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KDDL Ltd.

BSE: 532054 | NSE: KDDL |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE291D01011 | SECTOR: Miscellaneous

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Annual Report

For Year :
2018 2017 2016 2015 2014 2013 2012 2011 2010

Director’s Report

DIRECTORS’ REPORT

Dear Members,

The Directors present this 38th Annual Report together with the Audited Accounts of the Company for the financial year ended 31st March, 2018.

OPERATIONS AND PROSPECTS

Financial Results (Standalone and Consolidated)

The summary of operating results for the year 2017-18 and appropriation of divisible profits is given below:

Amount in Rs millions

Particulars

Standalone

Consolidated

2017-18

2016-17

2017-18

2016-17

Total Income

1520.4

1333.3

5084.9

4629.9

Profit before interest, depreciation and exceptional item

322.3

243.3

494.3

294.5

Less: Finance Cost

48.3

55.2

120.3

143.1

Gross Profit

274.0

188.1

374.0

151.4

Less: Depreciation and amortization

74.0

72.5

121.3

116.1

Profit before Share of Profit of an associate

200.0

115.6

252.7

35.3

Share of Profit of an associate

-0.3

0.5

Profit Before tax

200.0

115.6

252.4

35.8

Less: Tax Expense

59.3

40.4

70.7

17.2

Net Profit / (Loss) for the Year

140.7

75.2

181.7

18.6

Other Comprehensive Income / (Loss) (OCI)

-3.0

-0.3

1.9

-6.1

Total Comprehensive Income / (Loss) for the period

137.7

74.9

183.6

12.5

Add: Profit brought forward from previous year

171.3

116.1

-18.8

-4.0

Profit available for appropriation

312.0

191.3

162.9

14.6

Transfer to Minority reserve

0

16.3

-5.6

Proposed Dividend

16.3

0

16.3

0.0

Corporate Dividend Tax

3.3

0

3.3

0.0

Transfer to General Reserve

40

20

40.0

20.0

Dividend on Cumulative Preference Shares (Net of Excess Provision)

0

-52.2

19.0

Total Appropriation

59.6

20

23.7

33.4

Surplus carried forward to Balance Sheet

252.4

171.3

139.2

-18.8

PERFORMANCE AND PROJECTIONS

During the year under review, the Company achieved consolidated sales revenue of Rs. 5084 million against Rs. 4630 million in the previous year, registering a healthy growth of 9.8%. Profit before tax improved from Rs. 35.8 million to Rs. 252.4 million.

Sales revenue from manufacturing operations on standalone basis grew by 14% to Rs. 1520 Million from Rs. 1333 Million in the previous year. The company earned net profit after tax of Rs. 140.7 million against Rs. 75.2 million in the previous year.

Sales revenue in ETHOS, the retail business of the Company improved from Rs. 3270 million in the previous year to Rs. 3578 million, registering a growth of 9.4%. Retail business segment reported profit before tax of Rs. 52 million against the loss before tax of Rs 84.5 million in previous year.

Manufacturing Business Segments

The main revenue of the manufacturing business is from watch components segment. The Swiss watch market, the main destination for our exports, which was declining continuously for last 2 years, recovered during the year and witnessed a growth of 2.7% compared to previous year. On the other hand, the domestic watch market has continued to grow.

Due to improved market conditions revenue of the company from watch components improved by 12.5%; major growth of 29% was contributed by the domestic market whereas exports revenue improved by 4.6%. The other major segment of revenue is from the precision engineering business, wherein the company registered a healthy growth of 31% over the previous year. The revenue growth from domestic and exports market was 39% and 16% respectively. The revenue from ornamental packaging business of the company witnessed a growth of 8.8%.

As we continue to move up the value chain in the watch component manufacture. We are implementing multiple initiatives to enhance capabilities to manufacture more complex products and improved productivity. We continue to focus on manufacturing excellence with the goals of world class delivery compliance, quality and time to market (TAT).

