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Sarla Performance Fibers

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Directors Report Year End : Mar '18    Mar 16

Dear Members,

The Board of Directors takes immense pleasure in presenting the Twenty Fifth Annual Report on the Audited Financial Statements of Sarla Performance Fibers Limited (the Company) for the financial year ended 31st March, 2018.

Corporate Overview

Sarla Performance Fibers Limited (Your Company) is engaged in the business of Specialty Yarn from Past 24 Years having with 2 Manufacturing Plants at Silvassa, UT of Dadra & Nagar Haveli and a Dyeing Plant at Vapi, Gujarat and Wholly Owned Subsidiaries (WOS) at British Virgin Islands (BVI) and United States of America (USA) with Group''s Corporate Office situated at Mumbai.

FINANCIAL SUMMARY HIGHLIGHTS

The highlights of the performance of the Company for the year ended March 31, 2018 is summarized below: (Rs. in Lakhs)

Particulars

STANDALONE

2017-18

2016-17

CONSOLIDATED 2017-18 2016-17

Sales & Operations

27864.53

27669.25

30630.04

32185.93

Add: Other Income

2366.62

1671.46

1829.35

2703.00

TOTAL INCOME

30231.15

29340.71

32459.39

34888.93

Profit Before Interest, Depreciation & Tax

7865.90

7304.38

7288.22

8055.60

Less: Finance Cost

618.18

502.14

734.76

715.50

Less: Depreciation & amortization

1317.04

1243.55

2015.14

1969.55

PROFIT BEFORE TAX

5930.68

5558.69

4538.33

5370.74

Less: Provision for Taxation

- Current

1505.00

1200.10

1510.74

1204.93

- Deferred

362.83

879.93

565.62

1228.90

- Earlier Years

182.22

-

182.22

-

- MAT credit Entitlement

(145.39)

(492.70)

(1453.89)

(492.70)

NET PROFIT AFTER TAX

4026.02

3971.36

3733.64

3429.61

Net Comprehensive Income for the Year

4015.02

3967.60

3733.69

3452.51

Balance bought forward

12753.60

8994.77

11940.69

8743.66

Profit for the Year

4026.02

3971.36

2147.12

3410.49

Re measurement of Net defined benefit plans (net of

tax)

(11.00)

(3.76)

(11.00)

(3.76)

Dividend for the year

918.53

208.77

919.48

209.70

BUSINESS PERFORMANCE:

Operations: During the year under review the sales of the Company on standalone basis were Rs. 27864.53 Lakhs as against Rs. 27669.25 Lakhs in 2016-17 witnessing a minimal increase of 0.70%. The FOB value of exports stood at Rs. 14689.04 Lakhs compared to Rs 14635.78 Lakhs in 2016-17.

PROFITABILITY:

The profit before Depreciation, Interest & Tax was Rs. 7865.90 Lakhs as compared to Rs. 7304.38 Lakhs in the previous year, after providing for depreciation of Rs. 1317.04 Lakhs (Previous Year Rs. 1243.55 Lakhs) & provision for taxation of Rs. 1505.00 Lakhs (Previous Year Rs.1200.10 Lakhs), there was a net profit of Rs. 4026.02 Lakhs as compared to Rs. 3971.36 Lakhs in the Previous Year.

A. BUSINESS & ECONOMIC OVERVIEW

Global and India Economy: In 2017, the cyclical upswing underway since mid-2016 continued to strengthen and the global economy witnessed a pickup in growth. According to the International Monetary Fund (IMF), the year reported the broadest synchronized global growth surge since 2010. The advanced economies witnessed expansion owing to increased investments and manufacturing output. Similarly, key emerging markets and developing economies, including Brazil, China and India, posted strong upward momentum

Given stronger than expected economic activity in 2017, the IMF has revised its growth forecast for the United States from 2.3% to 2.7% in 2018 and from 1.9% to 2.5% in 2019.Stronger domestic demand in the United States is projected to increase imports. In Europe too, economic activity in 2018 and 2019 is projected to remain stronger than anticipated. Moreover, the advanced economies in Asia are expected to deliver stronger growth, while the emerging and developing ones are expected to grow at around 6.5% over 2018-19, broadly the same pace as in 2017.

