Kitex Garments Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the Twenty Eighth Annual Report of the Company together with the audited financials statements for the financial year ended March 31, 2020.

1. CORPORATE OVERVIEW

Your company is into exports of cotton garments especially Infantswear. The Company exports its products to United States and European Markets.

2. FINANCIAL HIGHLIGHTS

As mandated by the Ministry of Corporate Affairs, your company has prepared the financial statement (both standalone and consolidated) for the year ended March 31, 2020 as per Indian Accounting Standard (‘IND AS) notified under Sec 133 of the Companies Act, 2013 read with notification no. G.S.R. 111(E) dated 16.02.2015 as amended from time to time.

The Standalone and consolidated financial performance of the Company for the financial year ended March 31, 2020 is summarized below:

(Rs. in Lakhs)

Standalone Consolidated
Particulars For the year ended March 31, 2020 For the year ended March 31, 2019 For the year ended March 31, 2020 For the year ended March 31, 2019
Sales and other Income
Revenue from operations 73,920.98 60,680.46 73,920.98 60,680.47
Other Income 4,436.56 2,246.01 3,918.79 2247.12
Total Revenue 78,357.54 62,926.47 77,839.77 62927.58
Profit Before Interest and Depreciation 17664.83 16,133.25 17134.54 16114.60
Less: Finance Charges 702.49 387.99 702.49 388.00
Depreciation 2,645.23 2,726.25 2,645.23 2726.25
Net Profit Before Tax 14,317.12 13,019.01 13,786.82 13,000.35
Less: Provision for Tax 3,449.73 4,873.46 3,449.73 4,873.46
Net Profit After Tax 10,867.39 8,145.55 10,337.09 8126.89
Share Of Profit/ (Loss) Of Associates - - - (982.34)
Net Profit after share of profit of Associates 10,867.39 8,145.55 10,337.09 7144.55
Balance of Profit brought forward 35,775.33 29,252.65 33,011.04 27,489.37
Balance available for appropriation 46,556.31 37,376.59 43,208.03 34,612.31
Dividend paid on Equity Shares 1995.00 498.75 1995.00 498.75
Tax on Dividend 410.09 102.52 410.09 102.52
Transfer to General Reserve 2,000.00 1,000.00 2,000.00 1,000.00
Surplus carried to Balance Sheet 42,151.22 35,775.33 38,802.94 33,011.05

3. FINANCIAL PERFORMANCE

The Company continues to strengthen its market leadership in Infantswear across US markets during the year. It delivered yet another year of consistent growth in turnover and profit and fortified its manufacturing capabilities.

Your Company continued to build good relationship with our customers. The quality in our products is prime motto of our business. The manpower of the Company also remained a priority. During the year under report, there was a sustained focus to increase strength of your company and sharpen competitive advantages with a view towards long term value creation.

STANDALONE PERFORMANCE

On standalone basis, your company reported the revenue from operation and other income was Rs. 78,357.54 lakhs signifying a growth of 24.52% over previous financial year. The Revenue increased due to the better orders from the buyers. The operating profit stood at Rs. 14,317.12 lakhs compared with Rs. 13,019.01 lakhs in the previous year. Total employee benefit expense has increased by 15.60%. Our effective tax rate is at (19.64) % when compared to the previous year. The net profit for the year was Rs. 10,867.39 lakhs against Rs. 8,145.55 lakhs reported in the previous year. The EPS from continuing operations for the reporting year was Rs. 16.34.

CONSOLIDATED PERFORMANCE

On consolidated basis, total revenue for the financial year under review was Rs. 77,839.77 lakhs as against Rs. 62,927.58 for the previous financial year, 23.70% growth. Profit before tax was Rs. 13,786.82 lakhs and net profit after tax was Rs. 10,337.09 lakhs for the financial year under review as against Rs. 13,000.35 lakhs and Rs. 7144.55 lakhs for the previous year.

During the year under review, your company received and continued to receive enormous order confirmations from major infant garment buyers viz., Gerber Childrenswear LLC, Carters, Buy-Buy Baby, Ross Stores, Amazon, Target, Sams Club, Oshkosh and Walmart who can contribute major part of your Companys turnover in coming years. On a good day, the Company manufactures 6 lakhs pieces of infants apparel and dispatches as whole container of them to the US.

