Sambandam Spinning Mills Ltd Directors Report.

Your directors have pleasure in presenting the 45 th Annual Report together with the Audited Accounts for the year ended March 31,2019 (the year).

1 Performance highlights 2018 - 19 2017 - 18

(Rupees in Lakhs)

Revenue from Operations
Direct exports .. .. 362 708
Merchandise exports .. .. 136 0
Domestic Sales .. .. 20332 18442
Wind Turbine Generator Power sold to third party 120 158
Sub Total 20950 19308
Other income .. .. 144 166
Total Revenue from Operations 21094 19474
Profit
Gross profit [Profit before interest, depreciation & Tax] 2388 2279
Cash profit [Profit before depreciation & Tax] 1562 1360
Profit before tax [PBT] .. .. 547 344
Less : Provision for Current Tax .. .. 362 724
Provision for Deferred Tax .. .. (263) (725)
Profit after tax [PAT] .. .. 448 345

2 DIVIDEND

Your directors decided to recommend payment of Dividend at 20% (twenty percent) for the year, subject to the approval of the bankers of the Company.

3 management discussion and analysis

Core business of the company is manufacture and sale of cotton yarn. The management discussion and analysis given below discusses the key issues of the Industry with specific reference to the cotton yarn spinning sector.

1. Details of significant changes on following ratios (i.e changes if 25 % or more as compared to immediately previous financial year)

18-19 17-18 change change%
a. Debtors turnover ratio* 6.10 4.26 1.83 43.00%
b. Inventory turnover ratio 4.59 5.17 (0.58) (11.28%)
c. Interest coverage ratio 2.89 2.79 0.10 3.75%
d. Current ratio 1.01 0.94 0.07 6.98%
e. Debt equity ratio 0.15 0.18 (0.03) (16.42%)
f. Operating profit margin % 11.40% 11.80% (0.40%)
g. Net profit margin % 2.14% 1.79% 0.35%

* Debtors turnover ratio change is more than 25%, due to better collection management.

2. Details of any change in Return on net worth as compared to the immediately previous financial year along with a detailed explanation thereof

18-19 17-18 change%
a. Return on net worth 4.82% 3.83% 0.99%

a) INDUSTRY PERFORMANCE

Cotton Prices - Trends & Outlook

International Prices : Over the past few years, Indian cotton prices played a predominant role in influencing international cotton prices, given Indias status as the largest cotton producer and the second largest consumer of cotton. However, because of a significant correction in Chinas cotton reserves, the sensitivity of International cotton prices to Chinas cotton policies in terms of import quotas, quality of balance cotton in state reserves and pace of incremental liquidation of stocks, has increased considerably. Accordingly, a sharp surge in international prices to four-year high levels has been witnessed during the six- month period ended May 2018 (prices stand 12-14% higher YoY), amid an evolving cotton scenario in China as well as speculative buying in the backdrop of anticipated tightening of global cotton demand- supply situation. While the prices surged further by ~5-6% in the first few weeks of June 2018, these have stabilised in the last week of June 2018.

Indian Prices : Indian cotton prices increased at a relatively slower pace vis-a-vis the international prices during the six-month period ended May 2018, reporting a 9% increase in US dollar terms (13% in INR terms) vis-a-vis a 17% increase in the international cotton prices during the same period. As the Indian mills undertook adequate pre-emptive stocking during the peak harvest season, speculative buying was limited, which prevented an immediate increase when the international prices were surging. As a result, the spread between domestic and international prices, which typically remained range-bound at ~2-5% in the past, increased to ~12% in the quarter-ended March 2018 before peaking at 18% in May 2018. This, together with rupee depreciation in recent months, made the Indian cotton considerably competitive in global markets during the months of March, April and May 2018, shoring up demand for the Indian cotton. As a result, a sharp spike in Indian cotton prices has been witnessed starting mid-May 2018, following the upward trajectory in international prices, resulting in narrowing of the spread between the domestic and international cotton prices to ~6-8% in last week of June 2018 vis-a-vis 18% in May 2018. With price differential correcting, ICRA expects the recent spurt in exports of Indian cotton and yarn to be arrested from Q2 FY2019 onwards.

Indian Yarn Production and Exports

Exports : Indian cotton yarn exports fell for the second consecutive year in FY2018, amid continuing unfavourable demand trends in China - one of Indias key markets for cotton yarn. The export volumes declined by ~5% in FY2018, after having declined by ~13% in FY2017, primarily owing to a ~23% decline in exports to China in FY2018 following a 30% decline earlier in FY2017. While the pressure is partly explained by the falling import demand from China, as is evident in a ~10% and ~5% decline in Chinas overall cotton yarn import volumes during FY2017 and FY2018 respectively, increased competitive pressures from nations such as Vietnam have had a pronounced impact on exports from India. Nevertheless, Indian cotton yarn exports have reported a strong YoY growth of more than 50% during the past three months (Mar-May 2018), supported by higher exports to China. This has been primarily driven by competitive Indian cotton and yarn prices, further supported by a sharp rupee depreciation in the recent months, which has improved the relative competitiveness of domestic spinners in the global markets and is thus providing an arbitrage opportunity to the Chinese buyers. This spurt is, however, likely to be short-lived as the arbitrage opportunity neutralises.

