Eastern Treads Ltd Directors Report.

Dear Member,

Your Directors have pleasure in presenting the 28th Annual Report on the business operations of the Company and the audited standalone and consolidated Ind AS financial statements for the financial year ended 31st March, 2021 along with comparatives.

Financial Summary and Highlights

The following table shows the operational results of the Company for the year 2020-21 as compared to that of the previous year.

(Rs.in lakhs)

Standalone

Consolidated

Year ended

Year ended

31/03/21

31/03/20

31/03/21

31/03/20

Revenue from Operations

6,660

7,745

7,440

7,832

Other Income

49

33

34

24

Total Revenue

6,709

7,778

7,474

7,856

Expenditure

6,255

7,317

7,054

7,431

Profit before Interest, Depreciation and Tax

454

461

420

425

Depreciation/Amortisation/ Impairment

212

247

214

250

Profit before Finance Costs and Tax

242

214

206

175

Finance Costs

331

324

336

325

Profit (Loss) before Tax

(89)

(110)

(130)

(150)

Tax Expense

(32)

2

(32)

2

Profit (Loss) for the year

(57)

(112)

(98)

(152)

Other comprehensive income/ (loss)

2

(6)

3

(6)

Total comprehensive loss for the year

(55)

(118)

(95)

(158)

 

Impact of COVID-19 on operations

FY 2020-21 was an extraordinary and challenging fiscal year. During the month of March 2020, World Health Organisation declared COVID -19 to be a global pandemic. The spread of this pandemic affected the normal business operations in many countries, including India. The country has witnessed several disruptions in normal operations due to lockdowns imposed by the Government and other restrictions on movement of people, transportation and supply chain along with other stringent measures to contain Covid-19 spread. Due to nationwide lockdown during the first quarter, the operations of the Company were affected and totally disrupted until the end of April 2020.

Though the lockdown and transport movement restrictions were progressively relaxed subsequently, disruptions in operations of entities in road transport and automobile sector continued, which adversely affected Companys sales during the year. We observed sales dip in some areas, but through our conscious efforts, we were able to manage the sales by identifying new customers and active supports by existing customers. Even with a dip of around 25.17% sales on tonnage basis from some set of customers, we were able to get growth in volume sales by 17.04%, by adding new customers as well as by focusing on reinforcing customer relationship. This helped the Company to manage the sales with marginal dip of 8.13% when compared to previous year.

The Company is in a comfortable liquidity position to meet its commitments. There could be impact of increased input costs due to changes in current market scenario and hence, there will be some impact on our profitability in the short term; however, it is difficult to assess the exact quantum at this stage. The Company has taken adequate measures across the organization to control costs, and to address any evolving situation resulting from the pandemic.

Even though we are facing tough situations during the current year as Covid-19 bounced back with its second wave, we are expecting to revive our operations once normalcy regained. We also see that the prevailing slowness enable further acceptance of our cost effective products, thereby expanding the market share. The future depends on how the society respond to coronavirus and its economic outcome. The Company will take all efforts to adapt to the changing business environment and respond suitably to fulfil the needs of its customers.

Standalone and Consolidated Performance

During the year, the Company could not achieve a better financial performance due to the continued weakness in demand due to Covid 19 Pandemic, which created disruption across the globe. As the use of private vehicles were limited due to movement restrictions and the public transport services were disrupted during lockdowns, the sales were significantly impacted. The revenue for FY 2021 was Rs.6709 Lakhs, lower by 13.74% over the previous years revenue of Rs.7778 Lakhs. Strong control over organizational expenses allowed the Company to report cash profit. Compared to previous FY the PBIT has improved by 13.80%.

Through our subsidiary Shipnext Solutions Private Limited, we were able to strengthen our relationship with fleet- owners, who are our end customers. We hold 55% shareholding in Shipnext. Shipnext has focused its operations to provide cost effective, flexible, efficient and prompt services in logistic sector. With the intention to provide information technology in B2B and B2C logistic space, it is in the verge of launching fleet owner app that works on a chat based model. Even though disruptions continued in logistic industry due to localised restrictions across states, we were able to manage our revenue growth in subsidiary. On a consolidated basis, the revenue for FY 2021 was Rs.7474 Lakhs, lower by 4.86% over the previous years revenue of Rs.7856 Lakhs. Compared to previous FY the PBIT has improved by 17.71%. The operations are exhaustively discussed in Management Discussion and Analysis forming part of the annual report.

