Filatex Fashions Ltd Directors Report.
REPORT OF THE BOARD OF DIRECTORS AND MANAGEMENT DISCUSSION AND ANALYSIS
TO SHAREHOLDERS FOR THE YEAR ENDED 31ST MARCH, 2017
Your Directors have pleasure in presenting their 23rd Annual Report and Audited Accounts for the year ended
31st March 2017.
1. FINANCIAL RESULTS :
|Profit Before Taxation||(15,52,518)||(3,89,145)|
|Current Tax - Current Year||600,000|
|- Previous Year|
|Profit After Taxation||244,932||(3,23,315)|
The Company has actively engaged in manufacturing of Socks and actively finding out the venues of e-commerce in the Fashions Industry.
No Dividend Recommended for the financial year.
The total turnover of the Company was Rs. 38.34 crores (previous year - Rs. 35.20 crores ). The profit before exceptional items and taxation was Rs15,52,518/-.
4. DIVISIONAL PERFORMANCE
The Company operates in only one Business Operations
The Company has not increased its Authorized Capital of the Company during the financial year and there is no change in the capital structure of the Company.
6.INTERNAL CONTROL SYSTEMS
Your Company has in place a robust Internal and Financial control systems which assists the Board and Management to fulfill business objectives, safeguards the shareholders interest, financial transactions and companys assets. The primary objective of our internal control framework is to ensure that internal controls are established, properly documented, maintained and adhered to in each functional department for ensuring orderly and efficient conduct of business which includes proper use and protection of the Companys resources, accuracy in financial reporting, compliance with the statutes, timely feedback on achievement of operational and strategic goals. The Companys internal control system, is driven by well defined policies and procedures across its business divisions. In addition the Company is ISO 9001:2008 compliant which provides added comfort to our business partners and regulatory bodies.
The Company has an Internal Audit function which provides the Audit Committee and the Board of Directors an independent, objective and assurance of the adequacy, efficiency and effectiveness of the Organizations risk management, internal and financial control and corporate governance processes. The Audit Committee / Board approved annual audit plan prepared in consultation with business heads and inputs obtained from the Companys statutory auditors ensures coverage of significant areas of operations with a risk based approach in order to conduct the audit in an efficient and timely manner. Process reviews for critical functions at all locations are performed in accordance with the audit plan. The function also assesses opportunities for improvement in business processes, systems and controls; provides recommendations to the Senior Management.
The Audit Committee of the Board of Directors regularly meets to review the significant audit findings, action taken thereon, adequacy of internal and financial controls and implementation of various comprehensive policies. During the year, the Audit Committee met six times to review the reports submitted by the Internal Audit Department. The Audit Committee also regularly meets the Companys Statutory Auditors to ascertain their views on the business, adequacy of the internal control systems in the Company and their observations on the financial reports.
7. PUBLIC DEPOSITS
There are no outstanding public deposits at the beginning of the year under review. The Company has not accepted any public deposits during the year under review. The Board of Directors of the Company will consider accepting fresh public deposits at the appropriate time, in view of the regulatory changes under the Companies Act 2013.
The Company has paid up to date the Tax Liabilities other than those explained at point no. 8 of Annexure to Auditors report.
9. SUBSIDIARIES :
The Company has no subsidiaries during the Financial year.
10. HUMAN RESOURCES / INDUSTRIAL RELATIONS :
The Manufacturing unit has continued to maintain cordial industrial relations, with low absenteeism while maintaining output levels. Programs were conducted to improve the competency levels of workmen.
The Unit has its commitment to recognizing employee performance by conducting employee of the Month awards to recognize exceptional performances by employees and inculcating a commitment to perform beyond the regular roles and responsibilities.
Various programmes have been conducted during the year covering Safety Awareness, Alteration Authority, Job Safety Analysis (JSA), Hazard Identification, Risk Assessment, Risk Control (HIRARC). In addition, Internal / External Safety Audits; Safety Committee Meetings on regular basis; Job Study Analysis; HIRA / HAAZOP studies, SQC ; First Aid Training; Fire & Safety aspects and Emergency Rescue methods, have helped to strengthen the overall safety and disaster management processes in the Hyderabad Factory.
