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Suditi Industries

BSE: 521113|ISIN: INE691D01012|SECTOR: Textiles - Hosiery & Knitwear
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Directors Report Year End : Mar '16    Mar 15

DIRECTORS’ REPORT:

Dear Shareholders,

The Directors have pleasure in presenting the Twenty Fifth Annual Report of the Company together with the Audited Balance Sheet as at 31st March, 2016 and the Profit and Loss Account for the year ended on that date.

Financial Results:

(Rs. in Lakhs)

Particulars

Current Year Ended 31.03.2016

Previous Year Ended 31.03.2015

Export Sales

10.15

29.99

Local Sales

8044.09

6960.00

Other Income

56.71

57.18

Gross income

8110.95

7047.17

Profit before Interest and Depreciation

736.05

565.24

Finance Cost

298.55

250.24

Profit after Finance Cost

437.50

315.00

Depreciation

173.90

194.27

Profit / (Loss) before Tax

263.60

120.73

Provision for Tax

222.43

23.05

Profit / (Loss) after Tax before extra ordinary items

41.17

97.68

Extra Ordinary Items (Net)

105.50

(3.56)

Net Profit

146.67

97.68

Add: Brought forward from the previous year

901.23

832.27

Transfer to General Reserve

-

-

Amount available for appropriation

1047.90

926.39

Proposed Dividend

29.35

20.97

Tax on Proposed Dividend

6.06

4.19

Balance carried to Balance Sheet

1012.49

901.23

Dividend:

In order to balance the growth and developmental activities of the company as well as to fulfill the aspirations of the public stakeholders, the promoters have in writing waived their entitlement on the profit distribution in the form of dividend if any declared by the company for the year 2015-16. Accordingly the Board after considering all these aspects has recommended a dividend for the year under review at the rate of Rs.0.70 per Equity Share only on the portion of the paid up equity capital held by the public as on 31st March 2016. No amount has been transferred to General reserve from the profits for the year 2015-16.

Operations:

The company has registered substantial improvement in the overall performance during the year under review in comparison to previous year. The company has achieved an increase of over 15% in the sales figures and a substantial increase of around 118% in the net profits before tax in comparison to previous year. During the year the Retail division has given a significant contribution towards the growth in the sales and overall profit of the company in comparison to the previous year. However the performance of the Retail division separately as a division needs to be improved further to bring the same on anticipated levels. Consequently the company had to absorb some amount of the losses generated by the Retail business activities. Because of this the overall profit recorded by the company is lower than the projections for the year under review. The improved economic conditions in the country augur well for the textile sector and in general there is optimism prevailing all over the country, even though the situations continued to remain grim in the other part of the world. Hence the export of textile goods still needs to gain momentum which again depends largely on global factors. Since the company has a strong presence in the domestic market there is no negative slide in the sales growth. However for the retail division the company needs to give further thrust in the development of product ranges in the licentiate items as well as the marketing network.

The company continued to take necessary measures to strengthen the operations of the Retail division to make it a profitable business. Many unviable outlets selectively chosen in various formats were either discontinued or converted into own stores to bring better management in the operation. The company is now giving major thrust to expand the business through on line sales network like Flip kart, Jabbong, Myntra etc. Further the company is also using other social network to expand the reach of the products to the actual users as well as to increase the sales network through other media like Television channels and other social media. Finally regarding the pending EPCG License issue, the company is actively pursuing the case with DGFT office to resolve the matter at the earliest.

Export Sales:

The textile export market remained sluggish throughout the year because of economic slowdown in almost all parts of the world. Apart from this, the preferential trade regime followed by some leading importers of textile goods, has a negative impact on the growth of export trade in the world. Hence the export performance for the year is not as per the estimates made by the company. Because of these factors, the company continued to remain focused maximum in the local market. The negligible exports were mainly sent in the form of finished fabrics to neighboring countries like Bangladesh. The company is now making all-round efforts to increase the volume of fabric shipments to Bangladesh which again depends upon the global economic conditions as Bangladesh mainly caters to the export market. The company still pursue with some export promotion agencies to explore the possibility of developing new markets in African and Far East countries. However much depends upon the positive changes in the global economic conditions particularly in the US and European economies. The company still pursues its objective to achieve the target of exporting 50% of its capacity to the overseas customers with better value addition. Similarly efforts are made with various reputed buyers to align with their brands in the overseas market to promote the exports in large volume.

