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Faze Three Ltd.

BSE: 530079 | NSE: FAZETHREE | Series: NA | ISIN: INE963C01033 | SECTOR: Textiles - Spinning - Cotton Blended

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Annual Report

For Year :
2018 2016 2015 2013 2012 2011 2009 2008 2006

Director’s Report

The Directors have pleasure in presenting the 33rd Annual Report of your Company containing the business performance and the Audited Financial Statements for the year ended on 31st March 2018.

1. FINANCIAL PERFORMANCE (Standalone & Consolidated):

(Rs. in Crores)

Particulars

For the Year ended 31.03.2018 (Standalone)

For the Year ended 31.03.2018 (Consolidated)

For the Year ended 31.03.2017 (Standalone)

Revenue from Operations

239.87

239.87

243.77

Other Income

10.63

10.63

22.90

Profit before tax

15.54

15.54

27.27

Provision for taxation (incl. deferred tax)

(1.29)

(1.29)

(10.59)

Profit for the year

16.83

16.83

37.86

Other comprehensive income for the year

0.17

0.17

0.26

Total comprehensive income for the year

16.66

16.66

37.60

The standalone and consolidated financial statements for the financial year ended March 31, 2018, forming part of this Annual Report, have been prepared in accordance with the Indian Accounting Standards (Ind AS) as notified by the Ministry of Corporate Affairs.

2. KEY HIGHLIGHTS OF THE FINANCIAL PERFORMANCE:

During the year under review, the Company earned revenue from operations of Rs. 239.87 Crores as against Rs. 243.77 Crores in the previous year. The Company achieved Net Profit of Rs. 16.83 crores as against Net Profit of Rs. 37.86 Crores during previous year.

3. DIVIDEND:

Your directors are pleased to announce that the Board of Directors of the Company has declared an Interim Dividend of Rs. 0.50/- per share of Rs. 10/- each (5%) for FY 2017-18 considering the performance during the year to the shareholders who shall be on the register of members on June 2, 2018.

4. SHARE CAPITAL:

Preferential Issue of equity shares & convertible equity warrants

During the year under review the Company on April 7, 2017 allotted by way of Preferential allotment 3,19,000 equity shares of Rs. 10/- each and 8,45,500 equity warrants convertible into equal number of equity shares of Rs. 10/- each to promoter/ non promoter investors.

Out of the said 8,45,500 convertible equity warrants, 7,00,000 warrants were converted into equal number of equity shares ranking paripassu with the existing equity shares of the Company on December 26, 2017 upon receipt of balance subscription amount from the allottee to exercise the conversion. Consequently the paid up equity capital of the Company as at March 31, 2018 stood at Rs. 24,31,90,000/- consisting of 2,43,19,000 equity shares of Rs. 10/- each.

5. RESERVES:

There were no appropriations to reserve/ general reserve during the year under review.

6. DEPOSITS:

The Company has not accepted any deposits from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014, or under Chapter V of the Companies Act, 2013.

7. SUBSIDIARY COMPANY:

During the year under review, the Company formed a wholly owned subsidiary (WOS) in USA namely Faze Three US LLC and invested Rs. 2.43 crore for the set up. The said WOS is held as a front end of the Company in USA and is actively engaged in sourcing local business within USA for supplying the Company''s range of products to stores/ retailers. Pursuant to the provisions of Section 129(3) of the Companies Act, 2013, a statement containing salient features of financial statements of the WOS in Form AOC 1 is attached to the Consolidated Financial Statements. The separate audited financial statements in respect of the WOS are also available on the website of the Company.

8. DIRECTORS'' RESPONSIBILITY STATEMENT:

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, with respect to the Director''s Responsibility Statement, the Directors hereby confirm that:

(i) in the preparation of the Annual Financial Statements for the year ended March 31, 2018, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any;

(ii) such accounting policies as mentioned in Notes to Financial Statements have been selected and applied consistently and judgments and estimates have been made 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, 2018 and of the Profit of the Company for the year ended on that date;

(iii) proper and sufficient care have been taken 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 Financial Statements have been prepared on a going concern basis;

(v) proper internal financial controls were in place and that the financial controls were adequate and were operating effectively;

(vi) systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

9. NUMBER OF MEETINGS OF THE BOARD AND AUDIT COMMITTEE:

The Board and Committees of the Board meets at regular intervals to discuss and decide on Company / Business policy and strategy apart from other Board business. In case of a special and urgent business need, the Board''s approval is taken by passing resolutions by circulation, as permitted by law, which are noted and confirmed in the subsequent Board Meeting.

