Suryalata Spinning Mills Ltd Directors Report.

To

The Members,

Suryalata Spinning Mills Limited

Your Board of Directors present the 36th Annual Report of the company together with the Audited Financial Statements of Accounts for the financial year ended March 31, 2019.

Financial Results

The Company has prepared financial results in accordance with the Companies (Indian Accounting Standards) Rules, 2015 (Ind AS) prescribed under section 133 of the Companies Act, 2013.

The financial performance during the year ended March 31, 2019 has been summarized below:

(Rs in Lakhs)

Particulars Current Year 2018 - 19 Previous Year 2017 - 18
Gross Sales/Turnover 43,155 36,333
Net Sales/Turnover 39,111 33,412
Profit before Interest, Depreciation and Tax 4,197 2,715
Interest 1,035 710
Depreciation 840 765
Profit Before Tax 2,322 1,240
Less : Provision for tax 535 400
Deferred Tax Liability 364 51
Profit After Tax 1,423 789
Add : Profit brought forward from last year 890 922
Add : Adjustment due to adoption of Ind AS 11 2
Amount available for appropriation 2,324 1,713
Appropriations:
Transfer to
(a) General Reserve 1,090 800
(b) Dividend on Equity Shares 19 19
(c) Dividend distribution tax 4 4
Balance Carried forward to Balance Sheet 1,211 890

Details of Operations

The year under review was started with a rally of Raw Material prices along with Crude Oil prices due to the impending re-imposition of sanctions on Iran by the United States and continuing declines of production in Venezuela. Indian Rupee also depreciated continuously in the first two quarters, later on appreciated slightly and stabilized at the end of the year. Increase in raw material prices and Rupee depreciation created Stress on Yarn price realizations. Despite all above, the company executed and completed the Modernization cum expansion project at Kalwakurthy unit, increased the Sale volumes with widen customer base and with foresighted de-risking strategies delivered a solid performance in the FY 2018-19.

Operations were broadly affected with the following:

• Average input (raw material) cost increased to Rs 103.07 per kg. as against Rs 90.49 in the previous year.

• Raw materials-fiber taxable @ 18% and finished product yarn taxable @ 12% under GST Act, results to inverse duty structure and blockage of working capital funds about Rs 4.00 cr at any time during the year.

• Average yarn realization achieved at Rs 156.01 per kg. as against Rs 139.91 per kg in the previous year.

• Contributions from operations increased to Rs 50.43 per kg. from Rs 47.20 per kg in the previous year.

• Operational cost maintained at Rs 41.61 per kg. as against Rs 41.23 per kg in the previous year.

Highlights of the Companys Affairs

The highlights of the Companys performance are as under:

• Gross Revenue from operations for the FY 2018-19 is Rs 431.55 cr as compared to Rs 363.33 cr in the previous year.

• Exports increased to Rs 51.98 cr as compared to Rs 39.84 cr in the previous year.

• Production quantities increased to 25,152 MTs as against Rs 23,401 MTs in the previous year.

• Profit Before Tax for the FY 2018-19 is Rs 23.22 cr as compared to Rs 12.40 cr in the previous year.

• Profit after Tax is Rs 14.23 cr as against Rs 7.89 cr in the previous year.

Capital expenditure

The companys in hand project of Modernization cum expansion at Kalwakurthy unit has been completed during the current financial year and incurred total Capital Expenditure of Rs 83.93 cr The project taken shape with modernization of 9,120 spindles and expansion of 21,984 spindles thereby companys total spindle capacity increased to 1,15,248 spindles.

Transfer to Reserves

The Company has decided to transfer Rs 10.90 cr to the general reserve for the financial year ended March 31, 2019.

Dividends

Your Directors have recommended the payment of Dividend on the Cumulative Redeemable Preference Shares as per the terms and conditions of the Issue for the Financial Year 2018-19. The said Dividend will absorb a sum of Rs 41,30,000/-. The corporate dividend tax will be Rs. 8,48,934/-.

Also, your Directors have recommended the payment of Dividend on Equity Shares at 18% (i.e.) Rs. 1.80 per share of Rs. 10/- each to Non-promoter equity shareholders of the Company for the year 2018-19. The dividend will absorb a sum of Rs. 22,76,442/- and the dividend tax will be Rs. 4,67,929Rs.

Investor Education and protection Fund (IEPF).