India''s economy picked up some pace in FY 2017-18 and the gross domestic product growth was better than FY 2016-17. The structural reform of The Goods and Services Tax (GST) within a year of demonetisation is expected to provide a boost to the economic growth and investments in the long run with an improving business ecosystem, stable macroeconomic indicators and a liberal FDI regime, economy. According to World Bank''s Global Economic Prospects report, India''s GDP is expected to rise to 7.4% in FY 2018-19 and 7.8% in FY 2019-20.

Business Overview: Sarla Performance Fibers Limited is a leading exporter of Regular as well as High Tenacity Polyester and Nylon Yarns. It started operations 24 years ago as a commodity manufacturer of Man Made Fiber but transformed into a high value added yarn maker in the past decade. It has an installed capacity of 11,900 tons per annum for manufacturing yarns in Silvassa and 3200 tons per annum for a Dyeing unit at Vapi.The Plant of the Company located at Walterboro, South Carolina, USA is temporarily shut down in December 2017 due to low capacity utilization. The Company is exploring various options for its US Plant to make it profitable which includes entering into partnership/strategic alliance. The company''s emphasis this year will be to focus on niche end user applications in India, higher value added yarns to leading global apparel brands and companies. The company exports to 40 countries.

SPFL also owns Wind Power Capacity of 14.75 MW in totality, located in different states i.e. 6 MW is in the state of Maharashtra, 5.75 MW in the states of Gujarat and 3 MW in the state of Madhya Pradesh. Our plant load factor for the fiscal year 2018 was about 22%.

Customer Segments and Growth: The Company''s customer segments can be divided into four parts:

1) Innerwear, Narrow Fabrics, Hosiery and Sportswear.

2) Threads.

3) Industrial Yarns.

4) Regular Yarns.

Turnover Break Up (Customer Segment-wise)

Segments

FY 2017-18 (% of Total Sales)

FY 2016-17 (% of Total Sales)

Innerwear, Narrow Fabrics, Hosiery and Sportswear

38.30

37.50

Threads

32.50

32.45

Industrial Yarns

13.10

12.45

Regular Yarns

15.90

17.60

100.00

100.00

Turnover Break Up (Geographical)

Regions

FY 2017-18 (% of Export Sales)

FY 2016-17 (% of Export Sales)

South, North & Central America

24.84

17.60

Middle East & Europe

37.40

40.25

Africa

2.30

3.82

Asia Pacific

35.46

38.33

100.00

100.00

In all, we export to over 40 countries and to 105 customers. Our customer concentration is well distributed and no single customer exceeds more than 10% of our revenue.

B. OPPORTUNITIES AND THREATS:

The Indian textiles industry is among the oldest in the country. It is projected to reach USD 230 billion by 2020 from around USD 120 billion. Currently, the domestic textiles industry contributes 10% to the manufacturing output of the country, generates about 4% to its GDP and employs more than 45 million people. Importantly, the sector contributes 15% to the export earnings of Indiaremains a challenge.

Exports have been a core feature of India''s textile sector. The Indian textiles export market, estimated at billion, is expected to grow at a CAGR of 4% compared to the global CAGR of 3% over 2016-26.The fundamental strength of the textile industry is its prices of the raw materials like wool and increase in oilprices which increase the input costs.

One of the positive factors in recent time is the increasing gap between cotton and polyester prices. Though, there was a glut in cotton and prices had fallen due to oversupply and less offtake from China, the synthetic fiber prices also fell following the slump in crude oil and its derivatives. We believe, the demand for synthetic fiber will continue to outpace that of cotton due to the inherent price advantage and quality improvements.

One of our big market is the NAFTA and CAFTA market comprising of North American customers. Due to the growing preference for locally sourced products, the demand for synthetic yarn in this geography is increasing by 5-6% p.a. We are beneficiaries of this due to our direct presence in South Carolina, US through our manufacturing facility. Moreover, there are substantial cost advantage of manufacturing in the US making us reasonably cost competitive vis a vis suppliers from China, ASEAN and India.