The details of number of Board and Committee meetings of the Company are set out in the Corporate Governance Report which forms part of this Report.

10. PERFORMANCE EVALUATION OF BOARD:

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions of the Companies Act, 2013 and the Corporate Governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015. The same is found to be satisfactory.

The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, experience & competencies, attendance, effectiveness of board processes, information and functioning, independent approach, etc.

The performance of the Committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, attendance of the members, recommendations to the Board and their implementation, effectiveness of committee meetings, etc.

11. DECLARATION BY INDEPENDENT DIRECTORS:

The Company has received necessary declaration from each Independent Director under Section 149(7) of the Companies Act, 2013, that he / she meets the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015.

12. FAMILIARIZATION PROGRAMME FOR THE INDEPENDENT DIRECTORS:

Pursuant to the SEBI regulations, the Company has worked out a Familiarization Programme for the independent Directors, with a view to familiarize them with their role, rights and responsibilities in the Company, nature of industry in which the Company operates, business model of the Company, etc. The Board familiarization process comprises of the Induction programme for new independent Directors, sessions on business and functional issues and strategy making.

The policy for Familiarization Programme for the Independent Directors is available on website of the Company.

13. DISCLOSURE RELATING TO REMUNERATION TO DIRECTORS, KEY MANAGERIAL PERSONNEL AND PARTICULARS OF EMPLOYEES:

As required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personal) Rules, 2014, as amended from time to time, details of Remuneration to Directors and Key Managerial Personnel is provided in Form MGT-9 annexed to this Report.

The Company has no employee who- (i) if employed throughout the financial year, was in receipt of remuneration, in aggregate, more than Rs. 102.00 Lacs, or (ii) If employed for part of the financial year, was in receipt of remuneration, in aggregate, more than Rs 8.50 lacs per month.

14. AUDIT COMMITTEE:

The Audit Committee comprises of three members namely Mr.VinitRathod (Chairman), Mr.Manan Shah and Mr. Ajay Anand. Other details pertaining to audit committee are included in the Corporate Governance Report, which forms part of this report. All the Members of the Committee are financially literate.

15. NOMINATION & REMUNERATION COMMITTEE:

The Company has constituted a Remuneration Committee pursuant to Section 178(1) of the Companies Act, 2013 and Regulation 19 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Nomination and Remuneration Committee is responsible for evaluating the balance of skills, experience, independence, diversity and knowledge on the Board and for drawing up selection criteria. The Board of Directors of the Company has defined a policy on Director''s appointment and payment of remuneration including criteria for determining qualifications, positive attributes and independence of Directors and terms of reference of the Committee.

The Nomination & Remuneration Committee comprises of three members all being Non-Executive Directors namely Mr.VinitRathod (Chairman), Mr.Manan Shah and Ms.Shweta Jain. All the recommendations made by the Committee during the period were accepted by the Board.

16. CORPORATE SOCIAL RESPONSIBILITY STATEMENT (CSR):

The Company during the year formed CSR Committee comprising Mr. Ajay Anand as the Chairman and Mr. Sanjay Anand and Mr.Manan Shah as members.

The said Committee has formulated and recommended to the Board of Directors, CSR Policy indicating the activities to be undertaken by the Company and monitoring and implementation of the framework of the activities. The CSR Policy is available on the website of the Company at www.fazethree.com.

Note on CSR spending as required under Section 135 of the Companies Act, 2013 and the rules framed thereunder:

The FY 2017-18 was the first year post the turnaround of the Company in 2017. The Company was unable to undertake spending of Rs. 18.21 lacs for CSR Activities as per the rules, since it was unable to find adequate avenues and was in the process of identifying areas of expending the said amount and also it was necessary for the Company to focus and pull back the available resources to the maximum extent so as to meet its operational requirements in the interest of the stakeholders including the communities around the factory locations. The management believes that upliftment of the society at large is one of the key factors of sustainable economic growth and will strive to contribute to the society by way of CSR in the coming years in a fair and ethical way so as to balance their interests along with the interests of the stakeholders.

17. CONSERVATION OF ENERGY AND TECHNOLOGY ABSORPTION:

The information as required under Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 with respect to conservation of energy, technology absorption and foreign exchange earnings and outgoings is annexed to this report as Annexure I.

18. RELATED PARTY TRANSACTIONS:

All transactions entered into with related party as defined under Section 188(3) of the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year were in the ordinary course of business and on arm''s length price and do not attract the provisions of Section 188 of the Companies Act, 2013. All material transactions with related parties during the financial year were in the interests of the Company. Disclosure as required under IND AS 24 has been made in the notes to the financial statements. The Company has proposed to take approval of Members for all material related party transactions proposed to be entered into in the current financial year through Ordinary Resolution.

