DIRECTORS' REPORT Dear Members, Your Directors are pleased to present the Sixty Eighth (68th) Annual Report together with the Audited Financial Statement for the year ended March 31st 2015. The Management discussion and analysis is also included in this report. 1. CORPORATE OVERVIEW The Rai Saheb Rekhchand Mohota Spg. & Wvg. Mills Ltd. ("Your Company") is a leading and oldest textile composite mill in Vidarbha Region of Maharashtra State. The Company has its corporate Head Quarter at Hinganghat, Dist - Wardha of Maharashtra State. 2. OVERVIEW OF THE ECONOMY As per the latest GDP growth estimates, Indian economy grew by 7.4% in FY 2014-15 as compared to 6.9% in FY 2013-14, mostly driven by improved economic fundamentals and revision of GDP calculation methodology. Even inflation showed signs of moderation, a welcome sign - wholesale price and consumer price inflation declined to 4.2% and 7.4% respectively, compared with last year's 6.3% and 10.1%. Reduced inflation, falling crude oil prices, stable Rupee. Improved purchasing power and consumer spending, higher capital inflows supported by the government policy reforms have already put India on an accelerating growth track and improved the business outlook. The Government envisages GDP growth to accelerate to 8% in FY 2015-16 driven by strengthening macroeconomic fundamentals and implementation of policy reforms recently announced. Reforms like e-auctions of coal mines and telecom, FDI hike in insurance, speedier regulatory approvals etc. will be critic al growth enablers to de-bottleneck stalled projects, improve the investment outlook and the ease of doing business in the country. Reforms currently underway such as GST implementation, Amendment on Land Acquisition Bill, Labour Reforms, etc. are expected to provide the requisite thrust for growth in the medium-term. 3. FINANCIAL PERFORMANCE Amid optimism and rising business sentiments, your Company reported a top-line growth of 12.76% over the Previous Year, the gross profit from operation stood at \ 1679.85 lacs compared with \ 1606.15 lacs in the previous year. The operating Profit before tax stood at \ 303.02 lacs as against Rs.161.71 lacs in the previous year. The Net Profit for the year stood at \ 214.92 lacs against 1143.98 lacs in the previous year. 4. DIVIDEND AND RESERVE Your Directors recommend a dividend of 1% i.e. ? 0.10 per equity shares of face value of t 10 each aggregating to ? 14.59 lacs (? 6.25 lacs previous year). During the year under review no amount was transferred to General Reserve. General Reserve is reducing to the extent of \ 278.77 lacs on account of Depreciation on transition to Schedule II of Companies Act 2013 on Tangible Fixed Assets. 5. SHARE CAPITAL The paid-up Equity Share Capital as at March 31st 2015 stood at \ 1458.94 lacs. During the year the Board of Directors has issued Bonus Shares from its permitted reserves/surplus @ 1:6 in its meeting held on 05/02/2015 and same has been approved by members in EGM dated 02/03/2015 and listed on BSE & NSE dated 30/03/2015. 6. ANALYSIS AND REVIEW Textile Industry Conditions The Textile Industry contributes around 6% to India's GDP. 11% to export earnings and is the second largest employer (-whopping 55 million people) after agriculture. The Industry has shown continued growth with a potential to increase its global trade share from the current 4.5% to 8% (USD 80 Billion) in the next 5 years supported by a rich abundance of raw material, skilled labour and talent. In FY 2014-15, the textile industry is estimated to have contributed USD 42 Billion (4%) to India's GDP, and 27% to the country's foreign exchange inflows. Opportunities and Challenges Being the second largest employer in India coupled with strong Industry linkages with the rural economy augurs well for the Indian textile industry as one of the most significant sectors with an incremental growth potential. Rural economy has seen a spurt in income levels the last few years and this is the right time to juxtapose their synergies to promote the industry's growth. Being one of the key focus sectors under the Government's "Make in India" campaign is a testimony to the huge growth potential the industry holds, both in terms of infrastructure development and skill improvement. Globally, favourable trade policy reforms would also allow the industry to expand its trade partners, improve its export competitiveness and contribute substantially to the nation's income. However, the growth prospects are constrained by many challenges including rising input costs (wages, power and interest costs), restrictive labour laws and intensified competition from other low cost countries like Bangladesh. Such issues need to be addressed to result in unlocking maximum industry growth potential. STRENGTHS OF THE TEXTILE INDUSTRY The following are a few strengths of the Indian Textile Industry: • An Independent and self-reliant industry; • Tremendous potential of growth in the domestic and international markets; • Abundant Raw Material availability that helps industry to control costs and reduces the lead-time across operations; • Availability of low cost and skilled manpower provides competitive advantage to industry; • Availability of large varieties of cotton fiber and has a fast growing synthetic fiber