Production : Domestic yarn production was adversely impacted in FY2019 by multiple headwinds, including weakness in exports of cotton yarn and GST-led temporary demand disruptions. As a result, cotton yarn production ended up flat during the full year, making FY2019 the fourth consecutive year of weak production. Following the tepid production in FY2019, domestic yarn production remained under pressure in April 2019 as well with a YoY decline of 1.8%. This is despite the spurt in cotton yarn exports in recent months, thereby indicating continued weakness in demand from the domestic downstream segments. This in turn could be explained by declining apparel exports and subdued exports of made-ups as well as unencouraging trends in domestic demand. In this context, ICRA believes that a sustained revival in domestic demand will remain crucial for the trend in Indias cotton yarn production, especially considering concerns pertaining to the sustainability of export demand, given the stiff competitive pressures from Vietnam and steps being taken by China to improve cotton availability situation

Domestic Yarn Prices and Contribution

Yarn Prices : The cotton yarn realisations in India have firmed up in the recent months, after remaining fairly range-bound over the past few quarters. Cotton yarn realisations (for 30s carded yarn) stood ~7% higher at ~Rs. 211/ kg in Q1 FY2019 vis-a-vis Rs.197/ kg in Q1 FY2018 and Rs. 199/ kg in Q4 FY2018. While the increase has been driven partly by the higher cotton prices, a more-than-proportionate increase vis-a-vis cotton prices (7% increase in cotton yarn realisations during Q1 FY2019 vis-a-vis 2% increase in cotton prices during the quarter) is explained by the strong transitory export demand during the quarter.

Contribution : A more-than-proportionate increase in yarn realisations vis-a-vis cotton prices has resulted in a 15% YoY increase in spot contribution margins of domestic spinners to Rs. 89/ kg in Q1 FY2019 vis-avis Rs. 77/ kg in Q1 FY2018 and Rs. 79/ kg in FY2018. The real contribution level (adjusted for cotton stock holding) stood even higher at Rs. 96/Kg, increasing by 25% YoY. The increase in real contribution margins has been driven by cotton stocking by spinners at lower prices during the recent harvest season (Oct17- Mar18) vis-a-vis the previous season, wherein cotton prices had remained firm, amid delayed cotton arrivals during demonetisation.

Even though export demand is expected to normalise, expectations of firm cotton prices and revival of domestic demand is likely to lend support to the cotton yarn prices, thereby supporting the contribution levels of spinners during FY2019. Earlier, as the benefit of low-cost cotton stocking was not available with the spinners last year, it resulted in the real contribution margin level (in percentage terms) in FY2018 being at a multi-year low and translating into the weakest performance of the spinners during the six-year period ending FY 2018.

Financial Performance of Cotton Spun-Yarn Manufacturers

The year 2018-19 has been a year of major challenges faced by the spinning industry, which faced almost year long downtrend in Selling prices, coupled with wide fluctuations in cotton prices. The power situation was also bad in the first few months but got stabilized in the subsequent period. Market demand for yarn was also continuously subdued which forced many units to reduce the working days and lower their production for export orders from global retail giants. On the other hand, from the raw material front during the year 18-19 even though domestic cotton was aplenty, still mills were importing fibre. Quality constraint is observed to be the primary reason for such industry behavior. High trash content, rampant adulteration and abnormal moisture content was observed in domestic supplies and this has resulted in rampant import by many spinners .A cross-section of spinners said that mills in Tamil Nadu have stopped procuring cotton from Gujarat, in particular, and reduced the quantity purchased from Maharashtra due to quality issues. There is said to be authenticated report on the fact that there is a mix up of quality cotton such as Sankar 6 with Comber Noil and carded waste. To make quick money, when demand surges, ginners sell cotton without removing trash. While 2 per cent trash is permissible, in recent months it has soared to 7 per cent. Many traders also liberally douse kapas with water, adding to the moisture content. "The industry experts fears that this could adversely affect the India Cotton branding initiative. "It could be a threat to the entire textile value chain. This has posed additional challenge to procure cotton at competitive costs . Experts in the industry have urged urgent government intervention for stopping such unethical trade practices and also urged for reintroduction of Cotton Control Order and ISI standards be enforced. According to experts in this industry , contracted import volumes could easily touch a record 30 lakh bales. "Mills in Tamil Nadu invariably take the lead in importing the fibre, but this year, spinners in the North have also taken to imports as the realization is 3 to 4 per cent better than the domestic fibre."Such measures will not only conserve forex reserves, but also help every stakeholder in the textile value chain. Despite being the largest producer of cotton and the biggest exporter of yarn, India continues to depend on the US, West Africa and Australia for supply of quality fibre. Cotton farming is sustainable with minimum support from the government. The present state of affairs though would push farmers away from cotton cultivation," is the general industrial observation.