We also have a strong opportunity for growth in the nylon yarn segment with nylon 66 production to ramp up this year.

C. OUTLOOK:

The prospects for outsourcing of polyester/nylon yarns remain healthy. This is because of increased capacity in India. While we remain optimistic about future growth.

D. FINANCIAL PERFORMANCE: (Rs. in Lakhs)

Item

2017-2018

2016-2017

% increase

Raw Material Cost& Purchase of Stock in trade

13751.31

11827.81

16.26%

Employee Benefit and Other Expenditure

8613.94

10208.52

-15.62%

EBIDTA

7865.90

7304.38

7.69%

Finance Cost

618.18

502.14

23.11%

Fixed Assets (Gross Block)

19183.23

17805.56

7.74%

Net Current Assets

5178.62

3581.42

44.60%

Working Capital Finance

6445.68

8186.51

-21.26%

Cash & Bank Balances

4190.64

6923.46

-39.47%

Raw Material Cost: The Raw Material prices increased in the year 2017-18 due to continuous increase in Partially Oriented Yarn (POY) and Chips Prices. The Major reason for increase in prices of Raw Material is increase in price of Crude oil.

Expenditure: The Major reason for decrease in expenditure is reduction in Excise Expenses after implementation of Goods and Services Tax (GST).

Interest Cost: The interest cost increased mainly due to increase in USD LIBOR.

Fixed Assets: The increase in fixed assets of Rs. 1377.67 Lakhs is due to regular addition in Plant and Machinery.

Net Current Assets and Cash & Cash Equivalents: the Decrease in Net Current Assets is majorly due to decrease in fixed deposits which are utilised for the purpose of incurring capital expenditure for Plant & Machineries.

E. RISK AND CONCERNS

Raw material sourcing: We source 51% of our RM requirements (nylon and polyester chips/fiber) from India and 49 % from imports. For our RM sources we have multiple suppliers. Last year, the price of our major RM POY ranged between Rs 62 to 115 per kg and that of Nylon yarn ranged between Rs 210 to 310 per kg.

Interest Rates: The Company''s average gross interest cost in the last year increased by 23.11%. The company''s present Debt Equity Ratio is 0.35. The long term Debt equity Ratio is 0.13. Interest costs are 2.04% of total revenue.

Exchange Rate: 52% per cent of company revenue is in foreign currency (Dollar, Euro & GBP) and balance is in INR. Also, we import 23.54% per cent of turnover (88.27% of which consists of raw material purchases) creating a natural hedge to that extent. Apart from this, from time to time forward cover is taken to hedge exposure in foreign currency. For FY18, our average forward cover was for 3 months of our revenue.

Inflation: The Company does not cater to retail customers. Its sales are to the business segment and hence it has been able to pass on inflationary pressures. It does not expect any major impact dueto current high level of inflation.

F. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY:

The Company has in place reasonable internal control system both from the business process and regulatory compliance point of view. The system is reviewed and updated on regular basis. The company is continuously upgrading its internal control systems by measures such as strengthening of Information Technology infrastructure and use of external management consultant services.

G. HUMAN RESOURCES/INDUSTRIAL RELATIONS:

The Company has always valued and nurtured its human resources, nonetheless, globalization, high growth of the Indian economy in recent times and its ambitious growth targets have made talent attraction and retention amongst the biggest challenges the company faces today.

The company has in place a good appraisal system to motivate all the employees. The company believes in continuous development for all its employees and for that company is planning to frame a program wherein all the employees will be provided training into related areas of skill development.

H. CAPITAL EXPANSION AND INVESTMENT:

Last year, we incurred a CAPEX of Rs. 1377.67 towards purchase of Plant & Machinery. For F.Y. 2018-19 we envisage higher amount of CAPEX to the tune of about Rs. 3000.00 Lakhs.

