Cheviot Company Ltd Directors Report.

Dear Members, (Rs. in Lakhs)

The Board of directors present their report on the business and operations of the Company along with the Audited Standalone Financial Statements for the financial year ended 31st March, 2018.

1. FINANCIAL SUMMARY

Par!culars

For the year ended 31st March, 2017

Revenue from operations 37,611.67 39,354.15
Operating profit after depreciation and amortisation 4,999.12 3,506.84
Add: Other income 2,398.49 3,075.43
Add: Exceptional items: Indirect taxes for earlier year - 60.51
Profit before tax 7,397.61 6,642.78
Tax expense 1,990.00 1,694.73
Profit for the year 5,407.61 4,948.05
Other comprehensive income 277.99 228.56
Total Comprehensive Income for the year 5,685.60 5,176.61
Retained earnings - opening balance 2,643.29 2,090.53
Add/(Less):
Profit for the Year 5,407.61 4,948.05
Transfer from other comprehensive income (remeasurement gain/loss net of tax) to retained earnings 125.21 155.67
Reclassification from other comprehensive income to retained earnings 63.93 (50.96)
Amount available for appropria!on 8,240.04 7,143.29
Out of above:
Transfer to special economic zone re-investment reserve account - (300.00)
Transfer to general reserve (4500.00) (4,200.00)
Dividend including dividend distribution tax paid (54.29) -
Retained earnings - closing balance 3,685.75 2,643.29

The financial statements have been prepared in accordance with the Indian Accounting Standards (IND AS) notified under Section 133 of the Companies Act, 2013 read with Companies (Indian Accounting Standards) Rules, 2015, as amended. The financial statements for the year ended 31st March, 2017 have been restated in accordance with IND AS for comparative information. For the purposes of transition to IND AS, the Company has followed the guidance prescribed in IND AS 101 "First-time adoption of Indian Accounting Standards" with 1st April, 2016 as the transition date.

2. DIVIDEND

The Board of directors recommend a dividend of 1/- per ordinary share of face value of 10/- each (i.e. 10 %) for the financial year ended 31st March, 2018, aggregating to 43.11. Proposed dividend will be recognised as liability after approval of the members at the ensuing annual general meeting.

3. TRANSFER TO GENERAL RESERVE

We propose to transfer an amount of 4,500 to the general reserve out of the profit for the year.

(Rs. in Lakhs)

4. OPERATIONS AND STATE OF COMPANYS AFFAIRS

Revenue from operations, profitability and earnings per share show under noted position during the year under review as compared to previous year :

For the year ended 31st March, 2017
Revenue from operations 37,611.67 39,354.15
Export sales (C.I.F. value) 13,029.12 11,519.41
Operating profit 4,999.12 3,506.84
Other income 2,398.49 3,075.43
Profit before tax 7,397.61 6,642.78
Profit for the year 5,407.61 4,948.05
Earnings per ordinary share of face value of 10 (in ) 122.76 109.68

The overall performance of the Company during the year under review was much better than the previous year. The demand for Jute Goods remained good and steady. We witnessed substantial growth in production with better capacity utilisation during the year. There was significant growth in exports. However, revenue from operations was down mainly due to lower prices of raw jute having consequential impact in prices of finished goods.

We are pleased to report that the Company achieved highest ever operating profit in its history which was higher by 1,492.28 being 4,999.12 during the year under review as compared to 3,506.84 in the previous year. Such excellent jump in operating profit is attributed to better margins on goods sold coupled with higher production due to better capacity utilisation and operational efficiency, despite shortage of workers.

The bottom line was further improved by other income which was restricted to 2,398.49 on account of lower interest rates. Consequently, profit for the year was higher by 459.56 being 5,407.61 as compared to 4,948.05 during the previous year.

The Companys export oriented unit at Falta Special Economic Zone has been running smoothly. Efforts are being made to increase customer base in conventional and diversified hessian fabrics and jute shopping bags.

5. MANAGEMENT DISCUSSION AND ANALYSIS

a) Industry structure and developments

Under Jute Packaging Materials (Compulsory use in packing commodities) Act, 1987 (JPMA), order for compulsory packing of food grain at 90% and sugar at 20% continues up to 30th June, 2018. We are hopeful that the Government will further extend the Order and shall maintain the existing norms of packaging without further dilution in the larger interest of Jute Industry.

The availability of raw jute was comfortable throughout the year at reasonable price.

