S P Apparels Ltd Directors Report.

To

The Members,

The Directors of your Company are pleased to present the 16th Annual Report on the business and operations of the Company together with the Audited Financial Statements (Standalone & Consolidated) for the year ended 31st March, 2021. The Management Discussion and Analysis is also included in this Report.

FINANCIAL RESULTS

The Companys financial performance for the year ended 31st March, 2021 is summarised below:

(Rs. in Million)

PARTICULARS STANDALONE CONSOLIDATED
2020-21 2019-20 2020-21 2019-20
Sales and other income 5755.16 7583.10 6523.14 8089.66
Revenue from Operations
Other Income 11.72 238.08 13.76 237.07
Total 5766.88 7821.18 6536.90 8326.73
Profit before Interest & Depreciation 1016.61 1046.98 1057.22 1068.55
Less : Interest 137.60 224.20 142.75 227.81
Depreciation 340.05 316.32 323.05 299.34
Profit Before Exceptional Item 538.96 506.46 591.42 541.40
Exceptional Item - 97.31 - 97.31
Profit Before Tax 538.96 409.15 591.42 444.09
Less : Taxation
Provision for Current Tax 160.75 102.98 167.49 105.98
MAT Credit 4.59 - 4.59 (0.43)
Deferred Tax Expenses / (Credit) (13.22) (134.10) (12.38) (130.65)
Total Tax Expenses 152.12 (31.12) 159.70 (25.10)
Profit After Tax 386.84 440.27 431.72 469.19
Other comprehensive Income (Net of tax) (85.53) (74.55) (85.53) (74.55)
Minority Interest - - 0.34 0.37
Total Comprehensive Income 301.31 365.72 346.53 395.01

Review of Operations:

Garment Division:

Covid-19 the pandemic has disturbed the operations in garment division during this financial year 2020-21. Shipments were kept on hold by our international customers due to disruption in the supply chain coupled with lockdowns imposed in their respective countries. This led to revenue loss. Furthermore, all the factories, corporate offices and regional offices were closed as per directives from the local authorities during the lockdown in this financial year 2020 - 21. The migrant employees left to their native place, and this had disturbances in the production during the financial year 2020-21. This disturbance also put the sales growth plan and the strategies planned to increase our capacity utilisation on hold.

Second wave during the month of Jan21 in UK & Europe and the second wave in India had an impact in our revenue and operations partly during financial year 2020-21 and partly during the first quarter of the financial year 2021-2022.

We are very confident on the future growth of the garment division. We have invested into our infrastructure over couple of years and we have also increased our customer base in these years. Our strategies on increasing the skilled labour force have also started yielding results. Our strategy to increase the capacity by having double shift will also start yielding results in quarters to come. This gives us good confidence in growth of the garment division.

Retail Division

Financial year 2020-21 has been a very tough year for the Retail division. The industry as such has been undergoing very bad phase. We had lockdown in stores and large format stores where there was no sales for a period of 3 months. Even after the lockdown the walk-ins were very weak. Even under these circumstances, we have consolidated on nonperforming stores and have reduced the overhead considerably.

The strategy in retail division during the FY 2021-22 will be to consolidate on the presence and not to increase number of doors. The pandemic situation and the lockdown of stores and large format stores are not allowing us to strategize on retail operations and we are expecting to consolidate on performing stores.

SPUK

United Kingdom was also disturbed due to pandemic. The lockdown was severe, and all the retailers remained closed. We had couple of orders cancelled due to pandemic and for some orders we got delivery dates extended. In spite of this tough conditions, SPUK was able to deliver a revenue growth during the current financial year.

Under the new normal business way of working, many retail brands will prefer a full service support locally in UK which is in line with the business model of SPUK.

SPUK is confident of revenue growth and have lined up with couple of new customers and improving the supplier base as well.

DIVIDEND

The Board of Directors at their meeting held on 21.06.2021 has recommended final dividend of Rs.2.25 per equity share of the Company for the financial year 2020-21.