The policy on Related Party Transactions as approved by the Board is available on the website of the Company at www.fazethree.com.

Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Form AOC-2 and the same forms part of this report as Annexure II.

19. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy, as part of vigil mechanism as defined under Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 to provide appropriate avenues to the Directors and employees to bring to the attention of the management any issue which is perceived to be in violation of or in conflict with the Code of Conduct of the Company and to report concerns about unethical behavior. The said policy has been posted on the website of the Company at www.fazethree.com.

20. DICSLOSURE AS PER SEXUAL HARRASMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITION AND REDRESSAL) ACT, 2013:

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14, the internal committee constituted under the said act has confirmed that no complaint/ case has been filed/ pending with the Company during the year.

21. RISK MANAGEMENT:

The Company has in place a mechanism to inform Board of Directors about the Risk assessment and risk minimization procedures and periodical reviews to ensure that risk is controlled by the management through the means of a properly laid-out framework.

22. INTERNAL FINANCIAL CONTROLS:

The Company has adequate internal control systems, commensurate with the size, scale and complexity of its operations which monitors business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels.

23. MANAGEMENT DISCUSSION AND ANALYSIS REPORT:

Management Discussion and Analysis Report as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, is enclosed as Annexure III.

24. CORPORATE GOVERNANCE:

The Company is adhering to good corporate governance practices in every sphere of its operations. The Company has taken adequate steps to comply with the applicable provisions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. A report on Corporate Governance is annexed to this report as Annexure IV.

25. STATUTORY AUDITOR:

M/s. MSKA & Associates Chartered Accountants (Firm Registration No. 105047W), were appointed by the members of the Company in the 32nd Annual General Meeting for a period of 5 years i.e. till the conclusion of the 37th Annual General Meeting. In accordance with the Companies Amendment Act, 2017, enforced on 7th May, 2018 by Ministry of Corporate Affairs, the appointment of Statutory Auditors is not required to be ratified at every AGM. The appointment of M/s. MSKA & Associates as the Statutory Auditor of the Company shall continue for the FY 2018-19. M/s. MSKA & Associates has confirmed that their appointment is within the prescribed limits specified in Section 139 of the Companies Act, 2013.

26. SECRETARIAL AUDITOR:

The Company has undertaken Secretarial Audit for the financial year 2017-18 which, inter alia, includes audit of compliance with the Companies Act, 2013, and the Rules made thereunder, Listing Regulations and other applicable Regulations and Acts. The Secretarial Audit Report is annexed to this report as Annexure V. Pursuant to the provisions of Section 204 of Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. Sanjay Dholakia& Associates, Practicing Company Secretary to undertake Secretarial Audit for the financial year 2018-19.

27. OBSERVATIONS - STATUTORY AUDITOR & SECRETARIAL AUDITOR:

Statutory Auditor:

The Auditors'' Report to the Members does not contain any reservation, qualification or adverse remark.

Secretarial Auditor:

The Secretarial Audit Report to the Members does not contain any reservation, qualification or adverse remark.

28. COST AUDIT AND RECORDS:

The provisions of sub-section (1) of section 148 of the Act are not applicable to the Company as the Central Government of India has not specified the maintenance of cost records for any of the products of the Company.

As regards to Cost Audit, vide notification issued by Government on 31st December 2014, the Company is not required to conduct a Cost Audit.

29. EXTRACT OF ANNUAL RETURN:

The details forming part of extract of the annual return in Form MGT-9 is annexed to this report as Annexure VI.

30. INDIAN ACCOUNTING STANDARDS (IND AS):

The Indian Accounting Standards (IND AS) were notified by the Ministry of Corporate Affairs on February 16, 2015. The Company has adopted IND AS with effect from 1st April, 2017 with comparatives for the previous year ending 31st March, 2017. Your Company has taken adequate steps in this regard and has ensured a smooth transition to IND AS.

31. SIGNIFICANT MATERIAL ORDERS PASSED BY COURTS:

There are no significant material orders passed by the Regulators/ Courts which would impact the going concern status of the Company and its future operations.

32. ACKNOWLEDGMENT:

Your Directors wish to place on record their appreciation for the co-operation extended by all the employees, Bankers, Financial Institutions, various State and Central Government authorities and Stakeholders.

For and on behalf of the Board

For Faze Three Limited

Place: Mumbai Ajay Anand

Date: 22nd May, 2018 Chairman & Managing Director

Director’s Report