In promoting the exports of Jute Goods from India, Government has increased the rate of rewards in the form of duty free scrips from 5% to 7% of realised FOB value in free foreign currency under Merchandise Exports from India Scheme (MEIS) effective from 1st November, 2017. Moreover, National Jute Board is also continuing with scholarship scheme for children of jute mill workers, export market development assistance and incentive scheme for acquisition of plant and machinery.

In order to achieve overall growth of the Jute Industry, we are of the view that there is a need to lay thrust on manufacturing more diversified jute goods, carry out more research and development and make required capital investments as a result thereof.

b) Opportunities and threats

Opportunities

• Jute Goods, being bio-degradable and eco-friendly, will always be preferred across the world;

• Promotion of Jute diversified products by Government of India will help in increasing market of jute goods.

Threats

• Shortage of workers posing threat to maintain stable capacity utilisation ;

• Continuation of JPMA on periodic extension basis and its dilution ;

• Farmers opt for alternate agricultural activities in absence of proper incentive to grow jute crop on continuous basis.

c) Segment-wise or product-wise performance

The Company is engaged in a single business segment i.e. manufacturing and sale of Jute Goods. Hence, disclosure requirements as required by Ind AS -108 are not applicable in respect of business segment.

The geographical segments considered for disclosure are as under :

Particulars

For the year ended 31st March 2018

For the year ended 31st March 2017

India Overseas Total India Overseas Total
Revenue 23,618.01 13,029.12 36,647.13 27,013.33 11,519.41 38,532.74
Non-current assets other than financial instruments * 15,032.39 - 15,032.39 15,142.09 - 15,142.09

• Non-current assets other than financial instruments include property, plant and equipment, capital work-inprogress, investment property, other intangible assets, intangible assets under development, non-current tax assets (net) and other non-current assets.

d) Outlook

As of now, jute crop for the season 2018-19 appears to be lower, despite favourable weather conditions as the initial reports of sowing percentage for the new crop are not very encouraging. Moreover, the carryover from last season would be lower than the previous year. The cumulative effect of these adverse factors would lead to lesser availability of raw jute in the next crop year. Consequently, prices of raw jute are expected to remain higher than previous year.

Demand of jute goods is buoyant. There has been regular flow of Government Orders and enquiries from overseas markets. The Company is making all efforts to maintain steady production by incentivising and mobilising workforce in order to make effective utilisation of its production capacity to be able to execute orders.

Barring unforeseen circumstances, the outlook for the current year appears to be promising.

e) Risks and concerns

The key elements of business risks identified by the Company and measures taken to mitigate such risk are as under:

• Shortage of raw jute is a key element of risk. Availability of raw jute depends on crop size which in turn largely depends on weather conditions. The Company follows a policy of regular procurement of raw jute in a planned manner linked with production and maintains reasonable inventories.

• New generation machinery development and modernisation with latest technology are the key to survival of Jute Industry. More efforts towards research and development in this direction are required by the Jute Industry.

• Revenue concentration is an area of concern for the Company. The Company is largely dependent on Government Orders in domestic market. Efforts are being made to increase the foreign customer base.

• Shortage of labour and rate of absenteeism remain a key area of concern. The productivity is affected by labour shortage. The Company is mobilising new workers and providing them in-house training and incentivising workers on the basis of attendance from time to time.

• There is a possibility of new wage agreement which could have financial impact on account of increase in the wage cost.

f) Internal control systems and their adequacy

The Board has laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating effectively. Your Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business including adherence to the Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial disclosures. The audit committee periodically reviews such control procedures to ensure that internal controls are operating effectively.

M/s G.P. Agrawal, Chartered Accountants, Internal Auditor of the Company, carried out necessary checking in accordance with the aforesaid procedures and controls during the year under review. The statutory auditors have also reviewed the laid down policies and procedures of internal financial controls. No fraud was detected by the auditors.

g) Discussion on financial performance with respect to operational performance

The following are the significant areas of financial performance during the year under review :

• Revenue from operations was at 37,611.67 during the year as compared to 39,354.15 during previous year;

• Operating profit of the Company increased by 1,492.28, being 4,999.12 during the year under review as against 3,506.84 in previous year on account of better margins on goods sold coupled with higher production due to better capacity utilisation and operational efficiency.

• Finance costs was 89.04 during the year under review as against 61.88 in previous year.

