slowdown coming after FY13 which
was itself a difficult year for the Indian economy. This downturn
continued to affect the polyester industry as well.
The net turnover of the Company for the year 2013-14 declined 1 7.06%
at Rs.3066.62 crores as compared to Rs.3697.25 crores in the previous year.
The Company achieved total sale of yarn at Rs.1900.90 crores as compared
Rs.1865.60 crores in the previous year. The sales of chips were at
Rs.1172.89 crores, a major decline of about 39% compared with the
previous year. The sale of fabrics improved marginally from Rs.201.37
crores in the previous year to Rs.215.00 crores in the year 2013-14. The
income from export sales for the year declined 6.7% at Rs.398.00 crores
as compared to Rs.426.59 crores in the previous year.
Continuous backward integration by PFY producers towards polyester
chips production in order to reduce the cost of yarn production has
deeply affected the merchant sales of existing polyester chips
manufacturers. Your Company being the largest textile-grade polyester
chips manufacturer in India, witnessed a steep volume decline of 23.8%
CAGR over FY12-14.
The main reasons for higher decline in the Company''s chips volumes vis
a vis industry can be attributed to: (1) entry of new suppliers of
chips; and (2) continuation of disadvantageous taxation policies like:
(a) 2% VAT credit reversal for goods sale out of Gujarat utilizing
inputs procured within Gujarat (b) Availability of 2% CST exemption on
domestic sale outside Gujarat for competitors situated in Silvassa -
Daman areas and (c) delay in introduction of GST.
These tax related disadvantages also extend to Company''s POY and FDY
segments in which the Company was able to maintain its position. These
segments were less affected owing to the premium position of the
Company''s products. In fact, in terms of utilization levels, we were
among the highest in the industry. Chips segment, in which margins and
differentiation is low, was most affected.
These tax disadvantages are temporary. We further expect removal of VAT
credit reversal and introduction of GST in the next 1-2 years time.
Owing to large capacity additions the demand-supply gap worsened across
chips and PFY segments in FY13 and FY14 compared even with FY12 which
itself was a challenging year. If one includes the capacities of
producers who have recently shut capacities, utilisation levels are at
around 65%.
Your Company continued to be the leader in draw-warped and draw-twisted
yarns in the world. We are India''s largest sized-yarn producer and the
country''s premium seller of fully drawn yarn, the fastest growing
segment of the PFY industry.
Our weaving and finishing (dyed and printed fabric) divisions continue
to be at the forefront of design innovation in India. The sheer
varieties of designs generated are unparalleled in the industry.
In our finished (dyed and/or printed) fabric division we continued to
emphasise naturals via the introduction of new cottons, 100% viscose
filament, bemberg as well as blended varieties like poly-viscose and
poly-cotton fabrics. Various new sized yarn-based saree varieties have
been introduced. We have also introduced a host of new embroidery and
other value-added varieties especially for party-wear and wedding-
wear.
During the year, the Company''s 21 MW Thermal Captive Power Plant (CPP)
became fully operational at its Jolwa Plant. This reduces dependence
on high-cost furnace oil and gas- based power.
Corporate Governance
Your Company continues to be committed to good corporate governance
practices. Your Company complies 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 forms part of this report.
Directorate
Mr. Sunil S. Sheth, a Director liable to retire by rotation, who does
not seek re-election, be not re-appointed a Director of the Company.
In terms of Section 152 of the Companies Act, 2013, Mr. Sanjay S. Shah
would retire by rotation at the forthcoming Annual General Meeting and
is eligible for re-appointment. Mr. Sanjay S. Shah has offered himself
for re-appointment.
In terms of the provisions of Section 149 of the Companies Act, 2013,
it is proposed to appoint Mr. Arunchandra N. Jariwala, Mr. Yatish C.
Parekh, Mr. J. P. Shah and Mr. Madanlal U. Lankapati as independent
directors for a period of 5 years with effect from 1st April 2014. The
Company has received reguisite notice in writing from members proposing
the aforesaid directors forappointmentas Independent Directors.
The Company has received declarations from all the Independent
Directors of the Company confirming that they meet with the criteria of
independence as prescribed both under sub-section (6) of Section 149 of
the Companies Act, 2013 and under Clause 49 of the Listing Agreement
with the Stock Exchanges.
On the recommendations of Nomination and Remuneration Committee, the
Board of Directors of the Company at their meeting held on 28th May
2014, subject to the approval of shareholders in the forthcoming
General Meeting, approved the appointment and payment of remuneration
of Mr. Alok P. Shah as Joint Managing Director of the Company for a
term of 3 (three) years effective from 1 st November 2014.
The resolution for appointment is proposed to the Members in the Notice
of the Annual General Meeting vide item No.5 and the explanatory
statement includes the terms of appointment.
The Companies Act, 2013
The Ministry of Corporate Affairs (MCA) vide its Circular dated 4th
April 2014 has clarified that the financial statements and documents
annexed thereto, auditors report and board''s report in respect of
financial year that have commenced earlier than 1st April 2014 shall
begoverned by the provisions of the Companies Act, 1956 and in line
with the same, the Company''s financial statements, auditors''report and
Board''s report and attachments thereto have been prepared in accordance
with the provisions of the Companies Act, 1956.
Directors'' Responsibility Statement
Pursuant to the reguirement under Section 217(2AA) of the Companies
Act, 1956, with respecttoDirectors''Responsibility Statement, it is
hereby confirmed that:
(i) in the preparation of the Annual Accounts for the year ended 31st
March 2014, the applicable accounting standards, read with reguirements
set out under Schedule VI to the Companies Act, 1956, have been
followed and there are no material departures from the same;
(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 as at 31st March 2014 and of the loss of the Company for
the year ended on that date;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adeguate 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 of the Company on
a''going concern''basis.
Auditors
Messrs Natvarlal Vepari & Co., Chartered Accountants, Statutory
Auditors of the Company, hold office till the conclusion of the ensuing
Annual General Meeting and are eligible for re-appointment. The Company
has received a confirmation from them to the effect that their re-
appointment, if made, would be within the prescribed limits under
Section 141(3)(g) of the Companies Act, 2013 and the provisions of the
Companies (Audit and Auditors) Rules, 2014 and that they are not
disqualified for re-appointment.
Since Messrs Natvarlal Vepari & Co., Chartered Accountants, have been
functioning as the auditors of the Company for more than 10 years, in
accordance with the aforesaid rules, the Audit Committee and the Board
of Directors have recommended the re-appointment of auditors for a
maximum period of three consecutive years, subject to ratification of
their appointment at every AGM.
The Notes on Financial Statements referred to in the Auditors'' Report
are self-explanatory and do not call for any further comments.
Cost Auditors
In accordance with Section 141 of the Companies Act, 2013 and subject
to the approval of the Central Government, the Audit Committee has
recommended and the Board of Directors had appointed M/s Manubhai &
Associates, Cost Accountant, Surat being eligible and having sought re-
appointment, as Cost Auditors of the Company, to carry out
thecostauditofthe products manufactured bytheCompany during the
financial year 2014-15.
Internal Control Systems
Your Company has proper and adequate systems of internal control.
Regular Internal Audits and Checks are carried out and the management
also constantly reviews the internal control systems and procedures to
ensure orderly and efficient conduct of the Business. Periodically, the
systems are reviewed and aligned to the needs of the organization.
This is an ongoing exercise. Implementation of ERP on the Oracle based
platform has improved controls, created analytical tools and enhanced
the decision making process. The internal auditors periodically
interact with the Audit Committee of the Board of Directors of the
Company to discuss various internal controls / internal audit issues.
Fixed Deposits
During the year the Company has not accepted any fixed deposits from
the public. There are no fixed deposits outstanding with the Company as
on 31st March 2014.
Human Resources and Industrial Relations
Good human resource management plays a key role in company performance.
The employee relations during the year have remained cordial and
satisfactory. Attracting and retaining dedicated and skilled human
resource, offering them a conducive work environment and excellent
career development opportunities are currently prime HR priorities.
The Company maintains a transparent work culture that offers equal
opportunities of growth to all employees. While emphasis is laid on
recruiting best accessible talent at all levels all the time, the
Company takes due care of keeping its talent pool skilled and updated
by proving adequate on-the- job training to its employees. The Company
strongly believes that its growth and sustainability is closely aligned
to those of its human capital.
Environment and Safety
The Company is conscious of the importance of environmentally clean and
safe operations. The Company''s policy requires the conduct of all
operations in such manner so as to ensure high safety levels,
compliance of statutory and industrial requirement for environment
protection and conservation of natural resources to the extent
possible.
Investor Education and Protection Fund
Pursuant to the provisions of section 205A(5) and 205C of the Companies
Act, 1956 an amount of Rs.11,44,610/-, which pertains to the dividend for
the year 2005-06, and remained unpaid or unclaimed for a period of 7
years from the date of declaration, has been transferred by the Company
to the Investor Education & Protection Fund.
Reward, Recognition & Quality Systems Certification
During the year, the Company''s CP Division got certified OSHAS 18001
:2007 by Bureau Veritas. Our quality, health and safety processes are
now continuously monitored, assessed and improved to meet
internationally recognized standards. Each raw-material and product is
tested extensively and all manufacturing processes are continually
optimized with a strong commitment to energy efficiency, occupational
health, environmental responsibility and safety.
Your Company achieved the status of "Trading House" awarded by the
Office of Joint Director General of Foreign Trade, Ministry of
Commerces Industry, Government of India on achieving the required
Export targets.
The Company''s Vareli Plant enjoys the unique distinction of being the
first in polyester weaving industry to achieve ISO 9002:1994
certification by Bureau Veritas Quality International (BVQI). The
processes certified are Draw-Warping and Texturizing,Twisting, Sizing,
Warping and Weaving.The scope of audit includes "Manufacture of Woven
Greige Fabrics and Processed Yarns".
The manufacturing of Texturized, Flat Polyester Filament, Polyester
Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are
also ISO 9001:2000 certified by BVQI.
Energy, Technology and Foreign Exchange
Additional information on conservation of energy, technology
absorption, foreign exchange earnings and outgo as reguired, 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.
Particulars of Employees
In terms of the provisions of Section 217(2A) of the Companies Act,
1956, read with Rule 2 of the Companies (Particulars of Employees)
Rules of 1975, as amended, names and other particulars of the employees
are set out in the annexure to the Directors Report.