industry; • Promising export potential; WEAKNESSES OF THE TEXTILE INDUSTRY The following are a few weaknesses of the textile industry, which it has to overcome. • The Industry is a highly fragmented Industry. • It is highly dependent on Cotton. • There is lower productivity in various segments. • There is a tremendous growth in the unorganized sector. • Lack of technological developments that affect the productivity and other activities in whole value chain. • Infrastructural Bottlenecks and Efficiency such as transaction time at ports and transportation time. • Unfavorable labour Laws. • Lack of Trade Membership, which is a hindrance to tap other potential markets. Performance Highlights During FY 2014-15, Your Company's total sales registered a growth of 12.76% and Net profit being Rs. 214.92 lacs as against Rs. 143.98 lacs in FY 2013-14. The increase in sales was led by volume growth in domestic market. Raw Material Major raw material prices i.e. Polyester Staple Fibre & Viscose Staple Fibre were stable during the year largely because of steady international prices and a stable rupee. The Cotton prices were marginally higher than last year. The company is taking multiple cost saving initiatives for its raw materials. Retail Network Your Company has a large retail network throughout the country. It has more than 100 agents and more than 2500 retailers which helps the company to boost its total marketing strength throughout the country. 7. FINANCE AND ACCOUNTS During FY 2014-15 your company had issued and allotted bonus shares @ 1:6 to its existing share holders and Rs.1119.93 lacs were repaid for Term Loan during the year. 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, profits and cash flows for the year ended March 31st, 2015. There is no audit qualification in the financial statement by the statutory auditors for the year under review. 8. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on Corporate Governance practices followed by the Company, together with a certificate from the Company's Auditors confirming compliance, forms an integral part of the Report. 9. EXTRACT OF ANNUAL RETURNS The details forming part of the extract of the Annual Return in form MGT-9 as required under section 92 of the Company Act, 2013, are included in this Report as Annexure - A and forms an integral part of this Report. 10. DIRECTORS In accordance with the provisions of the Companies Act and the Company's Articles of Association, Dr. Ranchhoddas Mohota, Shri Girdharlal G. Singhee & Shri Suresh Rathi Directors of the company, retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. Ms. Aditi Bagri joined our company as Woman Director w.e.f. 29.08.2014. Shri Pavan Poddar Director of our Company has resigned on personal ground from Directorship w.e.f. 10.01.2015. Shri Krishnakant Tekriwal appointed as Director w.e.f. 13.04.2015. 11. KEY MANAGEMENT PERSONNEL During the year under review the company has appointed following persons as key managerial personnel. Sr. No. Name of the Person Designation i Shri Vinod Kumar Mohota Managing Director ii Shri Vinay Kumar Mohota Whole-time Director iii Shri Shantilal B. Singhvi Whole-time Director iv_Shri Mukesh B. Mahajan_Chief Financial Officer Note: Your Company has appointed a Whole - Time Company Secretary who will be joining by June 2015. 12. BOARD EVALUATION Pursuant to the provisions of the Company's Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration of the various aspects of the Board's functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance. The Company has received necessary declaration from each Independent Director of the Company under Section 149(7) of the Companies Act, 2013 and the clause 49 of the listing Agreement that the Independent Directors of the Company meet with the criteria of their Independence laid down in Section 149(6). The performance evaluation of the independent Directors was completed. The performance evaluation of the Chairman and the Non-independent Directors was carried out by the independent Directors. The Board of Directors expressed their satisfaction with the evaluation process. 13. NUMBER OF MEETINGS OF THE BOARD The details of the number of meetings of the Board held during the Financial Year 2014-2015 forms a part of the Corporate Governance Report. 14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY Details of Loans, Guarantees and investments covered under the provisions of Section 186 of the Companies Act 2013 are given in the notes under Financial Statements. 15. WHISTLE BLOWER POLICY The Company has a whistle blower policy to report genuine concerns or grievances. 16. REMUNERATION AND NOMINATION POLICY The Company has formulated the Nomination & Remuneration policy for its directors, key managerial personnel and other employees keeping in view the followings • the level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors of the quality required to run the company successfully; • relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and • remuneration to directors, key managerial personnel and senior management involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to the working of the company and its goals: This policy also lays down criteria for selection and appointment of Board Members. 