Your company had recorded excellent growth in last fiscals Q2 & Q3 and had lined up various investment strategies to increase the capacity. But CoVID-19 pandemic struck various future plan and unfolded the realities of various crisis. During the month of April & May, 2020, your company utilized the opportunity by supplying Personal Protective Equipment (PPE) kits to various organizations and this was carried out by the company without any additional investment in the existing infrastructure. There have been no material changes or commitments affecting the financial position of the Company which have occurred between the end of the financial year and the date of this report except below:

COVID-19 GLOBAL PANDEMIC

COVID 19 was declared a global pandemic on March 11, 2020 and consequently the Government of India declared lockdown on March 25, 2020 until May 2020. The pandemic and lockdown impacted normal operations by way of interruption in production, supply chain disruption, customer order deferrals, unavailability of personnel, etc. Manufacturing and Exports commenced by first week of May 2020 based on permissions from relevant authorities. The Management has made a detailed assessment on recoverability and carrying value of its assets comprising of Plant Property Equipment, Intangible assets, investments, inventory, trade receivables and other financial assets. Based on current visibility of future business environment, economic conditions and liquidity position of the company, the company expects to recover the carrying amount of these assets. The actual impact may be different from that estimated as at the date of approval of these financial results, as it will depend upon future developments and future actions to contain or treat the disease and mitigate its impact on the economy. Accordingly, no adjustments have been made to the financial statements. The detailed report on Disclosure on CoVID-19 impact to the company is given elsewhere in this report.

4. PERFORMANCE HIGHLIGHTS OF SUBSIDIARY & ASSOCIATE COMPANY

ASSOCIATE COMPANY

As on March 31, 2020, the Company has an Associate Company. Kitex USA LLC being an Associate Company with joint investment between the Company and Kitex Childrenswear Limited to support and facilitate design for US Market customers. The Associate Company markets the licence brand "Lamaze" and Own Brand "Little Star" Infantswear in US and Canada. The Consolidated Financial Statements of the Company along with its Associate prepared for the year 2019-20 in accordance with relevant Ind AS issued by ICAI forms part of this Annual Report.

SUBSIDIARIES

During the year under review, the company has 6 wholly owned subsidiaries viz., Kitex Littlewear Limited, Kitex Babywear Limited, Kitex Socks Limited, Kitex Packs Limited, Kitex Knits Limited and Kitex Kidswear Limited. Further, pursuant to the provisions of Sec 136 of the Act, audited financial statements in respect of subsidiaries are available on the website of the Company www.kitexgarments.com.

A Report on the salient features of the financial statements of Subsidiaries/ Associate Companies/ Joint Ventures prepared in form AOC-1 is provided as Annexure – A. There are no companies which have ceased to be its Subsidiaries, joint ventures or associate companies during the year under review.

The Company has adopted the policy for determining material subsidiaries in term of Reg 16(1)(c) of Listing Regulations as amended from time to time and may be accessed on the companys website www.kitexgarments.com.

Your company has also sold products worth Rs. 36805.64 Lakhs to its Associate during the reporting period.

5. DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Sec 134 (5) of the Act, the Board of Directors of the Company hereby state and confirm that;

(i) in the preparation of the Annual accounts for the year ended March 31, 2020, the applicable accounting standard have been followed along with proper explanation relating to the material departures, if any;

(ii) the Directors had 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 as at March 31, 2020 and of the profit of the Company for the year ended on that date;

(iii) that the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) the annual accounts have been prepared on a going concern basis;

(v) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; and (vi) that the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

6. DIVIDEND, DIVIDEND DISTRIBUTION POLICY AND TRANSFER TO RESERVE

Your Company has consistent track record of dividend payment. In compliance with Dividend Distribution policy of the company, the Board of Directors at its meeting held on February 11, 2020 had declared an Interim Dividend of Rs. 1.50 (150%) per equity shares of face value of Re. 1/- on equity share capital of the Company. The Interim dividend was paid to the members of the Company whose name appeared in the Register of Members as on Record date i.e. February 22, 2020. The aforesaid interim dividend declared by the Board would be recommended for the confirmation of members as final dividend for FY20. During the year under review, your company transferred a sum of Rs. 2000.00 lakhs to the General Reserve on account of future expansions. The Total outgo on account of dividend inclusive of taxes for FY 2019-20 is Rs. 2,405.09 lakhs which represents a payout of 22.13% of the Companys standalone profits.

