DIRECTORS' REPORT & MANAGEMENT DISCUSSION AND ANALYSIS Dear Members Your Directors are pleased to present the 67th Annual Report on the affairs of the Company together with Audited Financial Statements for the financial year ended 31st March 2016. 2. Transfer to Reserves & Dividend Rs.700 lakhs has been credited to Share Premium Account consequent upon conversion of Preference Shares of Rs.1400 lakhs into Equity Shares. In view of accumulated losses, the directors are unable to recommend any dividend. 3. Outlook of the Economy The Global Economy disappointed in terms ofgrowth, with deceleration of activity in key emerging and developing economies like China, Brazil and Russia overshadowing a modest recovery in major high income countries. Decelerating was accompanied by declines in commodity prices, subdued global trade, bouts of financial market volatility and weakening capital flows. The recovery is projected to strengthen in FY 2017 and beyond, driven primarily by emerging market and developing economies, as conditions in stressed economies start gradually to normalize. India has emerged as the fastest growing major economy in the world as per the Central Statistics Organization (CSO) and International Monetary Fund (IMF). According to the Economic Survey 2015-16, the Indian Economy will continue to grow more than 7 per cent in 2016-17. The improvement in India's economic fundamentals has accelerated in the year 2015 with the combined impact of strong government reforms, RBI's inflation focus supported by benign global commodity prices. According to IMF World Economic Outlook Update, Indian economy is expected to grow at 7-7.75 per cent during FY 2016-17, despite the uncertainties in the global market. The Economic Survey 2015-16 had forecasted that the Indian economy will be growing by more than seven percent for the third successive year 2016-17 and can start growing at eight per cent or more in next two years. The steps taken by the government in recent times have shown positive results as India's gross domestic product (GDP) at factor cost at constant (2011-12 prices 2015-16 is Rs.113.5 trillion as against Rs.105.5 trillion in 2014-15, registering a growth rate of 7.6 per cent. With the improvement in the economic scenario, there have been various investments leading to increased M&A activity. Numerous foreign companies are setting up their facilities in India on account of various government initiatives like Make in India and Digital India. The Government of India, under the Make in India initiative, is trying to give to the contribution made by the manufacturing sector and aims to take it up to 25 per cent of the GDP from 15 per cent as at present. 4. Industry Outlook India's textiles sector is one of the oldest industries in Indian economy dating back several centuries. Even today, textiles sector is one of the largest contributors to India's exports with approximately 11 per cent of total exports. The textiles industry is also labour intensive and is one of the largest employers. The industry realized export earnings worth US$ 41.4 billion in 2014-15, a growth of 5.4 per cent, as per The Cotton Textiles Export Promotion Council (Texprocil). The close linkage of the textile industry to agriculture (for raw materials such as cotton) and the ancient culture and traditions of the country in terms of textiles make the Indian textiles sector unique in comparison tothe industries of other countries. The Indian textile industry has the capacity to produce a wide variety of products suitable to different market segments, both within India and across the world. The Indian textiles industry, currently estimated at around US$ 108 billion, is expected to reach US$ 223 billion by 2021. The industry is the second largest employer after agriculture, providing employment to over 45 million people directly and 60 million people indirectly. The Indian Textile Industry contributes approximately 5 per cent to India's gross domestic product (GDP), and 14 per cent to overall Index of Industrial Production (IIP). The growth implies domestic sales to rise to US$ 315 billion from currently US$ 68 billion. At the same time, exports are implied to increase to US$ 185 billion from approximately US$ 41 billion currently. The Indian government has come up with a number of export promotion policies for the textiles sector. It has also allowed 100 per cent FDI in the Indian textiles sector under the automatic route. The future for the Indian textile industry looks promising, buoyed by both strong domestic consumption as well as export demand. With consumerism and disposable income on the rise, the retail sector has experienced a rapid growth in the past decade with the entry of several international players like Marks & Spencer, Guess and Next into the Indian market. The organized apparel segment is expected to grow at a Compound Annual Growth Rate (CAGR) of more than 13 per cent over a 10-year period. 