I. VALUE ADDED STATEMENT (Rs. in Lakhs)

Particulars

2017-18

2016-17

2015-16

2014-15

2013-14

Income from Production/Operations

27864.53

25954.04

24871.70

27229.95

24,365.14

Add : Other Income

2366.62

2026.98

2181.88

1146.98

783.89

CORPORATE OUTPUT

30231.15

27981.02

27053.58

28376.94

25,149.03

Less : Cost of Raw Materials Consumed

13751.31

10852.68

11095.02

12023.68

12,718.59

Less : Cost of Traded Goods

-

57.07

1159.90

2962.63

1,307.76

Less : Other Manufacturing Expenses

5068.47

5964.82

4847.21

4792.65

4,192.62

Less : Administrative & Other Expenses

2207.38

2022.55

1922.64

2173.37

1,760.33

EQUALS GROSS VALUE ADDED

9203.99

9083.90

8028.81

6424.61

5,169.72

Less : Depreciation &Amortization

1317.04

1243.55

1014.40

913.55

935.98

Less : Extra Ordinary/Prior Period Items

-

-

-

-

-

EQUALS NET VALUE ADDED

7886.95

7840.35

7014.41

5511.06

4,233.75

ALLOCATION OF NET VALUE ADDED

To Personnel

1007.77

921.73

831.10

778.28

619.19

To Taxes (including tax on proposed div.)

1904.66

1666.99

1587.87

1383.90

1087.74

To Creditors (via interest)

618.18

579.11

508.07

514.48

388.89

To Investors (via dividend)

918.53

918.53

876.78

668.02

521.27

To The Company (via retained earnings)

3437.81

3753.99

3210.60

2166.38

1,616.66

7886.95

7840.35

7014.41

5511.06

4,233.75

DIVIDEND:

Keeping in view the continued good performance, future fund requirements of the Company and for rewarding shareholders, your directors are pleased to recommend a dividend @ 110% i.e. Rs. 1.10 per equity share of face value of Re. 1 each fully paid-up Equity Shares [Excluding the Share upon which the Promoter / Member have waived / forgone / his / her / their right to receive the Dividend by him / her / them for the financial year ended 31st March, 2018]. The dividend shall be paid to members, whose names appear in the Register of Members as on 21st September, 2018.

MANAGEMENT DISCUSSION & ANALYSIS:

Management''s Discussion and Analysis Report for the year under review, as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (Listing Regulations), is presented in a separate section, forming part of the Annual Report.

CONSOLIDATED FINANCIAL STATEMENT:

In accordance with the provisions of the Companies Act, 2013 (the Act) and Ind AS 110 - Consolidated Financial Statement read with Ind AS - 28 Investments in Associates and Ind AS 31 - Interests in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES:

The Company does not have any Indian Company as Subsidiary. There are two wholly owned overseas subsidiaries viz. Sarla Overseas Holdings Ltd (BVI) and Sarlaflex Inc. (USA) and one Step down subsidiary viz. Sarla Europe (LDA) as on 31st March, 2018. There has been no material change in the nature of the business of the subsidiaries. The Policy for determining material subsidiaries as approved may be accessed on the Company''s website at www.sarlafibers.com.

Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company at the link: www.sarlafibers.com.

The Company will make available, the Financial Statements of the Subsidiary Companies to any Member of the Company who may be interested in obtaining the same.

No Company has become or ceased to be a Subsidiary during the year under consideration.

The Company is not having any Holding Company or Joint Venture or any Associates Company.

The salient features of the financial statements of the subsidiaries in pursuance of Section 129 (3) of the Companies Act, 2013, read with Rule 5 of The Companies (Accounts) Rules, 2014 are given herein below in prescribed form AOC-1:

(Rs. in Lakhs)

Name of the Subsidiary

Sarla Overseas Holdings Ltd (SOHL)

Sarlaflex Inc

Sarla Europe LDA (Subsidiary of SOHL)

Reporting period for the subsidiary

April to March

April to March

April to March

Reporting Currency

USD

USD

EURO

Conversion Rate

65.04

65.04

80.62

Number of Shares

435000

989000

3

Share Capital

196.99

596.49

3.18

Reserve and Surplus

4853.31

(7105.99)