Pursuant to provisions of Section 124 and 125 of the Companies Act 2013 read with IEPF Rules 2016, all unpaid or unclaimed dividends up to the financial year 2010-11 was transferred to the Investor Education and Protection Fund established by the Central Government. The shareholders whose dividends and shares have been transferred to the IEPF Authority can claim their dividend and shares from the IEPF Authority.

Deposits

During the year under review the Company has not accepted any deposits in pursuance of Chapter V Companies (Acceptance of Deposits) Rules, 2014.

Extract of Annual Return

The Extract of Annual Return prepared in Form MGT-9 as per the provisions of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is enclosed as Annexure I to this Report.

Number of Meetings of the Board of Directors

Four (4) Board Meetings & Audit Committee Meetings were held during the Financial Year 2018-19 as below:

1. May 9, 2018

2. August 13, 2018

3. November 5, 2018

4. February 12, 2019

The Meetings of the following Committees held on the respective dates as mentioned below:

1. Nomination and Remuneration Committee — November 5, 2018 & February 12,2019.

2. CSR Committee Meeting — May 19, 2018

3. Stakeholders Relationship Committee Meeting — February 12, 2019.

For details pertaining to attendance of Directors for the said Meetings, please refer to the Corporate Governance Report, which forms part of this report.

Changes in Share Capital

There was no change in the share capital of the Company during the financial year under review.

Directors Responsibility Statement

Pursuant to the requirements under Section 134 of the Companies Act, 2013 with respect to the Directors. Responsibility Statement, the Board of Directors of the Company hereby confirms:

(a) that in the preparation of the annual accounts for the Financial Year ended March 31, 2019, the applicable accounting standards have been followed;

(b) that the directors 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 as at March 31, 2019, and Profit and Loss Statement of the Company for that period;

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

(d) that the directors have prepared the annual accounts for the financial year ended March 31, 2019, on a going concern basis;

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

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

Statement on Declaration given by Independent Directors under Sub-Section (6) of Section 149 of the Companies Act, 2013.

The Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149 (7) of the Companies Act, 2013 stating that they meet the criteria of independence as provided in Sub-Section (6) of section 149 of Companies Act, 2013.

Related Party Transactions

All the related party transactions are entered on arms length basis and are in compliance with the applicable provisions and listing regulations. The disclosures relating to related party transactions as required in Form AOC-2 is enclosed to this report as Annexure-II.

The Company has adopted a related party transactions policy and the said policy as approved by the board is uploaded on the Companys website www.snrya.la.ta.com.

Particulars of Loans, Guarantees and Investments:

During the year under review, the Company has not granted any loans, neither provided guarantees nor made any investments covered in the register maintained under section 186 of the Companies Act, 2013.

Particulars of Employees

The details pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure-III.

Further during the year under review, the list of top ten employees in terms of remuneration drawn as set out in Rule 5(2) Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure-III.

Details of Directors and Key Managerial Personnels appointed or resigned during the year:

During the financial year under review, Sri R S Agarwal resigned from the board with effect from February 15, 2019. Further in accordance Sections 149, 152, 160 and other applicable provisions, if any, of the Companies Act, 2013 (Act) and the Rules framed thereunder, read with Schedule IV to the Act and regulation 17(1A) and Chapter IV of the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the shareholders of the company vide there special resolutions passed through postal ballot approved the continuation of Sri R Surender Reddy and Sri K Lakshmikanth Reddy as directors of the company till the conclusion of the current term and re-appointment for a further period of five years along with Sri K R Suresh Reddy with effect from August 6, 2019.

Committees of the Board:

Currently the Board has four Committees:

1. The Audit Committee

2. The Nomination and Remuneration Committee

3. Corporate Social Responsibility Committee

4. Stakeholders Relationship Committee

Audit Committee

The Audit Committee consists of Sri R Surender Reddy, Chairman, Sri K R Suresh Reddy, Member and Sri K Lakshmikanth Reddy, Member. During the year under review, due to the resignation, Sri R S Agarwal ceased to be the member of the committee w.e.f. February 15, 2019 and Sri K Lakshmikanth Reddy was appointed as member of the committee with effect from March 29, 2019. All the recommendations made by the Audit Committee were accepted by the Board.

Nomination and Remuneration Committee.