Having regard to the provisions of Section 219(1)(b)(iv) of the said
Act, the Annual Report excluding the aforesaid information is being
sent to the members of the Company. Any member interested in obtaining
such particulars may write to the Company Secretary of the Company.
The aforesaid Annexure is also available for inspection of Members at
the Registered Office of the Company, 21 days before the Annual General
Meeting and up to the date of the ensuing Annual General Meeting during
business hours on working days.
Insurance
The properties and insurable assets and interests of your Company, like
building, plant and machinery and stocks, among others, are adeguately
insured.
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.
Corporate Social Responsibility
During the year under review, your Company continued various economic
activities combined with the fulfillment of its social responsibilities
for the communities it operates in and undertook various initiatives in
the area of welfare, environment conservation, education, health and
empowerment, across its operations.
Acknowledgement
The Directors wish to place on record their appreciation for the
continued support and co-operation extended to your Company by Banks,
Financial Institutions, Customers, Suppliers, Government Authorities,
Regulatory authorities and other stakeholders. Your Directors are
thankful to the esteemed shareholders for their continued support and
the confidence reposed in the Company and its Management.
Your Directors also acknowledge the support extended by all the
employees for their dedicated service.
For and on behalf of the Board
Praful A. Shah
Surat, 28th May, 2014 Chairman & Managing Director
Mar 31, 2013
Dear Shareholders,
The Directors are pleased to present the 34th Annual Report together
with the audited accounts of the Company for the financial year ended
31st March, 2013.
Financial Results:
(Rs.in crores)
2012-13 2011-12
Total Income 3703.77 3527.72
Profit before interest, 91.60 122.05
depreciation and tax
Less: Finance Costs 148.93 153.95
Depreciation 93.54 86.15
ProW(Loss) before Tax (150.87) (118.05)
(Add)/Less: Provision for Tax (50.17) (39.17)
ProW(Loss) after Tax (100.70) (78.88)
Dividend:
Considering the loss incurred by the Company, your Directors do not
recommend any dividend on eguity shares for the year.
Corporate Governance:
Your Company reaffirms its commitments to the good corporate governance
practices. Pursuant to clause 49 of the Listing Agreement with the
Stock Exchanges, Corporate Governance Report and Auditors'' Certificate
regarding compliance of conditions of Corporate Governance are enclosed
and form an integral part of this report.
Directors:
Pursuant to the provisions of Sections 255 and 256 of the Companies
Act, 1956 and in accordance with provisions of Articles of Association
of the Company, Shri Rajen R Shah, Shri A. N. Jariwala, Shri J. P. Shah
and Shri Yatish Parekh, Directors of the Company, are liable to retire
by rotation and being eligible, offer themselves for re-appointment at
the ensuing Annual General Meeting.The Board recommends their
re-appointment. The Notice convening the Annual General Meeting
includes the proposals for re-appointment of Directors.
Details of the Directors seeking reappointment as reguired under Clause
49 (VI) of the Listing Agreements are provided in Notice forming part
of this Annual Report. None of the Directors are disgualified under
Section 274(1 )(g) of the Companies Act, 1956.
Directors'' Responsibility Statement:
Pursuant to the reguirement under Section 217(2AA) of the Companies
Act, 1956, with respecttoDirectors''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, read with
reguirements set out under Schedule VI to the Companies Act, 1956 have
been followed and there are no material departures from the same;
(ii) the Directors have selected such accounting policies and applied
them consistently and made judgements 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, 2013 and of the loss of the Company
for the year ended on that date;
(iii) the Directors have taken proper and sufficient care for the
maintenance of adeguate 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 of the Company on
a''going concern''basis.
Auditors and Auditors''Report:
Natvarlal Vepari & Company, Chartered Accountants, Statutory Auditors
of the Company, holds office until the conclusion of the ensuing Annual
General Meeting and is eligible for re-appointment.
The Company has received a letter from them to the effect that their
re-appointment, if made, would be within the limits prescribed under
Section 224(1 B) of the Companies Act, 1956 and they are not
disgualified for such re-appointment within the meaning of section 226
of the said Act.
Based on the recommendations of the Audit Committee, the Board of
Directors of the Company proposes the re-appointment of Natvarlal
Vepari & Company, chartered accountants, as the Statutory Auditors of
the Company. You are reguested to appoint the auditors and fix their
remuneration.
The Notes on Financial Statements referred to in the Auditors'' Report
are self-explanatory and do not call for any further comments.
Cost Audit:
Manubhai & Associates, Cost Accountants, were appointed with the
approval of the Central Government to carry out the cost audit relating
to products Polyester Chips and Yarns for the year 2012-13. They will
submit their report to the Board of Directors, before forwarding it to
the Ministry of Corporate Affairs, Government of India.
Based on the recommendation of the audit committee, Manubhai &
Associates, cost accountants, being eligible, have also been appointed
by the Board as the Cost Auditors for FY14.The Company has received a
letter from them to the effect that their re-appointment would be
within the Limits prescribed under Section 224(1 B) of the Companies
Act, 1956 and that they are not disgualified for such re-appointment
within the meaning of Section 226 of the Act.
The cost audit report for the Financial Year 2011 -12 was filed with
Ministry of Corporate Affairs on 25th December, 2012.
Internal Control:
Your Company has adeguate 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 adeguacy and effectiveness of interna
control systems and suggests improvement for strengthening them, from
time to time.
Fixed Deposits:
The Company has not accepted or renewed any deposits during the year.
There are no outstanding and overdue deposits as of 31 st March, 2013.
Human Resources and Industrial Relations:
ndustrial relations at all the plants were cordial. Your Company offers
various incentives to motivate performance. The employees attend
technical seminars and workshops to enhance their expertise levels. The
Company''s continuous focus on skill building provides egual
opportunities on latera growth.
Health, Safety and Environment Measures:
Your Company focuses on achieving excellence in occupational and
personal health of employees at all manufacturing sites as well as at
its offices.
Your Company is committed to providing a safe workplace to its
employees and contractors, and to the communities in which it operates.
Our Vareli plant has won the Gujarat State Safety award for a
substantial number of years in the last decade. Safety training and
management is viewed with egual importance as other management
disciplines. We have been chosen by the Factory Inspector to
disseminate our experience to other industries and it is a matter of
great pride that the organisation''s dedication to safety has been so
recognised.
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 surroundings.
Investor Education and Protection Fund
Pursuant to the provisions of Section 205A(5) and 205C of the Companies
Act, 1956 an amount of Rs. 12,43,259/-, which pertains to the dividend
for the year 2004-05, and remained unpaid or unclaimed for a period of
7 years from the date of declaration, has been transferred by the
Company to the nvestor Education & Protection Fund.
Reward, Recognition and Quality Systems Certification:
Your Company continues to have the status of "Star Export House" by the
Office of Joint Director General of Foreign Trade, Ministry of
Commerces Industry, Government of India on achieving the reguired
Export targets.
The Company''s Vareli Plant enjoys the unigue distinction of being the
first in polyester weaving industry to achieve ISO 9002:1994
certification by Bureau Veritas Quality Internationa (BVQI). The
processes certified are Draw-Warping and Texturizing,Twisting, Sizing,
Warping and Weaving.The scope of audit includes "Manufacture of Woven
Greige Fabrics and Processed Yarns".
The manufacturing of Texturized, Flat Polyester Filament, Polyester
Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are
also ISO 9001:2000 certified by BVQI.
Energy, Technology and Foreign Exchange:
Additional information on conservation of energy, technology
absorption, foreign exchange earnings and outgo as reguired, 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 cordia 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:
Details reguired as per Section 217(2A) of the Companies Act, 1956 read
with Rule 2 of the Companies (Particulars of
Employees) Rules of 1975, as amended and forming part of the Directors
Report for the year ended 31st March, 2013 is given in a separate
Annexure to this Report. However, in line with the provisions of
Section 219(1)(b)(iv) of the said Act, post the exclusion of the
information as reguired above, the annual report is being sent to all
the members of the Company and the others entitled thereto.
Any member interested in obtaining these details may write to the
Company Secretary at the Registered Office of the Company. The
aforesaid Annexure is also available for inspection of Members at the
Registered Office of the Company, 21 days before the Annual General
Meeting and up to the date of the ensuing Annual General Meeting during
business hours on working days.
Corporate Social Responsibility:
The Company as a responsible corporate citizen is contributing to
sustainable development by its economic activities combined with the
fulfillment of its socia responsibilities for the communities it
operates in.
Your Company undertook various initiatives in the area of community and
stakeholder welfare, environment conservation education, health and
empowerment, across its operations.
Cautionary Statement:
Statement in this Directors''Report & Management Discussion and Analysis
describing the Company''s objectives, projections, estimates,
expectations or predictions may be "forward looking statements" within
the meaning of applicable securities laws and regulations. Actual
result might differ materially from those expressed or implied.
important factors that could make a difference to the Company''s
operations include raw material availability and prices, cyclical
demand and pricing in the Company''s principal market, changes in
Government regulations, tax regimes, economic developments within India
and the countries in which the Company conducts business and other
incidental factors.
The Company assumes no responsibility in respect of the forward-looking
statements herein, which may undergo changes in future on the basis of
subseguent developments, information or events.
Acknowledgement:
Your Directors take this opportunity to thank the Banks, Financial
Institutions, Central and State Government authorities, Regulatory
authorities, Customers, Suppliers, Shareholders and Investors at large
for their continued support to the Company and look forward to having
the same support in the years to come.
Your Directors also wish to place on record their deep and special
appreciation for the unstinting diligence and dedication of the
Company''s employees.
For and on behalf of the Board
Praful A. Shah
Surat, 31st May, 2013 Chairman & Managing Director
Mar 31, 2012
To The Members of Garden Silk Mills Limited
The Directors present their Report on the Audited Accounts of the
Company for the year ended 31st March, 2012.
Financial Results:
(Rs. in crore)
2011-12 2010-11
Total Income 3527.72 3407.39
Profit before interest,
depreciation and tax 122.05 287.48
Less: Finance Costs 153.95 90.07
Depreciation 86.15 76.52
Profit / (Loss) before Tax (118.05) 120.89
(Add)/Less: Provision for Tax (39.17) 33.02
Profit / (Loss) after Tax (78.88) 87.87
Add: Balance brought forward
from Previous year 253.55 180.44
Balance Available for 174.67 268.31
Appropriation
Appropriations:
General Reserve 0.00 6.75
Proposed Dividend 0.00 6.89
Tax on Dividend 0.00 1.12
Balance carried to Balance Sheet 174.67 253.55
174.67 268.31
Notes:
Previous years' figures have been regrouped wherever necessary to bring
them in line with the current year's representation of figures.
