Eastern Silk Industries Ltd Directors Report.

TO THE MEMBERS

Your Directors have pleasure in presenting their Seventy Third Annual Report together with the Audited Statements of Accounts of your Company for the year ended March 31, 2019.

FINANCIAL RESULTS

(Rs. in Lacs)
2019 2018
Profit/(Loss) before depreciation/Exceptional Items and taxation (241.73) (2,930.47)
Less/Add: Depreciation 717.90 876.05
Profit/(Loss) before taxation (961.61) (3,806.52)
(Add)/Less: Exceptional Items - (5,910.03)
Profit/(Loss) for the year before taxation (961.61) 2,103.51
Add/ (Less): Provision for Current/Earlier Year Taxation (1.19) 0.03
Profit/(Loss) for the year (962.80) 2,103.48
Add: Balance b/f of Retained Earnings of Previous Year which Directors have decided to carry forward to the next year (19,112.26) (21,215.74)
(20,075.06) (19,112.26)

PERFORMANCE REVIEW

Highlights of performance during the financial year 2018-19 are:

Total Revenue from Operation of the Company is Rs. 6,523.58 Lacs as against Rs. 5,149.32 Lacs in the previous year.

• Operating Profit / ((Loss) is Rs. (243.71) Lacs as against Rs. (2,930.47) Lacs in the previous year.

Profit / (Loss) before taxation is Rs. (961.61) Lacs as against Rs. 2,103.51 Lacs in the previous year.

• Profit / (Loss) after Tax is Rs. (962.80) Lacs as against Rs. 2,103.48 Lacs in the previous year.

The performance of the Company during the year under review showed increase in the sales on account of the marginal support of the market resulting in improvement of the operating profit of the Company. However the management believes that a lot needs to be done at the micro level to achieve the desired results.

Your Company has been successfully introducing new designs and new blends but the operational difficulties can only be resorted by increasing the scale of operation via infusion of machines and technology.

FUTURE OUTLOOK

Within the limited scope and under restricted market condition, your management is very positively responding to matching situation in the global market. To bring down the cost of production, your Company will have to increase the scale of operation which further requires infusion of machineries and technology.

DIVIDEND

In view of the accumulated losses the Board of Directors does not recommend any dividend on Equity Shares. The Board of Directors does not also declare dividend on Redeemable Cumulative Preference Shares.

PUBLIC DEPOSIT SCHEME

During the year, your Company has not accepted any deposits. There are no outstanding deposits as on date.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Requisite declarations from all the Independent Directors of the Company confirming that they are not disqualified to act as an Independent Director in compliance with the provisions of Section 149 of the Companies Act, 2013 and the Board is also in the opinion that the Independent Directors fulfill all the conditions specified in the Companies Act, 2013 making them eligible to act as Independent Director.

Necessary policies and the criteria for the performance evaluation of Directors as Individual, Board and Committees are devised by the Company. Evaluation of Board and Committees are being done under best practices prevalent in the Industry. The Company ensures constitution of the Board of Directors with an appropriate composition, size, diversified expertise and experience and commitment to discharge their responsibilities and duties effectively. Nomination & Remuneration Committee formulated by the Companys Board in accordance with the provisions of Section 178 of the Companies Act, 2013 and Regulation 17(10) of SEBI (Listing Obligations and Disclosure Requirements), Regulations,2015 evaluates the each individual whether they met the specified criteria and provides valuable contribution to the Company. At the time of appointment/re-appointment of Independent Director, Nomination & Remuneration Committee assess the independence of the directors as referred in Section 149(6) of the Companies Act, 2013 and Regulations of SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 and re-assess the same when any new interest or relationships are disclosed by them. The Independent Directors shall abide by the "Code of Independent Directors" as specified in Schedule IV to the Companies Act, 2013. Nomination & Remuneration Committee ensures that all the requisite and applicable provisions of the Companies Act, 2013 rules and regulations made thereunder and SEBI (Listing Obligations and Disclosure Requirements), Regulations, 2015 as amended from time to time are complied with.

DIRECTORS

Mr. Sundeep Shah was designated as the Chairman Cum Managing Director of the Company with effect from 16th of January 2019 on account of death of his father and Ex-Managing Director, Late Shyam Sunder Shah on 18th of December 2018. Mr. H.S. Gopalka and Mr. Ramesh Kumar Somany also resigned from the directorship of the Company during the year under review. Mr. Madhu Kant Sharma and Mr. Pankaj Kumar Deorah were appointed as Additional Non-Executive Independent Director on the Board, who shall be regularized at the ensuing Annual General Meeting.

KEY MANAGERIAL PERSONNEL

Following are the Key Managerial Personnel of the Company: Mr. S. Shah - Managing Director Mr. U.S Gutgutia - Chief Financial Officer (CFO) Mr. Deepak Agarwal - Company Secretary

DIRECTORS RESPONSIBILITY STATEMENT

In terms of provisions of Section 134(3)(c) of the Companies Act, 2013, your Directors state that:

i) in the preparation of the annual accounts for the year ended March 31, 2019, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

ii) that 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 end of the financial year and of the loss of the Company for the year under review.

iii) that the Directors have taken proper and sufficient care for maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv) that the Directors have prepared the accounts for the financial year ended 31st March, 2019 on a going concern basis.

v) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

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

NUMBER OF MEETINGS OF THE BOARD

The details of the meetings of the Board and the details of the attendance of the directors in the meetings are provided in the Corporate Governance Report.

