Arex Industries Ltd Directors Report.

DIRECTORS REPORT

The Members,

Your Directors are pleased to present this Twenty Seventh Annual Report together with the Audited Statement of Accounts of the Company for the year ended on 31st March, 2016.

FINANCIAL RESULTS

(Amount in Rupees)

31.03.2016 31.03.2015
Revenue from Operations (Net of Excise Duty) 321553204 330365500
Profit before Depreciation & Amortisation Expenses and Finance Cost 77686528 78932669
Less: Finance Cost 7183316 7653810
Depreciation & Amortisation Expenses 25389633 31343450
Profit before Tax 45113579 39935409
Tax Expenses- Current Taxation 15900000 16200000
Deferred Tax 530000 (3270000)
Add/(Less): MAT Credit Entitlement (Excess)/Short Provision of tax of earlier years 29192 133850
Profit for the year 28654387 26871559
Surplus brought forward from previous year 12452843 101931974
Profit available for Appropriation 153182730 128803533
Proposed Dividend 11876100 3562830
Tax on Proposed Dividend 2417695 712360
Balance Carried to Balance Sheet 138888935 124528343

OPERATION

The year under review was a challenging business environment. The performance of the Company continued to be satisfactory despite adverse market conditions. The Company continued to explore overseas market opportunities and received good response. The exports amounted to Rs.1,93,16,394/ - i.e. increase of 48% over the previous years exports. There was heavy fluctuation in foreign exchange rates resulting into a loss of Rs.93,855/-. The raw material prices, fuel charges and other overheads were also increased during the year. However, the Company has earned profit of Rs.4,51,13,579/- i.e. increase of about 13% over the previous years profit before taxes.

The Companys expansion project with modern, upgraded, high tech machineries and other supporting systems is under implementation and likely to be completed during the current year. The Company also proposes to explore opportunities under Make in India projects and Amended Technology Upgradation Schemes (ATUFS). The Company is also planning for further strategic expansion with a total outlay of Rs.30 Crore.

DIVIDEND

Your Directors are pleased to recommend dividend at 30% (i.e. Re.3/- per share) out of the current profits / surplus in the profit and loss Account, subject to approval of the members in their ensuing Annual General Meeting. The final dividend, if declared, will absorb an outflow of Rs.1,18,76,100/- towards dividend amount and Rs.24,17,69E/- towards dividend distribution tax. The requisite provision for dividend has been made in the accounts for the year ended 31st March, 2016. Further, your Directors do not propose any amount to carry to the general reserves.

FINANCE

The Company continued to avail financial assistance to finance its present and proposed expansions.

PUBLIC DEPOSITS

The Company has not accepted any deposit within the meaning of the provisions of Section 2(31) and 73 to 76 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014. There is no deposit outstanding as on the commencement of the said Act.

INSURANCE

All the assets of the Company including buildings, plant and machineries and stocks are adequately insured.

INDEPENDENT DIRECTORS

As per the provisions of Section 149 of the Companies Act, 2013, the Independent Directors have confirmed and declared that they are not disqualified to act as independent directors and the Board is also of the opinion that the Independent Directors fulfill all the conditions specified in the Companies Act, 2013 making them eligible to act as Independent Directors. One separate meeting of the Independent Directors was held on 18.5.2015.

MATERIAL CHANGES AND COMMITMENTS, IF ANY, AFFECTING THE FINANCIAL POSITION OF THE COMPANY

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which the financial statements relate and the date of this Report.

BOARD EVALUATION

Pursuant to the provisions of Section 134 of the Companies Act, 2013, a structured questionnaire was prepared after taking into account various aspects like- company performance, contribution of individual directors, composition of Board and committees, performance of duties, culture, obligations, risk management etc. for evaluation process. The Board noted that all directors have understood the opportunities and risks to the Companys strategy with good balance between the core values of the Company and the interest of the stakeholders. The Board also evaluated performance of the various committees and concluded with satisfaction. The Board expressed their satisfaction for the above evaluation process.

CHANGES IN NATURE OF BUSINESS

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

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirements of Section 134(3)(c) of the Companies Act, 2013, the Directors hereby state that:

i) in the preparation of annual accounts for the financial year ended March 31, 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures;

ii) the directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the 315t March, 2016 and of the profits of the Company for the year ended on that date;

iii) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

iv) the directors have prepared the annual accounts on a going concern basis.

v) the directors had laid down internal controls to be followed and such internal controls are adequate and were operating effectively.

vi) 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.