The company also takes initiatives to develop export potential by taking active participation in various international Fairs/exhibitions as well as selling garments by using the brand and logos of some important sports clubs/events. The company has started selling garments in the local market under licentiate arrangements by executing agreements with some reputed football clubs in Europe. In the future the company may be able to enhance the scope of the sales through these arrangements in the other part of the world. Once the present turmoil in the global market is settled, India can look forward to have a better market share than other competitors in the global markets. Hence the prospects for the company are good in terms of better unit value realization and volume. Besides this, the company has developed capability to make better product range particularly in printed and embroidery varieties. In view of these, company continues to follow its plans to increase the exports business in sizable volume in the future. New Licentiate Rights:

The company has developed and produced wide range of garments under licentiate rights executed with globally well known football clubs like FC Barcelona, Manchester City, and Real Madrid. These brand LOGOS are embossed on the garments under licentiate rights acquired for India. The overall response is very good and encouraging. The company has now acquired adequate experience and expertise in this particular style of production. Hence the company has now associated with ‘YouWeCan” backed by celebrity cricketer Mr. Yuvraj Singh to create a clothing line under YWC label. For the company this is the first such venture and anticipates a good outcome from this venture. The company is now also exploring other avenues in the similar lines to promote the sales with better value addition.

Expansion:

The management continues to maintain the plan adopted earlier in respect of expansion plan and accordingly the company has not undertaken any new projects during the year under review. Further in the prevailing economic conditions, there will not be any major expansion plan in the current year some except addition of balancing equipments and replacement of old machineries and equipments. The remaining portion of the funds available for retail expansion plan as proposed in the Rights issue offer documents is utilized completely and hereafter any utilization of the funds for the Retail expansion will have to be financed by the company from its own sources.

Human Resources & Industrial Relations:

Human resources are one of the most important assets for the company. Efforts are made systematically in attraction, retention and development of talent as an ongoing process. A number of programs are made that provide focused people attention. The thrust is on the promotion of talent internally through job rotation and job enlargement. The Industrial relations with the employees at the Company’s plant at MIDC, TTC Industrial Area, Pawne Village; Navi Mumbai and in the other locations continue to remain healthy and cordial.

Share capital:

During the year under review, the company has not issued any class of shares like shares with preferential rights or sweat equity shares and accordingly there is no change in the Subscribed and Issued capital. However after the closing of the financial year 2015-16, the company in the month of May 2016, has issued 88930 shares to employees under SUDITI ESOP PLAN 2011. Suditi Employee Stock option Plan 2011 (Suditi ESOP 2011): The company had granted options to the employees in the year

2013 under the Suditi Employee Stock Option Plan 2011. Each option is equal to one share at par (Rs.10/- each) being the price fixed for exercising the right. To facilitate the employees to exercise their right to buy the options granted to them, the Company has divided the total options granted on certain prescribed basis over a period of 5 years. The share arising on exercise of the options shall be subject to a lock in period of 1 year from allotment. The three parts of the grant has been vested till the date of 31st March

2016. The revised details are as follows:

Granted

Accepted

Rejected

Vested

No of Employees

Total

options

(Nos.)

No of Employees

Total

options

(Nos.)

No of Employees (Nos.)

Total

options

Up to third part part of Grant

83

350800

20

253200

63

97600

103000

The disclosure of the details is as follows:-

(a) Options granted & accepted; 253200

(b) The pricing formula: At par

(c) Options vested: 103000

(d) Options exercised: During the year under review, no employee has exercised their options under the Scheme. However during the current year in the month of May 2016, 12 employees have exercised their options under the SUDITI ESOP PLAN 2011.

