Gillanders Arbuthnot & Company Ltd Management Discussions.

Managements Discussion and Analysis Report for the year under review, as stipulated under Schedule V of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘SEBI Listing Regulations) is presented in a separate section forming part of the Annual Report. The industry structure, development, performance, opportunities, threats, outlook, risk and concerns, internal control systems and its adequacy, financial performance with respect to operational performance and material developments in human resource and industrial relations have been discussed in the paragraphs to follow.

Textile Division

During the year under review the production was 16364 MT. The year was marked with one of the biggest reform in indirect taxes - The Goods and Service Tax (GST), which was implemented with effect from 1st July 2017. The unorganized sector, which forms a significant portion of your companys customer base, faced challenges in adapting to the new regime due to their unpreparedness and its complexity. However efforts were made to simplify and make the system user friendly with series of amendments.

The inverted duty structure of 18% in case of Synthetic and blended yarn, as against 5% on fabric, resulted in huge input credit getting blocked with fabric manufacturers who resorted to drastic production cuts and large scale protests. The duty structure was partially corrected by reducing the GST rates on synthetic and blended yarn to 12% in October, which gave some relief to the industry.

Apparel export during the year showed negative growth primarily on account of reduction in duty drawback/ duty refund and secondly due to inordinate delay in refund of GST to the exporters resulting in huge blockage of their working capital.

Textile value chain, particularly after spinning, has traditionally been dominated by the unorganized sector with minimal applicability and incidence of indirect taxes. After the implementation of GST the entire value chain in the unorganized textile sector witnessed huge disruption, which adversely affected their performance during the year.

The increase in crude oil prices from the last quarter resulted in increase in prices of all types of synthetic fibers, which could not be fully passed on to the upstream chain due to adverse market conditions.

Cotton crop during the crop year 2017-18 is estimated to be 365 lakh bales, which would be lower than the original projection due to crop damage.

As reported last year, your division is gradually increasing its business of fancy and value added yarn and is finding good response from the market. With continuous focus in increasing the business of value added and fancy yarn we expect to see improved performance in the current year.

Tea Division

The global tea production in 2017 was higher compared to 2016 with major increase in production in India, Sri Lanka and Malawi, whereas, major losers were Kenya and Bangladesh. India produced 1321 Million kgs, a growth of 54 million kgs, compared to the previous year i.e. 2016. This was primarily due to increase in production in West Bengal and South India, whereas, Assam was almost at par with previous year. Average price realization of India in auction centres was at par compared to last year. However, the price for bulk tea has increased by around Rs 4 per kg, compared to previous year, which reflects the goodwill and premium your product enjoys in the market. During the year under review, this division reported a production of 97.92 million kgs, which is marginally lower, compared to last year, due to adverse weather conditions in Assam and lower sourcing of outside green leaf.

During the year under review, the performance of the packet Tea segment was stable and the division is hopeful for improved performance in coming year.

The Directors are pleased to inform you that export by the division, during the year under review, has improved significantly when compared with previous year. The division has penetrated into new potential markets, and has also strengthened its presence in the existing markets. It is expected to continue its growth trend in the coming year.

As already reported, due to migration of workers, which has resulted in shortage of labour, the division continued to increase mechanization of its operations viz., introduction of tractor mounted spraying, pruning etc, and is exploring for further mechanization.

All eight factories are certified under ISO 22000-2005 and have Trust Tea certification.

Prospects of increase in wages and other input cost are major challenges that the tea industry may face. However, your Directors are confident of overcoming them with more high-value products, increase in volume of export and packet, improving quality of CTC, thereby, expecting an improved performance in coming year.

Engineering (MICCO) Division

MICCO is primarily an established contractor in almost all the steel plants of India, doing both EPC and Job contracting work. In the year under review, there had been a limited number of enquiries from major clients in the Steel sector. However, few projects for revamping and upgradation are expected in the coming year.

The performance of your Division has improved when compared to the previous year due to various steps taken viz., rationalization of cost, value engineering etc. It is the foremost EPC contractor in the area of Gasholder and your division has won the prestigious contract to build the 80,000m3 gasholder for Jindal Steel & Power Limited in the year under review.