As per Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, top five hundred listed entities based on market capitalization are required to formulate a Dividend Distribution Policy. However, since April, 2017 your company has been re-classified its class of scrip by the stock exchanges as small cap and hence this regulation does not apply to the Company. But, the Board approved and adopted Dividend Distribution policy is available on the Companys Website: viz., www.kitexgarments.com

7. SHARE CAPITAL

The paid-up equity share capital as on 31st March, 2020, was Rs. 6.65 Crores consisting of 6,65,00,000 equity shares of Re. 1/- each fully paid-up.

8. TRANSFER TO INVESTORS EDUCATION AND PROTECTION FUND

a. Transfer of Unpaid Dividend

Pursuant to the provisions of Sec 124 (5) of the Companies Act, 2013, your Company has transferred Rs. 6,68,905.00 for the financial year 2011-12 to Investors Education Protection Fund (IEPF) on 04.07.2019. This amount was lying unclaimed/ unpaid with the Company for the period of 7 (seven) years after declaration of final dividend for the said FY.

b. Transfer of shares underlying unpaid dividend

The Board of Directors at its meeting held on May 20, 2019, transmitted 25,800 equity shares of the Company into the demat account of the IEPF Authority held with CDSL (DPID/ Client ID: 12047200 – 13676780) in terms of the provisions of Sec 124 (6) of the Companies Act, 2013 read with IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 as amended from time to time.

The equity shares were the shares of 38 shareholders whose unclaimed/ unpaid dividend pertaining to FY 2011-12 had been transferred into IEPF and who had not encashed their dividends for 7 (seven) subsequent financial years. The Company has taken various steps by sending reminders requesting them to encash their dividend so as to reduce the limit of unclaimed dividend before transferring the dues to IEPF. The complete list of such shareholders whose shares were due for transfer to IEPF was also placed in investors relationship section on the website of the Company www.kitexgarments.com.

Further, dividend which has become unclaimed for the last 7 years since 2012-13 must be claimed by the concerned shareholders on or before June 18, 2020 for which Company had sent the reminder letter to them. Since due date for such transfer was elapsed on above date, the company had initiated and completed the process of transfer of such dividend to IEPF Authority on July 8, 2020. The details are provided in the Shareholder information section of this Annual Report and are also available on our website www.kitexgarments.com.

9. CAPITAL EXPENDITURE

As on 31st March, 2020, the Fixed Assets stood at Rs. 26,400.81 lakhs and net fixed assets of Rs. 16,924.64 lakhs. Additions during the year amount to Rs. 3,174.05 lakhs.

10. FUTURE PROSPECTS

In the last Boards Report, your Board of Directors had mentioned about investment plan of Rs. 910 crores to be spent over 7 years since 2018 under the theme "Kitex Garments Limited Strategic road map 2025". The said investment shall be from internal accruals and borrowings. The status of key activities w.r.t. above expansion plan is as follows:

• Preparation of strategy document – 100% completed
• Incorporation of Wholly owned Subsidiaries – 100% completed
• Land identification – 100% completed
• Preparation of detailed project report – under process
• Machinery and supplier identification – under process
• Land acquisition – under process
• Building and infrastructure planning – under process
• Automation of existing machinery – 40% completed

The Board is yet to receive project report for investment in setting up unit for spinning mill, socks, diaper and wet tissue manufacturing. Due to CoVID-19 pandemic, Board has put on hold all investment plan even in the core business. Only diversification which company has been doing is of supply of PPE kits to hospital and other organization without any additional investment and restraining the workforce. Board expects there would be good growth in the infants apparel business in coming years.

11. CREDIT RATING

During the year under review, ICRA, the Credit Rating Agency maintained the "[ICRA] AA-" rating with stable outlook for the companys long term borrowings and maintained the "[ICRA] A1+" rating for the Companys short term borrowings.