5. Business Strategy Textile Unit: Last year it was a very challenging year for the textile industry. Domestic market had not shown any significant signs of improvement. Global players turned to other small economies like Bangladesh & Vietnam, wherein they are reaping lot of duty benefits for imports given to these economies under the Generalized Scheme of Preferences (GSP) agreement and also pricing owing to cheap labour, thus put pressures on the capacity utilization. JCT has worked on areas to increase productivity from the existing infrastructure by focusing more on Work Wear range, increased focus on technical fabrics, domestic market, brands. Company is working on debottlenecking / upgrades its facilities wherever possible with available funds to meet competition with productivity and higher efficiencies. Company is in various stages of involvement and activation with power brands like MADURA GARMENTS, INDUS LEAGUE, INDIAN TERRAIN, PANTALOON RETAILS etc. We are also going to enter in E-commerce retailing which is another dominant force adding momentum to apparel retail market growth. New product developments and launches will definitely help in increasing the penetration in the world of technical textiles and deeper reach in the untouched Brands market. Filament Unit The Company produces Nylon FilamentYarn & Nylon Chips which fall within the broad industry category of Synthetic Fiber. 70% of the input cost comprises from petroleum based products Caprolactum, fuel oil, gas and coal. Per capita consumption of Nylon Textile Fabrics in India is very low as compared to global standards. Indian Nylon Market is expanding quite significantly at a CAGR of 13% otherwise in a shrinking global economy. Out of this 1200 MT expansions came in 2015-16 and approx another 2800 MT Expansions are planned for 201617. Till last year 30% of domestic demand was dependent on imports. Incremental growth during coming years is going to be met with domestic supplies only as imports would remain either stagnant at current levels or will go down with new domestic capacities. However threat of imports will remain with significant capacity additions in Vietnam mainly targeting India. The maximum share of growth in Nylon has come through Warp Knitting segment used for ladies dress apparels, shoulder and Elastic tapes and Dupatta Segment and is expected to continuously grow in coming future due to less labor intensive nature of warp knitting compared to weaving, growth in under garments segment due to middle income class population growth. Looking into coming expansions of around 4000 MTs during FY 2016 & FY 2017, the company is putting one New HOY (Spinning) machine which will help in overcoming technological Constraints to some extent and foraying into forward integration by starting production of Covered Yarn and further exploring possibilities in Warping segment to offset stiff competition. 6. OPERATIONS Textiles: The textile unit at Phagwara, despite challenging business environment, with its available resources fared quite well in the otherwise depressed markets. The unit produced and sold 3.67 crores and 4.14 Crores meters of fabrics respectively. The technical textiles have been well accepted by the market. The unit has launched new range of inherently Fire Retardant fabric like JCT Pinnacle, Derby, Polaris and Inferno. Nylon Filament Yarn: JCT Filament Unit is one of the top Textile Grade Nylon Yarn manufacturers in India with installed capacity of16000 TPA despite challenges thrown by peers and cheaper imports are coming to India through ASEAN countries. The unit performed exceedingly well during the year and sold highest quantity (14383 MT) of filament yarn and also sold 518 MT of Nylon Chips. The raw materials prices remained quite volatile and fluctuated between Rs 133/-Kg and Rs 93/- Kg. the selling prices were also synchronized with fluctuation in raw material prices. The unit has been exploring new productsto remain competitive in the market. 7. FINANCE The Company has been meeting its repayment obligation as per the terms of restructuring under CDR mechanism and the Charge on Company's moveable and immoveable assets of the Company have been created and registered in favour of All Bank Finance Ltd, the Security Trustee, appointed by the consortium member banks. 8. SHARE CAPITAL During the year under review, Company converted 14,00,000 Optionally Convertible Preference Shares (OCPS) aggregating to Rs.1400 lakhs held by one of the holders, namely Alport Limited into 2,80,00,000 Equity Shares at Rs.5 each (including Rs.2.50 as share premium) on 31.12.2015. The paid-up share capital as on 31.3.2016 stood at Rs.156.20 Crores. Further, during the year under review, the Board had considered the request to convert the Optionally Convertible Preference Shares (OCPS) aggregating to Rs.1000 lakhs held by one of the promoter companies namely Provestment Securities Private Limited into 13,333,333 Equity Shares subject to requisite approvals. Company after having all the requisite approvals, 13,333,333 Equity Shares at Rs.7.50 each (including Rs.5 as share premium) have been allotted on 5.5.2016. 9. FOREIGN CURRENCY CONVERTIBLE BONDS (FCCBs) The Hon'ble High Court ofPunjab & Haryana, allowed the mutually accepted consent terms between the Company, Foreign Currency Convertible Bond (FCCB) holders and The Bank of New York, Mellon, Trustee, on 05.06.2015. The Company started making payments to the Trustee of FCCB holders out of the funds received from sale / redemption proceeds of non-core assets including investments as per the consent terms. The bondholders have agreed to equally apportion the partly paid / unpaid installments upto March 2016 in remaining installments. 10. DEPOSITS During the year company accepted fixed deposits of Rs.526.25 lakhs upto 28.09.2015 and discontinued accepting fresh/ renewal of deposits thereafter. The company is regular in repayment of deposits as and when due and claimed by depositors. Fixed Deposits remaining unclaimed at maturity amounted to Rs. 7.24 lakhs. Out of unclaimed deposits amounting to Rs.4.23 lakhs have been repaid subsequently. 11. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. 