ORDERS BY REGULATORS, COURTS OR TRIBUNALS

No significant and/or material orders were passed by any Regulator, Court or Tribunal impacting the going concern status and the Companys operations in future.

COMPANYS POLICIES Code of Conduct

All Directors, Key Managerial Personnel and Senior Management of the Company have confirmed compliance with the code of conduct applicable to the Directors and employees of the Company. The Directors have confirmed compliance with the provisions of Section 164 of the Companies Act, 2013.

Risk Management Policy

The Company has formulated risk management policy so as to identify, evaluate, monitor and minimize identifiable business risks in the organization.

Vigil Mechanism/Whistle Blower Policy

The Company adopted Whistle Blower Policy to deal with matters pertaining to fraud, mismanagement etc.

Other Policies

Companys Policies on Remuneration, Materiality of Related Party Transactions, Board diversity, Preservation of documents, Corporate Social Responsibility (CSR) are finalized in accordance with applicable laws.

Donation

The Company has voluntarily donated Rs.4,50,000/- to Shri Hombuja Jain Math, Karnakata, Rs.2,00,000/- to Hare Krishna Movement, Ahmedabad (Charitable Trust) and Rs.21,500/- for miscellaneous charitable activities.

INTERNAL FINANCIAL CONTROLS

The Company has a proper and adequate internal control system to ensure that all assets are safeguarded and protected against loss from unauthorized use or disposition and those transactions are authorized, recorded and reported correctly.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION

The Company has been taking steps for optimum utilisation of power and fuel. The information as required under Section 134(3)(m) of the Companies Act,

2013 read with the Companies (Accounts) Rules, 2014, is given by way of Annexure A forming part of this Report.

MANAGEMENT DISCUSSION AND ANALYSIS (MD&A) & CORPORATE GOVERNANCE

Good Governance underpins the success and integrity of the organization, institutions and markets. The Companys philosophy is based on trusteeship, transparency and accountability. Our business fosters a culture of ethical behaviour and disclosures which build a trust of our stakeholders. The Code of Conduct, ethics and Code of Conduct for Prevention of Insider Trading are an extension of our values and reflect our commitment to ethical business practices, integrity, and compliances of both voluntary and statutory requirements. The Company has complied with conditions of Corporate Governance in line with the Clause 49 of the Listing Agreement entered into with BSE Ltd, Mumbai and also applicable regulations of the new Listing Regulations

entered into with the BSE Ltd, Mumbai under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), effective from December, 2015. Corporate Governance provisions as specified in Regulations 17 to 27, Clauses (b) to (i) of sub-regulation (2) of Regulation 46 and para C, D and E of Schedule V of the aforesaid LODR are not applicable at present. However, a detailed note on Management Discussion and Analysis is given as an Annexure C to this Report.

EXTRACT OF ANNUAL RETURN

As required under the provisions of Section 92 (3) of the Companies Act, 2013, an extract of Annual Return in Form MGT-9 is given by way of an Annexure D forming part of this Report.

PARTICULARS OF EMPLOYEES

There was no employee covered under the purview of Section 134(3)(q) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.

Information required under the provisions of Section 197(12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is given by way of an Annexure E to this Report.

BOARD OF DIRECTORS

a. Composition

The Board consists of nine Directors, of whom four are Executive Directors, two are non-executive non-independent Directors and three are independent Directors including one Woman Director having no material pecuniary relationship or transactions with the Company. None of the Directors on the Board is a member of more than ten committees and Chairman of more than five committees across all Companies in which they are directors.

Shri Chirag D Bilgi (DIN:02094970) and Shri Laxman C Tilani (DIN:00532516) are due to retire by rotation as Directors at the ensuing Annual General Meeting and are eligible for re-appointments. They have also offered themselves for re-appointments.

b. Independent Directors

The Non Executive Independent Directors fulfills the conditions of the independence specified in Section 149(6) of the Companies Act, 2013 and the Rules made thereunder. Separate meeting of the Independent Directors was held on 18.5.2015 whereat all the IDs were present.

c. Board Procedure

Notice for the Meeting of the Board of Directors are served to all the Directors along with agendas and brief notes for their consideration and deliberations at the meeting. The Board usually meets once every quarter to reviewing and taking on record of the quarterly performance of the financial results of the Company along with limited review report submitted by the Auditors of the Company. The Board of Directors met five times on 19.5.2015, 24.6.2015, 10.8.2015, 7.11.2015 and 12.2.2016. The gap between any two meetings did not exceed 120 days.