Dividend:
Considering the loss incurred by the Company, your Directors do not
recommend any dividend on equity shares for the year.
Review of Operations:
The year 2011-12 marked a deterioration in the fundamentals of both the
global and the Indian economies. The global and domestic textile
industries were not spared either. The year under review was a
challenging one for your Company as well. It marked the first loss for
the Company since its inception.
During the year under review, your Company achieved a gross turnover of
Rs. 3,763.55 crores as compared to Rs. 3,667.05 crores in the previous
year, an increase of 2.6%. The total sale of yarn was 156,246 M.T. an
increase of 9.2% over the previous year. In value terms, sales of yarn
have gone up by 23.5% to Rs. 1,749.84 crores. Sales of chips were 211,093
M.T. during the year, a reduction of 28%. In value terms, chips sales
were at Rs. 1,770.96 crores, a reduction of 12.2% compared with the
previous year. We maintained our sale of fabrics at Rs. 189.30 crores as
compared to Rs. 188.52 crores for the previous year.
The unprecedented crash in raw material prices in the first quarter of
the year under review resulted in significant inventory losses. It also
led to panic in the downstream market and thus severe demand
contraction. The second quarter saw a clawback but the third and fourth
quarters were hamstrung by very weak consumer demand for polyester
filament yarn-based fabrics coupled with rising raw material prices
that could not be adequately passed on. Energy cost, which is the
biggest operating cost for the company, increased dramatically. Gas,
which is the major energy cost component for the company, saw a cost
increase of 47%, supported by a crash in the rupee and a large increase
in the dollar price of gas.
Average interest rates for the company increased by about 230 basis
points last year. This resulted in substantially increased financial
costs. The lowered return on capital coupled with the high interest
rate in the last financial year led to a financial loss for your
Company.
Despite the contraction in domestic demand for yarn and fabric, your
Company was able to increase production and sales of yarn and maintain
sales of fabric. Chips were worse affected as the demand slowdown
affected the small chip- based spinners relatively more than direct
spinners, reducing their demand for textile-grade chips. The reduced
demand and margins in the chips division led to curtailed production
and sales of chips.
Operations were further impacted during the year due to a temporary
shutdown of our continuous polymerization (CP) plant on account of
technical modifications, as well as a shortage of PTA.
Despite the slowdown, the company maintained its position as the
largest producer of polyester textile and film-grade chips in the
world.
Your Company is proud to be known to have the largest product range and
to be the most differentiated among any polyester filament yarn
producer in India, if not the world.
We are the only Indian company to be present in every segment of the
polyester filament yarn business: POY, FDY, draw-twisting,
draw-texturising, air-texturising, draw-warping, warping, sizing,
twisting and other yarn-preparatory segments.
The Company has always been a leader in yarn innovation and this
position has been consolidated in the year under review. A host of new
products have been introduced through close cooperation between our
R&D, production and marketing departments. Despite the draw-texturised
yarn sector witnessing significant de-growth last year, our texturising
division held its own as we have emerged a leader in specialized
texturised yarns for different applications such as automotive and
lining. We are today the largest producer of lycra yarns on DTY
machines in the country.
The Company continues to be the leader in draw-warped and draw-twisted
yarns in the world. We are India's largest sized-yarn producer and
country's one of the largest producers of fully drawn yarn.
Our weaving and finishing (dyed and printed fabric) divisions continue
to be at the forefront of design innovation in India. The sheer
varieties of designs generated are unparalleled in the industry. In our
finished (dyed and/or printed) fabric division we continued to
emphasise naturals via the introduction of new cottons, 100% viscose
filament, bemberg as well as blended varieties like poly-viscose and
poly-cotton fabrics. Various new sized yarn-based saree varieties have
been introduced. We have also introduced a host of new embroidery and
other value-added varieties especially for party-wear and wedding-wear.
In order to reach working women in towns and villages, we have
introduced saree ranges and dress materials / suit combinations at
competitive price-levels.
During the year, a fire occurred at the 'Texturising Division' of our
Plant at Village Jolwa, Taluka Palsana, Dist. Surat on August 4, 2011,
damaging few of the machineries and inventory in the Division. The
Company took immediate steps and restored the production on the
remaining machines of the Texturising Division. There was no injury to
any person or casualties due to such accident. The plant and
machineries, building and the material in stock were adequately covered
under insurance.
Export:
To counter the slowdown in the domestic industry your Company paid
special emphasis on exports. The total export of goods of your Company
during the year 2011-12 was higher at Rs. 412.24 crores as compared to Rs.
340.49 crores in the previous financial year.
Expansion Program:
Your Company successfully enhanced its POY / FDY manufacturing capacity
by about 225 TPD in a phased manner during the second half of the year.
In the coming months the company hopes to make a range of new products
on these spinning lines that will substitute the import of specialty
yarns used by the domestic weaving industry.
To further strengthen and maintain its leadership in downstream yarn
preparatory activities and to achieve better yarn margins, the Company
enhanced its yarn processing capacity during the year. This will
increase captive consumption of our own POY production to provide
value- added yarns in the market.
We commissioned an 18 MW coal-based power plant which commenced power
generation in August 2011 at the Company's plant at Jolwa.
Further, a 21 MW coal-based power plant project has been initiated in
2011, which is likely to come on stream by the third quarter of the
current year. This initiative is expected to substantially reduce our
power generation cost by restricting the use of expensive gas-based
power plants.
Overview of Economy:
India's economic growth rate in 2011-12 moderated to 6.5 per cent from
8.4 per cent in 2010-11. Alarmingly, Gross Domestic Product (GDP)
growth has been steadily declining over the last few quarters and
slipped to 5.3 per cent in the fourth quarter of 2011-12 the lowest in
nearly 9 years due to poor performance of the manufacturing and farm
sectors. By comparison the GDP growth in January-March quarter of
2010-11 was 9.2 per cent indicating the magnitude of the economic
slowdown. Indicators suggest the year 2012-13 will see a further
slowdown in economic growth to around 6 per cent. While inflation has
moderated somewhat, it still remains uncomfortably high and according
to the RBI risks to inflation are still on the upside. Government
borrowings are also uncontrolled, leading to a dangerously high fiscal
deficit. Soaring inflation concomitant with a high deficit suggests
that the high interest rates, which have subdued the economy, will
continue to remain elevated.
The sovereign-debt crisis in Europe along with the slowdown in the
major world economies increases the likelihood of weak export potential
from India and poor foreign investments into the country despite the
weak rupee. Weak private and public investments, slowing consumer
demand and restricted government scope to stimulate the economy through
either monetary or fiscal policy suggests harder times ahead for the
economy. Despite the falling crude and coal prices internationally, in
rupee terms prices of these key commodities have risen, thus worsening
inflation and endangering the current account position.
Yet the gloom diminishes when one puts the past in perspective and
realizes how far India has come over the last two decades measured by
almost every economic and social indicator. Growth has slowed but
growth there will be and it will be quick by world standards though
probably not our own. The aggregate GDP growth figures hide the
'miracle' performance of "Little Indias" including relatively poor
states like Bihar, UP and Chattisgarh that have been mostly unaffected
by the slowdown as well as more developed ones like Gujarat that
continue to grow at double-digit levels.
India's extraordinary demographic dividend over next few decades will
allow for an enormous increase in working age population that will
benefit labour-intensive sectors like textiles. Around 250 million
people are expected to enter the workforce over the next 15 years. Any
slowdown would increase labour availability further still. In China,
our largest textile and polyester competitor, the working-age
population is expected to start declining in some years, a fact that is
expected to decelerate the growth of labor-intensive manufacturing like
textiles. The relatively strong Yuan puts further pressure on China's
manufactured exports. India should witness a revival in
labour-intensive sectors over the next decade.
Industry Scenario:
In the year 2010-11spectacular global and Indian economic growth along
with record-high cotton prices lifted production and profitability of
polyester manufacturers. Expensive cotton was substituted with
polyester. Record profitability globally meant that 2010-11 saw the
initiation of the largest polyester filament yarn capacity expansions
witnessed both globally (especially China) and in India.
For the PFY industry the year 2011-12 started with optimism which was
soon belied as the industry witnessed an unprecedented crash in raw
material prices in April-May 2011 which shadowed the rapid fall in
cotton prices. The crash resulted in inventory losses in the chain but,
worryingly, did not increase consumer demand despite a now-cheaper
PFY-based fabric.
High food inflation weakened demand for PFY in the rural areas which
have been the main driver of PFY growth in recent years. Also slower
GDP growth meant lower increase in disposable income further affecting
demand for clothing. Cheaper cotton also resulted in pressure on
pricing and demand of polyester. The effect of all these was a
contraction in demand of PFY by domestic weavers. The silver lining was
that India could substantially increase polyester filament yarn exports
owing to the high quality standards and cost-competitiveness of its PFY
producers. India also showed strong growth in exports of PFY-based
fabrics and made-ups in the year under review.
Overall, according to the Textile Commissioner's office PFY production
fell by 5.8% in 2011-12 compared with the previous year. The reduction
in polyester yarn demand coupled with the increase in supply resulted
in contraction in operating margins for the industry and your Company.
It may be noted that cotton yarn production fell by 11.8% and PSF fell
by 7.49% last year showing that there has been a generalized fall in
textile production in India. In the first 2 months of this financial
year growth resumed as PFY production grew by 6.6% (cotton yarn
production grew by only 1.53% and PSF production fell by 1.04%). Yet
the expected increase in PFY capacities will continue to put pressure
on margins.
In the year under review, domestic demand for texturised yarn decreased
substantially. Texturised yarn is the larger of two categories of PFY.
Fortunately, the other category - flat yarn (mainly fully drawn yarn)
-grew rapidly to substantially (though not fully) offset the
contraction in texturised yarn demand. The shift from texturised
yarn-based fabric to more flat yarn-based fabric has been largely due
to a shift in fashion. Flat yarn is preferred in the growing embroidery
segment and offers better drape properties in twisted-yarn based
fabric. Since your Company is a leader in flat yarn production and also
produces highly differentiated and value-added flat yarns, the recent
shift keeps us well-positioned in the year ahead. To offset the
domestic slowdown leading Indian producers of yarn increased export
sales as did your Company.