The proficiency in execution of building, revamping and upgradation of Blast Furnace by your Company is widely acclaimed in Steel sector. In coming years, projects for Blast Furnace upgradation are expected from Steel Plants.

Steel Industry is expected to improve in near future and we expect that most of the steel plants, will take up their expansion and upgradation plan. We are a preferred contractor in steel sector, and hence, anticipate increase in enquiries/orders for Gasholders, Blast Furnace, Mills, Piping & Equipment erection work. This division is expected to do better in the coming year.

Property Division

This Division has reported revenue of Rs 746.31 lakhs, which is marginally higher compared to previous year. Continuous efforts are being made to increase the occupancy of ‘Gillander House. The property market has not shown any significant signs of recovery during the current year. It has also been observed that huge property banks with all modern amenities are lying idle and this division will face severe competition in the coming year. Your directors are hopeful that the division will maintain its performance during the ensuing year. As already reported, this division religiously follows fire safety policy and conducts fire safety drills at regular intervals.

Internal Financial Control Systems and their adequacy

Your Company has adequate Internal Financial Control Systems in all areas of operation. Your Board has adopted policies and procedures for ensuring the orderly and efficient conduct of its businesses, including adherence to the Companys policies, 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. Internal Audits are conducted by Independent firms of Chartered Accountants and the reports are discussed with the operational heads by the CFO and Managing Director & CEO of the Company, and thereafter, placed before the Meetings of the Audit Committee of the Board of Directors. Representatives of the Statutory Auditors, Cost Auditors and Internal Auditors are also invited at the Meetings of the Audit Committee, as and when required. Corrective measures suggested at the Audit Committee Meetings are duly implemented.

The Audit Committee of the Board also reviews the adequacy of Internal Financial Control Systems at regular intervals.

Human Resources and Industrial Relations

The Company has laid down the process for attracting, retaining and recognizing talent as it acknowledges the importance of good Human Resources. Company has cordial relation with employees and there is mutual respect and admiration for each other. The Directors wish to record their appreciation for the co-operation received from all employees. Industrial relation was good.

Caution Statement

Management Discussion and Analysis Report contains forward-looking statements, which are based on certain assumptions and expectations of future events. The Companys actual results and performance may differ from those projected due to unforeseen circumstances viz., political, economic, etc., over which the Company does not have any control. The Company assumes no responsibility to publicly amend, modify or revise any such statements on the basis of subsequent developments, information or events. Readers are advised to apply their diligence and independent judgment.

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated financial statements for the financial year ended on 31st March, 2018, prepared as per the provisions of the Companies Act, 2013 (hereinafter referred to as ‘the Act), Rules framed therein and the applicable Accounting Standards are provided in the Annual Report.

SUBSIDIARY / ASSOCIATE COMPANIES

Gillanders Holdings (Mauritius) Limited, Mauritius, the Direct Foreign Subsidiary, reported a profit before tax of Rs 66.24 lakhs, against Rs 95.01 lakhs, during the previous year. No significant operational activities have been undertaken by the said Subsidiary during the year under review.

For the financial year ended on 31st March, 2018, Group Developments Limited, Malawi (GDL), a step down Foreign Subsidiary, has reported a profit of Rs 702.00 lakhs, against a reported loss of Rs 305.07 lakhs for the previous year.

GDL has three wholly owned Subsidiaries located at Malawi viz., Namingomba Tea Estates Limited, Mafisi Tea Estates Limited and Group Holdings Limited. GDL and its wholly owned Subsidiaries are engaged in growing and processing of Tea, Macadamia and other crops.

Tea production of GDL for the year under review was 2.40 Million kgs, compared to last years production of 2.07 million kgs. The Tea price realization during the period was also higher than the previous year.

During the year, Macadamia (N I H) production of GDL was 1.87 million kgs against last years production of 1.31 million kgs.