d. Code of Conduct

The Board Members and Senior Management team of the Company follow the Code of Conduct formulated and implemented by the Company. The code of conduct emphasizes the Companys commitment to compliances with the highest standards of legal and ethical behaviour.

e. Conflict of interest

Each Director informs the Company on an annual basis about the Board and Committee position he occupies in other Companies and also notifies changes therein during the year. Members of the Board while discharging their duties avoid conflict of interest in the decision making process and also restricts themselves from discussion or voting in transactions in which they have concern or interest.

f. Insider Trading Code

The Company has adopted a Code of Conduct for Prevention of Insider Trading in accordance with the requirements of Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.

COMMITTEES OF THE BOARD

a. Audit Committee

The Audit Committee reviews and recommends or suggests appropriate actions, financial results, related party transactions, appointment of auditors, internal controls etc from time to time. The Audit Committee comprised of (1) Shri Balkrishna I Makwana (2) Shri Dinesh H Pande (3) Shri Laxman C Tilani and (4) Smt Harsha H Parikh. The Committee was reconstituted with effect from 12th February, 2016 which comprises (1) Shri Balkrishna I Makwana (2) Shri Dinesh H Pande and (3) Shri Laxman C Tilani. Shri Balkrishna I Makwana is the Chairman of the Committee. The Committee met 4 times on 19.5.2015, 10.8.2015, 7.11.2015 and 12.2.2016 during the year.

b. Nomination and Remuneration Committee

The Nomination and Remuneration Committee has been constituted and entrusted with the powers of determining remuneration packages of the Directors and Senior Executives of the Company, keeping in mind the qualifications, experience, expertise and industry trends. (1) Shri Balkrishna I Makwana, (2) Shri Dinesh H Pande, and (3) Shri Vasant R Shah are the members of the Nomination and Remuneration Committee. Shri Balkrishna Makwana is the Chairman of the Committee. The Committee meets as and when required.

REMUNERATION POLICY

1. Remuneration to Non Executive Directors:

The Non Executive Directors are paid remuneration by way of sitting fees for each meeting of the Board or Committee of Directors attended by them. The total amount of sitting fees paid during the year was Rs. 1.50 Lacs during the FY 2015-16. Non executive Independent Directors do not have material pecuniary relationship or transactions with the Company.

2. Remuneration to Executive Directors:

The appointment and remuneration of Executive Directors including Managing Directors and Whole Time Directors is governed by the recommendation of the Remuneration and Nomination Committee and resolutions passed by the Board of Directors and Shareholders of the Company. Payment of remuneration to Executive Directors is governed by the respective agreements executed between them and the Company. The remuneration package of Managing Directors and Whole Time Director comprises of salary, perquisites, allowances, incentives, bonus, contribution to provident fund and other retirement benefits as approved by the shareholders at the general meeting. The details of remuneration to Directors are given in the Annual Accounts for the year ended on 31st March, 2016.

3. Performance Evaluation

The Board has carried out annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of Committees of the Board. A structured questionnaire was prepared after circulating the draft forms, covering various aspects of the Boards functions such as adequacy of composition of the Board and its committees, Board culture, execution and performance of specific duties, obligations and governance. The performance evaluation of the Managing Director and Non- Independent Directors was carried out by the Independent Directors. The Directors express their satisfaction with the evaluation process.

c. Stakeholders Grievance Committee

The Stakeholders Grievance Committee comprises of (1) Shri Dinesh H Pande, (2) Shri Balkrishna I Makwana (3) Shri Laxman C Tiiani and (4) Smt Harsha H Parikh, for addressing the grievances of the investors. The Committee was reconstituted comprising (1) Shri Dinesh H Pande, (2) Shri Dinesh A Bilgi and (3) Shri Chirag D Bilgi wef 12th February, 2016. Shri Dinesh H Pande is the Chairman of the Committee. The Committee meets as and when required and looks after shareholders complaints and matters relating to transfer of shares, transmission, non-receipt of annual report, non-receipt of dividend, credit of shares to demat account etc. During the year under review, the Company had received 2 complaints from . the shareholders, which were resolved The Complaints are normally resolved within the stipulated period under the Listing Regulations. The requests for revalidation of dividend warrants and issue of duplicate share certificates or duplicate dividend warrants etc are normally attended after completion of necessary formalities and procedure. Smt Kairavi Bilgi has been appointed as the Compliance Officer of the Company. The Committee meets as and when required. During the year, the Company (1) received: 2 complaints, (2) resolved: 2 Complaints and there is no compliant pending as on 31st March, 2016.