Reserves

In view of the loss incurred during the year, the Board of Directors of your Company has decided not to transfer any amount to the reserves for the year under review.

Dividend

In view of loss incurred during the year under review and losses of earlier years, your Directors do not recommend any dividend during the year under review.

Material Changes and Commitments

There have been no material changes and commitments, which affect the financial position of the Company which have occurred between the end of the financial year to which the financial statements relate and the date of this Report

Capital and Debt Structure

As per the terms of issue (as varied), the outstanding Zero Coupon Redeemable Preference Shares are liable to be redeemed at the rate of rupees One Crore every year in a phased manner. The Company has the option to stretch the redemption until 9th February 2029, being the date of expiry of twenty years from the date of the original allotment.

While the first tranche of redemption of rupees One Crore was made in FY 2016-17, no redemption was made in subsequent financial years including FY 2020-21. The Board of Directors at its meeting held on 14th February, 2019 approved the proposal to convert 9,00,000 Outstanding Redeemable Preference Shares of Rs.100 each aggregating to Rs.900 Lakhs into Equity Shares of Rs.10 each by issue of equity shares through Preferential Allotment route to the Preference Shareholders as consented by them on that date.

The outstanding Redeemable Preference Shares shall upon approval of equity shareholders be treated as Convertible Preference Shares with effect from the date of Equity Shareholders approval till the date of the completion of the conversion. Considering that Kerala State Industrial Development Corporation (KSIDC) is also a Promoter Shareholder, the Board has expressed the need to obtain their consent prior to proceeding with the Equity Shareholders approval. Company is in the process of getting approval from KSIDC to take further steps for the proposed conversion of Preference Shares.

Directors and Key Managerial Personnel

Mr. M.E. Mohamed, Managing Director, Mr. Mohammed Sherif Shah, Chief Financial Officer and CS. Baiju T., Company Secretary are the Whole-time Key Managerial Personnel (WKMP). Mr. Sachin Saxena was appointed as Chief Executive Officer and WKMP of the Company with effect from 23 June 2021. Mr. K.S. Neelacanta Iyer, having DIN: 00328870, Mr. M.S. Ranganathan, having DIN: 00254692 Mrs. Rani Joseph, having DIN: 07423144 are the Independent Directors of the Company. None of the Directors is disqualified under Section 164 of the Companies Act, 2013. Mrs. Shereen Navaz, having DIN: 00328770, Director retires by rotation at the ensuing Annual General Meeting and being eligible, offer herself for re-appointment. The Board recommends her appointment.

The Board has considered the declarations given by independent directors under Section 149(7) with respect to meeting the criteria of independence, compliance with the Code for Independent Directors. Independent directors further declared that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence and are independent of the management.

Board Meetings

Five Board meetings were held during the year. Details of Board meetings are included in Corporate Governance Report.

Committees of the Board

The Company is having five Board Committees, Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee and Share Transfer Committee. Details of all the committees along with their main terms, composition and meetings held during the year under review are provided in the Report on Corporate Governance, forming part of this Annual Report. The Board has accepted all recommendations of the Audit Committee during the year under review.

Board Evaluation

The Board has annually evaluated the performance of the Board, its committees and individual directors. The Board evaluated the performance of Non-Executive and Independent Directors. All the Directors are eminent personalities having wide experience in the field of business, industry and administration. Their presence on the Board is advantageous and fruitful in taking business decisions. Further details of Board evaluation are provided in the Report on Corporate Governance.

Remuneration of Directors and Employees

The Board has considered the Companys policy on directors appointment and remuneration including criteria for determining qualifications, positive attributes and independence of a director. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure -1 and forms part of this Report. No Directors of the Company has received any remuneration from the subsidiary company.

Directors Responsibility Statement

Pursuant to the requirement of Section 134 (3) and (5) of the Companies Act, 2013, your Directors confirm that:

(a) In the preparation of the Annual Accounts, the applicable Accounting Standards have been followed and that there are no material departures.