The Nomination and Remuneration Committee consists of Sri K R Suresh Reddy, Chairman, Sri K Lakshmikanth Reddy, Member and Sri R Surender Reddy, Member. During the year under review, due to the resignation, Sri R S Agarwal ceased to be the member of the committee w.e.f. February 15, 2019 and Sri R Surender Reddy was appointed as Member of the Committee w.e.f. March 29, 2019.

Policy on directors. appointment and remuneration and other details:

The Company follows a policy on remuneration of directors and other senior managerial personnel. The Policy is recommended by the Nomination and Remuneration Committee and approved by the Board. More details of the same is given in the Corporate Governance Report.

Corporate Social Responsibility Committee.

The Corporate Social Responsibility consists of Sri R Surender Reddy, Chairman, Sri Vithaldas Agarwal, Member and Sri Mahender Kumar Agarwal, Member.

This policy encompasses the Companys philosophy for giving back to society as a corporate citizen and lays down the guidelines and mechanism for undertaking socially useful programmes for the welfare & sustainable development of the community at large.

Corporate Social Responsibility Policy.

The core theme of the Companys CSR policy is giving back to the society from which it draws its resources by extending helping hand to the needy and the underprivileged.

Corporate Social Responsibility is the commitment of business to contribute for sustainable economic development. It is the contribution of the corporate sector for philanthropic causes like education, health, water, Sanitation, Animal Welfare, environment and community development. In alignment with vision of the company, through its CSR initiatives, will continue to enhance value creation in the society, through its services, conduct & initiatives, so as to promote sustained growth of the society, in fulfillment of its role as a Socially Responsible Corporate, with environmental concern.

The Report on Corporate Social Responsibility as per Rule 8 of (Corporate Social Responsibility Policy) Rules, 2014 is enclosed as Annexure IV.

Stakeholders Relationship Committee.

Stakeholders Relationship Committee consists of Sri K R Suresh Reddy, Chairman, Sri Vithaldas Agarwal, Member and Sri Mahender Kumar Agarwal, Member.

The Scope of the committee shall include considering and resolving the grievances of the security holders of the company which may arise due to any of the reasons cited in the Stakeholders Relationship Committee of the company.

Auditor:

Statutory Auditors:

At the Annual General Meeting (AGM) held on September 4, 2017, K S Rao & Co., Chartered Accountants (ICAI Firm Registration Number 003109S), were appointed as Statutory Auditors of the Company to hold office for a period of five years and there appointment will be subject to the ratification of members at every Annual General Meeting. However, pursuant to the Companies (Amendment) Act, 2017, the ratification of the auditors at every annual general meeting of the company has been dispensed with.

Auditors Report

The Auditors Report to the Shareholders for the year under review does not contain any qualification or adverse remark.

Secretarial Auditor

The Board has appointed VCAN & Associates, a firm of practicing Company Secretaries, Hyderabad as the Secretarial Auditors to conduct Secretarial Audit of the Company for the Financial Year ended March 31, 2019 in compliance with the provisions of Section 204 of the Companies Act, 2013.

The Secretarial Audit Report issued by VCAN & Associates, in Form MR-3 is enclosed as Annexure V.

Internal Auditor

The Board of Directors of the Company have appointed Brahmayya & Co., Chartered Accountants as Internal Auditors to conduct Internal Audit of the Company for the Financial Year ended March 31,2019.

Cost Auditor:

The Board of Directors have appointed Aruna Prasad & Co., Cost Auditors, Chennai for conducting the cost audit of the Company for the financial year 2019-20, in compliance to the provisions of Section 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit Rules,) 2014, on the recommendations made by the Audit Committee and has recommended her remuneration for the approval of Members at the ensuing Annual General Meeting.

Corporate Governance Report

The report on Corporate Governance as per Regulation 34(3) read with Schedule - V of the SEBI Listing Regulations

is included as a part of this Annual Report. The requisite certificate from VCAN & Associates confirming the compliance with the conditions of Corporate Governance is attached to the report on Corporate Governance.

Management Discussion and Analysis

In terms of provisions of Regulation 34(2) of SEBI Listing Regulations report on Management Discussion & Analysis for the year under review is provided in a separate section forming part of this Annual Report.

Vigil Mechanism/Whistle Blower Policy:

The Board of Directors of the Company have adopted Whistle Blower Policy. This policy is formulated to provide an opportunity to employees and an avenue to raise concerns and to access in good faith the Audit Committee, to the highest possible standards of ethical, moral and legal business conduct and its commitment to open communication, in case they observe unethical and improper practices or any other wrongful conduct in the Company, to provide necessary safeguards for protection of employees from reprisals or victimization and to prohibit managerial personnel from taking any adverse personnel action against those employees.