12. QUALITY AND ACCOLADES

Your Company continues to win awards year by year, thus reiterating its credible market position.

13. CHANGE IN THE NATURE OF BUSINESS

During the year under review, there was no change in the nature of the business.

14. LISTING

The Equity Shares of the Company continue to remain listed on BSE Limited and the National Stock Exchange of India Limited.

15. DEPOSIT FROM THE PUBLIC

The Company has not accepted any deposit within the meaning of Chapter V of the Companies Act, 2013 and the Rules framed thereunder.

16. EXTRACT OF ANNUAL RETURN

As per the requirements of Sec 92 (3) of the Act and Rules framed thereunder, the extract of annual return for the FY 2019-20 is given in Annexure – B in the prescribed form MGT 9, which is a part of this report. The same is available on www.kitexgarments.com.

17. SECRETARIAL STANDARD

The Company complies with all applicable secretarial standards.

18. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT BY THE COMPANY

During the year under review, no loan, guarantees and investments pursuant to the provisions of Section 186 of the Act and SEBI (LODR) Regulations, 2015, were made by the Company. However, loans and Investments covered under the provision of the said section are given in the notes to financial Statements.

19. DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review and between the end of the financial year and date of this report, the following are the changes in directors and Key Managerial Personnel of the Company:

(i) In accordance with Articles of Association, Mr. K. L. V Narayanan (DIN: 01273573), non-executive director of the Company will be retiring at the ensuing Annual General Meeting and being eligible, seek reappointment. Item seeking his re-appointment along with his detailed profile has been included in the notice convening the AGM.

(ii) Mr. C. P. Philipose (DIN: 01125157) was appointed as the Non-Executive Independent Director of the Company at the 24th Annual General Meeting held on June 10, 2016 for a period of five years. The said period of five years ends on June 9, 2021. Considering the past performance of Mr. C. P. Philipose as Director of the Company, his consent and necessary disclosures to continue as Independent Director of the Company and that he continue to meet criteria of Independence, the Board of Directors, on July 29, 2020, had approved his re-appointment as Independent Director of the Company and who has attained the age of 75 years, for the second term from June 10, 2021 to June 9, 2026, subject to approval of the shareholders and has recommended his re-appointments for approval of the shareholders in the forthcoming Annual General Meeting by way of Special Resolution.

(iii) Mr. Sabu M. Jacob (DIN: 00046016) is sought to be re-appointed as Chairman and Managing Director of the Company effective from August 16, 2020 till August 15, 2025 based on recommendation of Nomination and Remuneration Committee subject to the approval of shareholders at the ensuing Annual General Meeting.

(iv) Mrs. Sindhu Chandrasekharan (DIN: 06434415) is sought to be re-appointed as Whole Time Director of the Company effective from March 16, 2020 till March 15, 2025 based on recommendation of Nomination and Remuneration Committee subject to the approval of shareholders at the ensuing Annual General Meeting.

(v) The Board has appointed Mr. Boby Michael as Chief Financial officer (CFO) and Key Managerial Personnel (KMP) of the Company w.e.f. July 1, 2019 in the place of Mr. Sabu M. Jacob, Chairman and Managing Director who has been additionally holding the responsibility of CFO. There is no change in the Board of Directors & Key Managerial Personnel of your company during the financial year 2019-20 except as mentioned above. All Independent Directors have given declaration that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and Reg 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 as amended from time to time. Based on the confirmation/ disclosure received from the directors, the Non Executive Directors namely Mr. E. M. Paulose, Mr. Benni Joseph and Mr. C. P. Philipose are treated as independent as on March 31, 2020. The Company recognizes the importance of a diverse board and believes that it brings new ways of thinking, insights and different perspective on consumer wants and needs. This will help company to retain competitive position in the corporate world.

In the opinion of the Board, the Independent Directors are persons with integrity, expertise and experience in the relevant functional areas. Requirements of online proficiency self-assessment test in terms of Rule 6(4) of The Companies (Appointment and Qualifications of Directors) Rules, 2014 will be complied within the prescribed timeline, if the same is applicable to each of them.

During the year under review, meetings of the Board of Directors and its Committees were held, details of which are set out in the Corporate Governance Report which forms part of this Report.

