Soma Textiles & Industries Ltd Directors Report.

To

The Members,

Your Directors have pleasure in presenting their Seventy-ninth (79th) Annual Report of the Company, together with the audited financial statements for the financial year ended 31st March, 2017.

1. FINANCIAL PERFORMANCE

There was no improvement in the business scenario of the Textile Industry and is continued to remain challenging.

The revenue from operations for the year 2016-17 was Rs. 12,733 lacs as compared to Rs 17,024 lacs in previous year, a decline by 25.21%.

The loss before Prior period, Exceptional item and Tax was Rs. 1,412 lacs against the previous year loss of Rs 2,379 lacs.

The net loss for the year was Rs. 1,114 lacs against the previous year net loss of Rs. 1,423 lacs.

2. DIVIDEND

The Board of Directors of your Company have not recommended any dividend for the Financial Year ended 31st March, 2017, considering the loss during the year and brought forward losses.

3. COTTON

India’s cotton production in the current season 2016-2017 is likely to be 351 lac bales. Decline in domestic yarn production, Last year, Pakistan had bought almost 40% of India’s cotton due to a crop failure in its domestic market. This year Pakistan’s requirement will be less. With no significant increase in cotton exports to China estimated, overall shipment of cotton may decline.

4. EXPORT

Your Company’s export performance in the year under review has decreased from the last year mainly on account of reduction in the denim fabric export due to cut throat competition & appreciation of Rupees. The FOB value of the exports during the Year under review was Rs. 991 lacs against Rs 1,956 lacs in the previous year.

5. ANALYSIS AND REVIEW

Indian Textiles industry is one of the oldest industry and leading sectors of the Indian economy, contributes significantly to the country’s industrial output as well as on employment generation and brings valuable foreign exchange by exporting Textile fabrics, yarns and Garments.

6. OPPORTUNITIES AND CHALLENGES

The global textile industry will continue to grow along with growing consumption of textile products in developing countries and a gradual economic recovery of major developed economies. India’s textile sector is aided by several key advantages, in terms of availability of adequate raw material, entrepreneurial skills, large domestic market, presence of supporting industries and supporting policy initiatives from the government. The Government has introduced the Amended Technology Upgradation Fund Scheme (ATUFS) to give a further boost for technology investment in the textile industry.

The major challenge that the textile industry is facing is rising production costs, arising out of rising wages, power and interest costs. Currently the Indian Denim Industry is going through sluggish phase due to exponential capacity expansion which has created a huge oversupply situation.

7. EXPANSION AND MODERNISATION

In view of financial constraint company did not go for modernization.

8. CONSOLIDATED FINANCIAL STATEMENT

As required by Regulation 33 of the SEBI (LODR) Regulations, 2015, the Consolidated Audited Financial Statements have been prepared in accordance with the requirements under Accounting Standard AS-21 on "Consolidated Financial Statements" read with AS-23 on the "Accounting for Investment in Associates" read with the provisions of Companies Act, 2013, are provided, forming part of the Annual Report.

9. CASH FLOW STATEMENT

In compliance with the requirement of Section 34 of the SEBI (LODR) Regulations, 2015, the Cash Flow Statement for the year ended 31st March, 2017 prepared in accordance with the applicable Accounting Standard, is annexed to the financial statement, which forms part of the Annual Report.

10. INSURANCE

Adequate insurance cover has been taken by the Company for its properties including its Buildings, Plant & Machinery and Stocks among others against fire, flood, earthquake, explosive and other such risks as considered prudent and necessary.

11. INTERNAL FINANCIAL CONTROL

The Company has in place internal financial control systems commensurate with the size, nature and complexity of its operations ensuring proper recording of financials and monitoring of operational effectiveness and efficient conduct of its business including adherence to the Company’s Policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of accounting records and compliance of various applicable regulatory and statutory requirements.

The Internal Auditor monitors and evaluates the efficiency and adequacy of Internal Control System. Based on their report, corrective actions are undertaken by the concerned departments and thereby strengthen the Controls. Significant audit observations corrective measures and actions thereon are presented to the Audit Committee of the Board.

During the year such controls were tested and no reportable material weaknesses were observed.

The Audit Committee comprises the majority of Independent Directors in terms of the applicable provisions of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015.

