Garden Silk Mills Directors Report, Garden Silk Reports by Directors
Garden Silk Mills
BSE: 500155|NSE: GARDENSILK|ISIN: INE526A01016|SECTOR: Textiles - Weaving
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VOLUME 4,311
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Directors Report Year End : Mar '14    « Mar 13
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)
 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-
 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.
 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.
 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
 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
 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
 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.
 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
Source : Dion Global Solutions Limited
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