Preventive Health Check-ups
As part of preventive healthcare, the Factory organized series of free medical check-ups, consisting of Diabetes, Cardiology, Orthopedic and General Medical Check up, to all the employees.
As part of enhanced security of the Unit and other assets of the, compound walls have been reinforced, height raised and fencing of barbed wire & concertina coils provided. Other measures include CC TV monitoring at Key areas especially magazines relaying of patrolling route, erection of watch towers and construction of additional Security Check posts, installation of tower flood lights for better night illumination, installation of guard monitoring systems for effective patrolling checks. Communication systems from magazines, watch towers through land lines have been streamlined. As such over the years considerable additions and precautions have been added to strengthen the Security of the Factory.
The Company believes in fair employment practices and is committed to provide an environment that ensures that every employee is treated with dignity and respect and afforded equitable treatment. The Company has a large proportion of women on the workforce and has adopted a Policy in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Company has not received complaints in this regard, during the year.
11.PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The Company has not provided any Loans, Guarantees or Investments during the Financial year,
12. OUTLOOK FOR THE CURRENT YEAR, OPPORTUNITIES AND THREATS Overview of the Economy:
The merchandise exports from India have remained stagnant between US $ 302 to US $ 314 billion in the last three financial years. Indias share is a mere 2% in Global trade, where as that of China is around 11.7% (2013). The Foreign Trade Policy 2015-2020 announced in April 2015 has set a target of 3.5% by 2020-21 for India.
In the last two/three years, the exporting units were big beneficiaries of Indian rupee depreciation. The rupee has been strengthening against Several Currencies, resulting in erosion of both realisation and profit for exporters. This is one cause for the deceleration in exports In Foreign Trade Policy 2015-2020 announced in April 2015, a new scheme named MEIS (Merchandise Exports From India Scheme) has been introduced where by the exporters will get incentive of 2% of FOB value in respect of merchandise falling under ITC (HS) code 61 - Knitted Apparels (including socks) exported to United Kingdom and United States of America etc (but not Switzerland and Gulf countries). This scheme is in substitution of earlier MLFP scheme (market linked focal product) which was off and on introduced and withdrawn.
Industry Structure and Development
The Indian textile industry, including hosiery and clothing, is one of the leading sectors of the Indian economy and contributes significantly to the countrys industrial output (14%). It employs 35 million people in direct employment and earns much needed foreign currency with 17% of Indias exports coming from Textiles and Garments. Overall, it contributes around 5% to Indias GDP. Textiles and apparel exported from India consume mainly indigenous inputs and are, therefore, big earners of net foreign exchange. This helps the country reduce its current account deficit.
Value of socks manufactured in India is estimated around 3000 crores per annum. Many major socks manufacturers in India are supplying their socks in the domestic market as licensees of international brands. Only a few supply under their own brand name.
Your Company is well poised to seize opportunities available in the sock knitting industry on account of its state-of-the-art production facilities, technical expertise, good quality culture and emphasis on product innovation and growth potential.
Your Company is meeting international quality norms of comfort, stretch, sizing, skin care and other parameters essential for inner wear intimate apparel. They also meet the fashion demands in terms of design, different knits and multiple shades. The socks manufactured by your Company are sold in Supermarket Chains and upper end Retail Stores.
The growing young middle-class population is a source of great potential and provides immense opportunities to spurt growth in the sock industry in the future. For duty drawback on export shipments, "cap per unit" was raised upwards (more than double, say 2.25-2.50 Your Company is knitting super sophisticated design socks for a reputed international brand selling socks in big outlets at high prices. This gives great goodwill to your Company, as the name of your Company is mentioned on the band rolls of the socks of that brand.
All major overseas customers of your Company insist on social audits to be carried out in the factory at least once in two years, by the internationally acclaimed "Business Social Compliance Initiative Agencies". Such audits cover compensation to employees, health, safety, environment and management practices. New customers also insist on such audits to be conducted, before they start the business. The compliance of such audits to International Standards, brings healthy and ethical culture in working and creates goodwill of the Company among its clients. Your Company has successfully complied with many such audits and has thus ensured continuance of business with major clients for long periods.