(e) The total number of shares arising as a result of exercise of option: During the year under review, there were no shares allotted as there were no exercise of options. During the current year in the month of May 2016, the board allotted 88930 shares on the recommendation of the Compensation Committee for 12 employees on exercise their options under SUDITI ESOP PLAN 2011.

(f) Options lapsed: 97600

(g) Variation of terms of options: NA

(h) Money realized by exercise of options: Nil

(i) Total number of options in force: 253200 (j) Employee wise details of options granted to:

(i) Senior managerial personnel: 243500 (includes 35000 options granted to Company Secretary & V.P. (F) and no Director is granted any options under Suditi ESOP Plan 2011).

(ii) Any other employee who receives a grant in any one year of option amounting to 5% or more of option granted during that year: Nil

(iii) identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant: Nil

(i) Diluted Earnings per Share (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 ‘Earnings Per Share’]: No options are exercised till date.

(j) Where the company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognized if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the company shall also be disclosed: The impact on account of this will reduce the profits by Rs.1574753/- and accordingly on proforma basis the company’s basic and diluted earnings would have been Rs.0.79 and Rs.0.78 respectively:

(k) Weighted-average exercise prices and weighted-average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than the market price of the stock: NA (l) A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:

(i) Risk-free interest rate: 6.31%

(ii) Expected life: 5 years

(iii) Expected volatility: 5.59%

(iv) Expected dividend: Rs.0.70 per share

(v) The price of the underlying share in market at the time of option granted: Rs.7.68

Particulars of Employees

Pursuant to the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, details are stated separately in the Managerial Remuneration.

Meetings:

A calendar of Meetings is prepared and circulated in advance to the Directors. During the year four Board Meetings and four Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

Board Evaluation:

Pursuant to the provisions of the Companies Act, 2013 and Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Independent Directors have reviewed the performance of all the Directors including their own performance, as well as the evaluation of the working of its Audit committee, Nomination & Remuneration committee and other Compliance Committees. The details are provided in the Corporate Governance Report.

Declaration by an Independent Director(s) and reappointment, if any:

A declaration by an Independent Director(s) that they meet the criteria of independence as provided in sub-section (6) of Section 149 of the Companies Act, 2013 has been submitted to the Board in the first Board Meeting for the year 2016-17. An independent director shall hold office for a term up to five consecutive years on the Board of a Company, but shall be eligible for reappointment for next five years on passing of a special resolution by the Company and disclosure of such appointment in the Board’s report.

Remuneration Policy:

The Board has, on the recommendation of the Nomination & Remuneration Committee follows a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report.

Managerial Remuneration:

A) Details of the ratio of the remuneration of each director to the median employee’s remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. (Enclosed as Annexure II).

B) Details of the every employee of the Company as required pursuant to 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. The statement of the name of the top ten employees of remuneration drawn is given in Annexure II). Further the statement showing the requisite information pursuant to the Companies (Appointment of Managerial Personnel) Rules 2014 is not annexed herewith as there are no employees covered by the rule (2) (i)(ii) & (iii).

C) Any director who is in receipt of any commission from the company and who is a Managing Director or Whole-time Director of the Company shall receive any remuneration or commission from any Holding Company or Subsidiary Company of such Company subject to its disclosure by the Company in the Board’s Report. Nil

D) There are no disclosures to be made as the directors except the Chairman & Managing Director, are not in receipt of any remuneration or stock options other than sitting fees and reimbursement of expenses incurred for attending the meeting. The details are furnished separately in the corporate governance report.

Details of Subsidiary/Joint Ventures/Associate Companies: The company has incorporated two subsidiaries in the month of March 2015 and the subsidiaries have commenced their business from April 2015. One of the subsidiaries M/s. Suditi Design Studio Limited has commenced sales business activities while the other subsidiary M/s. Suditi Sports Apparel Limited is yet to commence their sales business operations. The details pursuant to sub-section

(3) of section 129 of the Act, containing the salient feature of the financial statement of a company’s subsidiary or subsidiaries, associate company or companies and joint venture or ventures etc are annexed herewith. The Company has also presented the Consolidated Financial Results along with the Standalone Financial Results of the Company for the first time. The Consolidated Financial Results are the combined performance of the Company along with its Subsidiaries and the details of the same are provided along with Notes to Accounts.