• Inventories were valued at 6,141.71 as at 31st March, 2018 as against 6,004.57 as at 31st March, 2017. Increase in inventories was mainly due to higher stock of raw material ;

• The Company had invested 351.36 in fixed assets inclusive of capital advances during the year.

h) Material developments in Human Resource / Industrial Relations front, including number of people employed

Industrial relations remained harmonious during the year under review. Shortage of labour continues to remain an area of concern. Workers were incentivised for attendance.

As at 31st March, 2018, the Company had 3926 employees (Previous year 3779 employees) on its roll.

Workers training program continue for the new incumbents in order to develop their all-round skills and working knowledge. Besides, the Company provides benefits and facilities to deserving staffs under its various staff welfare schemes.

The Company has in place an anti-sexual harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this Policy. The Policy is gender neutral and is being monitored by a committee constituted by the Company for the said purpose. During the year under review, no complaint of sexual harassment was received by the Company.

i) Cautionary statement

Statements made in this section of the report on future expectation, performance and outlook are based on the current perception of the Board. Actual results may differ from those expressed in the statements.

6. BUY BACK OF ORDINARY SHARES

Pursuant to the approval of the Board at its meeting held on 24th May, 2017, your Company completed Buy Back of 2,00,000 fully paid-up ordinary shares of 10/- each (representing 4.43% of the total number of Ordinary Share capital of the Company as at 31st March, 2017) at the Buy Back price of 1,500/- per ordinary share in September, 2017 for an aggregate amount of 3,000. The Buy Back was made from all shareholders of the Company holding shares as on record date for the Buy Back, being 16th June, 2017 on a proportionate basis under the tender offer route in accordance with the applicable provisions of Securities and Exchange Board of India (Buy Back of Securities) Regulations, 1998, the Companies Act, 2013 and the rules framed thereunder.

7. SHARE CAPITAL

During the year, the Company extinguished 2,00,000 fully paid up ordinary shares consequent to Buy Back of 2,00,000 ordinary shares in September, 2017. Accordingly, the issued, subscribed and fully paid up ordinary share capital of the Company as at 31st March, 2018 stood at 431.13 consisting of 43,11,250 fully paid up ordinary shares of 10/- each.

8. CORPORATE GOVERNANCE

In terms of Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("Listing Regulations"), a separate report on corporate governance together with a certificate from Ms. Aditi Jhunjhunwala, practising company secretary, confirming compliance thereof is given in Annexure-I forming part of this report.

9. EXTRACT OF THE ANNUAL RETURN

The extract of the annual return in the prescribed format (Form MGT-9) is annexed hereto as Annexure-II forming part of this report. The annual return of the Company is available on the website of the Company (http://www.groupcheviot.net/investors-jute/corporate-governance-jute/ ).

10. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

Particulars of investments made by the Company have been disclosed in Note 9 and Note 15 to the financial statements for the financial year ended 31st March, 2018.

11. DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY

The Board of directors has developed a risk management policy for the Company and identified therein the elements of risk and concern that may threaten the existence of the Company. The audit committee and the Board of directors periodically review the risk elements and adopt a systematic approach to mitigate or reduce its impact. Discussion on risks and concerns have been made in this report under the head management discussion and analysis.

12. PARTICULARS OF CONRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions with related parties were carried out in the ordinary course of business and on arms length basis and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Regulations. No materially significant related party transaction was made by the Company with its promoters, directors or key managerial personnel etc. which may have potential conflict with the interest of the Company at large or which warrants the approval of the shareholders. All related party transactions were placed before the Audit Commi"ee for approval on a quarterly basis. Prior omnibus approval of the audit commi"ee was obtained for the transactions which were of a repetitive nature.

There was no material contract or arrangement or transactions at arms length basis with a related party during the year under review. Therefore, disclosure in Form AOC-2 is not required.

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

The information on conservation of energy, technology absorption, foreign exchange earnings and outgo, as prescribed under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014, are provided in Annexure-III forming part of this report.

14. CORPORATE SOCIAL RESPONSIBILTY (CSR)

During the year under review, your Company had spent 90.56 towards CSR activities. The annual report on CSR activities as required under Section 135 of the Companies Act, 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 and Rule 9 of the Companies (Accounts) Rules, 2014 is given in Annexure-IV, forming part of this report. The contents of Corporate Social Responsibility Policy of the Company are available on Companys website (h"p://www.groupcheviot.net/investors-jute/corporate-governance-jute/ ).