The revenue from the precision engineering business of the Company is expected to maintain a healthy growth as we continue to expand our capabilities and capacity. Your company has established its reputation as a quality supplier with the ability to meet sophisticated customer needs. By focusing on the vital levers of operational performance while adding key technical capabilities and show-casing our capabilities at leading international trade exhibitions and on digital platforms, we are confident of healthy growth and returns in the ensuing periods.

The expansion project for the precision engineering business was delayed due to heavy rains in Bangalore but now the progress is as per revised schedule. We have already commenced partial operations and the new facility will be fully functional by the second half of FY 2019. As a part of the expansion, we are shifting and consolidating our existing precision engineering manufacturing facilities also at the new location. The Company continues to believe that this business segment will be a major source of growth in the future.

Retail Business Segments:

FY17-18 began on a challenging note for the luxury watch retail business. The after effects of many regulatory changes continued to have an impact on the performance of the business in the first half of the year. These regulatory changes included the introduction of PAN requirement for transactions above Rs. 2 lakhs, requirement for collecting TCS for all transaction in cash above Rs. 3 lakhs, demonetization in November 2016 and the subsequent banning of all cash transactions above Rs. 2 lakhs with effect from 1st April 2017. The initial uncertainties of the implementation of the GST regime also had a less than salutary impact of the business.

The business showed an impressive turnaround in the second half of the year. This came close on the heels of the changes in the GST rates on watches from 28% to 18%, consequent to which there was a reduction in the prices of watches. This fuelled demand in an already robust festive and wedding season. The fact that the uptrend of demand continued even after the season period is a testimony to the fundamental strategic changes to the business model that have been brought over the past 2 years.

The Company''s Swiss subsidiary, Pylania SA in Switzerland reports financial performance as per the expected levels and its financial performance is continuously improving for last 5 years, made possible by calibrated efforts for revenue enhancement and curtailing overheads. The recently implemented Swiss Made regulations and guidelines in Switzerland is also providing new opportunities for the watch component business of the Company through Pylania.

During the year, the 100% subsidiary company, Satva Jewellery and Design Limited (SJDL) merger with the parent company is in progress and the merger of this company will provide support for greater efficiency in operations and better utilization of resources and assets of SJDL.

DEPOSITS

The details of deposits covered under Chapter V of the Companies Act, 2013 (the act) is given hereunder:

1. Deposits Accepted/ renewed during the year : Rs 4,07,03,000

2. Deposits outstanding at the end of the year : Rs. 11,29,44,000

3. Deposits remained unpaid or unclaimed as at the end of the year : Nil

4. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number : NIL

of such cases and the total amount involved

5. The details of deposits which are not in compliance : NIL with the requirements of Chapter

CHANGES IN SHARE CAPITAL

During the Financial Year ended on 31st March, 2018, the paid up equity share capital of the Company has increased from Rs. 10,83,95,860 to Rs. 10,95,27,920 pursuant to the issue and allotment of 1,13,206 equity shares at a price of Rs 265/- per share (including a premium of Rs. 255/- per share) by way of preferential allotment to promoters, by way of conversion of Equity Share warrants into Equity post subscription of full amount as authorized by the shareholders by way of Special Resolution passed at Extra Ordinary General Meeting held on 8thNovember 2016.

Further, the Company has neither issued any shares with differential voting rights nor any Sweat equity shares. SUBSIDIARY COMPANY

During the period under review, Cadrafin Sari, an associate company was incorporated in Switzerland in which Kamla International Holding SA, a wholly owned subsidiary company holds 22% ownership. A separate statement containing salient features of the financial statements of Company''s subsidiaries in prescribed format AOC-I is annexed as Annexure 1 to this report.

LISTING OF SHARES

The equity shares of the Company are listed at National Stock Exchange of India (NSE) and Bombay Stock Exchange (BSE). The Company has paid the Annual Listing Fees to NSE and BSE for the financial year 2018-19.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements have been prepared by the Company''s Management in accordance with the requirements of Accounting Standard 21 issued by the Institute of Chartered Accountants of India (ICAI) and as per the provisions of the Companies Act, 2013 (the act).