17. VIGIL MECHANISM: Company established a vigil mechanism pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013 and as per Clause 49 of the Listing Agreement for their directors and employees to report their genuine concerns or grievances., which also incorporates a whistle blower policy in terms of the Listing Agreement, includes an Ethics & Compliance Task Force comprising senior executives of the Company. Protected disclosures can be made by a whistle blower through an e-mail, telephone or a letter to the member of Audit committee or to the Chairman of the Audit Committee. 18. RISK MANAGEMENT POLICY: Company has developed and implements Risk Management Policy including identification of elements of risk which in the opinion of the Board may threaten the existence of the company. Company also reviewed & evaluates the implementation process of risk management policy from time to time so that future risk can be minimized. 19. RELATED PARTY TRANSACTION All transactions entered with Related Parties for the year under review were on arm's length basis and in the ordinary course of business and that the provisions of Section 188 of the Companies Act, 2013 are not attracted. The disclosure in form AOC-2 is attached as Annexure B. The Company has developed a Related Party Transactions framework through Standard Operating Procedures for the purpose of identification and monitoring of such transactions. All Related Party Transactions are placed before the Audit Committee and also to the Board for approval. Omnibus approval was obtained on a quarterly basis for transactions which are of repetitive nature. Transactions entered into pursuant to omnibus approval are audited by the Risk Assurance Department and a statement giving details of all Related Party Transactions are placed before the Audit Committee and Board for review and approval on a quarterly basis. 20. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS There are no significant and material orders passed by the Regulators/Courts that would impact the going concern status of the Company and its future operations. 21. DIRECTORS' RESPONSIBILITY STATEMENT To the best of knowledge and belief and according to the information and explanations obtained by them. Your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013. (i) That in the preparation of the Annual Accounts for the year ended March 31st, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; (ii) 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 31st, 2015 and of the profit 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, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (iv) The annual accounts have been prepared on a going concern basis; (v) That the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) That the Directors had devised proper systems to ensure compliance with the Provisions of all applicable laws and that such systems were adequate and operating effectively. 22. AUDITOR'S REPORT AND STATUTORY AUDIT M/s. Batliboi & Purohit, Chartered Accountant (Firm Registration Number 101048W) who are statutory auditor of the company hold office up to the conclusion of the Seventieth (70th) AGM of the Company to be held in the year 2017 subject to ratification at AGM. Board recommends the appointment for ratification by members as required under the provision of section 139 of Companies Act, 2013 to audit the accounts of the company for the FY 2015-16. The Company has obtained written confirmation from M/s. Batliboi & Purohit, Chartered Accountants that there appointment, if made, would be in conformity with limit specified in the said section. The observations made in the Auditor's Report are dealt with separately in the Notes to the Statement of Profit and Loss and the Balance Sheet in Note No. 23 to 39 of the Accounts. 23. COST AUDITORS As per the requirement of Central Government and pursuant to Section 148(3) of the Companies Act, 2013 and Rules 6(2) read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your Company has been carrying out audit of cost records relating to Textile Company every year. The Board of Directors have Re-appointed M/s G. R. Paliwal & Company, Cost Accountants, (Registration Number 100058) Nagpur as the Cost Auditors of the Company pursuant to Section 148 of The Companies Act, 2013, for conducting the Cost Audit Records of the Company for the financial year 2015-2016, which has been approved by the Central Government. Cost Audit Report for the financial year ended 31st March, 2014 which was required to be filed with the Central Government on or before 30th September, 2014 has been filed electronically with the Central Government on 22nd September, 2014 in XBRL Format by SRN S31308505. 24. SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed Shri Dinesh Kumar Deora a firm of Company Secretaries in Practice (Mem. FCS No. 5683, C.O.P. No.4119) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure - C and forms an integral part of this Report. In regards to the qualification mentioned on secretarial Auditor Report, The Board would like to inform that the Company has appointed the Whole- Time Company Secretary and he will be joining by June, 2015 25. SAFETY AND POLLUTION CONTROL Your company accords priority to the health and safety of its employees and surroundings. It has been taking proper care in complying with all the statutory requirements relating to safety, environment and pollution control following are the measures taken by your company. 