Summary of Sales: (Rs. in Lakhs)

Particulars

Suditi Industries Limited

Suditi Design Studio Limited (Subsidiary)

Suditi Sports Apparel Limited (Subsidiary)

Consolidated

Sales

8110.95

524.70

8565.89

Profit

146.67

(16.88)

129.99

The growth in the Business activities of the Subsidiaries will help the Company to increase the sales volume of the Company as the Subsidiary also sources their part of the material requirement from the Company at the best prevailing market rate on arms length basis. In addition to this it also provides value addition to the Company in the Market apart from building brand value. It enables the Company to ensure focused attention to the certain market segment which otherwise not catered or explored by the Company.

Deposits:

The Company has not accepted any deposits within the meaning of Section 73 & 76 of Companies Act, 2013 and the rules made there under.

Energy, Technology and Foreign Exchange:

The particulars relating to conservation of Energy, Technology Absorption and Foreign Exchange earnings and outgo as required under Section 134 (3) (m) of the Companies Act, 2013 is given in the Annexure I forming part of this report.

Directors & the Key Managerial Personnel:

In accordance with the provisions of section 152 of The Companies Act, 2013, Smt. Sanjula Sanghai retire by rotation at the forthcoming Annual general meeting and being eligible offer herself for reappointment. Further the company is in the process of appointing a Chief Financial Officer (CFO) internally to take over the functions of CFO which hitherto was held by Chairman & Managing Director.

Directors’ Responsibility Statement:

The Directors hereby confirm: -

i) That in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) That the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period;

iii) That the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) That the Directors have prepared the annual accounts on a ‘going concern’ basis;

v) That the directors, have 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and were 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 and secretarial auditors and external consultants, including audit of internal financial controls over financial reporting by the statutory auditors, and the reviews performed by management and the relevant board committees, including the audit committee, the board is of the opinion that the Company''s internal financial controls were adequate and effective during FY 2015-16.

Corporate Governance:

A separate section on Corporate Governance and a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Regulation 34 & other applicable Regulations of the SEBI (Listing Obligations

& Disclosure Requirements) Regulations 2015, form part of the Annual Report.

Cost Audit:

In view of the new Companies (Cost Records & Audit) Rules 2014 and amendment thereof, the company is now out of the purview of the Cost Audit Report Rules. Hence the company has not appointed any Cost Auditor for the year 2016-17.

Auditors:

Pursuant to the provisions of section 139 of the Act and the rules framed thereafter, M/s. Chaturvedi & Co, Chartered Accountants, were appointed as statutory auditors of the Company from the conclusion of the twenty third annual general meeting (AGM) of the Company held on September 12, 2014 till the conclusion of the Twenty Sixth AGM to be held in the year 2017, subject to ratification of their appointment at every AGM.

Secretarial Audit Report:

In terms of Section 204 of the Companies Act 2013 and the rules made there under, Shri. Shivhari Jalan Practicing Company Secretary had been appointed as Secretarial Auditors of the Company. The report of the Secretarial Auditors is enclosed as Annexure separately to this report. The report is self-explanatory and does not call for any further comment other than the explanation given on the appointment of Chief Financial Officer.

Internal Audit & Controls:

The Company had engaged SGCO & Co as its Internal Auditor for part of the period. Subsequently, due to their non availability to continue with the Internal Audit assignment of the Company, Board has appointed M/s. Ram Agarwal & Associates as the internal Auditor to continue the task of suggesting and implementing the recommendations to improve the control environment. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on an ongoing basis to improve efficiency in operations.

Vigil Mechanism:

In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been made available to each and every stakeholder and the Company has designated two senior officials as Vigilance Officers to support the Vigilance Mechanism functions.

Risk management policy:

A statement indicating development and implementation of a risk management policy for the Company including identification therein of elements of risk, if any, that in the opinion of the Board may threaten the existence of the company as given separately in the Corporate Governance Report.