15. ESTABLISHMENT OF VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has established a vigil mechanism / whistle blower policy and encourages the affected persons to report any genuine concern or misconduct for prompt redressal. Under the vigil mechanism / whistle blower policy, the Company allows direct access to the Chairman of the audit commi"ee in appropriate or exceptional cases to investigate the complaints on an anonymous basis with adequate safeguards. During the year, no complaint was reported to the audit commi"ee. The whistle blower policy is available on the Companys website (h"p://www.groupcheviot.net/ investors-jute/corporate-governance-jute/).

16. ANNUAL PERFORMANCE EVALUATION

In terms of the provisions of the Companies Act, 2013, Listing Regulations and the Guidance Note issued by Securities and Exchange Board of India, annual performance evaluation was conducted by the Board of directors of its own performance, its Commi"ees and independent directors. The nomination and remuneration commi"ee carried out annual performance evaluation of individual directors. The outcome of the annual performance evaluation showed an overall effectiveness in the performance of the Board of directors, its commi"ees and individual directors.

The evaluation of the Board of directors was based on criteria such as appropriateness of Board composition and structure, decisions passed by the Board of directors, awareness on Industry operations, compliance with applicable laws, succession planning, strategic planning, implementation of guidelines or strategies decided by the Board of directors etc.

The evaluation of the Commi"ees was based on composition, functioning, competencies of the members, frequency of meetings, procedures, monitoring role, advisory role, timely reporting to Board of directors, etc.

The evaluation of directors was based on criteria such as preparedness for board meetings, a"endance, judgments, contribution to risk management, adherence to Companys code of conduct and corporate governance, pro-activeness in highlighting areas of concern, sharing of knowledge and business information, disclosure of interest and lists of relatives in timely manner, etc.

17. DIRECTORS

The members at the annual general meeting of the Company held on 25th August, 2017 appointed Mr. Utkarsh Kanoria (aged 25 years), (holding DIN 06950837), as the Wholetime Director of the Company, for a period of five years with effect from 24th May, 2017, whose office shall be liable to determination by retirement of directors by rotation.

Mr. Nawal Kishore Kejriwal (Mr. Kejriwal) (holding DIN 00060314) retires from the Board of directors by rotation at the forthcoming annual general meeting and, being eligible, offers himself for re-appointment.

Mr. Kejriwal has been re-appointed as Wholetime Director of the Company by the Board of directors for a period of one year with effect from 1st June, 2018 subject to the approval of the members at the forthcoming annual general meeting whose period of office shall be liable to determination by retirement of directors by rotation.

The present term of office of all the Independent Directors of the Company, namely, Mr. Navin Nayar (DIN 00136057), Mr. Sushil Kumar Dhandhania (DIN 00484489), Mr. Padam Kumar Khaitan (DIN 00019700) and Mr. Parag Keshar Bha"acharjee (DIN 00081899) is due to expire on 31st March, 2019.

Based on the recommendation of nomination and remuneration commi"ee and performance report of the independent directors, the Board of directors at its meeting held on 23rd May, 2018, decided to re-appoint Mr. Navin Nayar (DIN 00136057), Mr. Sushil Kumar Dhandhania (DIN 00484489) and Mr. Padam Kumar Khaitan (DIN 00019700) as independent directors of the Company for a second term of five consecutive years to hold office from 1st April, 2019 to 31st March, 2024 on the same terms and conditions subject to approval of the members at the ensuing annual general meeting.

Mr. Parag Keshar Bhattacharjee (DIN 00081899), who has attained the age of 79 years, shall retire from the Board of directors on completion of his term of office on 31st March, 2019. The Board of directors places on record its appreciation to the services rendered by Mr. Parag Keshar Bhattacharjee during his association with the Company.

Brief details of directors seeking re-appointment have been given in the notice convening the annual general meeting.

All the independent directors have declared that they meet the criteria of independence laid down in Section 149(6) the Companies Act, 2013 and Regulation 16(b) and Regulation 25 of Listing Regulations.

18. COMPANYS POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION INCLUDING CRITERIA FOR DETERMINING QUALIFICATIONS, POSITIVE ATTRIBUTES, INDEPENDENCE OF A DIRECTOR AND OTHER MATTERS

In compliance with the requirements of the Companies Act, 2013 and Listing Regulations, the nomination and remuneration committee follow the criteria laid down for identification of persons who are eligible to hold the office of directorship, key managerial personnel and senior management personnel of the Company including determining qualifications, positive attributes and independence of the person and their remuneration and other matters provided under Section 178 of the Companies Act, 2013. The nomination and remuneration committee has affirmed that the remuneration paid to directors, key managerial personnel and senior management personnel are as per the remuneration policy of the Company.