Your Company derives about 91% of its revenue from the export market. Economic slowdown or decline in demand in the country of buyer of your Companys products will have adverse impact on the working of the Company.
In the international market, countries like Turkey have developed an edge over the Indian manufacturers due to reduced freight cost and much reduced delivery time. Besides, Turkey enjoys exemption of 10.6% custom duty in relation with EU countries. This has posed a threat to the Indian socks suppliers and may pressurise them to reduce prices and thereby squeeze their margins. Even Bangladesh enjoys exemption in import duty by virtue of its being a less developed country and exports goods at prices which Indian socks suppliers cannot compete.
The major challenge that the textile, apparel and hosiery industry faces is of ever increasing production costs arising out of rising wages, power and other overheads.
Rupee has become strong against several foreign currencies from mid 2014. This has already adversely impacted the topline and bottom line of the exporting units, when compared with their last two/three years performances.
13 . DIRECTORS
In accordance with the provisions of the Companies Act 2013 and the Articles of Association of the Company Mr. Sangeeta Sethia retires by rotation at the 22nd Annual General Meeting of the Company and is eligible for reappointment. The number and details of the meetings of the Board and other Committees are furnished in the Corporate Governance Report.
The Independent Directors have furnished declaration of independence under Section 149 of the
Companies Act 2013.
Familiarization Programme for Independent Directors
The Company familiarizes its Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company, etc. through various programmes on a continuing basis. The Familiarisation programme for Independent Directors is disclosed on the Companys website.
Separate Meeting of Independent Directors
A separate meeting of Independent Directors of the Company, without the attendance of Non-Independent Directors and members of management, was held on 13th Feb, 2015, as required under Schedule IV to the Companies Act, 2013 (Code for Independent Directors) and Clause 49 of the Listing Agreement. At the Meeting, the Independent Directors:
- Reviewed the performance of Non-Independent Directors and the Board as a whole;
- Reviewed the performance of the Chairman of the Company, taking into account the views of Executive Director and Non-Executive Directors; and
- Assessed the quality, quantity and timeliness of flow of information between the Company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.
All the Independent Directors attended the Meeting of Independent Directors
Board & Directors Evaluation
Pursuant to the provisions of the Companies Act 2013 and SEBI (LODR) Regulations, 2015 of the Listing Agreement, the Board, its Committees and the Directors have carried out annual evaluation / annual performance evaluation, covering various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance The performance evaluation of the Independent Directors was carried out by the entire Board. The Criteria for performance evaluation are follows: Role & Accountability - Understanding the nature and role of Independent Directors position.
- Understanding of risks associated with the business.
- Application of knowledge for rendering advice to management for resolution of business issues.
- Offer constructive challenge to management strategies and proposals.
- Active engagement with the management and attentiveness to progress of decisions taken.
- Non-partisan appraisal of issues.
- Own recommendations given professionally without tending to majority or popular views.
Leadership & Initiative
- Heading Board Sub-committees.
- Driving any function or identified initiative based on domain knowledge and experience.
- Commitment to role & fiduciary responsibilities as a Board member.
- Attendance and active participation.
- Proactive, strategic and lateral thinking.
Directors Appointment and Remuneration Policy
The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company and formulates the criteria for etermining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Clause 49 of the Listing Agreement. The Board has, on the recommendations of the Nomination & Remuneration Committee framed a policy for remuneration of the Directors and Key Managerial Personnel. The objective of the Companys remuneration policy is to attract, motivate and retain qualified and expert individuals that the company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognizing the interests of Companys stakeholders.
The Non-Executive Directors (NED) no sitting fee is paid to non-executive directors. NEDs are reimbursed any out of pocket expenses incurred by them in connection with the attendance of the Companys Meetings.
PARTICULARS OF EMPLOYEES AND REMUNERATION
There are no employees in the company calling the information required under Section 197 (12) of the Act read with Rule 5 of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014.
14. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure to the Directors Report.
15. INFORMATION ON STOCK EXCHANGES
The Equity shares of the Company are listed on BSE Limited and the Listing Fees have been paid to them up- to-date.
16. CORPORATE GOVERNANCE
A detailed report on the subject forms part of this report. The Statutory Auditors of the Company have examined the Companys compliance and have certified the same as required under the SEBI Guidelines. Such certificate is reproduced in this Annual Report.
17. DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134 of the Companies Act 2013:
(a) that in the preparation of the annual accounts/financial statements for the financial year ended 31st March 2015, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any;
(b) that the accounting policies as mentioned in the financial statements were selected and applied consistently and reasonable and prudent judgments and estimates were made 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 and loss of the company for that period;
(c) that proper and sufficient care had been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act 2013 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
(d) that the annual accounts were prepared on a going concern basis;
(e) that proper internal financial controls were in place and that such internal financial controls are adequate and were operating effectively; and
(f) that proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.
Statutory / Financial Audit
M/s N G Rao and Associates, Chartered Accountants retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Company has received confirmation that their appointment will be within the limits prescribed under Section 141 of the Companies Act, 1956.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Vinod Sakaram, a Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as Annexure to the Directors Report.
19. CORPORATE SOCIAL RESPONSIBILITY (CSR)
In compliance with Section 135 of the Companies Act 2013 and other applicable provisions, the Company has constituted Corporate Social Responsibility Committee consisting of Mr. Sanjay I Bora, Chairman of the Committee (Independent Director), Mr. Prabhat Sethia (Executive Director and Chairman of the Company) and Mr. D.P. Kelkar (Independent Director) as the Members of the Committee. The Committee met once during the year and laid down the policy on Corporate Social Responsibility stating therein the objectives, implementation and other issues pertaining to the achievement of the CSR objectives of the Company.
The businesses of the Company do not have eligible profit on aggregate basis during the last three financial years. The CSR Policy of the Company is displayed on the website of the Company.
20. VIGIL MECHANISM / WHISTLE BLOWER POLICY
In terms of the requirements of the Companies Act 2013 and Clause 49 of the Listing Agreement, the Company has a vigil mechanism to deal with instance of fraud and mismanagement, if any. The details of the vigil mechanism are displayed on the website of the Company. The Audit Committee reviews the functioning of the vigil / whistle blower mechanism from time to time. There were no allegations / disclosures / concerns received during the year under review in terms of the vigil mechanism established by the Company
21.RELATED PARTY TRANSACTIONS
All related party transactions / arrangements that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel which may have a potential conflict with the interest of the Company at large.
All related party transactions / arrangements are placed before the Audit Committee for prior approval, supported by a statement from the Management as to the adherence of arms length basis and being the ordinary course of business.
The policy on Related Party Transactions as approved by the Board is displayed on the Companys website.
None of the Directors has any pecuniary relationships or transactions vis-a-vis the Company.
22. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the Regulators / Courts which would impact the going
concern status of the Company and its future operations
23. EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as
Annexure to the Directors Report.
Your Directors would like to express their appreciation for the assistance and co-operation received from the financial institutions, banks, Government of India and various State Government authorities and agencies, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services of all employees of the Company.
For and on behalf of the Board of Directors
|Place : Hyderabad||Prabhat Sethia|
|Date :September 1, 2017||Managing Director|
Statement in this Management Discussion and Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Companys operations include global and Indian demand supply conditions, finished goods prices, raw material availability and prices, cyclical demand and pricing in the Companys principal markets, changes in Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts businesses and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.