During the year under review, your Company did not have any associate / joint venture. A separate section on the performance and financial position of the Subsidiaries in Form AOC-1 is part of the Annual Report and is annexed to the Report.

FIXED DEPOSITS

The Company is eligible to invite, accept or renew deposits under the provisions of the Act and the Rules framed therein.

As on 31st March, 2018 an amount of Rs 4,651.04 lakhs was outstanding as fixed deposits received from the public and Shareholders of your Company. Matured fixed deposits amounting to Rs 3.64 lakhs remained unclaimed and outstanding as on 31st March, 2018.

DIRECTORS

Smt. Prabhawati Devi Kothari (DIN 00051860) will retire in the ensuing 84th Annual General Meeting, and being eligible, offers herself, for re-appointment. The Board of Directors recommends her re-appointment.

The Company has received declarations from Dr. H. P. Kanoria (DIN 00286685), Mr. H. M. Parekh (DIN 00026530),

Mr. N. Pachisia (DIN 00233768) and Mr. Arvind Baheti (DIN 0008094824), Independent Directors of the Company, that they meet the criteria of Independence, as prescribed both under the Act and SEBI Listing Regulations.

On the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company at their meeting held on 28th March, 2018, had:

(i) Appointed Mr. Mahesh Sodhani as an Additional Director (Wholetime) and designated him as ‘Managing Director for a term of 3 years with effect from 1st April, 2018, subject to the approval of the members of the Company at the ensuing 84th Annual General Meeting;

(ii) Appointed Mr. Manoj Sodhani as an Additional Director (Wholetime) and designated him as ‘Executive Director & CEO for a term of 3 years with effect from 1st April, 2018, subject to the approval of the members of the Company at the ensuing 84th Annual General Meeting;

(iii) Appointed Mr. Arvind Baheti as an Additional Director (Independent) with immediate effect for a term of 5 years, subject to the approval of the members of the Company at the ensuing 84th Annual General Meeting; and

(iv) Approved the resignation of Mr. D. K. Sharda as ‘Managing Director & CEO of the Company with effect from close of business hours on 31st March, 2018.

Your Directors wish to place their sincere appreciation for the contribution made by Mr. D. K. Sharda during his tenure as Managing Director & CEO of the Company. Your Board also recommends the appointment of:

(i) Mr. Mahesh Sodhani as a Director, designated as ‘Managing Director for a term of 3 (three) years with effect from 1st April, 2018;

(ii) Mr. Manoj Sodhani as a Director (Wholetime), designated as ‘Executive Director & CEO for a term of 3 (three) years with effect from 1st April, 2018;

(iii) Mr. Arvind Baheti as an Independent Director for term of 5 (five) consecutive years.

The aforesaid appointments would be beneficial to the Company.

The details of programmes for familiarization / training of 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 and related matters can be accessed on the website of the Company at the link: http://www.gillandersarbuthnot.com/ pdf/policv/Familiarization%20Programme%20for%20Independent%20Director.pdf

DIRECTORS RESPONSIBILITY STATEMENT

Your Directors state that:

a) in the preparation of the annual accounts for the financial year ended on 31st March, 2018, 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;

b) such accounting policies have been selected and applied 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 as at 31st March, 2018 and of the loss of the Company for the year ended on that date;

c) the Directors have taken proper and sufficient care for the 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;

d) the annual accounts has been prepared on a ‘going concern basis;

e) internal financial controls has been laid down so that the same can be followed by the Company and that such internal financial controls are adequate and are operating effectively; and

f) proper systems has been devised to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

CORPORATE GOVERNANCE

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements as set out by Securities and Exchange Board of India. The Report on Corporate Governance confirming compliance with the conditions stipulated under the SEBI Listing Regulations, which forms part of the Annual Report, is attached to this Report. Certificate on Corporate Governance, as stipulated in the said Regulations, issued by CS Deepak Kumar Khaitan, Practising Company Secretary (FCS No. 5615), is also attached to this Report.

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.