There are about 600 spinning mills registered in Tamil nadu out which majority of them have faced shutdown like situation due to acute competition accentuated by continuous cost pressures from all fronts. The cotton arrivals have been affected to a larger extent due to demonetisation in the second part of the year as farmers preferred cash payment instead of other modes of payment .Spinning mills are under continuous stress .Spinning is feeder industry to weaving and knitting sectors, its fortunes mainly depend upon the dynamics of those sectors This will naturally have a cascading effect on the spinning sector, which feed the weaving and knitting sectors. The spun yarn production has been on the declining path from the month of June 2017 onwards. While in October 2017 all production was lower by about 10%, cotton yarn production was lower by 12% when compared to the first half of the year. When compared to previous year performance ,countrys export during April - November 2017 was marginally higher, whereas import was lower by 8% in dollar terms

The textile Industry is facing lots of challenges and it is under transformation on following grounds

1. Excess spindle capacity due to unplanned expansion throughout the supply chain such as Ginning, spinning, weaving and till the end user stage

2. Soaring cotton prices coupled with increasing wage costs and power costs

3. Fast and quick fashion changes among consumers and other market dynamics

4. Stiff price competition

5. Entire textile industry is facing labour shortage due to labour migration and urbanisation of labour

b) companys performance

(i) In Spite of rough market condition as narrated in industry scenario, your company is able to overcome the challenges posed by competitive forces during the year. Thus during the year under review, your Companys turnover was to Rs.209.50 crores as against Rs.193.08 crores recorded in the previous year. Your Companys performance was satisfactory. This is mainly due to cost reduction measures that were adopted by the Company such as tie-up with Private Power Producers to get the required power at a price lesser than the TANGEDCO Power, securing dedicated power supply from EB Substation to all the three units of the Company and minimum use of diesel Gensets, supported by your Companys Wind Turbine generated power. In addition to that the good performance of windmill and price saving in group captive power purchased has helped the company to earn reasonable profit during the year. These measures helped to achieve improved level of plant utilization to maintain production and quality of the product and achieve reasonable profit after tax of Rs.393.90 lakhs as against Rs.346.69 lakhs recorded in the previous year.

(ii) Your Companys Wind Turbine Generators (WTGs) recorded generation of electric power of the value of Rs.1148.40 lakhs during the year (Rs.1408.82 lakhs in gross revenue 2017-18).

(iii) Bank interest rates remained high during the year, However management has exercised strict control on inventory and thus could reduce the interest costs from previous year level.

(iv) In spite of many challenges company is focussed on value creation such as improving the sale per spindle , better product mix, focus on internal costs, and use of non conventional power such as wind energy power and widening market foot print by improving product mix

c) future outlook

Industry expects improvement during the current financial year as cotton prices are stabilizing and yarn prices have started improving from the first quarter of the financial year 2019-20. Considering the present market demand for products like Viscose, Modal, Linen Fibre and value added products like Gassed and Mercerized Yarn, your Company has planned to produce these new products in addition to the existing products Viz., Combed, Carded and Compact Yarn. The Company also started converting its yarn into fabric as a measure of value addition. On the wind energy side, with all set for the next windy season in the state, wind energy generation has started picking up. The State has a total installed wind energy capacity of 7,685 MW. The capacity addition was higher in states such as Andhra Pradesh. However, evacuation has not improved in Tamil Nadu and during the last financial year, contribution of wind energy to total energy consumed in the State went up to 40 % during the peak wind season. The winds started in March last year and went on till November. However , generation was less in 2018-19. This year, winds started picking up in the first week of April and wind energy generation is steadily increasing. Majority of the wind energy investors in the State are industries who have wind mills for captive use.

Going forward, in textile industry there will be increase in demand due to increase in population coupled with vast potential domestic market. In addition to existing products, lot of value added product is expected to go up manifold in the market. Also there is going to be exponential demand on technical textile products in the area of medical textiles, automobile textiles, agricultural textiles, flame retardant textiles, and other wide range of applications.

d) risks and concerns

Your Company has devised risk management policy which involves identification of the risks associated with the business risks as well as the financial risks, its evaluation, monitoring, reporting and mitigation measures. Audit Committee and the Board of Directors of the Company refined the risk management policy of the Company so that the management controls the risk through properly defined frame work. Heads of departments are responsible for implementation of the risk management system as may be applicable to their respective areas of functioning and report to the Board and the Audit Committee. Details of the risk management mechanism and key risks faced by the Company are enumerated in the risk management policy.

Risk Management Policy adopted pursuant to the provisions of Section 134 (3) (n) of the Companies Act 2013 is hosted on the website of the Company under the web link http://www.sambandam.com

e) environment protection, health and safety (ehs)

EHS continues to receive the highest priority in all operational and functional areas at all locations of your Company. Systematic process safety analysis, audits, periodic safety inspections are carried out by expert agencies and suitable control measures adopted for ensuring safe operations at the site. Various processes as required for Pollution Control and Environmental Protection are strictly adhered to.

f) internal control and systems

Your Company has in place well established internal control procedures covering various areas such as procurement of raw materials, production planning, quality control, maintenance planning, marketing, cost control and debt servicing. Steps are taken without loss of time, to correct if any weakness is observed.