ANNEXURE TO THE BOARDS REPORT
CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND
FOREIGN EXCHANGE EARNINGS AND OUTGO [Section 134(3)(m) of The Companies Act, 2013 read with Rule 8(3) of The Companies (Accounts) Rules, 2014]
A. CONSERVATION OF ENERGY a) Steps taken or impact on conservation of energy: Nil b) Steps taken by the company for utilising alternate sources of energy: Nil c) The capital investment on energy conservation equipments: Nil
|B. TECHNOLOGY ABSORPTION: Nil|
|(a) the details of technology imported;|
|(b) the year of import;|
|(c) whether the technology been fully absorbed;||Not Applicable as there was no import of technology during the last three years.|
|(d) if not fully absorbed, areas where absorption has not taken place, and the reasons thereof; and|
|C) Expenditure on R&D|
|(Rs. in lakhs)|
|(a) Capital Expenditure|
|(b) Recurring Expenditure|
|(c) Total Expenditure|
|(d) Total Expenditure on R&D as a percentage of total turnover||--||--|
|D) FOREIGN EXCHANGE EARNINGS & OUTGO:|
|Total Foreign Exchange used and earned in terms of actual inflows and actual outflow:|
|Used / Outflow||Nil||Nil|
|Earned / Inflow||Nill||Nil|
ANNEXURE TO THE DIRECTORS REPORT
[Pursuant to Rule 5 of The Companies (Appointment and Remuneration of Managerial
Personnel) Rules, 2014]
1. The ratio of the remuneration of each Director to the median remuneration of the Employees of the Company for the financial year: (Explanation: (i) the expression "median" means the numerical value separating the higher half of a population from the lower half and the median of a finite list of numbers may be found by arranging all the observations from lowest value to highest value and picking the middle one; (ii) if there is an even number of observations, the median shall be the average of the two middle values).
2. The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary, or Manager, if any, in the financial year: The ratio of remuneration of each Director to the Median Remuneration of all employees who were on the payroll of the Company and the percentage increase in remuneration of the Directors during the financial year 2016-17 are given below:
|Managing Director||Percentage Increase in Remuneration|
|Mr. Prabhat Sethia||Nil|
The current Chief Financial Officer is appointed in the Company during current financial year. Hence, increase of CFO remuneration is not applicable. 3. The percentage increase in the median remuneration of employees in the financial year: 2% 4. The number of permanent employees on the rolls of Company: 10.
5. The explanation on the relationship between average increase in remuneration and Company performance: Remuneration of employees has a close linkage with the performance of the Company. The Variable Pay (VP) component in the remuneration for all the management staff, has a direct correlation with the Companys performance. VP is calculated based on both individual and Company performance. Component of VP has a higher weightage for senior positions and lower weightage for junior positions.
6. Variations in the market capitalization of the Company, price earnings ratio as at the closing date of the current financial year and previous financial year and percentage increase over decrease in the market quotations of the shares of the Company in comparison to the rate at which the Company came out with the last public offer in case of listed companies: 7. Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration: The percentage increase in the salaries of employees other than the managerial personnel in the last financial year is Nil as against an increase of Nil in the salary of the Managing Director (managerial personnel as defined under the Act). The increment given to each individual employee is based on the employees potential, experience as also their performance and contribution to the Companys progress over a period of time. 11. The ratio of the remuneration of the highest paid Director to that of the employees who are not Directors but receive remuneration in excess of the highest paid Director during the year: The highest paid Director is the Managing Director. No employee has received remuneration in excess of the Managing Director during the year.
12. Affirmation that the remuneration is as per the Remuneration Policy of the Company: It is affirmed that the remuneration paid is as per the Remuneration Policy for Directors, Key Managerial Personnel and other employees, adopted by the Company.
Statement of particulars of employees pursuant to Rule 5(2) and (5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)
Rules, 2014 and forming part of Directors Report for the financial year ended 31st March, 2017
|Name of the Employee||Age (years)||Nature of Designation/ Duties||Qualification||Experience (years of employment)||Date of Commence- ment||Remuneration (Rs. in lakhs)||Last Employment / Position held||% of equity shares held in the Company|
|EMPLOYED THROUGHOUT THE YEAR|
|1. Prabhat Sethia||53||Managing Director||B.Com||26||Since Inc||9.00||3.99%|
1. Nature of employment is contractual or as per Agreement wherever applicable. Other terms and conditions applicable to them are as per Companys rules. 2. None of the employees is a relative of any Director of the Company.
3. Shares held by Mr.Prabhat Sethia - - 1159700