(7.10)

Total Assets

5697.44

15068.02

303.72

Total Liabilities (Including Reserves)

5697.44

15068.02

303.72

Investments

3.17

5934.20

-

Turnover

4595.53

1681.33

270.04

Profit before Taxation

1185.21

(1512.13)

17.67

Provision for Taxation

4.86

(203.66)

4.86

Profit after Taxation

1180.35

(1715.79)

12.81

Proposed Dividend

902.51

-

-

% of shareholding

100%

100%

60%

Country

British Virgin Island

United States of America

Portugal

SECRETARIAL STANDARDS:

The Directors state that applicable Secretarial Standards, i.e. SS-1 and SS-2, relating to ''Meetings of the Board of Directors'' and ''General Meetings'', respectively, have been duly followed by the Company.

DIRECTORS'' RESPONSIBILITY STATEMENT:

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013:

a. that in the preparation of annual accounts for the year ended 31st March, 2018, the applicable accounting standards had been followed along with proper explanation relating to material departures for the same;

b. that they 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 of the Company for that year;

c. that 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. that the Directors had prepared the annual accounts on a ''going concern'' basis and

e. that the Directors had laid down internal financial controls and such internal financial controls are adequate and operating effectively.

f. that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively.

CORPORATE GOVERNANCE:

In compliance with the provisions of Schedule II of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Report on the Corporate Governance is annexed and forms an integral part of this Report. The requisite certificate from the Statutory Auditors of the Company confirming compliance with the conditions of Corporate Governance is attached to the report of Corporate Governance.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013.

Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed off during the year 2017-18

- No of complaints received: NIL

- No of complaints disposed off: NIL

RISK MANAGEMENT:

Internal Control Systems and Their Adequacy:

The Company has an Internal Control System, commensurate with the size of its operations. The Internal Audit Department monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company and its subsidiaries. Based on the report, significant audit observations and corrective actions thereon are regularly presented to the Audit Committee of the Board.

The Company''s Internal Audit Department also monitors and evaluates the internal control system and submits Quarterly Reports which are placed before the Audit Committee of the Board.

DIRECTORS AND KEY MANAGERIAL PERSONNEL:

In terms of provisions of the Section 152(6) of the Companies Act, 2013, Ms. Neha K. Jhunjhunwala, Director retire by rotation at the ensuing Annual General Meeting, and being eligible offers herself for re-appointment. The profile of Director seeking reappointment pursuant to Regulation 36 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is included in the Annual Report.

Mr. Arun Vaid, Independent Director (DIN:00351464) has ceased to be an Independent Director of the Company with effect from 12th December, 2017. The Board places on record its appreciation towards valuable contribution made by Mr. Arun Vaid during his tenure as Director of the Company.

The Board of Directors of the Company on the recommendation of Nomination and Remuneration Committee appointed Ms. Shreya Desai (DIN: 08041995) as an Additional (Independent NonExecutive) Director of the Company with effect from 12th December, 2017 subject to approval of Shareholders.

All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

ANNUAL PERFORMANCE EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit Committee, CSR Committee, Nomination & Remuneration Committee, Risk Management Committee and Stakeholder Relationship Committee. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report.

RELATED PARTY TRANSACTIONS:

All related party transactions that were entered into during the financial year were on an arm''s length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors or Key Managerial Personnel which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed at the meetings of Audit Committee and also at the Board meeting for approval. The particulars of contracts or arrangements with related parties referred to in sub-section 1 of Section 188 of the Companies Act, 2013 are furnished in Form AOC-2 in ''Annexure A'' to this report.

The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company''s website at the link: www.sarlafibers.com.

Members may refer to Note No 45 to the Standalone Financial Statement which sets out related party disclosures pursuant to Ind AS.

CORPORATE SOCIAL RESPONSIBILITY:

As required under Section 135 of the Companies Act, 2013, the Board in its meeting held on September 30, 2014 formulated CSR Committee for formulating the CSR Policy and implementing the Corporate Social Responsibility (CSR) activities of the Company.