RESERVES & SURPLUS

As at March 31, 2021 the Company had reserves of Rs. 5264.62 million. During the year under review the company has transferred Rs.301.3 Million to Other Equity (General reserve)

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCATION AND PROTECTION FUND

Since there was no unpaid/unclaimed Dividend, the provisions of Section 124 & 125 of the Companies Act, 2013 relating to transfer of Unclaimed dividend to Investor Education and Protection fund do not apply.

SHARE CAPITAL

The Authorised share capital of the Company is Rs. 47,25,00,000/- divided into 4,72,50,000 equity shares of Rs. 10/- each and the issued, subscribed and paid-up share capital of the Company as at 31.03.2021 stood at Rs.25,69,26,000/- divided into 2,56,92,600 Equity Shares of Rs.10/- each.

WEBLINK OF ANNUAL RETURN

The Annual Return of the Company for the financial year 2020-21 as required under Section 92(3) of the Companies Act, 2013 is available on the website of the Company at the link http://www.s-p-apparels.com

CAPITAL EXPENDITURE

As on 31st March, 2021, the gross fixed assets block stood at Rs.6933.04 Million and net fixed assets block at Rs.4109.30 Million. Additions to Fixed Assets during the year amounted to Rs. 428.93 Million

BOARD AND COMMITTEE MEETINGS

The details of meetings of Board of Directors and Committees thereof and the attendance of the Directors in such meetings have been enumerated in the Corporate Governance Report.

STATEMENT ON COMPLIANCE WITH SECRETARIAL STANDARDS

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards. Such systems are found to be adequate and are operating effectively. The Company has duly complied with Secretarial Standards issued by the Institute of Company Secretaries of India in respect of the meeting of the Board of Directors (SS-1) and General Meetings (SS-2).

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that:

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed;

(b) 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 at the end of the financial year and of the profit of the company for that period;

(c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) the directors had prepared the annual accounts on a going concern basis;

(e) the directors laid down internal financial controls to be followed by the Company and such internal financial controls were adequate and operating effectively and

(f) 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.

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12) OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of the Companies Act, 2013.

DECLARATION OF INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as stipulated in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and that their name is included in the data bank as per Rule 6(3) of the Companies (Appointment

and Qualification of Directors) Rules, 2014. During the year, the Independent Directors of the Company had no pecuniary relationship or transactions with the Company other than sitting fees and reimbursement of expenses incurred by them for the purpose of attending meetings of the Board of directors and Committee(s). The details of remuneration and /or other benefits of the Independent director are mentioned in the Corporate Governance Report. Further, they have also declared that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence.

Based on the confirmation / disclosures received from the Directors and on the evaluation of the relationships disclosed, the following Non-Executive Directors are Independent:

Mr.V.Sakthivel, Mr.A.S. Anand Kumar, Mr.C.R.Rajagopal and Mrs.H.Lakshmi Priya

Pursuant to Companies (Appointment and Qualification of Directors) Rules, 2014, the Certificate of Registration received from all the Independent Directors of the Company were taken on note by the Board of Directors.

STATEMENT REGARDING OPINION OF THE BOARD WITH REGARD TO INTEGRITY, EXPERTISE AND EXPERIENCE (INCLUDING THE PROFICIENCY) OF THE INDEPENDENT DIRECTORS APPOINTED DURING THE YEAR

Board of Directors have evaluated the Independent Directors appointed/ re-appointed during the year 2020-21 and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors is satisfactory.