DETAILS OF COMMITTEES OF THE BOARD

Composition of Audit Committee of Directors, Nomination & Remuneration Committee of Directors, Stakeholders Relationship/Grievance Committee of Directors and Share Transfer Committee of Directors, number of meetings held in each committee, and meetings attended by each member as required under the Companies Act, 2013 are provided in Corporate Governance Report and forming part of this report.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The report on Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 forms an integral part of this Report. The requisite certificate from the Auditors of the Company confirming compliance with the requirements of Corporate Governance is attached to the report on Corporate Governance.

A separate section on Corporate Governance and Management Discussion and Analysis together with the Auditors certificate confirming the compliance of conditions on Corporate Governance as Schedule V (Part E) of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 with the Stock Exchange form part of the Annual Report as "Annexure II".

PARTICULARS OF LOANS, GURANTEES, INVESTMENTS AND SECURITIES MADE

There are no loans given, investments made, guarantees given or security provided by the Company to any entity, under Section 186 of the Companies Act, 2013.

CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions.

Your Directors draw attention of the members to Note 46 to the financial statement which sets out related party disclosures.

MATERIAL CHANGES

No material changes or commitments affecting the financial position of the Company have occurred after the closure of the financial year till the date of this report.

CORPORATE SOCIAL RESPONSIBILITY

The Company formulated the Corporate Social Responsibility Committee (CSRC) in consultation with the Board during the F.Y 2014-15 pursuant to introduction of Section 135 under the Companies Act, 2013. Mr. Sundeep Shah, Mr. Madhu Kant Sharma and Mr. G.D Harnathka are the members of the CSRC. Since the Company has been incurring cash losses in the last three preceding financial years, the Board does not recommend any amount to be spent on the CSR activities. However the Board ensures that once the Company will start earning cash profits, they shall after taking into account the recommendations of the CSRC, approve the Corporate Social Responsibility Policy of the Company and shall disclose contents of such policy in its report and will also place the same on the Companys website www.easternsilk.com.

BANK LOANS

Out of the 11 (Eleven) Consortium members, the Company have already settled with 4(four) banks/financial Institutions on One Time Settlement (OTS) basis and entered into a settlement arrangement through ARCs for 6(Six) banks/financial Institutions and efforts are going on and the Company is hopeful to arrive at the settlement arrangement soon with the remaining financial institution i.e. Exim Bank.

RISK MANAGEMENT

The Company has been addressing various risks impacting the Company and the policy of the Company. During the year, your Directors made sure that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks.

The Company monitors, manages and reports on the principal risks and uncertainties that can impact its strategic long term objectives. The risk management process is reviewed periodically in order to keep it aligned with the emerging risks across the globe. Various programmes involve risk identification, assessment and risk mitigation planning for strategic, operational, and financial compliance related risks across various levels of the organization.

INTERNAL FINANCIAL CONTROLS

The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weaknesses in the design or operation were observed.

DISCLOSURE OF PARTICULARS OF CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNING AND OUTGO

The particulars required to be furnished under Section 134(3) (m) of the Companies Act, 2013 read with Companies (Disclosure of particulars of Board of Directors) Rules, 1988 are set out in "Annexure I", which forms part of the report.

AUDITORS

Messrs. Suresh Kumar Mittal & Co., Chartered Accountants, New Delhi (Firm Regn. No.500063N) has been appointed as Auditors of the Company for a period of five years commencing from the conclusion of Seventy First Annual General Meeting till the conclusion of Seventy Sixth Annual General Meeting.

Messrs. Suresh Kumar Mittal & Co., Chartered Accountants, consented to the said appointment and confirmed that their appointment are within the limits specified under Section 141(3)(g) of the Act. They have further confirmed that they are not disqualified to be appointed as statutory auditors in terms of the proviso to Section 139(1), Section 141(2) and Section 141(3) of the act read with the Companies (Audit and Auditors) Rules, 2014.

COST AUDITORS

Pursuant to the Companies (Cost Records And Audit) Rules, 2014 notified w.e.f 30th June, 2014 and subsequent amendments thereof, your Company is required to maintain the Cost Records but are still outside the purview of applicability of Cost Audit because the Companys overall turnover from all its products and services does not exceed Rs.100 Crores. Your Company is continuing its association with M/s. N. Radhakrishnan & Co., a firm of Cost Auditors, for assisting and directing the Company with regard to allocation of direct and indirect costs to the various products and suggesting various measures lowering the cost without compromising with the quality and shall conduct the Cost Audit on achieving the desired turnover or on any subsequent changes in the provisions of law thereof.