12. CORPORATE GOVERNANCE As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a separate report on Corporate Governance practicesfollowed by the Company, together with a certificate from the Company's Auditors confirming compliance forms an integral part of this Report. 13. AUDITORS Statutory Auditors M/s S.P. Chopra & Company (Firm Registration No.000346N), Chartered Accountants, were appointed as Statutory Auditors of your Company at the 65th Annual General Meeting held on 25.09.2014 for a term of three consecutive years. As per the provisions of Section 139 of the Companies Act, 2013, the appointment of Auditors is required to be ratified by the Members at every Annual General Meeting. The Report given by the Auditors on the financial statements of the company is self explanatory and is a part of Annual Report. Their qualified opinion given in the Report has been fully explained in Note No.5.2 attached to the schedule 5 of Long Term Liabilities. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules 2015, the cost audit records maintained by the Company in respect of its textile and filament yarn units are required to be audited. The Board of Directors, on the recommendation of the Audit Committee, has appointed M/s Goyal, Goyal & Associates, Cost Accountants, as Cost Auditor of the Company for the financial year 2016-17 at a remuneration of Rs. 1,50,000/- plus service tax as applicable and reimbursement of out of pocket expenses. As required under the Companies Act, 2013, the remuneration payable to Cost Auditor is required to be placed before the members for ratification. Accordingly, a resolution seeking members' approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting. The cost audit report for the financial year 2015-16 is under finalization and would be filed within the stipulated time with the Ministry of Corporate Affairs. Secretarial Audit Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, the company has appointed Ms. Seema Sharma, Whole Time Company Secretary in Practice (C.P No.4397) to undertake the Secretarial Audit of the Company. The Secretarial Audit report forms an integral part of this Report. There is no secretarial audit qualification for the year under review. 14. EXTRACT OF THE ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9, as required under Section 92 of the Companies Act, 2013, forms an integral part of this Report. 15. STATUTORY DISCLOSURES Conservation of Energy, Technology Absorption & Foreign Exchange Earnings & Outgo The particulars relating to energy conservation, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 forms an integral part of this Report. Particulars of Employees The Disclosure required under Section 197(12) of the Companies Act, 2013 read with the Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed and forms an integral part of this Report. Details of employees who were in receipt of remuneration as per Rule 5(2) & (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed and form an integral part of this Report. However, these details are not being sent along with this Annual Report to the Members of the Company in line with the provision of Section 136 of the Companies Act, 2013. Members who are interested in obtaining these particulars may write to the Company Secretary at the Registered Office of the Company. Further, the above information is available for inspection by Members at the Registered Office of the Company, 21 days before the 67th Annual General Meeting and upto the date of the ensuing Annual General Meeting during the business hours on working days. None of the employees hold (by himself or along with his spouse and dependent children) more than two percent of the equity shares of the Company. 16. DIRECTORS Changes in Directors and Key Managerial Personnel During the year under review, there was no change in the Board of Directors and the following are the Key Managerial Personnel (KMPs) of the Company : - Mr Samir Thapar - Chairman & Managing Director - Ms Priya Thapar - Director (HR) - Mr M P S Narang - Chief Financial Officer - Ms Nidhi Goel - Company Secretary Ms. Priya Thapar will retire at the forthcoming Annual General Meeting of the Company and being eligible, offer herself for re-appointment. Declaration by Independent Directors and re-appointment, if any All independent directors have given declarations that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Regulation 25 of SEBI (LODR) Regulations, 2015. Formal Annual Evaluation Pursuant to the provisions of the Companies Act, 2013 and Regulation 25 of SEBI (LODR) Regulations, 2015, the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its constituted Committees from time to time. Remuneration Policy In pursuance of Section 178 of Companies Act, 2013, The Board of Directors has framed a policy which lays down a framework in relation to criteria for selection, appointment, remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy is stated in the Corporate Governance Report. Number of Meetings of Board and its Committees The details of the number of meetings of the Board held during the financial year 2015-16 forms part of the Corporate Governance Report. 17. WHISTLE BLOWER POLICY The Company has a Vigil Mechanism named Whistle Blower Policy to deal with the instances of fraud and mismanagement, if any. The details ofWhistle Blower Policy is explained in the Corporate Governance Report and also posted on the website of the Company. 