FAMILIARIZATION PROGRAMMES

In compliance with the requirements of the Listing Regulations, the Company has put in place a familiarization programme for the Independent Directors to familiarize them with their roles, rights and responsibilities as Independent Directors, the working of the Company, nature of the industry in which the Company operates, business model and so on. The same is also available on the Company website at http://www.s-p-apparels.com

COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND OTHER MATTERS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT, 2013

The Company pursuant to the provisions of Section 178 of the Companies Act, 2013 and in terms of Regulation 19(4) of the SEBI Listing Regulations has formulated a policy on Nomination and Remuneration for its Directors, Key Managerial Personnel and senior management. The Nomination and Remuneration Policy of the Company can be accessed on the Companys website at the link http://www.s-p-apparels.com

COMMENTS ON AUDITORS REPORT:

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. ASA & Associates LLP, Statutory Auditors in their reports however Mr.M.D.Selvaraj, proprietor of MDS & Associates, Secretarial Auditor has qualified non appointment of women independent director as required under Regulation 17(1)(a) of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, and the Company has resolved the qualification by appointing a women independent Director on its Board on 02.09.2020 and further qualification on nonfiling of MGT 14 is due to oversight.

MAINTENANCE OF COST RECORDS UNDER SUB-SECTION (1) OF SECTION 148 OF THE COMPANIES ACT, 2013

The maintenance of cost record as specified by the Central Government under Section 148(1) of the Companies Act, 2013 is applicable to the Company and accordingly the cost accounts and records are made and maintained. However, the appointment of Cost Auditor under the provisions of Section 148 is not applicable to the Company.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

The Company has duly complied with the provisions of section 186 of the Companies Act 2013 and as required therein the details of the loans is annexed by way of notes to accounts. And also, the details of the loans and investments made in earlier years are given in the Notes to the Financial Statements.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered into with related parties as defined under the Companies Act, 2013 during the financial year 2020-21 were in the ordinary course of business and on an arms length basis. Since there are no transactions which are not on arms length basis and material in nature the requirement of disclosure of such related party transactions in Form AOC-2 does not arise.

The Policy on Related Party Transactions as approved by the Board of Directors of the Company has been uploaded on the Companys website and may be accessed through the link at http://www.s-p-apparels.com

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY:

The outbreak of COVID 19 pandemic has impacted the turnover and profitability of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the report.

Other than this, there were no material changes and commitments, affecting the financial position of the Company

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

The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earnings and outgo as required under section 134(3)(m) of the Companies Act,

2013 read with Rule 8(3) of the Companies (Accounts) Rules,

2014 is furnished in Annexure-A and is attached to this report.

RISK MANAGEMENT

Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Regulation 17(9) of the SEBI (Listing Obligations and Disclosure Requirements) Rules 2015, the Company has framed an effective Risk Management policy in order to analyse, control or mitigate risk. The board periodically reviews the risks and suggests steps to be taken to control the same.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES:

The Corporate Social Responsibility Committee consisting of Directors Mr.P.Sundararajan - Chairman, Mrs.S Latha and Mr.V Sakthivel as members of the committee have formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company as specified in Schedule VII of the Companies Act, 2013, which has been approved by the Board. The CSR policy may be accessed on the Companys website http://www.s-p-apparels.com.

The prescribed (two percent of the average net profit of the Company for last 3 financial years) CSR expenditure for the year 2020-2021 is Rs.14.22 Million. During the year the Company has spent Rs.14.31 Million towards CSR Activities. The annual report on CSR activities is annexed in Annexure-B herewith.

CONSOLIDATED FINANCIAL STATEMENTS

Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to the provisions of the Companies Act, 2013. They are prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard. The Consolidated Financials also show a significant increase in Revenues as well as Profitability.

ANNUAL EVALUATION OF THE BOARD ON ITS OWN PERFORMANCE AND OF THE INDIVIDUAL DIRECTORS

In accordance with the evaluation criteria and procedure suggested by the Nomination and Remuneration Committee, the Board of Directors evaluated the performance of the Board, having regard to various criteria such as Board composition, Board processes, Board dynamics etc. The Independent Directors, at their separate meetings, also evaluated the performance of non-independent directors and the Board as a whole based on various criteria. The performance of each independent Director was evaluated by the entire board of directors on various parameters like engagement, leadership, analysis, decision making, communication, governance etc. The Board and the Independent Directors were of the unanimous view that performance of the Board of Directors as a whole was satisfactory.