12. FIXED DEPOSITS

The Company has not accepted any deposits from public falling within the meaning of Section 73 of the Companies Act, 2013, read with Companies (Acceptance of Deposit) Rules, 2014 and as such, there are no outstanding deposits as on the Balance Sheet closure date.

13. SHARE CAPITAL

During the year there was no change in the Company’s Issued, Subscribed and Paid-up Equity and Preference Share Capital. On 31st March, 2017, the Equity Share Capital stood at Rs. 3303.30 Lacs, divided in to 33033000 Equity Shares of Rs. 10 each and Preference Share Capital stood at Rs. 975 Lacs, divided in to 975000, 0.01% Cumulative Redeemable Non-convertible Preference Shares of Rs. 100 each.

14. DIRECTORS AND KEY MANAGERIAL PERSONNEL

Rotation

Shri S. K. Somany (DIN: 00001131), will retire by rotation at the forthcoming Annual General Meeting, and being eligible, offers himself for re-appointment in accordance with the provisions of the Companies Act, 2013, and Articles of Association of the Company. The Board recommends his re-appointment.

Brief resume, nature of expertise and details of directorship held in other companies of Shri S. K. Somany proposed to be appointed is given in the Notice of the Ensuing General Meeting (AGM), as stated under Secretarial Standard 2 and Regulation 36 of the SEBI (LODR) Regulations, 2015.

None of the Directors are disqualified from being appointed or holding office as Directors as stipulated under Section 164(2) of the Companies Act, 2013.

Change in Key Managerial Personnel

Shri R. S. Sharma ceased as Company Secretary effective from 1st October, 2016 and Shri Abhishek Kumar Mishra has been simultaneously appointed as Company Secretary with effect from 1st October, 2016.

Shri Maghraj Parakh continues to be Chief Financial Officer (CFO) of the Company.

15. DECLARATION OF INDEPENDENT DIRECTORS

The Company has received declarations from all the Independent Directors of the Company under section 149(7) of the Companies Act, 2013, confirming that they continue to meet the criteria of independence as prescribed under Section 149(6) of the Companies Act, 2013 and Regulation 25 of the SEBI (LODR) Regulations, 2015.

16. CORPORATE SOCIAL RESPONSIBILITY

The Company does not fall within the ambit of Section 135 of the Companies Act, 2013, read with the Companies (Corporate Social Responsibilities Policy) Rules, 2014. Therefore the Annual Report on Corporate Social Responsibility initiatives as required under the said act is not applicable to the Company. In view thereof, the Annual Report on CSR activities is not annexed.

17. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE

COMPANIES ACT, 2013

The Company has not, given loans, made investments or given guarantees under the provisions of Section 186 of the Companies Act, 2013 during the year under review.

18. CONTRACTS AND ARRANGEMENTS WITH RELATED PARTY

During the financial year ended 31st March, 2017, all the contracts or arrangements or transactions entered into by the Company were in the ordinary Course of business and on arm’s length and were in compliance with applicable provisions of the Companies Act, 2013 and the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, as applicable. Further the Company did not entered into any contract or arrangement or transactions with related parties that could be considered material as per the Policy of the Company on Materiality of Related Party Transactions. In view of the above disclosure of Related Party Transactions in Form AOC-2 is not applicable, as required under Section 134(3)(h) and relevant rules made thereunder.

The Policy on Materiality of Related Party Transactions and dealing with the related party transactions as approved by the Board is available on the Company’s website at the web link: www.somatextiles.com/home.php/investors/policies.

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

19. LISTING ON STOCK EXCHANGES

The Equity Shares of the Company are listed at the following Stock Exchanges:-(a) BSE Limited (BSE).

Address: Phiroze Jeejeebhoy Towers, Dalal Street, Mumbai–400001 (b) National Stock Exchange of India Limited (NSE).

Address: Exchange Plaza, Bandra Kurla Complex, Bandra (East), Mumbai–400051.

NOTE:

(i) Listing fees have been paid to the Stock Exchanges for the year 2017-18.

(ii) The Calcutta Stock Exchange Association Ltd. has vide its Letter No. CSEA/ID/223/2008 dated 16th April, 2008, confirmed the delisting of Company’s Shares from the official List of their exchange. However Equity Shares have been allowed to be traded under the "Permitted Category" on the Exchange considering the interest of General Investors in the Company.