1. Tree plantation (1000 Plant) in land adjacent to Mills ETP Plant. 2. Green Energy through use of Husk & Briquettes in boiler under United Nation Environmental Programme (UNEP). 3. Extra bag filter installed in the boiler house to arrest even smallest emission material. 26. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure - D to this Report. 27. PERSONNEL The information required under Section 197(12) of the Companies Act, 2013 and with Companies (Appointment and Remuneration of Managerial Personnel) Rules. 2014 and forming part of the Directors' Report for the year ended March 31st, 2015. The Company at present dose not has any employee drawing salary in excess of the limit specified under section 197 of Companies Act, 2013. 28. SUBSIDIARIES The company does not have any subsidiary/subsidiaries within the meaning of Companies Act, 2013. 29. DEPOSIT The Company has not accepted any deposit and accordingly no amount was outstanding as on date of Balance sheet. 30. CORPORATE SOCIAL RESPONSIBILITY (CSR) According to the Companies Act, 2013, the company is not covered under the Companies (Corporate Social Responsibility) Rules 2013. 31. SEGMENTWISE PERFORMANCE: The company has only one business segment i.e. "Textiles". 32. INTERNAL CONTROL SYSTEM AND ADEQUACY: The company has a proper and adequate internal control system to ensure that its assets are safeguarded and protected against unauthorized use and disposition and all the transactions are properly recorded and reported. The company also has a system of management reviews to ensure compliance with the prescribed procedures and authority levels. 33. PARTICULARS OF EMPLOYEES Details Pertaining To Remuneration as Required Under Section 197(12) of the Companies Act, 2013 Read With Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014is Furnished In Annexure- E 34. MATERIAL DEVELOPMENTS IN HUMAN RESOURCES/INDUSTRIAL RELATIONS FRONT: Your company's most valuable resource is its employees. Your company continues to create a favorable environment at work place. The company also recognizes the importance of training and continuously deputes its work force in various courses/seminars relating to important management tools like 'Total Quality Management' (TQM). The management is specifically calling professionals from renowned textile research institutes like BTRA/SITRA to train its work force. The Company has taken the following initiatives for skill development for workers & Staff. 1 Training to maintenance staff by qualified engineers from Voltas Ltd., Murata Machinery, Saurer Schlafhorst and Toyota. 2. Shop floor Training to technical staff on "Air Engineering" (Humidification system) by B.T.R.A. a renowned textile research association. 3 Training to shop floor workers/operatives by trainer from U.T.T.S., Ahmedabad who guided them about discipline and work procedure while working on machines with proper safety for Toyota Airjet Looms. 4 Deputed staff members to attend International and National Textile Conference organized by Textile Association of India. 5. Water conservation in Process reduced by 33% by adopting technical upgradation and value engg. 6. Electrical power consumption reduced by 2.5% by adopting various technical controls. Following social activities held by the Company 1 Organized Blood donation Camp on Founder's Day of the Company i.e. on 29th March by donating 100+ bags of blood to Blood Bank. 2 During the year company organized seminar on "Stress-Management" by one of a reputed Social and charitable Trust from Nagpur for entire staff members of the Mills. 3 Manpower deployment for programmes undertaken in education development in collaboration with NGO "Creative Educators" of Nagpur. These programmes resulted in increase of passing percentage in 10th SSC Board Exams 2015 conducted in Nagpur region of Maharashtra from 4% to 24% in various schools as compared to 2014. 4 Flag-Day 2014 fund for Sainik Welfare through District Collector, Wardha 79,024/-). Industrial relations are cordial and satisfactory. 35. CAUTIONARY STATEMENT: Statement in the Management Discussion and Analysis describing the Company's projections and expectations may be "forward looking statements" within the meaning of applicable securities laws & regulation. Actual results might differ materially from those expressed or implied. Important factors that could make a difference to the company's operations include, among others, economic conditions affecting demand/supply and price conditions in the market in which the company operates, changes in the Government regulations, tax laws and other statutes and incidental factors. 36. ACKNOWLEDGEMENTS The Directors wish to place on record, their appreciation and gratitude for all the co-operation extended by Government Agencies, Bankers, Financial Institutions and Shareholders. The Directors also record their sense of appreciation for the sincere services rendered by all the Executives and Staff of the company and for their valuable contribution in the working of the company. By the order of the Board Dr. Ranchhoddas Mohota Chairman Place : Hinganghat Date: 30/05/2015 |