SECRETARIAL AUDITOR

The Board has appointed Mrs. Garima Gupta, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2018-19. The Secretarial Audit Report for the financial year ended March 31, 2019 is annexed herewith marked as "Annexure III" to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

COMPLIANCE OF SECRETARIAL STANDARDS

Yours Company has complied with the applicable Secretarial Standards.

EXTRACT OF ANNUAL RETURN

The particulars required to be furnished under Section 134(3)(a) of the Companies Act, 2013 read with Companies (Management and Administration) Rules, 2014 as prescribed in Form No. MGT-9 is given in "Annexure IV" annexed to this report.

PARTICULARS OF EMPLOYEES PURSUANT TO SECTION 134(3)(q) AND SECTION 197 (12) OF THE COMPANIES ACT, 2013 READ WITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014

Your Directors appreciate the significant contribution made by the employees to the operations of your Company during the period. In terms of provisions of Section 197(12) of the Act read with Rules 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars and disclosures of the employees drawing remuneration in excess of the limits set out in the said rules are provided in the Annual Report. Having regard to the provisions of the first proviso to Section 136(1) of the Act and as advised, the Annual Report excluding the aforesaid 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.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The company in pursuance to the provisions of section 177(9) & (10) of the Companies Act, 2013 has formulated a vigil mechanism (whistle blower policy) for its Directors and Employees of the Company to report their genuine concerns about unethical behavior, actual or suspected fraud or violation of the companys Code of Conduct. The mechanism provides for adequate safeguards against victimization of Directors and employees who avail of the mechanism. In exceptional cases, Directors and employees have direct access to the Chairman of the Audit Committee. The Vigil Mechanism (Whistle Blower Policy) is available on the companys website.

GENERAL

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

1. Details relating to deposits covered under Chapter V of the Act.

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

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

4. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries.

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

Your Directors further state that during the year under review there were no cases filed pursuant to the Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENT

Your Directors wish to convey their appreciation for the co-operation and assistance received from the government, financial institutions, bankers and stakeholders of your Company. The Board wishes to place on record its deep appreciation for the integrity and hard work of its employees at all levels to meet challenging markets.

Registered Office: By Order of the Board
19 Rs. N Mukherjee Road SUNDEEP SHAH
Kolkata 700 001 Chairman & Managing Director
Dated: The 30th May, 2019

ANNEXURE TO DIRECTORS REPORT

"Annexure I"

Particulars of Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo required under the Companies (Accounts) Rules, 2014 are as follows:

CONSERVATION OF ENERGY

FORM A

The Company is engaged in the continuous review of energy costs, reduction in energy generation cost through improved operational and maintenance practices.

(A) Power and Fuel Consumption
1. Electricity Current Year Previous Year
(a) Purchased Units 2,867,681.00 2,826,125.00
Total Amount - 23,309,622.00 22,124,514.00
Rate/Unit - 8.13 7.83
(b) Own Generation through
Diesel Generator Units 130,968.00 170,116.00
Total Amount - 2,439,977.00 2,463,095.00
Cost/Unit - 18.63 14.48
2. (a) Briquettes
Quantity Kgs 2,136,335.00 1,878,250.00
Total Amount 12,648,990.00 11,480,974.00
Cost/Unit 5.92 6.11
(b) Fire Wood
Quantity Kgs. - 61,600.00
Total Amount - - 294,973.00
Cost/Unit - - 4.79
(B) Consumption per unit of products:
Fabrics Mtrs 518,770.02 502,647.47
Electricity - 44.93 44.02
Briquettes - 24.38 22.84
Fire Wood - - 0.58
Diesel - 4.70 4.90

TECHNOLOGY ABSORPTION

Form B

Research & Development
1. Specific areas in which R&D carried out by the Company R&D activities are carried out for development of new products.
2. Benefits derived as a result of above R&D Improvement in quality and customer satisfaction.
3. Future plan of action Development of new varieties of products.
4. Expenditure on Rs. & D Capital - Nil
Recurring - Nil
R&D Expenditure as a percentage of turnover -

Technology Absorption, Adaptation & Innovation

1. Efforts in brief, made towards technology Absorption, adaptation and innovation Latest softwares are used for better design development.
2. Benefits derived as a result of the above Improved products.
3. Details of imported technology Not Applicable.

Foreign exchange earnings & outgo

(a) Activities relating to exports, initiatives taken to increase exports, development of new export markets for product and services and export plans. Participating in the international trade fairs to showcase the companys new developments and also invite the different companys selling agents as well as customers to provide a platform of interaction in order to procure orders for the Companys product as well as scout for new customers.
Travelling expenses in respect of such activities are also expensive. Travelling by the sales personnel also brings in order for the Companys products.
(b) i) Overseas Travelling The information on foreign exchange earnings and outgo is contained in the Note No. 49 & 50 of Notes on Financial Statements.
ii) Commission to Agents
iii) Consultation Fees
iv) Others
By Order of the Board
Kolkata 700 001 SUNDEEP SHAH
Dated: The 30th May, 2019 Chairman & Managing Director