The CSR Committee had met on 27th May, 2017. The Company was required to make CSR contribution aggregating to 2% of average net profits of preceding three financial years. The Committee earmarked Rs. 105.03 Lakhs towards company''s CSR activities for financial year under review. However, the Committee was by then in process of identifying areas where it could contribute money. Hence, the company could not contribute to CSR in time. Efforts would be made to contribute more in the coming years as we feel the sense of social security. The CSR Policy is available on the Company Website at www.sarlafibers.com.

The Annual Report on CSR activities is attached with this report as ''Annexure B''.

AUDITORS AND AUDITORS'' REPORT STATUTORY AUDITOR:

CNK & Associates LLP, Chartered Accountants, Mumbai (ICAI Firm Registration No. 101961W) were appointed as the Statutory Auditors of the Company for a term of five consecutive years, at the Twenty Fourth AGM of the Company held on 29th September, 2017.

They have confirmed that they are not disqualified from continuing as Auditors of the Company.

In terms of the Companies (Amendment) Act, 2017 and vide notification no S.O.1833(E) dt. 7.5.2018, the Ministry of Corporate affairs have done away with the requirement of ratification of the appointment of auditors, at each subsequent annual general meeting, by deleting the 1st Proviso to the sub-section (1) of Section 139 of the Companies act, 2013. Accordingly, the same is now onwards not required to be put up to the members for ratification.

The Notes on financial statement referred to in the Auditors'' Report are self-explanatory and do not call for any further comments. The Auditors'' Report does not contain any qualification, reservation, adverse remark or disclaimer.

COST AUDITOR:

Pursuant to the provisions of Section 148 of the Companies Act, 2013, read with Rule 4 of the Companies (Cost Records and Audit) Rules, 2014 and Rule 14 of the Companies (Audit and Auditors) Rules, 2014 and pursuant to the recommendations by the Audit Committee in that behalf, M/s. B.F. Modi &Associates, Vapi Cost Accountants, (Membership Number: 6955), was appointed as Cost Auditors of the Company for carrying out the Audit of Cost Records of Company maintained for the financial year from 1st April, 2017 to 31st March, 2018.

SECRETARIAL AUDITOR:

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed CS Ajit Sathe- Proprietor of M/s A. Y Sathe & Co. Company Secretaries in Practice (Registration No.:FCS2899/COP738) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure C.

The Secretarial Auditor has made following qualifications / adverse remarks:

I. Under the Companies Act, 2013:

a) During financial year 2017-18, the Company has not spent full amounts due i.e. 2% of average net profit of last three financial years towards Corporate Social Responsibility activities pursuant to Section 135 of the Companies Act, 2013.

b) The Company is yet to file Statement of shares transferred to the Investor Education and Protection Fund in Form IEPF-4 as required to be made under Section 124(6) of the Companies Act, 2013.

c) The Company is yet to file Form MGT-14 for appointment of Internal Auditor.

d) The Company has continued to give Interest Free Loans to its wholly owned Subsidiaries during the financial year 2017-18.

Board''s Reply to Secretarial Auditors'' qualifications/adverse remarks:

I) Under the Companies Act, 2013:

1) The Committee formed for CSR Purpose was in process of identifying areas where it could contribute money and therefore full amount could not be contributed towards CSR objectives.

2) The Company have already deposited the amount of unclaimed dividend for financial year ended 31st March, 2010 on 22nd November, 2017 to IEPF Account. However, the Share Transfer Agent of the company is in the process of transfer of shares to IEPF Account. As soon as the procedure is completedand The Company will file relevant form with ROC.

3) The Company inadvertently missed to file the MGT 14 to ROC. The same will be filed in Due Course. .

4) As a part of project funding the Company had agreed to give interest free loan to its wholly owned subsidiary and the said commitment continuous to make the project financially viable. Even provisions under FEMA Regulations permit giving of interest free loans to wholly owned subsidiary Company

DISCLOSURES

Meetings of the Board:

Four meetings of the Board of Directors were held during the year. The particulars of meetings held and attended by each Director are detailed in the Corporate Governance Report, which forms part of this Report.