18. RELATED PARTY TRANSACTIONS All transactions entered with Related Parties were on arm's length basis and in the ordinary course of business. There were no material significant related party transactions made by the Company during the year under review with the Promoter/ Directors or Key Managerial Personnel. All related party transactions are placed before the Audit Committee and has sent also to the Board for approval and omnibus approval was obtained on a quarterly basis for transactions which are of repetitive natures. The policy on related party transactions as approved by the Board has been uploaded on the website of the Company. None of the Directors has any pecuniary relationship or transactions vis-a-vis the company. 19. RISK MANAGEMENT The Company has a Risk Management Policy for identifying, prioritizing and mitigating risks which may impact attainment of short and long term business goals of the Company. The risk management framework is reviewed periodically by the risk management teams at all the units of the Company constituted by the Board which monitors and evaluates the effectiveness of risk management framework of the Company and strengthens it. 20. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE There are no significant and material orders passed by the Regulators / Courts that would impact the going concern status of the Company and its future operations. 21. INTERNAL CONTROL SYSTEMS Company is having strong & effective internal control & risk mitigation systems in all areas of its operations. There are qualified personnel having efficient monitoring systems. Independent analyses by internal auditors are reported to Audit committee and their suggestions are being appraised by Board of Directors, Statutory Auditors and Business Head and accordingly corrective actions are taken. The company is in compliance with laws and regulations and runs business with strong ethical behavior. Internal financial control of your Company has adequate internal control system in place, commensurate with the size, scale and complexity of the operations. The Statutory Auditor has also commented on the internal financial control on financial reporting in their report. 22. CORPORATE SOCIAL RESPONSIBILITY As a part of its initiative under the "Corporate Social Responsibility" (CSR) drive, the Company has set up Corporate Social Responsibility Committee (CSR Committee) as per the requirement of the Companies Act 2013. The CSR policy was approved by the Board of Directors and has been uploaded on the Company's website i.e. www.jct.co.in. The list of Programs and other imperative information of CSR is mentioned in the said policy. The members of the CSR Committee are Mr Samir Thapar -Chairman & Managing Director, Ms Priya Thapar - Director HR and Mr Gordhan Bhojraj Kathuria - Independent Director. Due to the accumulated losses the average net profit of last 3 years is coming as negative, hence the contribution under CSR, is not applicable for this financial year. However, the Company's unit at Phagwara is running a co-education school which provides free education to the children of the workers right up to the class 12th standard and similar school is being run in Hoshiarpur up to 8th standard. 23. CONSERVATION OF RESOURCES Company's working is as per applicable statutory provisions pertaining to health and safety and company also take all possible measures to prevent accidents and occupational hazards. The manufacturing operations are conducted to ensure sensitivity towards the environment and minimize waste by encouraging "Green Initiative" practices. Efficient management and use of renewable resources are encouraged. All employees are obliged to ensure that they fully understand all policies and they fully comply with the requirements. 24. DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has zero tolerance for sexual harassment at work place and has adopted a policy against sexual harassment in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed there under. The Company has not received any complaints on sexual harassment and hence no complaints remain pending as of 31st March, 2016. 25. DIRECTORS' RESPONSIBILITY STATEMENT In terms of Section 134(3) (c) of the Companies Act, 2013, your Directors make the following statement that: (a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; (b) the directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; (c) the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; (d) the directors had prepared the annual accounts on a going concern basis; (e) the directors, had laid down internal financial controls which were followed by the company, such internal financial controls are adequate and operating effectively; and (f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively. 26. STATEMENT OF CAUTION Statements in this Directors' Report & Management Discussion and Analysis Report describing the Company's objectives, projections, estimates, expectations of predictions may be forward looking within the meaning of applicable laws and regulations. Actual results could, however, differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include raw material availability and its prices, cyclical demand and pricing in the Company's principle markets, changes in Government regulations, tax regimes, economic developments within India and globally. 27. APPRECIATION & ACKNOWLEDGEMENTS Your Directors wish to place on record their deep appreciation for the contribution made by the workers and employees at all levels. Your Directors also wish to extend their appreciation for the assistance and co-operations received from the bankers, investors, customers, dealers, agents, suppliers for their continued support and faith reposed in the Company. For and on behalf of the Board SAMIR THAPAR Chairman & Managing Director Date : 30.05.2016 Place : New Delhi |