As per the provisions of Section 136 of the act, the Company has placed separate audited accounts of its subsidiaries on its website www.kddl.com and a copy of the same will be provided to the shareholders at their requests.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return, in Form MGT -9 for the Financial Year 2017-18 is enclosed with this report as Annexure 2.

NUMBER OF BOARD & COMMITTEE MEETINGS

The details of board and committee meetings held during the financial ended 31st March, 2018 are set out in the Corporate Governance Report which forms a part of this report. The intervening gap between the meetings was within the period prescribed under the Act, Secretarial Standard-I and the Listing Regulations.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134 (3) (c) read with Section 134(5) of the act and the Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Obligations) the Board confirm and report that:-

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures;

(b) the directors had 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, 2018 and of the profit and loss of the company for that period;

(c) the directors had 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;

(d) the directors had prepared the annual accounts on a going concern basis; and

(e) 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.

(f) 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.

NOMINATION & REMUNERATION POLICY

The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management Personnel of the Company. This policy also lays down criteria for selection and appointment of Board Members. The detail of this policy is explained in the Report on Corporate Governance which forms part of this report.

APPOINTMENT OF INDEPENDENT AUDITOR

M/s BSR & Co. LLP, Chartered Accountants, (Registration No.101248W/W-100022) were appointed as Statutory Auditors of the Company at the 37th Annual General Meeting (AGM) held on 11th August, 2017 for a term of two years to hold office from the conclusion of the 37th AGM till the conclusion the 39th AGM. The requirement of placing the matter relating to the ratification of above appointment at every AGM has been omitted by the Companies (Amendment) Act, 2017 w.e.f. 7th May, 2018.

Information referred in Auditors'' Report are self-explanatory and don''t call for any further comments. SECRETARIAL AUDIT REPORT

Pursuant to the provisions of Section 204 of the act and rules made there under, the Company appointed M/s A. Arora & Co., a firm of Company Secretaries (C.P. No 993) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report in prescribed format MR.-3 given by aforesaid Secretarial Auditors is annexed to this Board Report as Annexure 3 and forms an integral part. The report doesn''t contain any reservation, qualification or adverse mark.

PARTICULARS OF LOAN, GUARANTEES AND INVESTMENTS UNDER SECTION 186

The details of Loans, Guarantees and Securities, and Investments covered under Section 186 of the act are given in the financial statement of the company during the period under review.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

The particulars of contracts or arrangements with related parties referred to in Section 188(1) of the act for the Financial Year 2017-18 in the prescribed Form AOC 2 has been enclosed with the report as Annexure 4.

BOARD''S COMMITTEES

The Board of Directors of the Company constituted the following Committees :

a) Audit Committee

b) Nomination & Remuneration Committee

c) Corporate Social Responsibility (CSR) Committee

d) Stakeholders Relationship Committee

The Committees composition, charters and meeting held during the year and attendance thereat, are given in the Report of Corporate Governance forming part of this Annual Report.

AMOUNTS TRANSFERRED TO RESERVES

The Board of Directors of the Company has decided to transfer Rs. 40 million to its General Reserves.

DIVIDEND

Your Directors have recommended a dividend of 25% i.e. Rs. 2.5 per equity share of face value of Rs. 10 each. The dividend shall be paid after the approval of the shareholders at the ensuing Annual General Meeting.

The total financial outgo of the dividend to be paid to shareholders will be Rs. 33.01 million (inclusive of Corporate Dividend Tax).

The dividend payout for the year under review has been formulated in accordance with the Company''s policy to pay sustainable dividend linked to long term growth objectives of the Company.

TRANSFER OF UNPAID AND UNCLAIMED AMOUNTS TO INVESTOR EDUCATION AND PROTECTION FUND

In terms of Section 125 of the act, the company has duly transferred the Unclaimed Dividend up to the financial years 2007-08 to the Investor Education and Protection Fund established by the Central Government . As no dividend was declared during the financial year 2008-09 and 2009-10, hence no amount was required to be transferred to the said fund during the year.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments in the business operations of the Company from the financial year ended 31st March, 2018 to the date of signing of the Director''s Report.

RISK MANAGEMENT POLICY

The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risks.