Your Company is certified ISO 9001, ISO 14001 and OHSAS18001 for the systems. Further, your Companys laboratory is also certified by NABL on Global Organic Textile Standard, Better Cotton Initiative and others as displayed on the cover page of this Annual Report.

g) HUMAN RESOURCES MANAGEMENT

Employees are your Companys most valuable resource. Your Company continues to create a favourable environment at work place. Your Company has formulated and implemented various welfare measures for the employees. The Company also recognizes the importance of training and consequently deputes its work force in various work related courses/seminars including important issues like Total Quality Management (TQM), behavioural skills, soft skills, etc. Because of these labour welfare and improvement measures, your Company is able to attract and retain well trained and dedicated workforce.

The fact that relationship with the employees continues to be cordial is testimony to the Companys ability to retain high quality workforce. In view of the aforesaid relationship no man days were lost during the year under report.

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

The Company has zero tolerance for sexual harassment at workplace and has adopted a policy on prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder. The Company has set up a Committee for addressing issues related to women and during the financial year 2018-19, there were no complaints received on sexual harassment

i) COSTAUDIT

Audit Committee at the Audit Committee Meeting held on 25th May 2019, board of directors have approved the appointment of M/s.K.M.Krishnamurthy & Co., (Firm Reg No 102198 Cost Accountants for audit of cost accounts of the Company. In accordance with the provisions of the Companies Act 2013 and the Rules framed there under, Cost Audit for the Company is applicable for the financial year commencing from 1st April 2018. On the recommendation of the Audit Committee, Board of Directors of the Company at their meeting held on 26.05.2019, approved the appointment of M/s.K.M.Krishnamurthy & Co., Firm Reg. No 102198, Salem, for audit of Cost Accounts of the Company for the year 2019-20 and the resolution for ratification of the remuneration payable to the Cost Auditor for the year 2019-20 is placed before the members for ratification at the 45th Annual General Meeting of the Company scheduled to be held on 11.08.2019.

In view of the Company maintaining the cost records and the statutory requirement for the cost audit of such records, your directors decided to continue the Cost Audit for the year 2019-20. The Cost Auditor will submit to the Board of Directors his report for the year 2018-19 after duly certifying the cost records. Cost Audit Report for the year 2018-19 will be submitted in XBRL format in time.

J) board meetings :

During the year under review four board meetings were held and the intervening gap between any two board meetings did not exceed 120 days. Dates of the board meetings and details of directors attendance at the meetings are furnished in the Corporate Governance report at Annexure - VIII.

k) directors

Companys policy on Directors appointment and remuneration including criteria for determining qualifications, positive attributes, independence of a director and other matters provided under section 178(3) of the Act are covered under Nomination and Remuneration Policy and it is available in the web-link of the Company http://www.sambandam.com. Further, information about elements of remuneration package of individual directors is provided in the extract of Annual Return as provided under Section 92(3) of the Act, in prescribed form MGT-9 annexed with this report and forms part of this Report.

During the year, special resolution was passed through postal ballot on 27.03.2019, in accordance with provisions of SEBI (LODR) Regulations, 2015, for continuation of Non-Executive Independent Director Sri. S. Gnanasekharan to hold his directorship up to his original tenure i.e., until the conclusion of 45th AGM of the Company, as he crossed the age limit of 75 years.

Independent Directors Sri S. Gnanasekharan and Sri Kameshwar M. Bhat were appointed at the 40th AGM of the Company held on 28.09.2014 for a term of five consecutive years and shall hold office upto the conclusion of the ensuing 45th AGM of the Company. The Board has recommended for the reappointment of these directors for a second term of five consecutive years and has placed the resolutions in the notice convening the 45th AGM of the Company for members approval.

Companys Code of Conduct applicable to the board has been adopted by the board and all directors of the company have confirmed compliance with the Code of Conduct

During the year Woman Director Mrs. Abirami (DIN No :06953377 ) has resigned from her directorship with effect from 11.08.2018

During the year one Woman Director Mrs. Annapoorani Venugopalan (DIN no : 08276668) was appointed by the board of director as Non Executive Non Independent Director on 11.11.2018. Her appointment as Independent director (Not liable to retire by rotation) is being approved by the members at the 45 th Annual general meeting held on 11.08.2019.

Declaration by Independent Directors

Independent directors of the Company have submitted a declaration that each of them meets the criteria of independence as provided in Sub-Section (6) of Section 149 of the Act. Further, there has been no change in the circumstances which may affect their status as Independent director during the year.

l) directors responsibility statement as per section 134(5) of the companies act,

2013

Pursuant to the requirement of Section 134(5) of the Act, and based on the representations received from the management, the directors hereby confirm that:

a) in the preparation of the annual accounts for the financial year 2018-19, the applicable accounting standards Ind AS have been followed and there are no material departures;

b) they have 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 the financial year;

c) they have taken proper and sufficient care to the best of their knowledge and ability for the maintenance of adequate accounting records in accordance with the provisions of the Act. They confirm that there are adequate systems and controls for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) they have prepared the annual accounts on a going concern basis;

e) they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and operating properly; and

f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

m) significant and material orders passed by the regulators

During the year under review no significant material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and the operations of the Company.

n) PARTICULARS OF EMPLOYEES - information pursuant to Rule 5 (2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014

None of the employees or directors of the Company has drawn remuneration exceeding Rs.8.5 lakhs per month or Rs.102 lakhs per annum during the year.