(b) 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 your Company at the end of the financial year and of the profit of the Company for that period.

(c) 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 your Company and for preventing and detecting fraud and other irregularities.

(d) Prepared the Annual Accounts on a going concern basis.

(e) Devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

(f) Had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively.

Internal Financial Controls

Internal financial control and their adequacy are included in the Management Discussion and Analysis, forming part of this report.

Frauds reported by the Auditor, if any.

The Statutory Auditors of the Company have not reported any fraud as specified under the second proviso to Section 143(12) of the Act.

Performance and financial position of the subsidiaries, associates and joint ventures

Pursuant to Section 129(3) of the Companies Act, 2013 ("Act"), the consolidated financial statements of the Company and its subsidiary, prepared in accordance with the relevant Accounting Standard specified under Section 133 of the Act, read with Rule 7 of the Companies (Accounts) Rules, 2014, form part of this Annual Report.

Pursuant to the provisions of the said section, a statement containing the salient features of the financial statements of the Companys subsidiary in Form AOC-1 is given in this Annual Report as Annexure - 2. Further, pursuant to the provisions of Section 136 of the Act, the standalone financial statements of the Company, consolidated financial statements of the Company, and the relevant consolidated financial statements and separate audited financial statements along with other relevant documents, in respect of subsidiary, are available on the website of the Company. Except Shipnext Solutions Private Limited, the Company do not have subsidiaries, associates and joint ventures.

Deposits

The Company has not accepted any fixed deposits during the year to which the provisions of Section 73 of the Companies Act, 2013 are applicable.

Corporate Social Responsibility

Company has generally taken corporate social responsibility (CSR) initiatives. However, the present financial position of the Company does not mandate the implementation of CSR activities pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013.

Particulars of loans, Guarantees or Investments

Particulars of loans, guarantees or investments under Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statement. Company has invested Rs.2.59 Lakhs in Shipnext Solutions Private Limited and hold 55% shareholding, 1441550 Equity shares of Rs.1/- each at the agreed purchase price of Re.0.18 per share. The Board of directors of the Company has further agreed to provide financial assistance to Shipnext Solutions Private Limited in the form of loan or to give guarantee or provide security in connection with a loan taken by it up to limit Rs.450 Lakhs on requirement basis. Shareholders authorised the Board to provide financial assistance to subsidiary company not exceeding Rs.10 Crores over and above the limit as prescribed under Section 186 of the Companies Act, 2013.

Contracts or Arrangements with Related Parties

There were no materially significant related party transactions which could have had a potential conflict with the interests of the Company. Transactions with related parties are in the ordinary course of business on arms length and are periodically placed before the Audit Committee and Board for its approvals and the particulars of contracts entered during the year, in Form AOC-2 is enclosed as Annexure - 3.

The Board of Directors, as recommended by the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules thereunder and the Listing Agreement. The policy on Related Party Transactions is available on the website of the Company. The details of the transactions with related parties during the financial year are provided in the financial statements.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

Your Company continues its efforts to improve energy conservation and utilization most efficiently to nurture and preserve the environment and to exploit all its avenues to adopt latest technology in its operations. The information required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, regarding Conservation of Energy, Technology Absorption, Foreign Exchange Inflow and Outflow are given in Annexure - 4 to this report.

Risk Management

Company has developed and implemented a risk management policy, and formed a Risk Management Committee to address and evaluate various risks impacting the Company and a report on risk management is provided in this Annual Report in Management Discussion and Analysis.

Vigil Mechanism

A Vigil Mechanism for directors and employees to report genuine concerns has been established as required under the provisions of Section 177 of the Companies Act, 2013. The Vigil Mechanism Policy has been uploaded on the website of the Company.

Material Orders of Judicial Bodies / Regulators

No significant and material orders were passed by Courts, Tribunals and other Regulatory Authorities affecting the going concern status of the Companys operations.

Secretarial Audit Report

The secretarial audit report on the compliance of the applicable Acts, Laws, Rules, Regulations, Guidelines, Listing Agreement, Standards etc. as stipulated by Section 204 of the Companies Act 2013, read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part of this report as Annexure - 5. The findings of the audit have been satisfactory.