Some of the risks that the Company is exposed to are:

Risks of Specific Nature

The Company as a part of normal business monitoring review and development plans, identifies the specific risks for each business segment and develops necessary action plan to minimize the impact of same on business performance. Based on the present operations and areas of interest for the company, following specific nature risks are identified:

- Risks due to decline in overall demand for watches and over dependence on watch segment;

- Risks pertaining to over dependence on few customers;

- Foreign Exchange Risks;

- Risk related to availability of Skilled manpower;

- Risks related to compliance and statutory requirements Risk Strategy

The Company recognizes that risk is an integral and unavoidable component of business and is committed to managing the risk in a proactive and effective manner. The Company believes that the Risk cannot be eliminated but it can be better managed by

- Transferred to another party, who is willing to take risk, say by buying an insurance policy or entering into a forward contract in case of business involving use of Foreign exchange;

- Reduced, by adopting good internal controls;

- Avoided, by not entering into risky businesses;

- Retained, to either avoid the cost of trying to reduce risk or in anticipation of higher profits by taking on more risk, and;

- Shared, by following a middle path between retaining and transferring risk.

Risk Management Framework

The Company adopts systematic approach to mitigate risks associated with accomplishment of objectives, operations, revenues and compliance with the regulations. The Company believes that this would ensure mitigating steps proactively and help to achieve the risk management effectively.

The Company has constituted a Risk Management Committee of Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Chief Marketing Officer and Business Heads as its regular members and other senior functional heads on invitation basis. The Committee is committed to review periodically the various risks associated with the Company and report the same to the Board.

Focus of the Company is on the three key elements, viz., Risk Assessment / Identification, Risk Management and Risk Monitoring.

- Potential Risks are identified and analyzed, considering likelihood and its impact, as a basis for determining how they should be managed.

- Risk Assessment consists of a detailed study of threats and vulnerability and resultant exposure to various risks. Based on the assessment and identification of the risks, the committee decided the proactive steps for managing and monitoring these risks.

CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY

The Company is committed to discharge its social responsibility as a good corporate citizen. As part of its social responsibility, the Company has contributed to KDDL-Ethos foundation and the projects are undertaken by the trust formed for this purpose. These projects have been undertaken in compliance with the provision of the Section 135 of the act read with Schedule VII and rules made there under and in accordance with Company''s CSR Policy. The Annual Report on CSR activities required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is set out as Annexure 5 forming part of this report.

MECHANISM FOR EVALUATION OF BOARD

Pursuant to the provisions of the Companies Act, 2013 and the Listing Regulations, a structured procedure was adopted after taking into consideration the various aspects of the Board''s functioning, composition of the Board and its various Committees, execution and performance of specific duties, obligations and governance.

The performance evaluation of the Board, Committees thereof and Independent Directors was completed on time. The performance evaluation of the Board as a whole, Chairman and the Non-Independent Directors was carried out by the Independent Directors at their meeting.

DIRECTORS

There was no change in the composition of Board of Directors during the year. Mr. Sanjeev Kumar Masown, Whole time Director who retires by rotation at ensuing Annual General Meeting of the Company and being eligible, offers himself for re-appointment.

MATERIAL CHANGES AFFECTING THE FINANCIAL POSITION OF THE COMPANY

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

STATEMENT IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS

A strong internal control culture is an important focus and thrust area in the Company. The Company has comprehensive internal systems, controls and policies for all the major processes to ensure the reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws, and regulations, safeguarding of assets and economical and efficient use of resources.

The formalized systems of control facilitate effective compliance as per the Listing Regulations. The company also has well documented Standard Operating Procedures (SOPs) for various processes which are periodically reviewed for changes warranted due to business needs.

The Internal Auditors of the company continuously monitor the efficacy of internal controls/ compliance with SOPs with the objective of providing to the Audit Committee and the Board of Directors, an independent, objective and reasonable assurance on the adequacy and effectiveness of the organization''s risk management, control and governance processes.

The scope and authority of the Internal Audit activity are well defined in the Internal Audit scope and guidelines, approved by the Audit Committee. Internal Auditors develop a risk based annual audit plan with inputs from major stake holders, and the major focus areas as per previous audit reports.