In the recent budget 2012-13, considering the need for fiscal
correction, the standard rate of Central Excise Duty has been raised to
12% from the existing level of 10%. This increases the tax differential
with cotton products which effectively enjoy an exemption from excise
duty.
Further the Inter-Ministerial Steering Committee (IMSC) under R-TUFS,
in May'12, decided to continue R-TUFS in 2012-13 to the extent of the
unutilized amount of the subsidy cap of Rs. 1,972 crores.
In addition to international developments, India's textile industry has
also been affected by Government decisions such as reduction of
drawback rates and withdrawal of interest subvention on export credit
as well as the inordinate delay in disbursement of TUFS claims.
Opportunities and Outlook:
The PFY market is the largest synthetic yarn segment in India and
accounts for over 50% of the total demand for synthetic yarn. Surat and
its outskirts provide the largest market for PFY, being at the heart of
the polyester filament weaving and processing industry. The Company's
manufacturing units have a locational advantage being situated in the
Surat area. Its location gives it proximity to both raw material
suppliers as well as end users.
The Surat area is also the most innovative textile center which gives
the Company a natural outlet for its specialty yarns and fabrics.
The economic slowdown may affect PFY growth as well. Yet 2012-13 is
widely expected to see a revival in PFY demand. In the first 2 months
of 2012-13 PFY-based fabric growth has been strong at around 22% y-o-y.
Moreover, the demand for differentiated products continues to increase
as does our ability to cater to the demand for specialty products.
Moreover the flat yarn segment which is a core-competency for your
Company is growing rapidly despite the slowdown. While commodity
textile-grade chips sales are likely to be under pressure in the coming
year, the Company intends to sell primarily specialty chips like
various bright-chip variants, full dull, cationic and silica-based
chips whose demand is expected to increase.
The Company's wide product range, highly differentiated product-mix,
high quality standards, strong service-ethics and reputation for fair
practices give it a special position among customers of chips, yarn and
fabric. We hope to leverage our position to sell during the slowdown
and to help us introduce the new products we have planned to bring to
the market.
The fundamentals of PFY based fabrics - wrinkle-resistant, highly
durable, most versatile, affordable, light and fashionable - remain
sound. For Indian women, such fabrics will always be preferred not just
by the cost-sensitive buyer but also by the fashion-conscious rich. PFY
based fabrics have a dominant position in sarees and are very popular
in the growing salwar-kameez/kurti segment. PFY is also the most widely
used yarn in fabric for party and wedding wear among both rich and poor
consumers. The application of PFY is increasing in denim-wear,
sportswear, home-textiles and automotive textiles. Globally, demand
growth of polyester is much faster than that of cotton. This is true
for both developing and developed countries. It is widely expected that
PFY growth in India will be much faster than global growth.
With the large PFY capacity expansions likely to come on stream this
year and the next, operating margins in the industry over the next
couple of years will remain under pressure. However, as far as your
Company is concerned, it is expected that with the introduction of
important new products produced on our new and existing spinning lines
and with the second thermal power plant coming on stream we will
improve our performance in time to come.
We have strong tie-ups with raw material (PTA and MEG) suppliers and
that offers advantages at a time when raw materials are projected to be
in short supply.
Risks 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. The competition is likely to reach a
historical climax this year and the next with the large expansions
planned in 2010-11 coming on stream.
An economic slowdown - both domestic and global - may have some adverse
effect on the growth of the PFY industry. Yet, since growth will be on
a low base it is expected the industry will not be as badly affected as
it was last year. In the first 2 months of 2012-13 PFY-based fabric
growth has been very strong.
Raw material prices fluctuate in line with international prices and
will continue to have an impact on the Company's results as raw
materials constitute around 80% of the Company's net sales. Increased
emphasis on differentiated and value-added products as well as a
reduced working capital cycle this year will help reduce this risk.
The industry is dependent on the international price of crude oil which
directly impacts the price of both our key raw materials PTA and MEG.
Any crude supply shock could have an adverse impact on the industry.
The PTA industry is presently in distress, both globally and in India.
There are signs that owing to the poor margins in the PTA business,
suppliers may possibly curtail supply, resulting in temporary
shortages.
The Company hedges its forex exposures and hence, does not carry
significant forex risk. The Company's relatively high debt coupled with
high interest rates makes it sensitive to interest rate fluctuations.
Over the years it expects to bring down debt levels.
For domestic sales of chips and yarns outside of Gujarat State, the
Company has a disadvantage compared with central sales tax (CST)
exempted units in Silvassa and Daman. Once the exemptions expire
(latest by 2017) or once GST is implemented, this disadvantage is
expected to be removed or significantly reduced. The Company's emphasis
on value- added and differentiated products, exports and Gujarat-based
sales is expected to partly counter this shortcoming.
Finance and Investment:
Tight monetary policy throughout the year kept bank base rates high
which resulted in increased and high interest rates for the Company.
Since interest rates are expected to remain high and owing to the
relatively high amount of leverage, it is the intent of the Company to
reduce debt in the years to come.
Over time the Company intends to unlock value from non- core assets
such as Art and Artifacts, land and other unproductive assets.
The Company follows a conservative policy in managing its foreign
exchange liabilities to minimise the risks associated with fluctuations
in exchange rates. This has limited the losses resulting from the large
fluctuations in the rupee during the year.
The Company has been taking advantage of interest subsidy under
Technology Upgradation Fund (TUF) provided by the central government.
The Company along with its lenders has worked out a realignment of
certain long term debts. As a result of this, repayments of these loans
will be extended by about 2 years.
Credit Rating:
During the year under review Credit Analysis & Research Ltd. (CARE), on
review of operational and financial performance of the Company, revised
the rating from CARE A (Single A Plus) to CARE BB (Double B) assigned
to the long-term facilities of your Company. Further, the Rating
Committee of CARE has revised the rating from 'CARE A1 ' (A One Plus)
to 'CARE A4' (A Four) assigned to the short- term facilities of your
Company.
Corporate Governance:
Your Company reaffirms its commitments to the good corporate governance
practices. Pursuant to clause 49 of the Listing Agreement with the
Stock Exchanges, Corporate Governance Report and Auditors' Certificate
regarding compliance of conditions of Corporate Governance are enclosed
and form an integral part of this report.
Directors:
Pursuant to the provisions of section 255 and 256 of the Companies Act,
1956 and in accordance with provisions of Articles of Association of
the Company, Shri Sanjay S. Shah, Shri Suhail P. Shah, Shri Alok P.
Shah and Shri Madanlal U. Lankapati, Directors of the Company, are
liable to retire by rotation and being eligible, offer themselves for
re-appointment at the ensuing Annual General Meeting. The Board
recommends their re-appointment. The Notice convening the Annual
General Meeting includes the proposals for re-appointment of Directors.
Details of the Directors seeking reappointment as required under Clause
49 (VI) of the Listing Agreements are provided in Notice forming part
of this Annual Report. None of the Directors are disqualified under
Section 274(1 )(g) of the Companies Act, 1956.
Smt. Shilpa P. Shah resigned as member of the Board w.e.f. 1st May,
2012. She held the position of Whole-time Director since inception of
the Company in the year 1979.
During this period, she made several significant contributions to the
Company's growth and business strategies, more particularly in
marketing and advertising of Company's finished fabrics segment. She
has played a pivotal role in making Garden and Vareli household names
across the breadth of our country. The advertising campaigns she has
conceived and executed have captured the imagination of men and women
alike over a generation. The Company has immensely benefited from her
contribution and guidance. The Board places on record their deep sense
of appreciation for the distinguished services rendered by Smt. Shilpa
Shah during her tenure as a Director of the Company.
In recognition of her experience and contributions, the management of
the Company appointed Smt. Shilpa Shah as a senior member of the
Company's management team, designated as Director-Advertising w.e.f.
1st May, 2012. The resolution seeking members' approval in terms of
Section 314(1)(B) of the Companies Act, 1956, forms part of the Notice
of Annual General Meeting. The remuneration committee and the Board of
Directors have recommended the said appointment.
Directors' Responsibility Statement:
To the best of their knowledge and belief and according to the
information and explanations obtained by them, your Directors make the
following statements in terms of Section 217 (2AA) of the Companies
Act, 1956:
(i) that in the preparation of the Annual Accounts for the year ended
31st March, 2012, the applicable accounting standards, read with
requirements set out under Schedule VI to the Companies Act, 1956 have
been followed and there are no material departures from the same;
(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 as at 31st March, 2012 and of the loss of the
Company for the year ended on that date;
(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; and
(iv) the annual accounts have been prepared on a going concern basis.
Auditors and Auditors' Report:
Natvarlal Vepari & Company, Chartered Accountants, Statutory Auditors
of the Company, hold office until the conclusion of the ensuing Annual
General Meeting and are eligible for re-appointment. The Company has
received a letter from them to the effect that their re-appointment, if
made, would be within the limits prescribed under Section 224(1 B) of
the Companies Act, 1956 and they are not disqualified for such
re-appointment within the meaning of section 226 of the said Act.
Based on the recommendations of the Audit Committee, the Board of
Directors of the Company proposes the re-appointment of Natvarlal
Vepari & Company, chartered accountants, as the Statutory Auditors of
the Company.
The comments on statement of accounts referred to in the report of the
auditors are self explanatory and therefore do not call for any further
comments.
Cost Audit:
Manubhai & Associates, Cost Accountants, were appointed with the
approval of the Central Government to carry out the cost audit relating
to products Polyester Chips and Yarns for the year 2011-12. They will
submit their report to the Board of Directors, before forwarding it to
the Ministry of Corporate Affairs, Government of India.
Based on the recommendation of the audit committee, Manubhai &
Associates, cost accountants, being eligible, have also been appointed
by the Board as the Cost Auditors for FY13. The Company has received a
letter from them to the effect that their re-appointment would be
within the Limits prescribed under section 224(1B) of the Companies
Act, 1956 and that they are not disqualified for such re-appointment
within the meaning of section 226 of the Act.
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 27th September, 2011.
Internal Control Systems and their adequacy:
The Company maintains adequate internal control systems, which
provides, among other things, reasonable assurance of recording the
transactions of its operations in all material respects and of
providing protection against significant misuse or loss of company
assets.