Managerial Remuneration

Statistical Disclosures pursuant to Rule 5 of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 with subsequent amendments thereto is annexed with this report and forms part of this report

o) Related Party Transactions :

Transactions entered with related parties have been explained in Form AOC -2 annexed with this report and forms part of this report. Further, Policy on dealing with Related Party Transactions has been uploaded on the Companys website, under the web link: http://www.sambandam.com

p) board evaluation

In accordance with the provisions of Companies Act, 2013 and SEBI (LODR) Regulations, 2015 read with "Guidelines on Board Evaluation issued by SEBI vide its Circular dt. January 5, 2017, In the separate meeting of the Independent directors, performance of non-independent directors, performance of the board as a whole and performance of the Chairman was evaluated taking into account the views of executive directors and non-executive directors.

The same was discussed and noted by the Board at the next Board Meeting followed the meeting of the Independent directors. Further, Board carried out an annual evaluation of its own performance, Board committees and individual directors pursuant to the provisions of Companies Act, 2013 and SEBI (LODR) Regulations, 2015 read with "Guidelines on Board Evaluation issued by SEBI vide its Circular dt. January 5, 2017

The performance of the Board was evaluated by the Board after seeking inputs from all the directors on the basis of criteria such as the Board Composition and structure, effectiveness of the Board processes, information and functioning etc. The performance of the Committees was evaluated by the Board after seeking inputs from the Committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings etc. The Independent Directors were evaluated without the presence of the director getting evaluated.

Independent Directors Sri Kameshwar M. Bhat and Sri S. Gnanasekharan is proposed for reappointment this year and based on the evaluation carried out, the Nomination and Remuneration Committee and the Board had recommended for their reappointments and the Board has placed the proposal before the members for approval.

Outcome of evaluation process

Based on inputs received from the members, it emerged that the Board had a good mix of competency, experience, qualifications and diversity. Each Board member contributed in his/her own manner to the collective wisdom of the Board, keeping in mind his/her own background and experience. The necessary disclosures under SEBI Regulations given hereunder:

(i) Previous years observations and action taken

The following actions were taken based on previous years observations

(a) More active participation of all the directors.

(b) Layout of strong succession plan

(c) Board discussions are made comprehensive and of subject importance

(ii) Current year Observations and proposed actions based on current year observation The following actions required to be taken based on current years observations

(a) To make availability of funds for the effective functioning of the Company.

(b) Recruitment of employees in all the levels in key areas like HR, Marketing, Finance, Production and other operational areas of the Company and to provide adequate training.

q) FAMILIARIZATION PROGRAMME OF THE INDEPENDENT DIRECTORS

Periodic presentations are made by Senior Management and Internal Auditors at the Board meetings and Committee meetings on the business and performance updates of the Company, global business environment, business risks and its mitigation strategy, impact of regulatory changes on strategy etc. Updates on relevant statutory changes encompassing important laws are regularly intimated to all the Directors including the Independent Directors.

r) DEPOSITS

Following are the details of deposits covered under Chapter V of the Companies Act 2013:

i. Deposits Accepted from shareholders during the year (2018-19) : Rs. 53.56 lakhs

ii. Deposits remaining unpaid or unclaimed as at the end of the year : NIL

iii. Any default in repayment of deposits or payment of interest thereon during the year : NIL

iv. Total Deposits from shareholders outstanding at the end of the year : Rs. 628.71 lakhs Company has duly complied with the provisions of Section 73 of the Companies Act, 2013 read with relevant rules with respect to fixed deposits.

s) industry associations

Sri S. Dinakaran, Joint Managing Director of the Company is a member of the Committee of Administration and Chairman of the Yarn Committee of the Cotton Textiles Export Promotion Council (TEXPROCIL), Mumbai and the Confederation of Indian Textile Industry ( CITI ), Delhi. By virtue of the offices he holds, Sri S. Dinakaran has been representing to the Industries and Finance Ministries at the appropriate time to get relief to the ailing Textile Industry.

t) report on performance and financial position of the associate companies :

There are two associate Companies -

SPMM Health Care Services Pvt. Ltd. - 49.75% investment in the share capital

This Company has recorded total revenue of Rs 457.27 Lakhs and profit after tax (PAT) of Rs 24.65 Lakhs during the year ended 31.3.2019 as against Rs. 437.73 Lakhs Revenue and Rs. 20.88 Lakhs PAT recorded in the previous year 2017-18.

Salem IVF Centre Pvt. Ltd. - 27.73% investment in the share capital of that Company.

This Company incorporated on 17th November 2014 has recorded total revenue of Rs. 231.63 lakhs and Loss of Rs 35.64. lakhs during the fifth year of its operations as against the revenue of Rs. 195.75 lakhs and loss recorded Rs.71.92 lakhs the Previous Year 2017 - 2018.

Highlights of performance of subsidiaries or Associate Companies

SPMM Health Care Services Pvt Ltd., revenue increased by 4.46 % from operations during 18-19 when compared to 17-18. Also Profit after tax has increased by18.06 %., and this is due to maintaining operational expenditure at the same level in 18-19 when compared to 17-18.