All significant audit observations are reviewed periodically and follow-up actions thereon are reported to the Audit Committee. The Audit Committee also meet the Company''s Statutory Auditors and Internal Auditors to ascertain their views on the financial statements, including the financial reporting system, compliance to accounting policies and procedures, the adequacy and effectiveness of the internal controls and systems followed by the Company.

The top and senior management of the Company also assesses opportunities for improvement in business processes, systems and controls, provides recommendations, designed to add value to the organization and follows up on the implementation of corrective actions and improvements in business processes.

The senior management of the Company meets periodically to assess the performance of the each business segment and key functions of the Company and areas for improvement of performance / controls are identified and reviewed on continuous basis.

DISCLOSURE REGARDING ISSUE OF EMPLOYEE STOCK OPTIONS

The disclosure pertaining to Employee Stock Option Plan of the Company is enclosed as a Annexure-6 DECLARATION BY INDEPENDENT DIRECTOR

All Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the act and the regulations 16 (1) (b) of the Listing Regulations.

CONSERVATION OF ENERGY, TECHNOLOGY, ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information required under section 134(3)(m) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 relating to Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo is given in the Annexure - 7 forming an integral part of this Report.

CHANGE IN THE NATURE OF BUSINESS

There is no change in the nature of business of the Company

MANAGERIAL REMUNERATION

Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed with this report as Annexure --8.

VIGIL MECHANISM/WHISTLE BLOWER POLICY

The Board of Directors of the Company has adopted Whistle Blower Policy effective from 2nd February, 2015. The Whistle Blower Policy aims for conducting the affairs in a fair and transparent manner by adopting highest standards of professionalism, honesty, integrity and ethical behavior. All permanent employees of the Company are covered under the Whistle Blower Policy.

A mechanism has been established for employees to report concerns about unethical behavior, actual or suspected fraud or violation of Code of Conduct and Ethics. It also provides for adequate safeguards against the victimization of employees who avail of the mechanism and allows direct access to the Chairperson of the Audit Committee in exceptional cases. The Whistle Blower Policy of the Company is available at the link http://www.kddl.com/pdf/2015/KDDL Whistle Blower Policy.pdf.

DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

The Company had about 271 women employees, both permanent as well as contractual in various fields within the factory premises and offices. The Company has in place an policy in line with the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. There was no complaint received from any employee during the financial year 2017-18 and hence no complaint is outstanding as on 31stMarch, 2018.

MANAGEMENT DISCUSSION AND ANALYSIS REPORT

A detailed Report on Management Discussion and Analysis, pursuant to Listing Regulations is annexed to this report as Annexure - 9.

CORPORATE GOVERNANCE

The Company has complied with all the requirements of Corporate Governance as stipulated in Listing Regulations during the year ended on 31st March, 2018 as per Report on Corporate Governance annexed as Annexure -10 and a Certificate from the Practicing Company Secretary to this effect for the year ended on 31stMarch, 2018 is also enclosed with this report.

CASH FLOW ANALYSIS

In conformity with the provisions of Clause 34(2) of Listing Regulations, the Cash Flow Statement for the financial year ended on 31st March, 2018 forms an integral part of the Financial Statements.

PERSONNEL

Your Directors place on record their appreciation for the significant contribution made by all the employees, who through their competence, hard work, solidarity and co-operation, have enabled the Company to perform better.

TRADE RELATIONS

The Board wishes to place on record its appreciation for the support and co-operation that the Company received from its suppliers, distributors, retailers and other associates. The Company has always looked upon them as partners in its progress and has happily shared with them rewards of growth. It will be Company''s endeavor to build and nurture strong links based on mutuality, respect and co-operation with each other and consistent with customer interest.

ACKNOWLEDGMENTS

Your Directors take this opportunity to thank all the investors, clients, vendors, banks, regulatory and government authorities, for their continued support.

Date : 14 May, 2018 For and on behalf of the Board of Directors

Place : Gurugram, Haryana

Yashovardhan Saboo

Chairman & Managing Director

DIN : 00012158

Director’s Report