The performances of all the Committees were evaluated by the Board having regard to various criteria such as committee composition, committee processes, committee dynamics, degree of fulfillment of key responsibilities, effectiveness of meetings etc. The Board was of the unanimous view that all the committees were performing their functions satisfactorily.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Mrs.S.Latha (DIN: 00003388) as Executive Director, retires by rotation at the Annual General Meeting and being eligible, offers herself for re-appointment. Your Directors recommend her re-appointment.

Based on the recommendation of the Nomination and Remuneration Committee, the Board of Directors at their meeting held on 2nd September 2020 has re-appointed Mr.P.Sundararajan (DIN: 00003380) as Chairman and Managing Director of the Company for a further period of 5 (Five) years with effect from 21st November 2020 and Mrs.S.Latha (DIN: 00003388) as Executive Director of the Company for a further period of 5 (Five) years with effect from 16th August 2021. Subsequently, the members at the Annual General Meeting held on 28th September 2020 approved the said appointments.

Further, based on the recommendation of the Nomination and Remuneration Committee and the Board of Directors at their meetings held on 2nd September, 2020, the members at the Annual General Meeting held on 28th September 2020 re-appointed Mr.A.S.Anandkumar (DIN: 00058292) as Independent Director of the Company for a second term of 5 consecutive years with effect from 13th November, 2020, by way of passing a special resolution.

Further, based on recommendation of Nomination and Remuneration Committee, the board of directors appointed Mr. C.R.Rajagopal (DIN: 08853688) and Mrs. H. Lakshmi Priya (DIN: 08858643) as Additional Directors with effect from 2nd September 2020 with an intention to appoint them as the Independent Directors of the Company. Subsequently, the members at the Annual General Meeting held on 28th September 2020 approved the said appointments.

During the year under review, the Board of Directors redesignated Mr.S.Chenduran (DIN:03173269) Whole-time director (Director-Operations) as non- Executive Director of the Company, liable to retire by rotation of Directors, with effect from 13th February 2021.

Key Managerial Personnel of the Company as required pursuant to Section 2 (51) and 203 of the Companies Act, 2013 are

Mr.P.Sundararajan - Chairman and Managing Director,
Mrs.S.Latha - Executive Director
Mr.S.Chenduran - Director
Mr.V.Balaji - Chief Financial Officer and
Mrs.K.Vinodhini - Company Secretary.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company has two subsidiary companies viz. Crocodile Products Private Limited and S.P.Apparels (UK) Private Limited.

The consolidated financial statements of the company and its subsidiaries were prepared in accordance with the applicable accounting standards have been annexed to the Annual Report.

The annual accounts of the subsidiary companies are posted on the website of the Company viz. http://www.s-p-apparels.com and will also be kept open for inspection by any shareholder at the Registered Office of the Company.

A report containing the salient features of the subsidiaries as required under Section 129(3) of the Companies Act 2013 has been annexed herewith in AOC - 1 and is attached as Annexure-C to this report.

The Company has formulated a Policy for determining Material Subsidiaries. The Policy may be accessed at: http:// www.s-p-apparels.com.

The Company does not have Joint Venture or Associate Company.

FIXED DEPOSITS

Since the Company has not accepted any fixed deposit covered under Chapter V of the Companies Act, 2013, there are no deposits remaining unclaimed or unpaid as on 31st March, 2021 and accordingly, the question of default in repayment of deposits or payment of interest thereon during the year does not arise.

FINANCE

Prompt repayments, facilitated by healthy cash flows, elevated the standing of your Company. It enabled prudent application of funds and better negotiation strength. This trend is expected to continue.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATION IN FUTURE

No significant and material order was passed by any Regulators that have any impact on the going concern status and the operations of the Company.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has an adequate Internal Control System, commensurate with the size, scale and complexity of its operations. The Audit Committee of the Board periodically reviews the Internal Financial Control Systems and their adequacy and recommends corrective action as and when necessary to ensure that an effective internal control mechanism is in place.