Stock Code

(i) NSE - SOMATEX, (ii) BSE - 521034, (iii) CSE - 29067. De-mat ISIN Number in NSDL & CDSL – ISIN – INE 314C01013.

20. EXPLANATION OR COMMENTS ON QUALIFICATIONS, RESERVATIONS OR ADVERSE REMARKS OR

DISCLAIMERS MADE BY THE AUDITORS AND THE PRACTICING COMPANY SECRETARY IN THEIR REPORTS

The Auditors Report and Secretarial Auditors Report do not contain any reservation, qualification or adverse remark and therefore need no explanations or comments from the Board of Directors.

21. BOARD’S EVALUATION OF THE PERFORMANCE

In compliance with the Companies Act, 2013, and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015, the Board has carried out an annual evaluation of its own performance, and that of its Committees and individual Directors. The manner in which the evaluation has been carried out has been given in the Corporate Governance Report.

22. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW

During the year Four (4) Board Meetings were held, the details of which are given in the Report on Corporate Governance, that forms part of the Board’s Report.

The maximum interval between the two meetings did not exceeded 120 days, as prescribed in the Companies Act, 2013 and SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

23. AUDIT COMMITTEE

The Audit Committee comprises of four (4) members, Majority of them are Independent Directors namely; Shri B. K. Hurkat Chairman, Shri M. H. Shah and Smt. N. Singh and Shri S. K. Somany a Non-Independent & Promoter Director, as other member of the Committee. Thus the composition is in conformity with the requirements of section 134(3) and section 177(8) of the Companies Act, 2013, read with the provisions of SEBI (LODR) Regulations, 2015.

Four (4) Meetings of the Audit Committee were held during the year under review, the details of which are given in the Report on Corporate Governance, forming part of this Report. The Board of Directors accepted all recommendations of the Audit Committee in the reporting period.

24. ESTABLISHMENT OF VIGIL MECHANISM / WHISTLE BLOWER MECHANISM

The Company has in place a Vigil Mechanism/ Whistle Blower Policy for Directors, Employees and other Stockholders of the Company to report genuine concerns about any wrongful act with respect to the Company or its business or affairs. The policy covers malpractices, misuse or abuse of authority, fraud, violations of the Company’s policy or Rules, manipulations, negligence and such other matters and activity on account of which interest of the Company is affected or is likely to be affected and formerly reported by Whistle Blowers.

The Mechanism provides for adequate safeguards against victimization of Directors, employees and others who use such mechanism and makes provisions for direct excess to the Chairman of the Audit Committee. The details of the Whistle Blower Policy/ Vigil Mechanism have been provided in the Corporate Governance Report forming part of this Report and are also available on the Company’s website; www.somatextiles.com/home.php/investors/policies.

25. REMUNERATION POLICY

The Board has, on recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration including criteria for determining qualifications, positive attributes, independence of Directors and other matters as per section 178 and Clause 49(IV)(B) of Listing Agreement. The Nomination & Remuneration Policy is stated in the Corporate Governance Report. The Policy is also available on the website of the Company i.e. http://www.somatextiles.com.

26. CORPORATE GOVERNANCE

Your Company has complied with requirements under the Corporate Governance as stipulated in the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

A detailed reports on ‘Corporate Governance’ pursuant to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, along with an Auditors’ Certificate on Compliance with the conditions of Corporate Governance, is annexed and forms part of the Annual Report.

27. CORPORATE GOVERNANCE – VOLUNTARY GUIDELINES 2009

The Ministry of Corporate Affairs, Government of India, had issued a set of Voluntary Guidelines 2009 on Corporate Governance in December, 2009, for voluntary adoption of a set of good practices by the Corporate Sector. These guidelines are expected to serve as a bench mark for the Corporate Sector and also help them in achieving the highest Standard of Corporate Governance. Guidelines are reviewed by the Management from time to time to ensure the adherence of the same voluntarily commensurate with the requirements, best suited to your Company gradually in phases.

28. LISTING AGREEMENT

Your Company entered in to new Listing Agreements with BSE Limited and National Stock Exchange of India Ltd., in compliance with Regulation 109 of the SEBI (LODR) Regulations, 2015.

29. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report under review, as stipulated under SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 is presented by virtue of an Annexure, forming part of the Directors’ Report.

30. DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act, 2013, the Board of Directors of your Company to the best of their knowledge and belief and on the basis of information and explanation obtained from the operating management, hereby states and confirms: –

(a) that in the preparation of attached Annual Accounts for the Financial Year ended 31st March, 2017 the applicable Accounting Standards have been followed along with proper explanation relating to material departures, wherever, applicable;

(b) that they have selected the Accounting Policies described in notes to accounts, which have been consistently applied, except where otherwise stated 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 on 31st March, 2017 and of the loss of the Company for the year ended on that date;

(c) that they 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; and

(d) that they have prepared the attached Annual Accounts on a ‘going concern’ basis.

(e) that they had laid down internal financial controls to be followed by the Company and that such internal controls are adequate and were operating effectively.

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

31. AUDITORS

In terms of the provisions of Section 139 of the Companies Act, 2013, read with the Companies (Audit and Auditors) Rules, 2014, Pipara & Co LLP, Chartered Accountants, (ICAI Firm Registration No.107929W), the Statutory Auditors of your Company shall hold office till the conclusion of the ensuing Annual General Meeting and they shall not be eligible for re-appointment due to expiry of the maximum permissible tenure as the Statutory Auditors of the Company. Your Board places on record its deep appreciation for the valuable contributions of the Auditors during their long association since the inception of your Company and wishes them success in the future.

Based on the recommendation of the Audit Committee and in terms of the requirement of the Companies Act, 2013, your Board at its meeting held on 12th July, 2017, appointed a New Firm of Chartered Accountants, M/s. A. K. Ostwal & Co., Chartered Accountants (ICAI Firm Registration No.107200W), as the Statutory Auditors of the Company, in place of the retiring statutory auditors M/s. Pipara & Co LLP, Chartered Accountants, to hold office for a period of consecutive five (5) years from the conclusion of the ensuing 79th Annual General Meeting (AGM) until the conclusion of 84th Annual General Meeting (AGM) of the Company, on such remuneration, as may be fixed by the Board of Directors of the Company, subject to approval of the Members of the Company at the ensuing 79th AGM and ratification by the Members of the Company every year thereafter.

Your Company has received a certificate from M/s. A. K. Ostwal & Co., Chartered Accountants, confirming their eligibility to be appointed as Statutory Auditors of the Company in terms of the provisions of Section 141 of the Companies Act, 2013 and Rules framed thereunder. They have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India (ICAI) as required under the provisions of Regulation 33 of the Listing Regulations. The proposal for their appointment has been included in the Notice convening the 79th AGM for obtaining approval of the Members of the Company.

32. SECRETARIAL AUDITOR

The Company has appointed M/s. Drolia & Company, Company Secretaries, Kolkata, in practice having certificate of Practice No. 1362, as the Secretarial Auditor, to undertake Secretarial Audit for the year ended 31st March, 2017, pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (appointment and Remuneration of Managerial Personnel) Rules, 2014.

33. MANAGERIAL REMUNERATION

Details of the ratio of the remuneration of each director to the median employee’s remuneration and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is attached to this Report.

34. SECRETARIAL AUDIT REPORT

The Secretarial Audit Report for the financial year ended 31st March, 2017, as given in the prescribed form MR-3 is annexed herewith as Annexure to this Report and forms an integral part of this Report.

The Secretarial Audit Report does not contain any qualification, reservation and adverse remark.

35. AUDITORS’ REPORT

There are no qualifications, reservations or adverse remarks of the Auditor in their Auditors’ Report that may call for any clarifications/explanations.

The Notes on financial statement, referred to in the Auditors’ Report are self-explanatory and do not require any elucidation and comments thereof.

36. INDUSTRIAL RELATIONS

Industrial relations in your Company, during the year under review continued to be cordial and harmonious.