Salem IVF Centre Pvt Ltd., revenue from operations has increased by 18.33 % from operations during 1819 when compared to 17-18. This company was incorporated in November 2014 and is in its 5th year of operation and it is in gestation period and is still in progress and will take a few more years to earn profit .

u) changes or commitments after the year end on 31.3.2019

No material change or commitment affecting the financial position of the Company has occurred between the close of the financial year on 31.3.2019 and the date of this report.

Information pursuant to section 197 (12) of the Act read with Rule 5(1) & 5(2) of the Companies (Appointment and Remuneration of Managerial personnel) Rules 2014 :

(i) Ratio of the remuneration of each Director, Company Secretary, Chief Financial Officer and Chief Technical Officer to the median remuneration of the employees of the Company; AND

(ii) Percentage increase in their remuneration in 2018-19 as compared to the previous year (2017-18): (Median Remuneration : Rs.1,02,960 in 2018-19)

Name of whole-time

Remuneration in 2018-19 Rs. lakhs

Remuneration in 2017-18 Rs. lakhs

% increase in 2018-19

Ratio to Median Remn.

Ratio of 2018-19 Remuneration to

Directors and KMP Revenue Net Profit
Mr. S.Devarajan, 66.00 48.00 37.50% 64.10 0.31% 16.76%
Chairman and Managing Director
Mr. S.Jegarajan, Joint Managing Director 63.30 45.60 38.82% 61.48 0.30% 16.07%
Mr. S.Dinakaran, Joint Managing Director 36.60 19.20 90.63% 35.55 0.17% 9.29%
Mr. S.Natarajan, Company Secretary 12.00 12.00 NIL 11.66 0.06% 3.05%
Mr. D.Niranjan Kumar,

Chief Financial Officer

22.50 18.00 25% 21.85 0.11% 5.71%
Mr. J.Sakthivel,

Chief Technical Officer

22.50 18.00 25% 21.85 0.11% 5.71%

Percentage increase in the remuneration of all employees in 2018-19 : 17 %

Name of Non-executive Directors # Sitting fees in 2018-19 # Sitting fees in 2017-18
Rs. lakhs Rs. lakhs
Mr. D.Sudharsan, - 0.55 1.05
Smt. S.Abirami - 0.30 1.05
Name of Independent Directors # Sitting fees in 2018-19 # Sitting fees in 2017-18
Rs. lakhs Rs. lakhs
Dr. R.Ramarathnam 2.35 2.80
Dr. V.Sekar 3.00 3.05
Mr. D.Balasundaram 2.35 2.80
Mr. S.Gnanasekharan 3.00 3.05
Mr. Kameshwar M Bhat 3.00 3.20
Smt. Annapoorani Venugopalan 0.25 0.00

# Only sitting fees is payable to Non-executive and Independent Directors for the meetings of the Committee or of the Board attended by them.

(a) There was increase in the sitting fees of Directors from Nov 2018 meeting as follows Audit Committee Meeting from Rs.25,000 to Rs.40,000

Board Meeting from Rs.15,000 to Rs.25,000

Nomination and Remuneration Committee Meeting from Rs.15,000 to Rs.25,000

(b) Variation in the sitting fees paid to Directors depends on their attendance at the Board / Committee Meetings.

(ii) Number of permanent employees on the rolls of the Company : 987

(iii) No variable component of the remuneration availed by any director.

4 AUDITORS

At the 44th Annual General Meeting held on 11.08.2018, M/s R. Sundararajan & Associates, Chartered Accountants, were reappointed as statutory Auditors of the Company from the financial year 2018-2019 to 2021-2022. Statutory Auditors M/s R. Sundararajan & Associates, Chartered Accountants have confirmed their eligibility and willingness to continue their office. On the recommendation of the Audit Committee, Board is placing the resolution for the remuneration payable to the statutory Auditors for the FY 2019-20 before the members for approval.

5 Particulars of Loans, Guarantees or Investments under Section 186 of the Companies Act, 2013

Details of loans, guarantees and investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in note 48 to the notes to the financial statements.

6 vigil mechanism / whistle blower policy

The Company has an established vigil mechanism for Directors / Employees to report concerns about unethical behavior, actual or suspected fraud, or violation of the code of conduct or ethics policy. It also provides for adequate safeguards against victimization of directors/ employees who avail of the mechanism. The Company affirms that no personnel have been denied access to the audit committee. The Company has formulated a Policy on Vigil Mechanism and has established a mechanism that any personnel may raise Reportable Matter after becoming aware of the same. All suspected violations and Reportable Matters are reported to an Independent Director and member of the Audit Committee at his e- mail id ksg_comsec@yahoo.com. The key directions/actions are informed to the Managing Director of the Company.

The Company has adopted Whistle Blower Policy in line with the provisions of Section 177(9) of the Companies Act 2013 which can be accessed on the Companys Website under the web link http://www.sambandam.com

7 audit committee :

Details of Composition of Audit committee are covered under corporate governance report annexed with this report and forms part of this report. Further, during this year all the recommendations of the Audit committee have been accepted by the Board.

8 reports of statutory auditors and secretarial auditors

Reports of the Statutory Auditors and the Secretarial Auditors for the year under review are free from any qualification, reservation or adverse remark or disclaimer. Secretarial Audit Report in Form MR-3 is attached, which forms part of this report - refer Annexure VI. It also confirms that none of the directors of the board of directors on the board of the company have been debarred or disqualified from being appointed or continuing as the directors of the companies by the board /MCA or any such statutory authority

Applicable Secretarial standards, ie SS1 and SS2 ,relating to "Meeting of the board of directors "and "General meeting "respectively, have been duly complied with by the company.