The Policy on vigil mechanism/whistle blower policy may be accessed on the Companys website www.suryalata.com

Details of adequacy of internal financial controls.

The company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation were observed.

Change in the Nature of Business.

There has been no change in the nature of business of the Company during the financial year under review.

The details of significant material orders passed by the regulators or courts or tribunals impacting the going concern status and Companys operations in future.

No significant or material orders were passed by the regulators or courts or tribunals impacting the going concern status and companys operations in future during the year under review.

Material changes and Commitments, if any, affecting the financial position of the Company occurred after the closure of financial year till the time of adoption of this report.

No other material changes and commitments have occurred after the close of the year till the date of this Report, which affect the financial position of the Company. Further, there is no change in the nature of business of the Company.

However, Sri K K Sinha, Director of the company resigned from the board w.e.f. August 14, 2019.

Conservation of energy, technology absorption, foreign exchange earnings and outgo.

The information with respect to Conservation of energy, technology absorption, foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Act read with Rule 8 of Companies (Accounts) Rules, 2014, are provided in the Annexure VI to this Report.

Risk Management Policy.

The Company has policy for identifying risk and established controls to effectively manage the risk. Further the company has laid down various steps to mitigate the identified risk. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

Declaration with the compliance with the code of conduct by Members of the board and Senior Management personnel.

The Company has complied with the requirements about code of conduct for Board members and Sr. Management Personnel.

The said policy is available on the website of the Company

www.suryalata.com

Mechanism for Board Evaluation.

The board of directors has carried out an annual evaluation of its own performance, board committees and individual directors pursuant to the provisions of the schedule IV of the Companies Act, 2013 and the corporate governance requirements as prescribed by Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements), Regulations 2015.

The Directors evaluation was broadly based on the parameters such as understanding of the Companys vision, objective, skills, knowledge and experience, participation and attendance in Board/ Committee meetings; governance and contribution to strategy; interpersonal skills etc.

The Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as evaluation of the working of its Board Committees. A structured questionnaire was prepared covering various aspects of the Boards functioning such as adequacy of the composition of the Board and its Committees, Board Culture, execution and performance of specific duties, obligations and governance.

A meeting of the Independent Directors was also held which reviewed performance of non-independent directors, performance of the board as a whole and performance of the chairman after taking in to account the views of executive directors and non-executive directors. The same was discussed in the board meeting that followed the meeting of the independent directors, at which the performance of the board, its committees and individual directors was also discussed. Performance evaluation of independent directors was done by the entire board, excluding the independent director being evaluated.

Policy on Sexual Harassment

The Company has adopted policy on Prevention of Sexual Harassment of Women at Workplace in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company regularly conducts awareness programmes for its employees.

Disclosure pertaining to sexual harassment of women at workplace.

During the Financial year ended March 31, 2019 the Company has neither received any complaints nor there are any pending complaints pertaining to sexual harassment, and the Company had created Internal Complaints committee.

Environment, Health and Safety

The Company considers it is essential to protect the Earth and limited natural resources as well as the health and well being of every person. The Company strives to achieve safety, health and environmental excellence in all aspects of its business activities. Acting responsibly with a focus on safety, health and the environment is part of the Companys DNA.

Compliance with Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India.

Prevention of Insider Trading Code

As per SEBI (Prohibition of Insider Trading) Regulation, 2015, the Company has adopted a Code of Conduct for Prevention of Insider Trading. The Company has designated the company secretary being the compliance officer, who will be responsible for setting forth procedures and implementing the code for trading in Companys securities. During the year under review, there has been due compliance with the said code.

Acknowledgments.

The Company is grateful to its Customers, Shareholders, Suppliers, Banks & Financial institutions, Central & State Government Authorities for their constant support. The Board of Directors also place on record their deep appreciation of the contribution made by the employees at all levels, the consistent growth of the Company was made possible by their hard work, loyalty, dedication, coordination and support.

For and on behalf of the Board
For Suryalata Spinning Mills Limited
Vithaldas Agarwal Mahender Kumar Agarwal
Managing Director Joint Managing Director
DIN: 00012774 DIN: 00012807
Place: Secunderabad
Date : August 14, 2019