The Policy on related party transactions as approved by the Board may be accessed on the Companys website at the link: http://www.gillandersarbuthnot.com/pdf/policv/Related%20Partv%20Transaction%20Policv.pdf

Your Directors draw attention of the Members to Note No. 47 to the standalone financial statements which set out related party disclosures.

CORPORATE SOCIAL RESPONSIBILITY

Your Company tries to address the needs of people by taking sustainable initiatives in the areas of promoting education, health care and setting up of homes and hostels for women and orphans.

The Corporate Social Responsibility Committee has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Companys website at the link: http://www.gillandersarbuthnot. com/pdf/policv/Corporate%20Social%20Responsibilitv%20Policv.pdf

The Annual Report on CSR activities is annexed herewith and marked as Annexure I.

RISK MANAGEMENT

The Company has laid down a procedure to inform the Board Members, on a periodic basis, about the identified risks and the steps taken to mitigate and minimize the same. The Company has already identified and assessed major elements of risks, which may adversely affect the various Divisions of the Company. The Executive Management reviews the identified risks, including assessment of the said risks and procedures, which are being implemented for the monitoring, mitigating and minimization of the said risks.

AUDITORS

Pursuant to Section 139 of the Companies Act, 2013, at the 81st Annual General Meeting (AGM) of the Company, Messrs Singhi & Co., Chartered Accountants, (Firm Registration No. 302049E) was re-appointed as the Statutory Auditor of the Company for a term of 5 (Five) consecutive years up to the conclusion of the 86th AGM of the Company to be held in the calendar year 2020.

Pursuant to Section 139 of the Companies Act, 2013, at the 80th AGM of the Company, Messrs Dutta Ghosh & Associates, Chartered Accountants (Firm Registration No. 309088E) was re-appointed as Branch Auditors of the GIS Cotton Mill (unit of Textile Division) of the Company for a term of 4 (Four) consecutive years, upto the conclusion of the ensuing 84th AGM of the Company scheduled to be held on 30th July, 2018.

Pursuant to Section 139 of the Companies Act, 2013, at the 83rd AGM of the Company, held on 1st September, 2017, M/s. Kothari & Company, Chartered Accountants, (Firm Registration-309088E), was re-appointed as Branch Auditor of the Engineering (MICCO) Division of the Company, for a term of 5 (Five) consecutive years up to the conclusion of the 88th AGM of the Company to be held in the calendar year 2022.

Your Directors do not recommend appointment of any Branch Auditor for GIS Cotton Mill unit, on conclusion of the tenure of Messrs Dutta Ghosh & Associates, Chartered Accountants, as the financial results of the said Unit will be audited by Messrs Singhi & Co., Chartered Accountants, Statutory Auditor of the Company.

AUDITORS REPORT

Auditors Report to the Members of the Company does not contain any qualification or adverse remark. Financial Statements and the notes thereon are self-explanatory and need no further explanation.

COST AUDITORS

On the recommendation of the Audit Committee, and in compliance with the provision of Section 148 of the Act, read with the Companies (Audit and Auditors) Rules, 2014, your Board had appointed the following Cost Auditors to conduct the audit of the cost records of the Company, as detailed below:

S.N. Division Cost Auditors for the financial year ending on 31st March, 2019
1 Tea M/s. B. Ray & Associates
2 Textile M/s. D. Sabyasachi & Co.
3 Engineering (MICCO) M/s. D. Sabyasachi & Co.

In accordance with the provision of Section 148 of the Act read with the Companies (Audit and Auditors) Rules, 2014, appropriate Resolution seeking your ratification of the Remuneration of the said Cost Auditors appointed for the year ending on 31st March, 2019, is appearing in the Notice convening the 84th AGM of the Company.

SECRETARIAL AUDIT

The Board had appointed CS K. C. Dhanuka, Practising Company Secretary (FCS No. 2204), to conduct Secretarial Audit for the financial year ended on 31st March, 2018. The Secretarial Audit Report for the financial year ended on 31st March, 2018 is annexed herewith and marked as Annexure II to this Report. The Secretarial Audit Report does not contain any qualification / adverse remark / observation.

