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.
(Rs. in crores)
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)
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
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-
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.
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.
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
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
(iv) the Directors have prepared the annual accounts of the Company on
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.
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.
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
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
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
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.
The properties and insurable assets and interests of your Company, like
building, plant and machinery and stocks, among others, are adeguately
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
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.
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