Internal Controls are adequately supported by Internal Audit and
periodic review by the management. The Audit Committee meets
periodically to review with the management, and statutory auditors,
financial statements. The audit committee also meets with the internal
auditors to review adequacy / scope of internal audit function,
significant findings and follow up thereon and findings of any abnormal
nature.
Your Company has successfully implemented an Oracle Applications ERP
system across the Company. This has ensured improved controls making
them process driven rather than individual driven. It will ensure the
highest data integrity with an audit trail. It enables integration of
all systems.
Human Resources and Industrial Relations:
Industrial relations at all the plants were cordial. Your Company
offers various incentives to motivate performance. The employees
attend technical seminars and workshops to enhance their expertise
levels. The Company's continuous focus on skill building provides equal
opportunities on lateral growth.
Health, Safety and Environment Measures:
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 surroundings.
Your Company is aware of its responsibilities as a good corporate
citizen in health, safety and environmental management. Your Company
contributes to community welfare activity and takes up initiatives and
measures related to education and health. The Company recognises
protection and management of environment as one of its highest
priorities and every effort is made to conserve and protect the
environment.
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 has put in place co-generation systems that keep
carbon emissions to the minimum.
Investor Education & Protection Fund:
Pursuant to the provisions of section 205A(5) and 205C of the Companies
Act, 1956 an amount of Rs. 11,47,921 which pertains to the dividend for
the year 2003-04, and remained unpaid or unclaimed for a period of 7
years from the date of declaration, has been transferred by the Company
to the Investor Education & Protection Fund.
Reward, Recognition & Quality Systems Certification:
Your Company continues to have the status of "Star Export House" by the
Office of Joint Director General of Foreign Trade, Ministry of Commerce
& Industry, Government of India on achieving the required Export
targets.
The Company's Vareli Plant enjoys the unique distinction of being the
first in polyester weaving industry to achieve ISO 9002:1994
certification by Bureau Veritas Quality International (BVQI).
The processes certified are Draw-Warping and Texturising, Twisting,
Sizing, Warping and Weaving. The scope of audit includes "Manufacture
of Woven Greige Fabrics and Processed Yarns"
The manufacturing of Texturised, Flat Polyester Filament, Polyester
Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are
also ISO 9001:2000 certified by BVQI.
Statutory Information:
Details required as per section 217(1)(e) of the Companies Act, 1956
read with Rule 2 of the Companies (Disclosure of Particulars in the
Report of the Board of Directors) Rules of 1988, are provided in the
annexure to this report.
Details required as per section 217(2A) of the Companies Act, 1956 read
with Rule 2 of the Companies (Particulars of Employees) Rules of 1975,
as amended and forming part of the Directors Report for the year ended
31st March, 2012 is given in a separate Annexure to this Report.
However, in line with the provisions of Section 219(1)(b)(iv) of the
said Act, post the exclusion of the information as required above, the
annual report is being sent to all the members of the Company and the
others entitled thereto.
Any member interested in obtaining these details may write to the
Company Secretary at the Registered Office of the Company. The
aforesaid Annexure is also available for inspection of Members at the
Registered Office of the Company, 21 days before the Annual General
Meeting and upto the date of the ensuing Annual General Meeting during
business hours on working days.
The Company has not accepted any deposits, within the meaning of
Section 58A of the Companies Act, 1956 read with the Companies
(Acceptance of Deposits) Rules, 1975 made thereunder.
Corporate Social Responsibility:
The Company as a responsible corporate citizen is contributing to
sustainable development by its economic activities combined with the
fulfillment of its social responsibilities for the communities it
operates in.
Your Company undertook various initiatives in the area of community and
stakeholder welfare, environment conservation education, health and
empowerment, across its operations.
Cautionary Statement:
Statement in this Directors' Report & Management Discussion and
Analysis describing the Company's objectives, projections, estimates,
expectations or predictions may be "forward looking statements" within
the meaning of applicable securities laws and regulations. Actual
result might differ materially from those expressed or implied.
Important factors that could make a difference to the Company's
operations include raw material availability and prices, cyclical
demand and pricing in the Company's principal market, changes in
Government regulations, tax regimes, economic developments within India
and the countries in which the Company conducts business and other
incidental factors.
The Company assumes no responsibility in respect of the forward-looking
statements herein, which may undergo changes in future on the basis of
subsequent developments, information or events.
Acknowledgement:
Your Directors take this opportunity to thank the Banks, Financial
Institutions, Central and State Government authorities, Regulatory
authorities, Customers, Suppliers, Shareholders and Investors at large
for their continued support to the Company and look forward to having
the same support in the years to come.
Your Directors also wish to place on record their deep and special
appreciation for the unstinting diligence and dedication of the
Company's employees.
For and on behalf of the Board
Praful A. Shah
Surat, 8th August, 2012 Chairman & Managing Director
Mar 31, 2011
Dear Shareholders,
The Directors have pleasure in presenting the 32nd Annual report on
the business and operations of your Company together with the Audited
Statements of Accounts for the year ended 31st March, 2011.
Financial Highlights:
The highlights of the financial performance for the year ended 31st
March, 2011 are as under.
(Rs. in crore)
2010-11 2009-10
Total Income 3,406.25 2521.46
Profit before interest, 286.49 238.82
depreciation and tax
Less: Interest & Finance 88.93 73.17
Charges (Net)
Depreciation 76.52 72.56
Profit before Tax 121.04 93.09
Less: Provision for Tax 33.17 29.88
Net Profit after Tax 87.87 63.21
Add: Balance brought forward 180.44 130.02
from Previous year
Balance Available for 268.31 193.23
Appropriation
Appropriations:
General Reserve 6.75 4.75
Proposed Dividend 6.89 6.89
Tax on Dividend 1.12 1.15
Balance carried to Balance Sheet 253.55 180.44
268.31 193.23
Operating Results:
The year 2010-11 was another year of rapid growth for the Company. Your
Company showed a significant improvement in business as compared to the
previous year despite high raw material and fuel prices. Your Company
recorded 35% growth in net revenue at Rs. 3,406.25 crore from Rs.
2,521.46 crore in the year-ago period, which enabled the Company to
maintain its track record of sustained year-on-year growth. The growth
in revenue was largely driven by higher sales volumes, aided by new
capacities of Polyester Chips of about 250 TPD which commenced
commercial production during the year, and increase in product prices.
All the Company's major product categories showed a healthy growth in
revenue. Chips sales for the year were Rs. 2018.38 crore (as compared
to Rs. 1,356.04 crore in the previous year). Yarn sales were also
higher at Rs. 1,417.17 crore (Rs. 1,132.55 crore). Finished fabric
sales were at Rs. 1,00.61 crore (Rs. 79.01 crore) and grey fabric sales
were Rs. 87.94 crore (Rs. 72.14 crore).
All the product categories showed an increase in profit as well. EBIDTA
for the Company was Rs. 286.49 crore for the year, higher by about 20%
as compared to the Rs. 238.82 crore in the previous year despite stiff
competition and much higher input costs across the board. Operating
margins did reduce during the year but this was essentially owing to
relatively higher low-margin chip sales. In fact operating profit
margins per-unit-production increased during the year for all product
categories.
Post tax profit for the year grew 39% to Rs. 87.87 crore.
The volatility in raw material prices continued throughout the year.
During the year 2010-11 MEG prices per MT US$ fluctuated between
$708.40 in July, 2010 to $1,246.83 in February, 2011. The PTA prices
were low at $ 847.38 in June 2010 and high at $1,514.00 in March, 2011.
Effectively the average international price increase resulting in
higher raw material costs for MEG and PTA was about 25% and 22%
respectively. In rupee terms the average price of raw materials during
the year increased by 17% compared with the previous year. Notably, in
the second half of the year the Company's raw material prices increased
by an unprecedented 61%. The speed and magnitude of the rise resulted
in slowdown in demand but the company was able to pass on price
increases to a large extent.
Tightness in supply due to planned and unplanned plant maintenance shut
downs of major raw material suppliers resulted in shortage of PTA and
MEG as well as increase in prices. This affected Company's operations
for a part of the year.
In the dyed and printed fabric products category, during the last year,
the Company emphasised upon fabrics manufactured from natural fibres
like cotton, bamberg and viscose. The Company tied up with various
branded retail Malls for retail sales of its products. In the wholesale
segment, efforts were made to increase sales to institutional buyers
and corporations for their uniform requirements.
Exports
During the year under review, your Company achieved export sales of FOB
value Rs. 315.24 crore as against Rs. 158.62 crore for the previous
financial year.
Dividend:
The Directors recommend for consideration of the Shareholders at the
ensuing Annual General Meeting, payment of dividend of Rs. 1.80 per
share of Rs. 10/- each (18%) for the year ended 31st March, 2011. The
amount of dividend and the tax thereon aggregates to Rs. 8.01 crore.
(Previous year Rs. 8.04 crore).
Expansion Program:
The Company enhanced its Continuous Polymerization (CP) capacity by 250
TPD on successful commissioning of CP Plants 4-5 during April-June,
2010. The Company has also increased its yarn processing capacity, by
installing additional Draw Warping and Air Texturising machines. This
will help us consume our captive POY production to supply value-added
yarns to the markets.
The trial run in connection with the 18 MW thermal power project has
been completed. The company is also on track to complete its next
thermal power plant of 21MW before March 2012. Theses expansions will
reduce the cost of energy for the Company.
The Company is also in the process of increasing its POY/ FDY
capacities. The trial production is in progress and the commercial
operations from this expansion are expected to commence during
August-October 2011.
Your Company's capacity augmentation of the PFY (polyester filament
yarn) business, where net realizations are relatively higher than
chips, would help shield the Company from any shrinkage in chips demand
due to the ongoing backward integration plans of major domestic chip
buyers.
The Company is undertaking further expansion of Draw Texturising and
Air texturising capacities which are expected to be financed under the
TUF ( Technology Upgradation Fund) scheme recently re-introduced by the
central government.
The Company has been continuously focusing on technology and process
upgradation to produce new value-added specialty products. The most
recent expansion of polymerization capacity and the ongoing expansion
of PFY spinning capacity will further strengthen our capability to
bring innovative products to market.
Corporate governance:
Your Company continued to follow the principles of good Corporate
Governance. The Company has already constituted several committees of
directors to assist the Board in good corporate governance.