d. Corporate Social Responsibility Committee

The Company has constituted Corporate Social Responsibility Committee (CSR) which comprises (1) Smt Harsha H Parikh, (2) Shri Dinesh H Pande, and (3) Shri Balkrishna I Makwana. Smt Harsha Parikh is the Chairman of the CSR Committee. The CSR Policy has been formulated but the committee has concluded that the provisions relating to CSR activities do not apply to the Company at present.

LISTING WITH BSE LTD

The Equity Shares of the Company are listed at the BSE Ltd, Mumbai under Stock Code No. 526851 and ISIN No. is INE480H01011. The Company has entered into fresh agreement with BSE Ltd under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 effective from December, 2015.

However, the Company continues to raise objections to the BSE Ltd for the exorbitant hikes, i.e increase of 1233% in annual listing fees over the fees paid for 2013-14 and increase of the same every year since 2014-15 (i.e. Rs.15000 to Rs.l lac in 2014-15 and from Rs.l lac to Rs.2 lacs in 2015-16). Therefore, the Annual Listing Fees for the year 2015-16 and year 2016-17 to the BSE Ltd, Mumbai are yet not paid. The Company has paid custodial charges to National Securities Depository Ltd and Central Depository Services (India) Ltd for the year 2016-17.

CHANGE OF REGISTRAR AND SHARE TRANSFER AGENT (RTA)

The Securities and Exchange Board of India has issued ex-parte interim order bearing No. WTM/RKS/MIRSD2/41/2016 dtd 22/3/2016 against the Companys then existing RTA, i.e. Sharepro Services (India) Pvt Ltd, Mumbai refraining from its RTA activities and directing the concerned Companies to change their RTA. Therefore, the Company has entered into necessary agreements and appointed M/s Link Intime India Pvt Ltd, Mumbai as its new RTA with effect from 16th August, 2016 to carry out the share transfers, transmission, dividend and other related activities.

RELATED PARTY TRANSACTIONS

All the transactions entered with related party during the year under review were on arms length basis and in the ordinary course of business and approved by the Audit Committee. Hence these transactions are outside the purview of the provisions of Section 188 of the Companies Act, 2013. However, details of such transactions i.e. purchases, lease, services, etc., are given in the Notes to the Financial Statements for the year ended on 31st March, 2016 and therefore details in Form AOC-2 are not given.

LOANS, GUARANTEES AND INVESTMENT

The Company has not granted any inter-corporate loan, given guarantee or provided any security for availing loan by other Company. However, the Company has made investments in other Companies/MF aggregating to Rs.1,02,60,700/- as per the Note No.10 to the Financial Statement for the year ended on 31st March, 2016.

ENVIRONMENT AND SAFETY

The Company considers clean and safe mode of operations in all respects. Further, as required under the provisions of Sexual Harassment (Prevention, Prohibition and Redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at workplace. There was no such complaint lodged during the year.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, a Secretarial Audit Report is given by way of an Annexure B, forming part of this Report. The Auditors observations are self-explanatory.

AUDITORS

M/s C R Sharedalal & Co., Chartered Accountants, Ahmedabad retires as the Statutory Auditors at the conclusion of the ensuing Annual General Meeting and are eligible for re-appointment to conduct audit for the financial year 2016-17 and have also indicated their willingness to act as Auditors, if appointed. The Company has obtained written consent and certificate as required under the provisions of Section 139 of the Companies Act, 2013. You are requested to consider their re-appointment.

The Auditors observations read with the notes to the Accounts are self-explanatory.

ACKNOWLEDGEMENTS

The Board of Directors of the Company appreciates continuous & comprehensive support and cooperation by the Companys bankers, shareholders, customers, suppliers and other business associates.

Your Directors place on record their deep appreciation for contribution and devoted services of the employees at all levels.

For and on behalf of the Board
Regd Office:
612, GIDC Estate
Chahtral,Tal: Kalol Neel D Bilgi Dinesh A Bilgi
Dist : Gandhinagar-382 729 Mg Director Mg Director/CFO
Date: 12th August, 2016 DIN:00096180 DIN:00096099