The remuneration policy including criteria for determining qualifications, positive attributes and independence of a director is available on the website of the Company (http://www.groupcheviot.net/investors-jute/corporate- governance-jute/ ).

19. DIRECTORS RESPONSIBILITY STATEMENT

In terms of Section 134(5) of the Companies Act, 2013, it is hereby stated to the best of our knowledge and belief 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 judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit 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;

(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.

20. NUMBER OF MEETINGS OF THE BOARD

The Board of directors met 4 times during the year under review. More details are available in the report on corporate governance.

21. COMPOSITION OF AUDIT COMMITTEE

The audit committee is constituted with three independent directors of the Company. More details on the audit committee are given in the report on corporate governance.

22. KEY MANAGERIAL PERSONNEL

During the year under review, Mr. Utkarsh Kanoria (holding DIN 06950837), was appointed as wholetime director of the Company. All the other key managerial personnel continue to hold their offices.

23. PARTICULARS OF EMPLOYEES

Information required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been provided in Annexure-V forming part of this report.

The details of employees prescribed under Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms part of the Annual Report. However with regard to the provisions of the second proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the said information is being sent to the members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

24. PUBLIC DEPOSITS

The Company has not accepted deposits from Public under Section 73 of the Companies Act, 2013 read with Rules framed thereunder.

25. DISCLOSURE

Following disclosures are made under the Companies (Accounts) Rules, 2014:-

(i) The financial summary or highlights are discussed at the beginning of this report;

(ii) There is no change in the nature of business;

(iii) There is no company which has become or ceased to be the Companys subsidiary, joint venture or associate company during the year;

(iv) No significant and material order was passed by the regulators or courts or tribunals which impact the going concern status and its future operations;

(v) There have been no material changes and commitments, affecting the financial position of the Company which occurred between the end of the financial year to which the financial statements relate and the date of this report.

26. STATUTORY AUDITORS

M/s Singhi & Co., Chartered Accountants (Firm Registration No. 302049E), was appointed as statutory auditors of the Company by the members at the annual general meeting of the Company held on 25th August, 2017 to hold office for a term of five consecutive years from the conclusion of that annual general meeting until the conclusion of the sixth consecutive annual general meeting on a remuneration to be mutually agreed upon with the Board of directors.

There are no qualifications, reservations or adverse remarks made by Singhi & Co., Statutory Auditors, in their report for the financial year ended 31st March, 2018. Pursuant to the provisions of section 143(12) of the Companies Act, 2013, the Statutory Auditors have not reported any incident of fraud to the audit committee during the year under review.

27. COST AUDITORS

The cost accounting records maintained by the Company for the current financial year ending on 31st March, 2019 are required to be audited pursuant to Section 148 of the Companies Act, 2013 read with Rules framed thereunder. In this regard, the Board of directors on the recommendation of audit committee, had re-appointed M/s D. Radhakrishnan & Co., Cost Accountants (Registration No. 000018), to carry out the cost audit at a remuneration of 40,000/- plus applicable taxes and re-imbursement of out of pocket expenses incurred by them. The resolution included at Item No. 9 of the Notice convening the annual general meeting seek members ratification to the remuneration payable to the cost auditor.

28. SECRETARIAL AUDIT

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 had appointed M/s MR & Associates, a firm of practising company secretaries (CoP 2551) to conduct Secretarial Audit of the Company. Report of the Secretarial Audit in Form MR-3 for the financial year ended 31st March, 2018 is enclosed as Annexure VI to this report. There are no qualifications, reservations or adverse remarks made by the Secretarial Auditor in his report.

29. ACKNOWLEDGEMENTS

Your directors take this opportunity to convey their sincere gratitude to all the customers, shareholders, suppliers, bankers, financial institutions and the Government for their consistent support to the Company. The directors place on record their appreciation to all employees of the Company for their hard work and valued contribution.

For and on behalf of the Board CHEVIOT COMPANY LIMITED Harsh Vardhan Kanoria

Chairman and Managing Director, Chief Executive Officer DIN :00060259

Place : Kolkata

Date : 23th May, 2018