20. BOARD EVALUATION & FAMILIARISATION PROGRAMME

Having a formalized Board evaluation give Board Members an opportunity of assessing their own performance and brings out the importance of the contributions of individual directors. It is a mechanism by which Board members candidly reflect on how well the Board is meeting its responsibilities.

The Board of Directors has carried out an annual evaluation of its own performance, Board Committees and individual Directors pursuant to the provisions of the Companies Act, 2013 as well as SEBI (LoDR) Regulations, 2015.

With the objective of evaluating the performance of Directors, Nomination and Remuneration Committee has formulated a structured questionnaire after taking into consideration the various aspects viz., composition of the Board and its committees, Boards function, its culture, quality and timely flow of information, frequency of meetings, execution and performance of specific duties, obligations and governance. Board has carried out an annual performance evaluation of its own performance, the performance of various committees of the Board, Individual Directors and the Chairman based on adopted questionnaire. A note on the familiarizing programme adopted by the Company for the orientation and training of the Directors and the manner in which the Board evaluation process undertaken in compliance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is provided in the Corporate Governance Report which forms part of this Report. Further, the Independent Directors of the Company met on February 11, 2020 to review the performance of the Non-executive directors, Chairman of the Company and the access of the quality, quantity and timeliness of flow of information between the Company management and the Board to effectively perform their duties. The details of familiarization program conducted for Independent Directors of your Company are available on your Companys website www.kitexgarments.com.

21. POLICY ON DIRECTORS APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Companys policy on directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided in Section 178(3) of the Act is available on our website www.kitexgarments.com. We affirm that remuneration paid to the directors is as per the terms laid out in the Nomination and Remuneration Policy of the Company.

Some of the salient features of which are as follows:

1. To regulate the appointment and remuneration of directors, key managerial personnel and the senior management personnel;

2. To identify persons who are qualified to become directors as per the criteria/ Board skill matrix identified by the Board;

3. To ensure proper composition of Board of Directors and Board diversity;

4. To ensure that level and composition of remuneration is reasonable and sufficient to attract, retain and motivate directors, key managerial personnel and senior management and their remuneration involves a balance between fixed and incentive pay reflecting short and long term performance objectives appropriate to Companys working and its goals.

22. BOARD COMMITTEES

Detailed composition of the mandatory Board committees namely Audit Committee, Nomination and Remuneration Committee, CSR Committee, Stakeholders Relationship Committee, its number of meetings held during the year under review and other related details are set out in the Corporate Governance Report which forms part of this Report.

There have been no situations where the Board has not accepted any recommendation of the Audit Committee.

23. EMPLOYEES STOCK OPTION SCHEME

The Company has not granted any Employee Stock Option within the meaning of section 62 (1) (b) of the Companies Act, 2013 read with its Rules framed thereunder and respective SEBI regulations.

24. CORPORATE SOCIAL RESPONSIBILITY

Your Company believes in touching some of the important aspects of human life. Even before commencement of Companies Act, 2013, it has embarked on the journey of social change through inclusive growth, dedicated to the cause of future and future generations. The Company implements CSR directly to society of Kizhakambalam Panchayat in which it operates and efforts are revolved around several projects relating to Social Empowerment and Welfare, Infrastructure Development, Sustainable Livelihood, Health Care and Education during the year under review. These projects are in accordance with Schedule VII of the Act and its CSR policy. The brief report of the Corporate Social Responsibility (CSR) policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure C of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. For other details regarding the CSR Committee, please refer to the Corporate Governance Report, which is a part of this report. The Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company are available on your Companys website www.kitexgarments.com.

25. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report on the operations of the Company, as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 as amended, forms an integral part of this Report.

26. BUSINESS RESPONSIBILITY REPORT

As required under Regulation 34 of the Listing Regulations, the Business Responsibility Report is provided in a separate section and forms part of the Annual Report.

27. CORPORATE GOVERNANCE

A separate section on parameters of statutory compliance evidencing the standards expected from a listed entity have been duly observed and a report on Corporate Governance as well as certificate from company secretary in practice confirming compliance with the requirements of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 forms part of this Report.