37. COST AUDITORS

Pursuant to Section 148 of the Companies Act, 2013, read with the Companies (Cost Records & Audit) Amendment Rules, 2014, the cost records maintained by the Company in respect of its products are required to be audited. Your Directors, on the recommendation of the Audit Committee, appointed M/s. N. D. Birla & Co., Cost Accountants, as Cost Auditors of the Company to conduct the Audit of the Cost Accounts in respect of manufacturing of Textile for the Financial Year ending March 31, 2018 on a remuneration fixed by the Board and has recommended their remuneration to the Shareholders for their ratification, at the ensuing Annual General Meeting (AGM). Accordingly, a resolution seeking Members’ ratification for payment of remuneration to M/s N. D. Birla & Co., Cost Accountants, is included in the Notice of the ensuing AGM.

38. DEPOSITORY SYSTEMS

The Company’s Shares are currently traded in dematerialized form, as per the SEBI directives and the Company has entered in to agreements with the following Depositories i.e. National Securities Depository Limited (NSDL) and Central Depository Services (India) Limited (CDSL), for trading in dematerialized form.

Members are therefore advised to avail of the services either of the depositories, to dematerialize their physical shares, if any held by them, for trading in Company’s shares smoothly and conveniently.

As on March 31, 2017, 32,503,346 Equity Shares are held in dematerialized form and represent 98.40% of the Company’s total paid up Capital.

40. SEXUAL HARASSMENT OF WOMEN AT THE WORKPLACE

The Company has in place as Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

No sexual harassment complaint was received during the year under review.

41. ACCOUNTS OF THE SUBSIDIARIES, ASSOCIATE COMPANIES AND JOINT VENTURES

The statement containing the silent features of the financial statement of the company’s associate companies under the first proviso to sub-section (3) of section 129 of Companies Act, 2013 is enclosed as AOC-1 in the Annexure.

42. PARTICULARS OF EMPLOYEES

During the year under report, none of the employees of the Company was in receipt of remuneration for any part of the year, in excess of the amount of remuneration prescribed under Section 197 of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended upto date.

The information required under Section 197 of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration) Rules, 2014 is Annexed and forms a part of this Report.

43. EXTRACT OF ANNUAL RETURN

In terms of provisions of Section 134(3)(a), read with Section 92 of the Companies Act, 2013 and Rule 12 of the Companies (Management and Administration) Rules, 2014, the extracts of Annual Return of the Company in form no. MGT-9 is attached to this Report.

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

The Company is primarily engaged in the business of manufacturing of Cotton Yarn, Denim Fabrics, Shirtings and Garments.

Information on conservation of energy, technology absorption, foreign exchange earnings and outgo, required to be disclosed pursuant to Section 134(3)(m) of the Companies Act, 2013, read with rule 8(3) of the Companies (Accounts) Rules, 2014, as amended is given in the Annexure and forms part of this Report.

45. RISK MANAGEMENT

The Company has in place mechanism to inform Board Members about the Risk Assessment and Risk Minimization procedure which is periodically reviewed to ensure that risks and uncertainties are systematically identified, prioritized and initiated on constant basis.

The risk management procedure is reviewed by the Audit Committee from time to time to ensure that the executive management controls the risks and uncertainties through a proper defined framework and major risks, are properly and systematically addressed through mitigation actions on continuing basis.

46. OTHER DISCLOSURES

Business Responsibility Report as per Regulation 34(2)(f) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, describing the initiatives taken by them from an environmental, social and governance perspective is not applicable to the Company, for the financial year 2016-17 as per the SEBI Notification dated 22nd December, 2015 and Frequently Asked Questions issued by SEBI on SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 dated 29th January, 2016.

47. CAUTIONARY STATEMENT

Statements in the Board’s Report and the Management Discussion & Analysis describing Company’s objectives, expectations or forecasts may be forward-looking within the meaning of applicable securities laws and regulations. Many factors may affect the actual results, which could be different from what the Directors envisage in terms of future performance and outlook.

48. ACKNOWLEDGEMENT

Your Directors place on record their sincere thanks and appreciation for the continuing support and assistance received from the financial institutions, banks, government as well as non-government authorities, customers, vendors, stock exchange and members during the period under review.

Your Company takes pride in all of its dedicated officers, employees and workers, who have been wholeheartedly supporting and sincerely contributing their best for the success and growth of your Company as well as maintaining harmonious relations throughout the Company.

On behalf of the Board
Place : Ahmedabad (A. K. SOMANY) (S. B. BHAT)
Date : 12th July, 2017 Managing Director Director