Extract of Annual Return:

As required pursuant to section 92(3) of the Companies Act, 2013 and rule 12(1) of the Companies (Management and Administration) Rules, 2014, an extract of annual return in MGT 9 forms part of this Annual Report as ANNEXURE III.

Material changes and commitments, if any, to report affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report:

There are no such material changes and commitments to report under this head other than the association with “YouWeCan” which is explained in detail in the report under the head New Licentiate Rights.

Details of significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company’s operations in future:

There are no such significant and material orders passed by any regulators to report under this head.

Details in respect of adequacy of internal financial controls with reference to the Financial Statements:

The company has set up vigilant internal control mechanism to ensure that the financial statements prepared are true, fair and transparent. The company has set up strong internal audit department apart from Management committee to ensure that all the financial transactions executed are in compliance with applicable laws and regulations and in line with the budget plans. Any variations or deviations are appropriately dealt with by the internal Audit department as well as by the Audit committee. The Company has appointed an independent Chartered Accountant Firm to improve and strengthen further the existing standard operating procedures and same is implemented in stages. According to the management the present mechanism followed in the company is adequate and effective. The details are also stated in the Management discussion and analysis report annexed herewith and form part of this report.

Particulars of loans, guarantees or investments under section 186 of the companies Act:

There are no loans/guarantee or security provided during the year under review. The details of investments made are as follows:-Details of Investments:-

Sl

Date of

Details of

Amount

Purpose for

Date of

Date of

Expected

No

investment

Investee

which the proceeds from

investment is proposed to be utilized by the recipient

BR

SR

(if reqd)

rate of return

1

01/04/15

Suditi Sports Apparel Ltd.

4 lakhs

Business

activities

16/01/2015

NA

10%

2

01/04/15

Suditi Design Studio Ltd.

4 lakhs

Business

activity

16/01/2015

NA

10%

14/03/16

— do —

82 Lakhs

Development of Business activity

11/02/2016

NA

Particulars of contracts or arrangements with related parties:

The particulars of contract or arrangements entered into by the Company with related parties at arm’s length basis referred to in sub-section (1) of section 188 of the Companies Act, 2013 is disclosed in Form No. AOC-2 as Annexure IV Obligation of company under the “Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act 2013:

In order to prevent sexual harassment of women at work place, the company has set up a separate internal compliance committee under the “Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.” Under the said Act the Internal Complaints Committee is empowered to look into complaints relating to sexual harassment at work place of any women employee. Accordingly the Company has adopted a policy for prevention of Sexual Harassment of Women at workplace and the Committee is authorized to implement the said policy all over the company. During the year Company has not received any complaint of harassment.

Corporate Social Responsibility (CSR):

The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy) Rules, 2014 is not applicable to the company. Transfer of amounts to Investor Education and Protection Fund:

The Company does not have any funds lying unpaid or unclaimed for a period of seven years in respect of unclaimed/unpaid dividends. Therefore there are no funds on this account which are required to be transferred to Investor Education and Protection Fund (IEPF). Pursuant to the provisions of the Investor Education Protection Fund (Uploading of information regarding unpaid and unclaimed amounts lying with companies) Rules, 2012, the Company has already filed the necessary form and uploaded the details of unpaid and unclaimed amounts lying with the Company, as on the date of last AGM, with the Ministry of Corporate Affairs. Listing with Stock Exchange:

The Company confirms that it has paid the Annual Listing Fees for the year 2016-2017 to the Bombay Stock Exchange limited where the Company’s Shares are listed.

Appreciation:

Your Company and its Directors wish to place on record their sincere appreciation for the support and assistance extended by different Central and State Government Departments and Agencies, Banks and Financial Institutions, Insurance companies, Customers and Vendors. Your Directors are thankful to the esteemed shareholders for their continued support and confidence reposed in the company and its management. Your Directors also wish to place on record their deep sense of appreciation to all the employees of the Company for their outstanding contribution towards the operations of the Company.

For and on behalf of the Board of Directors

Place: Mumbai PAWAN AGARWAL

Date: 08.08.2016 CHAIRMAN & MANAGING DIRECTOR

Source :
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