28. VIGIL MECHANISM

The Company has a Vigil Mechanism to report concern about unethical behavior, actual or suspected fraud or violation of Companys code of conduct by the Directors and employees. The vigil mechanism is disclosed in the website of the company viz., www.kitexgarments.com

29. RELATED PARTY TRANSACTIONS

All transactions or arrangement entered into with the related parties for the year under review were on arms length basis and in the ordinary course of business. Hence the provisions of Section 188 of the Companies Act, 2013 and the Rules made thereunder are not attracted. Accordingly, the disclosure of Related Party Transactions as required under Section 134 (3) (h) of the Companies Act, 2013 in Form AOC 2 is enclosed as Annexure D. The company has developed a framework through Standard Operating Procedures for the purpose of identification and monitoring of such Related Party Transactions. All Related Party Transactions were placed before the Audit Committee as also to the Board for approval. Omnibus approval was obtained on a yearly basis for transactions which are of repetitive nature. Transactions entered into pursuant to omnibus approval are audited by the Risk Assurance Department and a statement showing the details of all Related Party Transactions are placed before the Audit Committee and the Board for review and approval on a quarterly basis.

None of the Directors has any pecuniary relationship or transactions vis--vis the Company.

The policy on Related Party Transactions as approved by the Board of Directors has been uploaded on the website of the Company viz., www.kitexgarments.com.

30. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/ revised standard operating procedures. The Companys internal control system is commensurate with its size, scale and complexities of its operations. The Internal and operational audit is entrusted with M/s. K. Venkitachalam Aiyer & Co, a firm of Chartered Accountants. The main thrust of Internal Audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal financial control systems w.r.t. the financial statements and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism.

The Audit Committee of the Board of Directors, Independent Auditors and the Core Committee Heads have periodically been appraised the significant internal audit observations and the corrective actions have been taken. The Audit Committee places a key role in providing assurance to the Board of Directors. In order to maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

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

The information on conservation of energy, technology absorption and foreign exchanges earnings and outgo pursuant to Section 134 (3) (m) of the Companies Act, 2013 read with the Rule 8(3) of the Companies (accounts) Rules, 2014 as amended from time to time is annexed as Annexure - E and forms an integral part of this Report.

32. BUSINESS RISK MANAGEMENT

Your Company continues to strengthen its robust Risk Management Framework and the same was reviewed by the Audit Committee periodically. The Committee meets for focused interaction with business, identifying and prioritizing strategic, operational risk and formulating appropriate mitigation strategies and conducting frequent review of the progress on the management of the identified risk. Your company believes that managing risk helps in maximizing return. The companys approach in addressing business risks includes periodical review of such risks and thereby mitigating it effectively. The risk management framework is reviewed periodically by the Board and the Audit Committee. Some of the risks that the company is exposed to are:

FINANCIAL RISKS:

The Companys policy is to actively manage its foreign exchange risks within the framework laid down by the Companys forex policy approved by the Board. Given the interest rate fluctuations, your Company has adopted a prudent and conservative risk mitigation strategy to minimize financial and interest cost risks.

COMMODITY PRICE RISKS

The Company is exposed to the risk of price fluctuations of raw materials as well as finished goods. The company proactively manages these risks through forward booking, inventory management and proactive vendor development practices. Your companys reputation for quality, product differentiation coupled with the existence of a powerful brand image with a robust design and marketing network in US mitigates the impact of price risk on finished goods.

REGULATORY RISKS

The Company recognized its risks attached to various statutes, laws and regulations. The company is mitigating these risks through regular review of legal compliances carried out through our internal as well as external compliance audits by our customers.

HUMAN RESOURCE RISKS

Retaining the existing talent pool and attracting new talent are the major risks affecting the company. We have initiated various measures including rolling out of strategic talent management systems, training and integration of learning and development activities. Our company has collaborated with various agencies like Integrated Skill Development Scheme (ISDS), Kudumbashree which helps to identify, nurture and groom labour talents within all states of India to prepare them for future business leadership.

STRATEGIC RISKS

Emerging businesses, capital expenditure for capacity expansion etc are normal strategic risks face by your company. However, your Company has well-defined processes and procedures for obtaining approval for investments in new businesses and capacity expansions.