The directors confirm that the Internal Financial Control (IFC) is adequate with respect to the operations of the Company. A report of Auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of Internal Financial Control is annexed with the Auditors Report.

AUDITORS

a) STATUTORY AUDITORS

M/s. ASA & Associates LLP, Chartered Accountants, Chennai were appointed as the Statutory Auditors of the Company for a period of five years at the Annual General Meeting of

the Company held on 11th August 2017. The Company has received a certificate from the Statutory Auditors to the effect that their appointment as the Statutory Auditors of the Company, would be within the limits prescribed under section 139 of the Companies Act, 2013.

b) SECRETARIAL AUDITOR

The Board has appointed Mr.M.D.Selvaraj of M/s. MDS & Associates, Company Secretaries in Practice, Coimbatore as the Secretarial Auditors of the Company for the year 2021 -22 to carry out the Secretarial Audit, pursuant to the provisions of Section 204 of the Companies Act, 2013.

The report of the Secretarial Auditors for the financial year 2020-21 is annexed as Annexure-D to this Report

c) INTERNAL AUDITOR

The Board had appointed M/s. Deloitte Touche Tohmatsu LLP, Chartered Accountants, Coimbatore as Internal Auditors for the financial year 2021-22.

EMPLOYEE WELFARE

The Employee Welfare Initiatives and practices followed by the Company is among the best in the Corporate sector. The Company employs close to 13006.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to define the policy and redress complaints received. All employees (permanent, contractual, temporary, trainees) are covered under this policy. There were no complaints received from any employee or third parties during the Financial Year 202021.

PARTICULARS OF EMPLOYEES

Statement pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment

and Remuneration of Managerial Personnel) Rules, 2014, is annexed to Annexure-E attached to this report.

BUSINESS RESPONSIBILITY REPORT:

The Business Responsibility Report as required by regulation 34(2) of the listing regulations is annexed to Annexure-F attached to this report.

CORPORATE GOVERNANCE

A report on Corporate Governance is annexed and forms part of this report. The Company has complied with the conditions relating to Corporate Governance as stipulated in Regulation 27 of SEBI (Listing Obligation & Disclosure Requirements) Regulations, 2015.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors has been duly constituted in accordance with the provisions of Section 177 of the Companies Act, 2013. Details relating to the composition, meetings and functions of the Committee are set out in the Corporate Governance Report forming part of this Annual Report. The Board has accepted the Audit Committee recommendations during the year whenever required and hence no disclosure is required under Section 177(8) of the Companies Act, 2013 with respect to rejection of any recommendations of Audit Committee by the Board.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

The Company has provided for adequate safeguards to deal with instances of fraud and mismanagement and to report concerns about unethical behaviour or any violation of the Companys Code of Conduct. During the year under review, there were no complaints received under this mechanism. The policy can be accessed on the Companys website at http://www.s-p-apparels.com

CEO/CFO CERTIFICATION

As required under SEBI (Listing Obligations and Disclosure Requirements) Rules 2015, the Chairman and Managing Director and the Chief Financial Officer have furnished necessary certificate to the Board on the financial statements presented.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 DURING THE YEAR

No applications has been made and no proceedings are pending against the Company under the Insolvency and Bankruptcy Code, 2016.

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF.

The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions.

CAUTIONARY NOTE

Certain statements in "management discussions and analysis" section may be forward looking and are stated as required by law and regulations. Many factors, both external and internal, may affect the actual results which could be different from what the directors envisage in terms of performance and outlook.

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation, for the contribution made by all the employees at all levels but for whose hard work and support, your Companys achievements would not have been possible. Your Directors also wish to thank its customers, suppliers and bankers for their continued support and faith reposed in the Company.

For and on behalf of the Board of Directors
P. Sundararajan S. Latha
Place : Avinashi Chairman and Managing Director Executive Director
Date : 21.06.2021 DIN : 00003380 DIN : 00003388