A separate section titled 'Corporate Governance' has been included in
this annual report. A certificate from the statutory auditors of the
Company regarding compliance with corporate governance norms stipulated
in the aforesaid clause is annexed to the report on Corporate
Governance.
All board members and senior management personnel have affirmed
compliance with the code of conduct for the year 2010-11. A declaration
to this effect signed by the Managing Director of the Company is
contained in this annual report.
The Chairman & Managing Director and Joint Managing Director have
certified to the board with regard to the financial statements and
other matters as required in Clause 49 of the listing agreement and the
said certificate is contained in this annual report.
Directors:
In accordance with the provisions of the Companies Act, 1956 and the
Company's Articles of Association, Mr. Arunchandra N. Jariwala, Mr. J.
P. Shah and Mr. Sunil S. Sheth, Directors of the Company retire by
rotation and being eligible, offer themselves for re-appointment at the
forthcoming Annual General Meeting. The Board recommends their
re-appointment. The Notice convening the Annual General Meeting
includes the proposals for re-appointment of Directors.
Details of the Directors seeking appointment/re-appointment as required
under Clause 49 (VI) of the Listing Agreements are provided in Notice
forming part of this Annual Report. None of the Directors of the
Company is disqualified for being appointed as Director as specified in
Section 274(1)(g) of the Companies Act, 1956.
Directors' responsibility statement:
Pursuant to the requirement of sub-section (2AA) of Section 217 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, 2011, the applicable accounting standards read with requirements
set out under Schedule VI to the Companies Act, 1956 have been followed
and there are no material departures from the same;
ii. the Directors have selected such accounting policies and applied
them consistently and made judgements 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, 2011 and of the profits of the Company
for the year ended on that date;
iii. 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; and
iv. The Directors have prepared the annual accounts of the Company on a
'going-concern' basis.
Auditors:
The statutory auditors of the Company, M/s. Natvarlal Vepari & Co.,
Chartered Accountants, hold office until the conclusion of the ensuing
Annual General Meeting and are eligible for re-appointment. The Company
has received a written certificate from them to the effect that their
re-appointment, if made, would be within the prescribed limits under
Section 224(1B) of the Companies Act, 1956 and that they are not
disqualified for re-appointment within the meaning of Section 226 of
the said Act.
The Audit Committee at their meeting held on 27th July, 2011 has
recommended the reappointment of M/s. Natvarlal Vepari & Co., Chartered
Accountants, Surat as Statutory Auditors of the Company for the year
2011-12.
Auditors' report:
The observations made in the Auditorsà Report, read together with the
relevant notes thereon are self-explanatory and hence, do not call for
any further explanations or comments under Section 217 of the Companies
Act, 1956.
Cost Audit:
The Cost Accounts records maintained by your Company for the product Ã
Polyester are subject to yearly audit by qualified Cost Auditor. Your
Company has appointed Mr. V. Srinivasan, Cost Auditors for conducting
the audit of such records for the financial year 2010-11.
Internal Control Systems:
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. They also have ensured compliance of
stipulated policies, procedures and statutes, ensuring accuracy of
accounting records and corporate governance.
Regular internal audits 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.
Human Resources and Industrial Relations:
The Company continuously work to nurture this environment to keep its
employees highly motivated, result-oriented and adaptable to changing
business environment. The Company organised activities for staff and
officers for exposure to latest trends in technology etc.
Your Company's value proposition is based on providing value to our
customers, through innovation and by consistently improving efficiency.
With a view to create the resource bandwidth for the future, your
Company initiated various measures such as investing in new skills,
technologies, business models and training programmes for key
technology areas.
For us, growth in the Company extends beyond just numbers and includes
personal growth for each individual of the Company, growth for our
customers and growth of our relationships and partnerships.
Health, Safety and Environment Measures:
Your Company continued its focus in creating an aesthetic,
environment-friendly industrial habitat in its factory units,
mobilizing support and generating interest among staffand labour for
maintaining hygienic and green surroundings.
The Company has organised various programmes on health issues such as
free medical Check-up for staff. The plant also organised programmes on
safety related topics with the help of outside trainers and counsellors
in this field.
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 has put in place co-generation systems that keep
carbon emissions to the minimum.
Your Company has ensured eco-friendly disposal of various hazardous
waste at the designated disposal site recognised by Pollution Control
Board. In addition, the Company has complied with the environmental
norms.
Efficient cogeneration plants have been designed to use as much of the
fuel's heat value for energy purposes, thus keeping emissions to a
minimum.
Investor Education and Protection Fund:
Pursuant to Section 205C of the Companies Act, 1956 the Company has
transferred an amount of Rs. 17,58,606/- being the amount of dividend
pertaining to financial year 2002-03 which remained unclaimed and
unpaid for a period of seven years, to the Investor Education and
Protection Fund.
Reward, Recognition and Quality Systems Certification:
Your Company continues to have the status of "Star Export House" by the
Office of Joint Director General of Foreign Trade, Ministry of Commerce
& Industry, Government of India on achieving the required Export
targets.
The Company's Vareli Plant enjoys the unique distinction of being the
first in polyester weaving industry to achieve ISO 9002:1994
certification by Bureau Veritas Quality International (BVQI). The
processes certified are Draw Warping and Texturising, Twisting, Sizing,
Warping and Weaving. The scope of audit includes "Manufacture of Woven
Greige Fabrics and Processed Yarns".
The manufacturing of Texturised, Flat Polyester Filament, Polyester
Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are
also ISO 9001:2000 certified by BVQI.
Fixed Deposits:
Your Company has neither accepted nor invited any deposit from public,
within the meaning of Section 58A of the Companies Act, 1956 and Rules
made thereunder.
Statutory disclosures:
As required under the provisions of sub-section (2A) of Section 217 of
the Companies Act, 1956 read with the Companies (Particulars of
Employees) Rules, 1975 as amended, particulars of the employees are set
out in an Annexure to the Directorsà Report. However as permitted under
Section 219(1)(b)(iv) of the said Act, the Annual Report excluding the
aforesaid information is being sent to all members of the Company.
Any member, who is interested in obtaining such particulars about
employees may write to the Company Secretary at Registered Office of
the Company.
The particulars as prescribed under Section 217(1)(e) of the Companies
Act, 1956 read with Companies (Disclosures of the Particulars in Report
of the Board of Directors) Rules, 1988 relating to conservation of
energy and technology absorption are set out in Annexure-A forming part
of the Directors' Report.
A Cash Flow statement for the year 2010-11 is attached to the balance
sheet.
Depository System:
As the members are aware, the CompanyÃs shares are compulsorily
tradable in electronic form. As on 31st March, 2011, 94.78% of the
Company's total paid-up Capital representing 36290170 shares are in
dematerialized form. In view of the numerous advantages offered by the
Depository system, members holding shares in physical mode are advised
to avail of the facility of dematerialization on either of the
Depositories.
Corporate Social Responsibility:
The Company is contributing to sustainable development by its economic
activities combined with the fulfillment of its social responsibilities
relating to the education, health, safety and environment aspects.
Corporate Social Responsibility encompasses within itself
sustainability which means creating an awareness of climate change and
social imbalance and demanded suitable action. The Company was
promptly responsive to the call. Be it in infrastructure building or
social initiatives, conservation, conscience and commitment became
CompanyÃs watchwords.
Cautionary Statement:
Statement in this Directors' Report & Management Discussion and
Analysis describing the Company's objectives, projections, estimates,
expectations or predictions may be "forward looking" within the meaning
of applicable securities laws and regulations. Actual result might
differ materially from those expressed or implied.
Important factors that could make a difference to the Company's
operations include raw material availability and prices, cyclical
demand and pricing in the CompanyÃs principal market, changes in
Government regulations, tax regimes, economic developments within India
and the countries in which the Company conducts business and other
incidental factors.
The Company assumes no responsibility in respect of the forward-looking
statements herein, which may undergo changes in future on the basis of
subsequent developments information or events.
Acknowledgement:
Your Directors take this opportunity to thank the Banks, Financial
Institutions, Central and State Government authorities, Regulatory
authorities, Customers, Suppliers, shareholders and investors at large
for their continued support to the Company and look forward to having
the same support in the years to come.
Your Directors takes this opportunity to express their sincere
appreciation for the contribution made by employees at all levels. The
consistent growth was made possible by their hard work, cooperation and
support.
For and on behalf of the Board
Praful A. Shah
Chairman & Managing Director
Surat, 27th July, 2011
Mar 31, 2010
The Directors are pleased to present their 31st report on the business
and operations of your Company together with the Audited Statements of
Accounts for the year ended 31st March, 2010.
Summarised Financial Results:
(Rs. in crore)
12 months 9 months
ended ended
31 st March, 31st March,
2010 2009
Operating Income 2514.89 1331.61
Other Income 6.41 7.06
Profit before interest, 238.82 161.81
depreciation and tax
Less: Interests Finance 73.17 46.98
Charges (Net)
Depreciation 72.56 44.84
Profit before Tax 93.09 69.99
Less: Provision for Tax 29.88 20.41
Profit after Tax 63.21 49.58
Add: Balance b/f from 130.02 78.51
Previous year
Transfer from Debenture 0.00 11.25
Redemption Reserve
Balance Available for 193.23 13934
Appropriation
Appropriations:
General Reserve 4.75 2.60
Proposed Dividend 6.89 5.74
Tax on Dividend 1.15 0.98
Balance carried to Balance Sheet 180.44 130.02
193.23 139.34
Previous years figures have been regrouped wherever necessary to
compare with current years presentation.
Financial Year:
The financial year of the Company was changed from 30th June to 31st
March in the previous year 2008-09 therefore the figures for the
current year ended 31st March, 2010 are not strictly comparable with
the corresponding previous year as the previous year period pertains to
9 months.
Transfer to General Reserve:
Out of the total profit of Rs.63.21 crore for the financial year
2009-10, an amount of Rs.4.75 crore is proposed to be transferred to
the General Reserve.
Dividend:
Your Directors are pleased to recommend a dividend of Rs.1.80 per
equity share of Rs.10 each on 3,82,90,560 shares
for the year ended 31st March, 2010 for your consideration. The
Dividend, if approved at the ensuing Annual General Meeting, will be
paid to those shareholders whose names appear on the register of
members of the Company as on the Book Closure date.