9 extract of annual return

Extract of Annual Return in Form MGT-9 pursuant to Section 92(3) of the Companies Act 2013 is also attached, which forms part of this report - refer Annexure VII.

10 transfer of unpaid and unclaimed dividend amount to investor education and protection fund account :

Pursuant to the provisions of section 124 of the Companies Act, 2013, which came in to effect from 07.09.2016 ,the declared dividends which remained unpaid or unclaimed for a period of seven years, has to be transferred by the company to the Investor Education and Protection Fund (IEPF) established by the Central Government. During the year 2018-19, transfer of Unclaimed final Dividend of the year 2010-11 was applicable since the final dividend was declared for the year 10-11.

However, shareholders are requested to take note that as per IEPF rules, the company is required to transfer unpaid dividend and underlying shares also in respect of which final dividend was not claimed /paid of the year 10-11, to IEPF authority. Shareholders who have not claimed their final dividend of the year 1011 can write to the Company or Registrar and transfer agent M/s Cameo Corporate Services Limited, at Subramanian Building, No.1, Club House Road, Chennai - 600 002 who are the Registrars and Share Transfer Agents (RTA) of the Company for further details and for claiming unclaimed dividend lying unpaid. In case no valid claim is received ,the shares in respect of which the dividend are lying unpaid /unclaimed will be transferred to IEPF authority on the due date Further in terms of rule 6(3) of the IEPF rules ,statement containing the details of shareholders who have not claimed dividend for previous years ,and his folio number /DP-ID /client ID is made available on companys website www.sambandam.com for information and necessary action by shareholder. In case, the concerned shareholder wish to claim the shares after transfer to IEPF, an application has to be made to the IEPF authority in form IEPF- 5 online and submit the hard copy of such form IEPF -5 along with necessary documents to the company as prescribed under the rules and the same is available at IEPF website (ie) www.iepf .gov.in.

Dividend year Date of declaration of dividend Due date for transfer to IEPF
11-12 Dividend not declared Not applicable
12-13 Dividend not declared Not applicable
13-14 28.09.2014 27.10.2021
14-15 27.09.2015 26.10.2022
15-16 06.08.2016 05.09.2023
16-17 12.08.2017 11.09.2024
17-18 11.08.2018 10.08.2025

Annexures to this Board Report

The following are the annexures to this report

1. Statement containing salient features of the financial statement of associate company (Form AOC - 1) in Annexure - I

2. Form AOC - 2 in Annexure - II

3. CMD / CFO Certification in Annexure - III

4. Conservation of energy, technology absorption, Research and development and foreign exchange earnings and outgo in Annexure - IV

5. Details of CSR Expenditure in Annexure - V

6. Secretarial Audit Report (Form MR-3) in Annexure - VI

7. Extract of Annual Report (Form MGT-9) in Annexure - VII

8. Corporate Governance Report in Annexure - VIII

11 cautionary note

Statements in the Boards report and the management discussion and analysis describing the Companys objectives, expectations or predictions may be forward looking within the meaning of applicable securities laws and regulations. Actual results might differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes in government regulations, tax laws, economic developments within the country and other related factors such as litigation and industrial relations

12 acknowledgement

Your directors thank the Companys customers, vendors and investors for their continued support during the year. Your directors place on record their appreciation for the contribution made by the employees at all levels. Your Companys consistent growth has been made possible by the hard work, solidarity, cooperation and support of the management team.

Your directors thank State Bank of India, Karnataka Bank Limited, Canara Bank, Axis Bank Limited and the State and Central Government departments for their support, and look forward to their continued support in future

Salem S. Devarajan
May 26, 2019 Chairman & Managing Director
DIN :00001910

 

form aoc - i annexure- I
part "A": subsidiaries
Not Applicable since the Company does not have any subsidiary.
part "B": associates
Statement pursuant to Section 129 (3) of the Companies Act, 2013 related to Associate Companies

 

SI. No. Name of Associate

SPMM Healthcare Services P Ltd

Salem IVF P Ltd

1. Latest audited Balance Sheet Date 31-03-2019 31-03-2018 31-03-2019 31-03-2018
2. Date on which the associate or JV was associated or acquired Shares of Associate held by the Company on the year end: 10-09-2003 10-09-2003 17-11-2014 17-11-2014
3. Number of Shares 19,90,000 19,90,000 7,04,060 7,04,060
Amount of Investment in Associates (Rs.) 1,99,00,000 1,99,00,000 70,40,600 70,40,600
Extend of Holding % 49.75% 49.75% 27.73% 27.73%
4. Description of how there is significant influence

Associate Company

Associate Company

5. Reason why the associate / joint venture is not consolidated

Associate Companies accounts have been consolidated

6. Networth attributable to Shareholding as per latest audited Balance Sheet (Rs. in lakhs) 125.79 113.53 (35.06) (25.17)
7. Profit / (Loss) for the year (Rs. in lakhs) 24.65 20.88 (35.64) (71.92)
Profit/(Loss) attributable to the Shareholding (Rs.in lakhs) 12.26 10.39 (9.88) (19.94)