33. AUDITORS

33.1.INDEPENDENT AUDITORS

As per the provisions of Section 139 of the Companies Act, 2013, MSKA & Associates, Chartered Accountants, (FRN 105047W) have been appointed as Independent Auditors of the company for a period of 5 (Five) years in the AGM of the Company held on July 28, 2018.

Further the report of the Independent Auditors along with notes to financial statements is enclosed to this Annual Report. The Auditors Report does not contain any qualification, reservation, disclaimer or adverse remarks.

33.2.SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has re-appointed M/s. SVJS & Associates, Practicing Company Secretaries, Kochi to conduct the secretarial Audit for the financial year 2019-20. The Audit Report issued by the Secretarial Auditors for the said FY form part of this Report and is set out in Annexure – F which is a self-explanatory.

33.3.INTERNAL AUDITORS

M/s. K. Venkitachalam Aiyer & Co, Chartered Accountants continue to be the Internal Auditors of your company for the financial year 2019-20.

34. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There were no significant and material orders passed by the Regulators/ courts except as detailed below, which would impact the going concern status of your company and its future operations during the period under review.

Name of Regulator Date of levy Reason for levy Amount Company Remarks
SEBI 31.08.2018 Non Redressal of investors complaint of Mr. Madhubhai Patwa Rs. 11,00,000 The Company has redressed the investors complaint on time during the period where principle of natural justice was in force. Without considering it, Adjudication officer has passed such order. Company had filed an appeal with Securities Appellate Tribunal (SAT), Mumbai against aggrieved order of SEBI. SAT rejected the appeal. The Company had paid said fine amount to SEBI. Considering the amount, matter is not considered as material

35. ENVIRONMENT AND SAFETY

The Company is conscious of the importance to environmental friendly and safe operations. The companys policy requires conduct of operations in such a manner so as to ensure safety of all concerned, compliance of environmental regulations and preservation of natural resources.

As required by the Sexual Harassment of Women at Workplace (Prevention, Prohibition and redressal) Act, 2013, the Company has formulated and implemented a policy on prevention of sexual harassment at the workplace with a mechanism of lodging complaints. The following is a summary of sexual harassment complaints received and disposed off during the reporting period:

• No. of complaints received: Nil

• No. of complaints disposed off: Nil

• No. of complaints pending: Nil

The company has complied with provisions relating to the constitution of Internal Complaints Committee under the Act. The Company has filed Annual Report for the year ended December 31, 2019 under the Act with District officer.

36. HUMAN RESOURCES AND INDUSTRIAL RELATIONS

Your Company believes that its manpower is an asset for the company and enjoys strong brand image as a preferred and caring employer. The ongoing focus is on attracting, retaining and engaging talent with the objective of creating a robust talent pipeline at all levels. Value-based HR programmes have enabled your Companys HR team to become strategic partners for the business. Your company laid stress to build a women-friendly workplace by introducing various initiatives for the development of women employees in the organization. Your Company has focused on internal talents and nurtures them through the culture of continuous learning and development, thereby building capabilities for creating future leaders. Your companys initiatives like a hiring freeze at some levels, robust talent review, career development conservations and best-in-class development opportunities, which will help to enhance the employees experience at your Company. The Companys Human Resources plays a critical role in your Companys talent management process.

The Disclosure as required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure – G and forms a part of this report. Information relating to remuneration of Directors under Section 197 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been given in Annexure H to the Directors Report.

37. 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 year under review:

• Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries; • there were no frauds reported by the auditors under provisions of the Companies Act, 2013;

• Issue of equity shares with differential rights as to dividend, voting or otherwise;

• There were no revisions in the financial statements;

• Issue of share (including sweat equity shares) to employees of the Company under any scheme as permitted under any provision of Companies Act, 2013.

• Company is not required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

38. ACKNOWLEDGEMENTS

Your Directors thank various Central and State Government Departments, Organizations and Agencies for the continued help and cooperation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company.

For and on behalf of the Board of
Kitex Garments Limited
Sd/-
Sabu M. Jacob
Kizhakkambalam Chairman and Managing Director
July 29, 2020 (DIN: 00046016)