Review of operations:
Gross sales for the year ended 31st March, 2010 increased to
Rs.2,662.33 crore as compared to Rs.1,863.64 crore in the corresponding
12 months period of 2008-09, registering a growth of about 43%.
Polyester chip sales increased substantially during the year from
Rs.784.45 crore to Rs.1,356.04 crore whereas yam sales were higher at
Rs.1,132.55 crore as compared to Rs.911.84 crore in the corresponding
12 months of the previous year. The FOB value of goods exported by the
Company during the 12 months period ended 31.03.2010 increased to
Rs.158.62 crore as compared to Rs.40 crore in the corresponding period
of 2008-09.
The Earnings before Interest, Depreciation &Tax (EBIDTA) rose by 18.77%
to Rs.238.82 crore compared to Rs.201.09 crore in the previous year.
The Profit before Tax also grew by 18.55% to Rs.93.09 crore in the
financial year 2009-10.
The Company achieved higher production of chips/polymer melt at 358758
MT during the financial year 2009-10 as compared to 231758 MT in the
corresponding period of 2008-09. The increase in chip/polymer
production was the main reason for the increase in profits for the
year.The increase in output more than offset the reduction in chip
margins which followed increased competition from new entrants.
With the enhancement in POY/FDY manufacturing capacity, the yarn
production during the year, was higher at 127520 MT compared to 94703
MT in the 12 months period of 2008-09. The higher yarn production was
the second most important reason for profit increase. During the year
the Company increased its emphasis on specialty yarns and broadened the
geographical distribution of its products.
Fabric production increased from 318.41 lac meters to 352.10 lac meters
in the year under review. The Company increased its presence in the
kidswear segment by introducing many new georgette and chiffon
varieties for this segment. The Company also increased its sales of
embroidered sarees and dress materials and institutional sales.
In the last year fabric development has been geared towards jaquard and
dobbies. In line with the market your Company has made a shift from
traditional dress materials and sarees to shirtings, fabric for
garmenters and interlining fabric.
The Government of India partially rolled back the stimulus package, by
raising the excise duty on polyester from 4% to 8% in July 2009 and
increased it by another 2% on polyester
and feedstock alike in the Union Budget 2010-11, thus bringing them at
a uniform rate of 10%. The higher excise duty will enable the Company
to substantially reduce its accumulated cenvat balance and hence
improve financial liquidity.
Your Company has closed down its activity of the finance division
during the year and therefore the present business activity falls
within a single primary business segment viz. Textiles.
Expansion Program:
To expand its product portfolio and to maintain its leadership in
domestic market, your Company has over a period successfully enhanced
its chips and yarn manufacturing capacity with an emphasis on specialty
products.
In January 2009 after the successful expansion of Continuous
Polymerization (CP) capacity to 416,000 TPA the Company successfully
added POY and FDY capacity of 47,250 TPA in April 2009. The fruits of
this expansion are visible in the results of the year under review.
Moreover, the Company has successfully commissioned a project involving
further enhancement of polyester chips capacity by 300 tonnes per day
(TPD) at its plant at Village Jolwa, Taluka Palsana, Dist. Surat which
commenced commercial production during April, 2010. The chips to be
produced will be specialty chips that will cater to the needs of not
just the textile industry but also the fast growing film and packaging
industry.
During the year, your Company undertook expansion involving increase in
POY capacity by about 144 TPD and FDY capacity of about 112 TPD at
Jolwa. These projects are expected to be commissioned in a phased
manner during January-June, 2011. These new plants will markedly
increase production of specialty products. To cater to the growing
needs of the sized-yarn sector the Company has initiated a draw-warping
expansion project which will further enhance draw-warping capacity by
35 TPD.This project is expected to be on-stream by October, 2010.
To meet the captive power requirement for these projects, the Company
is also putting up a coal based thermal power project of 18 MW at Jolwa
which is expected to commence power generation before March, 2011.
Our expansion projects over the year are aligned with our objective of
maintaining above-industry-average growth and will consolidate our
position as a global leader in specialized polyester products. These
initiatives will improve our economies of scale, our technological
capabilities and strengthen our position in a very competitive market.
Review of the Economic Scenario:
The global economy continues to recover amidst ongoing policy support
and the improving financial conditions of consumers and businesses
alike. The recovery has been almost as synchronized and unanticipated
as was the downward phase of the Great Recession.
The recovery process is led by emerging market economies, especially
those in Asia. Advanced economies are expected to grow as well though
at a much slower rate. According to IMF, the world economy expanded at
an annual rate of over 5 per cent during the first quarter of 2010,
primarily driven by the growth in Asian economies. World growth is
projected at about 4.5% in 2010 and 4.25% in 2011. GDP forecasts for
Asia have been revised upward for 2010, from about 7% to 7.5%.
The global economy however continues to face several challenges. The
likely exit from expansionary monetary and fiscal policies in 2011 may
be the biggest risk facing the global recovery. Developed nations are
facing high levels of unemployment (around 10% in the US and the Euro
area), poor credit growth and lethargic financial markets. Despite
signs of renewed activity in manufacturing and signs of improvement in
retail sales, the prospects of economic recovery particularly in Europe
are clouded by acute fiscal strains and default-risks in some
countries.
Indias recovery after the slow-down is well under way. Growth is
projected to recover to 8-9% in the next two years. Rising interest
rates, rupee appreciation, high inflation, volatility in capital flows
and continued low growth in high income nations could somewhat slow the
recovery but are unlikely to derail it.Consumerand business confidence
is very strong and are reasonably balanced across the country. The
confidence is supported by fast growing disposable income and corporate
earnings. Manufacturing is expected to be a major driver of growth over
the next few years. Exports have been expanding since October, 2009, a
trend that is expected to continue.
On the back of 15.1% growth by the manufacturing sector, the Indian
economy expanded by 9.0% in the first three months of 2010. In the
current fiscal the government projects the economy will grow by 8.5%
(vs 7.4% in 2009-10).
Inflation in food products, measured by the Wholesale Price Index
(WPI), rose to 16.8% in 2009-10 from10% in 2008-09. With the wholesale
price-based inflation still above 9.5%, the RBI may further tighten
money supply, which will result in higher interest rates. With the
unclear prospects for the monsoon, high inflation and the policy
responses it may bring, are possibly the biggest hurdles to the
economic growth.
Chinas announcement of a flexible policy for its currency may result
in some appreciation against the dollar but may not have much impact on
India. Its rapidly increasing wage rate on the other hand is having a
positive impact on many Indian manufacturers including PFY
manufacturers by improving their relative cost competitiveness.
Industry Review:
Globally synthetic fibres, led by polyester (polyester staple fibre and
polyesterfilamentyarn) have been growing rapidly owing to a growing
demand for fiber and the continuing replacement of natural fibres in a
world short of agricultural acreage.
The proportion of synthetics in total fibre consumption worldwide has
risen from 47% to 57% in the last 15 years while cotton has reduced
from 42% to 36%. Moreover the percentage of polyester in global
synthetics market has gone up from 58% to 79% in this period (source
Oerlikon: Fibre Year 2010). In India polyester has been steadily
replacing natural fibres as well. However since past government
policies have led to a much higher ratio of natural (especially cotton)
fibres to synthetics the potential for polyester growth is
correspondingly higher. India has overtaken Taiwan and Korea to become
the largest producer of polyester yarn (including PFY) outside of
China.
The demand for polyester filament yarn in India grew by around 14% in
2009-10, faster than all other major yarn categories. Exports of PFY
based textile products have also shown good growth unlike exports of
other textile products.
As per CRISIL estimates, the domestic textile market (ready-made
garments and home textiles) is expected to grow at a CAGR of 6-7%
between FY 2008-09 and FY 2013-14. International experts have estimated
a much higher growth rate. Rising income levels and increased growth in
rural spending on textile products will translate into growth in
domestic demand for fabric. Moreover Indias improved competitive
position vis-a-vis China should help in good growth of chips and yarn
exports.
In the year 2009-10 the growth in the Indian PFY industry was positive,
despite a severe shortage of PTA raw material owing to delayed start-up
of a large new Indian PTA plant. It is expected that the recent
start-up of this plant will result in healthy growth of the industry in
the remaining months of the year. The recent successful start-up of the
IOC MEG plant will also significantly reduce the import dependency of
MEG in India.
In the years ahead relatively easier availability of raw materials,
growing local and international demand and improved cost
competitiveness of Indian manufacturers vis-a-vis their global
competitors should permit strong growth in the PFY industry.
The general weaving/fabric processing segment of the PFY industry
suffered production losses due to labour shortage. The market seems to
be consolidating from its super fragmented nature. Very small weavers
who traditionally were job workers are shutting shop, and medium large
scale weavers are augmenting capacity particularly in automatic looms.
Opportunities, Strengths and Outlook:
When oil prices were at $147 and costs of polyester raw materials were
at a peak, and when the economy was in the grip of a severe slowdown,
your Company has shown robust profitability reestablishing its
credentials as a relatively low- risk company. During the financial
crisis Indian consumers skewed their spending toward value-products
like PFY textiles.
The growth of the rural market has played a major role in the resilient
growth of PFY in good times and bad. It is expected that rural markets
will play an increasingly important role in the economy which offers a
major opportunity for growth in the polyester industry. The price of
cotton has gone up considerably putting it out of reach of many
consumers thus improving the competitive positioning of PFY.
Per capita consumption of polyester in India is exceedingly low by
world standards so there is great scope for local demand growth.
Moreover we believe India will play an increasingly important role as
an exporter of high quality polyester filament chips and yarn. Your
Company is well positioned to take advantage of both local and global
demand growth.
Your Company occupies a leadership position in the manufacturer of
Polyester Filament Yarn (PFY)-based textiles in India. It has the
distinction of being the largest manufacturer of PFY-based fabrics in
the country. It is also the leading manufacturer of fully drawn flat
filament yarn and textile-grade chips. The Company is also a
significant producer of differentiated Partially Oriented Yarn (POY),
draw- warped yarn, draw-twisted yarn, draw-textured yarn, sized yarn
and twisted yarn. Your Company is the second largest specialty yarn
maker and the largest specialty chip maker in India.
Your Company is considered to be a market leader in quality and enjoys
a solid reputation with its customers who give it a price-premium
across its product range. Its market position gives it the ability to
grow fast and profitably. Its specialty range allows it to
differentiate itself in the market and will enable it to successfully
withstand competitive pressures in times to come. The specialty market
is growing and so is the need for quality, providing a great
opportunity for your Companys growth.