1. Names of associates or joint ventures which are yet to commence operations : NIL

2. Names of associates or joint ventures which have been liquidated or sold during the year : NIL

3. The Company does not have any joint venture.

Corporate Social Responsibility Purpose Statement

SSML seeks to impact the lives of the underprivileged by supporting and engaging in activities that aim at improving their well-being. Promoters of the Company have dedicated to the cause of empowering people, educating them and in improving their quality of life. While they undertake programmes based on the identified needs of the community, education and healthcare remain their priority. Across the different programme areas identified by the trust, its main endeavour is to reach the underprivileged and the marginalised sections of the society to make a meaningful impact on their lives.

The CSR Policy of the Company can be viewed on the Companys Website under the web link

http://www.corporate@sambandam.com Accordingly, the programme areas include the following :

1) Promoting preventive health care facilities to economically backward societies,

2) Promoting education and Sustainable livelihood to differently abled.

3) Provision of Skill Development / Vocational Training,

4) Rural Development and Environmental sustainability,

5) Promoting Rural Sports, Traditional Arts & Culture Scope

This policy applies to all projects/programmes undertaken as part of the Companys Corporate Social Responsibility and it is developed, reviewed and updated periodically with reference to relevant changes in corporate governance, international standards and sustainable and innovative practices.

The policy ensures compliance and alignment with the activities listed in Schedule VII read with Section 135 of the Companies Act 2013 and the Rules framed there under.

Implementation

The Company undertakes CSR projects / programmes identified by the CSR Committee and approved by the Board of Directors in line with the CSR Policy and implements its CSR programmes accordingly.

1 Composition of the CSR Committee :
CHAIRMAN : SRI S.DEVARAJAN - Chairman and Managing Director
MEMBERS : SRI S. GNANASEKHARAN - Independent Director
SRI S.JEGARAJAN - Joint Managing Director
SRI S.DINAKARAN - Joint Managing Director
SRI D.SUDHARSAN - Non-executive Director

 

2 Average net profit of the company for the last three financial years - Rs.458.11 lakhs
3 Prescribed CSR Expenditure (two per cent of Rs.458.11 lakhs) - Rs.9.16 lakhs
4 Details of CSR spent during the financial year :
(i) Livelihood enhancement of differently abled - Provision of artificial limbs - Rs.4,05,450
(ii) Promote Education - Rs.2,00,000
(Item (ii) of Schedule VII of the Companies Act 2013)
(iii) Promote sanitation - Rs.2,17,590
(iv) Eradication of hunger, poverty and malnutrition - Rs.1,00,073
5 Total amount spent during the financial year 2018-19 - Rs.9,23,113
6 Amount unspent, if any Nil

5 Manner in which the amount spent during the financial year is detailed below

Sl.

No.

CSR project or activity identified. Sector in which the

Project is

covered

Local area in which the programs were under taken in Tamil Nadu Amout outlay - project or Program- wise

Rupees

Amount spent on the projects or Programs

Rupees

Cumulative Expenditure upto the reporting period Rupees Amount spent: Direct or through implementing agency Rupees
1 Promoting preventive health care Item No(i) of Sch. VII of the Comp. Act 2013 Salem - - Rs.5,35,000 -
2 Livelihood enhancement & Trainning of differently abled Item No(ii) of under Sch. VII of the Comp. Act 2013 Salem & Chennai Rs.4,05,540 Rs.4,05,450 Rs.11,82,550 Rs.4,05,450
3 Persons

Promote

Education

Item No(ii) of under Sch. VII of the Comp. Act 2013 Book

Festival

Rs.2,00,000 Rs.2,00,000 Rs.6,06,951 Rs.2,00,000
4 Environment

Sustainability

Clause (iv) of Schedule VII of the Companies Act 2013 Salem Rs.1,21,750
5 Promoting Sanitation, and making available safe drinking water at the girls & boys High School, Ammapet, Salem. Item No(i) of under Sch. VII of the Comp. Act 2013 Salem Rs.2,17,590 Rs.2,17,590 Rs.7,40,590 Rs.2,17,590
6 Eradication hunger, poverty and malnutrition Item No (.i.) of under Sch. VII of the Comp. Act 2013 Salem Rs.1,00,073 Rs.1,00,073 Rs.1,00,073 Rs.1,00,073
Total Rs.9,23,113 Rs.9,23,113 Rs.31,16,268.50 Rs.9,23,113

The second item - Livelihood Enhancement of differently abled has been organized through SPMM hospital, by providing Artificial Limbs to Amputees and poor people.

The third item - Promoting Education - payment to Book Festival

The fifth item is for providing drinking water to girls high school.

The Sixth item is for Eradication hunger, poverty and malnutrition - payment for Gaja flood relief fund

CSR Committee confirms that implementation and monitoring of the CSR projects detailed above are in compliance with the CSR objectives and the CSR Policy of the Company.

Salem S. Dinakaran S. Devarajan
May 26, 2019 Joint Managing Director Chairman - CSR Committee
DIN : 00001932 DIN : 00001910