OTHER DISCLOSURES:

Composition of Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee of the Company, at present, comprises of Mr. H. M. Parekh as the Chairman of the Committee, Smt. P. D. Kothari and Mr. N. Pachisia as the Members of the said Committee.

Composition of Audit Committee

The Audit Committee of the Company, at present, comprises of Mr. H. M. Parekh as the Chairman of the Committee, Mr. A. K. Kothari, Mr. N. Pachisia and Mr. Arvind Baheti, as the Members of the said Committee. The recommendations made by the Audit Committee were accepted by the Board.

Composition of Nomination and Remuneration Committee

The Nomination and Remuneration Committee of the Company, at present, comprises of Mr. H. M. Parekh as the Chairman of the Committee, Smt. P. D. Kothari, Dr. H. P. Kanoria and Mr. N. Pachisia as the Members of the said Committee. The criteria for performance evaluation of Board, Committees and the Directors are laid down under the Nomination and Remuneration Policy of the Company. Remuneration Policy for Directors, Key Managerial Personnel and other employees is annexed herewith and marked as Annexure III.

Composition of Stakeholders Relationship Committee

The Stakeholders Relationship Committee of the Company, at present, comprises of Mr. H. M. Parekh as the Chairman of the Committee, Mr. A. K. Kothari, Smt. P. D. Kothari and Mr. Mahesh Sodhani as the Members of the said Committee.

Whistle Blower Policy

The Company has in place a Whistle Blower Policy in compliance with the provisions of the Act and SEBI Listing Regulations. The said Policy provides for a formal vigil mechanism for all employees and Directors of the Company, to report to the Chairman of the Audit Committee of the Company, genuine concerns or grievances about the unethical behavior, actual or suspected fraud or violation of the Companys Code of Conduct. The Policy on whistle blower may be accessed on the Companys website at the link: http://www.gillandersarbuthnot.com/pdf/policy/Whistle%20Blower%20

Policy.pdf.Your Board affirms that no person has been denied access to the Chairman of the Audit Committee. Meetings of the Board

Six Meetings of the Board of Directors were held during the year. For further details, please refer to Clause II D of the report on Corporate Governance, which forms part of this Annual Report.

Particulars of Loans given, Investments made, Guarantees given and Securities provided

During the year under review, the Company has not given any loan, guarantee or security. However, the Company has invested an amount of USD 4,00,000 (United States Dollar Four Lakhs) by subscribing to the fully paid up Equity Shares of USD 1 each, at par, of Gillanders Holdings (Mauritius) Limited.

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

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith and marked as Annexure IV.

Extract of Annual Return

Extract of Annual Return of the Company is annexed herewith and marked as Annexure V.

Particulars of Employees and related disclosures

No employee draws Remuneration in excess of the limits provided in the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Rule 5(2) of the said Rules state that the Boards Report shall include a statement showing the names of top ten employees in terms of Remuneration drawn and the name of every employee, who, if employed throughout the financial year, was in receipt of Remuneration for that year, which, in the aggregate, was not less than Rs 102 lakhs and if employed, for part of the financial year, was in receipt of Remuneration for any part of that year, at a rate which, in the aggregate, was not less than Rs 8.50 lakhs per month.

Disclosures pertaining to Remuneration and a statement showing the names of top ten employees in terms of Remuneration drawn, as required under Section 197(12) of the Act read with Rule 5(1), 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Amendment Rules, 2016 is annexed herewith and marked as Annexure VI.

MATERIAL CHANGES

There have been no material changes and commitments affecting the financial position of the Company since the close of the financial year i.e. 31st March, 2018. Further, there has been no change in the nature of business of the Company.

GENERAL

Your Directors states that no significant or material orders were passed by the Regulators or Courts or Tribunals, which may impact the going concern status and Companys operations in future, and that no case was filed pursuant to Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

ACKNOWLEDGEMENT

The Directors would like to record their appreciation for the co-operation and support received from the employees, shareholders, banks, government agencies and all stakeholders.

For and on behalf of the Board
Place: Kolkata A. K. Kothari
Date: 30th May, 2018 Chairman