Your Company is expected to increase its exports substantially this
financial year. While China is still the largest and most
cost-competitive country in PFY-based clothing, the scarcity of labour
and high rate of wage growth in China is making your Company relatively
more cost competitive in the international markets. Your Company is
becoming a sizeable exporter of chips and yarn and is sometimes
exporting to China, too.
Garden is an integrated player in the polyester chain whose products
stem from chips to POY to processed yarn, preparatory yarn, to
finished, dyed and printed fabric. This integration helps insulate it
from the vagaries of the market and gives it leading information on
which to base decisions across the chain.
The introduction of GST will be beneficial to your Companys
performance as it will create a level playing field vis-a-vis its some
of competitors who presently have central sales tax exemptions.
The general economic expansion is expected to contribute further to the
upbeat trend. Your Company plans to exploit this opportunity through a
disciplined policy of long-term investment thereby achieving higher
returns and enhancing shareholder value. The Company will especially
address opportunities to leverage domains of market leadership.
Risks and Concerns:
The next 1 -2 years are likely to see a large expansion in PFY, both
POY and FDY. This may result in a reduction in margins in the yarn
business. The margins in chips may not decline much, however, owing to
the expected increase in yarn production.The Companys growth in chip
and yarn sales will help offset the reduction in margins. The Companys
thrust on specialties, high quality and customer relationships will
help support margins.
The developed world faces the less likely but real risk of a double-dip
recession which will have a slowing effect on the Indian economy as
well. Yet this is unlikely to affect your Company adversely as it has
done well in probably far worse conditions.
To curb the high inflation in the country the RBI may increase interest
rates. This may have a negative effect on your Companys cost of
borrowing.
Your Company takes risk management very seriously. The risk management
practice inter alia provides for review of risk assessment and
mitigation procedures, with guidelines to regularly update the
management and the Board of risk status.
Duringthe year, the AuditCommittee, which has been designated by the
Board, reviewed the adequacy of the risk management framework of the
Company, the key risks associated with the businesses of the Company
and the measures and steps in place to mitigate the same. The details
were thereafter presented to and discussed at the Board Meeting.
Project execution is largely dependent upon timely delivery by the
equipment suppliers, project management skills, and adherence to
schedule by civil contractors. Any delay in project implementation will
impact revenue and profit for that period.
The volatility witnessed in the global markets has reiterated the need
for robust forex management systems and prudent investment practices.
Your Company has conservative forex management processes, which ensure
that forex exposures are hedged immediately upon the occurrence of an
exposure. Currently the Company uses only forward contracts to hedge
both its imports and exports and continues to maintain the philosophy
of protecting cash flows. The Company does not speculate in the forex
market.
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 customers sudden price reductions can
result in freezing up of sales and consequent inventory losses.
Finance and Investment:
The Company, during the year under review, has successfully mobilized
additional resources to fund its long-term and project-related
financial requirements. The capex program of the Company is being
funded by a combination of internal accruals and long-term borrowings
from banks. The Company has spent an aggregate amount of Rs.186.49
crore on ongoing projects until year-ended 31st March, 2010.
Your Company availed term loans of Rs. 195.53 crore during the year to
part-finance the capital expenditure program.The working capital
requirements are met through borrowings from a consortium of banks, and
placement of Commercial Papers and availing buyers credit from raw
material suppliers. The Company repaid long-term loans of Rs. 124.67
crore (including prepayment of Rs. 1.47 crore to a foreign bank) to the
banks and institutions towards its term loan obligations for the year
2009-10.
The Company continues to maintain adequate liquidity to meet
unanticipated expenditures and accordingly invests surplus funds
available in rated debt mutual funds and fixed deposits of reputed
banks. As in the past, the Company enjoyed the confidence of its
bankers and has been able to avail various banking facilities at
favourable terms.
Interest cost has gone up during the year largely on account of
additional borrowings for the new projects which commenced during the
year. Your Company with better working capital management maintained
lower interest costs inspite of higher working capital utilization
during the year as compared to previous year.
Banks have switched over to the system of Base Rate from 1st July,
2010. It is expected that the Base Rate system will enhance
transparency in lending rates. The switchover to base rate system will
not have major impact on the Company.
Credit rating:
The Company continues to have the highest credit rating of "PR1+" (PR
One Plus) from Credit Analysis & Research Ltd. (CARE) to the Commercial
Paper (CP) / Mibor linked Short-Term unsecured NCD etc. of the Company,
aggregating to Rs.185 crore for a maturity up to six months. Strong
credit ratings by Credit Rating agencies reflect the Companys
financial discipline and performance.
Corporate Governance:
Your Company continues 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.
Directors:
In accordance with the provisions of the Companies Act, 1956 and the
Companys Articles of Association, Mrs. Shilpa P. Shah, Mr. Rajen P.
Shah, Mr. Alok P. Shah and Mr. Yatish Parekh retire from the Board by
rotation and are eligible for re-appointment at the forthcoming Annual
General Meeting. The Board recommends their re-appointment. The Notice
convening the Annual General Meeting includes the proposals for
re-appointment of Directors,
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 there has been no material departures;
ii. the selected accounting policies were applied consistently and the
Directors made judgements 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, 2010 and of the profits of the Company for
the year ended on that date;
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 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.
Auditors:
The statutory auditors of the Company, M/s. Natvarlal Vepari & Co.,
Chartered Accountants, hold office until the conclusion of the ensuing
Annual General Meeting. Certificate from the auditors has been received
to the effect that their re-appointment, if made, would be within the
limits prescribed under Section 224(1 B) of the Companies Act, 1956.
The Audit Committee and the Board of Directors therefore recommend
their re-appointment as statutory auditors of the Company for 2010-11
for the approval of shareholders.
Auditors Report:
Notes to the accounts, as referred in the auditors report, are self
explanatory and a practice consistently followed, and therefore do not
call for any further comments and explanations.
Cost Audit:
As per the requirement of the Central Government and pursuant to
Section 233B of the Companies Act, 1956, your Company carries out an
audit of cost accounts relating to the product Polyester every year.
Subject to the approval of Central Government, the Company has
appointed Mr. V. Srinivasan, cost accountants, as auditors to audit the
cost accounts of the Company for the Financial Year 2010-11.
Internal Control Systems:
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 Companys financial and
non-financial resources. They also have ensured compliance of
stipulated policies, procedures and statutes, ensuring accuracy of
accounting records and corporate governance.
Regular internal audits 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.
Human Resources and Industrial Relations:
Good human resource management plays a key role in company performance.
The employee relations during the year have remained cordial and
satisfactory. Attracting and retaining dedicated and skilled human
resource, offering them a conducive work environment and excellent
career development opportunities are currently prime HR priorities.
Health, Safety and Environment Measures:
Your Company is aware of its responsibilities as a good corporate
citizen, in health, safety and environmental management. Your Company
contributes to community welfare activity and takes up initiatives and
measures related to education and health. The Company recognises
protection and management of environment as one of its highest
priorities and every effort is made to conserve and protect the
environment.
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 has put in place co-generation systems that keep
carbon emissions to the minimum.
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 surroundings.
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.
Investor Education & Protection Fund:
During the year, the Company has transferred a sum of Rs.l 2,63,825 to
Investor Education & Protection Fund, the amount of Dividend pertaining
to financial year 2001-02 which remained unclaimed and unpaid for a
period of seven years, as provided in Section 205C(2) of the Companies
Act, 1956.
Reward, Recognition & Quality Systems Certification:
Your Company continues to have the status of "Star Export House" by the
Office of Joint Director General of Foreign Trade, Ministry of Commerce
& Industry, Government of India on achieving the required Export
targets.
The Companys Vareli Plant enjoys the unique distinction of being the
first in polyester weaving industry to achieve ISO 9002:1994
certification by Bureau Veritas Quality International (BVQI). The
processes certified are Draw Warping and Texturising,Twisting, Sizing,
Warping and Weaving.The scope of audit includes "Manufacture of Woven
Greige Fabrics and Processed Yarns".
The manufacturing of Texturised, Flat Polyester Filament, Polyester
Partially Oriented Yarn (POY) and Fully Drawn Yarn (FDY) at Jolva are
also ISO 9001:2000 certified by BVQI.
Fixed Deposits:
Your Company has not accepted or renewed any fixed deposits under
Section 58A of the Companies Act, 1956 and as such no amount of
principal or interest was outstanding as on 31st March, 2010.
Disclosure of Particulars:
Information as per the Companies (Disclosure of Particulars in the
Report of Board of Directors) Rules, 1988, relating to Conservation of
Energy, Technology, Absorption, Foreign Exchange Earnings and Outgo is
provided in Annexure A forming part of this Report.
Personnel:
The information required under Section 217(2A) of the Companies Act,
1956 and the Rules made thereunder, is provided in an Annexure forming
part of this Report. In terms of Section 219(1)(b)(iv) of the Act, the
Report and Accounts are being sent to the shareholders excluding the
aforesaid Annexure. Any shareholder interested in obtaining copy of the
same may write to the Company Secretary.
Depository System:
The Companys shares are compulsorily tradable in electronic form. As
on 31st March, 2010, 94.49% of the Companys total paid-up capital
representing 36,17,9323 shares are in dematerialised form. In view of
the numerous advantages offered by the depository system, members
holding shares in physical mode are advised to avail of the facility of
dematerialisation on either of the depositories.
Cautionary Statement:
Statement in this Directors Report & Management Discussion and
Analysis describing the Companys objectives, projections, estimates,
expectations or predictions 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 make a difference to the Companys
operations include raw material availability and prices, cyclical
demand and pricing in the Companys principal market, changes in
Government regulations, tax regimes, economic developments within India
and the countries in which the Company conducts business and other
incidental factors.
The Company assumes no responsibility in respect of the forward-looking
statements herein, which may undergo changes in future on the basis of
subsequent developments information or events.
Acknowledgement:
Your Directors take this opportunity to thank the Banks, Financial
Institutions, Central and State Government authorities, Regulatory
authorities, Customers, Suppliers, shareholders and investors at large
for their continued support to the Company and look forward to having
the same support in the years to come.
Your Directors would like to express their appreciation to all
employees for their outstanding contribution to the operations of the
Company during the year.
For and on behalf of the Board
PrafulA.Shah
Chairman & Managing Director
Surat, 7th July, 2010
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