Audit Committee:

The Audit Committee comprises two Independent Directors namely Jigar Shah (Chairman) and Parantap Dave and Mr. Madhusudan Jhunjhunwala, Whole-time Director. During the year all the recommendations made by the Audit Committee were accepted by the Board.

Corporate Social Responsibility (CSR) Committee:

The CSR Committee comprises Mr. Madhusudan Jhunjhunwala (Chairman), Mr. Jigar Shah and Mr. Parantap Dave.

Vigil Mechanism:

The Company has established Vigil Mechanism and a Whistleblower policy in accordance with provisions of the Act and Listing Regulations. The Vigil Mechanism and whistle-blower policy is out on the Company''s website and can be accessed at: www.sarlafibers.com

Particulars of Loans given, Investments made, Guarantees given and securities provided:

Particulars of Loans given, Investments made, Guarantees given and securities provided along with purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in Note No.51of the Standalone financial statements.

Conservation of Energy, Technology Absorption and Foreign Exchange earnings & outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in ''Annexure D'' to this Report.

Extract of the Annual Return:

The details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith as Annexure E.

Particulars of Employees and related Disclosures:

During the year under review, there was no employee drawing remuneration in excess of limits prescribed under Rule 5 (2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Information required pursuant to Section 197 (12) read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees:

1. The Ratio of the remuneration paid to each director to the median remuneration of the employees of the Company for the financial year 2017-18:_

Name of Director

Remuneration

Paid

Median

Remuneration

Ratio

Mr. Madhusudan S. Jhunjhunwala (Chairman, Wholetime Director)

1,38,00,000

1,51,800

90.90x

Mr.Krishnakumar M. Jhunjhunwala (Managing Director)

1,38,00,000

1,51,800

90.90x

Independent directors are paid sitting fees for attending board meetings which are not considered.

2. The percentage increase in remuneration of each director, Chief Financial Officer, Chief Executive Officer, Company Secretary in the financial year:

Name of Director

Remuneration

paid

Percentage Increase in current financial year

Mr. Madhusudan S. Jhunjhunwala (Chairman, Whole-time Director)

1,38,00,000

4.5%

Mr.Krishnakumar M. Jhunjhunwala (Managing Director)

1,38,00,000

NIL

Mr. Mahendra Sheth (CFO & Company Secretary)

46,03,208

5.84

3. The percentage increase in the median remuneration of employees in the financial year:

7-10%

4. The number of permanent employees on the rolls of company:

208

5. Average percentage increase in salaries of non-managerial employees was 7-10% as compared to average percentage increase in managerial remuneration which was 5-7%

6. The Board affirms that the remuneration paid is as per the Remuneration Policy of the Company.

Neither Managing Director nor Whole-time Director of the Company receives any remuneration or commission from any Subsidiary of the Company.

GENERAL:

Your Director state that no disclosure or reporting is required in respect of following matters as there were no transactions on these items during the year under review:

Details relating to Deposits covered under Chapter V of the Act.

Issue of Equity shares with differential voting rights as to voting, dividend or otherwise.

Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except Employees'' Stock Options Plan referred to in this Report.

The Company does not have any scheme of provision of money for the purchase of its own shares by employees or by trustees for the benefit of employees.

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company''s operations in future.

No fraud has been reported by the Auditors to the Audit Committee or the Board.

ACKNOWLEDGEMENT:

Your Directors wish to place on record their appreciation of the dedicated efforts by employees at all levels. The Directors also wish to place on record their word of sincere appreciation to the bankers, the investors, the vendors, the customers, and all other business associates for their continued support.

FOR AND ON BEHALF OF BOARD OF DIRECTORS

MADHUSUDAN S. JHUNJHUNWALA

Place: Mumbai Chairman and Whole Time Director

Date: 14th August, 2018 DIN: 00097254

Source : Dion Global Solutions Limited
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