Statutory Auditors and Auditors Report

M/s. Walker Chandiok & Co LLP, Chartered Accountants, Kochi, were appointed as the Auditors of the Company at the Annual General Meeting held on 06 July 2017 to hold office for a period of 5 consecutive years. Necessary certificate and consent has been obtained from the Auditors as per Section 139(1) and 141 of the Companies Act, 2013 and the Companies (Audit and Auditors) Rules 2014 for their continuance as the Auditors of the Company. They Auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the ICAI. Since ratification by Shareholders every year for the appointment of the Statutory Auditors is not required the Notice of ensuing Annual General Meeting does not include the proposal for seeking Shareholders approval for ratification of Statutory Auditors appointment.

The Auditors Report on the financial statement of the Company forms part of this Annual Report and it does not contain any qualifications, reservations or adverse remarks or disclaimer. The Auditors observations are suitably explained in notes to the Accounts and are self-explanatory.

Cost Records and Cost Audit

Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 the Cost Audit Report is not mandatorily applicable to our Company for the financial year, hence, no such audit has been carried out during the year. The Cost accounts and records as required to be maintained under Section 148 (1) of Act are duly made and maintained by the Company.

Compliance with Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Board meetings and Annual General Meetings.

Corporate Insolvency Resolution Process

No application filed for corporate insolvency resolution process, by financial or operational creditor or by the Company under The Insolvency and Bankruptcy Code, 2016 before the National Company Law Tribunal during the year.

Corporate Action

The Board of Directors approved the proposal to convert 9,00,000 outstanding Redeemable Preference Shares into Equity Shares by issue of equity shares through Preferential Allotment route to the Preference Shareholders. Company is in the process of getting required approvals to take further steps for the proposed conversion of Preference Shares.

Annual Return

In compliance with Section 92 and Section 134 of the Companies Act,2013 the Annual Return in the prescribed format is available at https://www.easterntreads.com/reports/Annual+Reports

Listing and Dematerialisation

The equity shares of the Company are listed on the BSE Limited. Shareholders are requested to convert their holdings to dematerialized form to derive its benefits by availing the demat facility provided by NSDL and CDSL.

Corporate Governance Report

Your Company has been complying with the principles of good Corporate Governance over the years and is committed to the highest standards of compliance. Pursuant to the Listing Agreement read with Regulation 15(2) of the SEBI (LODR) Regulations 2015, the compliance with the corporate governance provisions as specified in regulations 17 to 27 and clauses (b) to (i) of Regulation 46(2) and para C, D and E of Schedule V shall not apply the Company. However, as a good Corporate Governance practice the Company has generally complied with the Corporate Governance requirements and a report on Corporate Governance is annexed as Annexure - 6 and forms part of this Report.

Management Discussion and Analysis Report

As required under SEBI (LODR) Regulations 2015 the Management Discussion and Analysis Report is annexed as Annexure - 7 and forms part of this Report.

Employee Wellbeing and Safety

Your Company has implemented policies and procedures with the objective of ensuring employee safety, security and wellbeing at the workplace. As stated in our Code of Conduct, we are committed to provide a gender friendly workplace, equal opportunities for men and women, prevent/redress sexual harassment and institute good employment practices. The Company has adopted policy on prevention of sexual harassment in line with the requirements of the Sexual Harassment of Women at the work place (Prevention, Prohibition and Redressal) Act, 2013.

Internal Complaints Committee 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 of during the year:

a) Number of complaints pending at the beginning of the year Nil
b) Number of complaints received during the year Nil
c) Number of complaints disposed off during the year Nil
d) Number of cases pending at the end of the year Nil

 

Acknowledgement

Your Directors wish to place on record their gratitude to Bankers, Share Transfer Agents, Auditors, Customers, Suppliers and Regulatory Authorities for their timely and valuable assistance and support. The Board values and appreciates the professionalism, commitment and dedication displayed by employees at all levels. Your Directors are thankful to the shareholders for their continued support and confidence.

For and on behalf of the Board

Kochi

Navas M Meeran

23 June 2021

Chairman

DIN: 00128692