DIRECTORS' REPORT FOR THE YEAR ENDED MARCH 31, 2015 TO THE MEMBERS, Your Directors present the 58th Annual Report together with the Audited Statement of Accounts of the Company for the year ended 31st March, 2015. 2. Dividend Your Directors have not recommended any dividend on the equity share capital for the year under review with a view to conserve resources and to plough back profits to strengthen the net working capital. 3. Transfer to Reserves The Company proposes to transfer Rs. 54.46 Crores to the Capital Redemption Reserve out of the amount available for appropriation and an amount of Rs. 268.85 Crores is proposed to be retained in the profit and loss account. 4. Company's Performance On consolidated basis, revenue from operations for the financial year 2014-15 at Rs. 923.17 Crores was higher by Rs.70.24 Crores over last year (Rs. 852.93 Crores in 2013-14). Earnings before interest, tax, depreciation and amortization (EBITDA) was Rs. 86.56 Crores registering a growth of 10 % over EBITDA of Rs. 78.60 Crores in 2013-14. Profit after tax (PAT) for the year was Rs. 17.81 Crores registering growth of 73 % over the PAT of Rs.10.29 Crores in 2013-14. On standalone basis, revenue from operations for the financial year 2014-15 at Rs. 913.37 Crores, was higher by 8% over last year (Rs. 846.82 Crores in 2013-14). Earnings before interest, tax, depreciation and amortisation (EBITDA) was Rs. 85.23 Crores registering a growth of 8% over the EBITDA of Rs. 78.88 Crores in 2013-14. Profit After Tax (PAT) for the year was Rs. 17.34 Crores recording a growth of 52% over the PAT of Rs. 11.38 Crores in 5. Operations The year 2014-15 has ended with marginal improvement over the year 2013-14 with increase in sales by about 8% due to higher sales volume of Industrial Products. The average sales realization was better due to reduction in the raw material cost and an increase in the sale of specialty products which has helped the Company in achieving 8% Growth in EBITDA. 6. Future Outlook The overcapacity situation persists in the Polyester Film manufacturing industry in Indian market as well as in the international market, the prices remain under pressure due to competition and oversupply situation. The Company has shifted its focus to the specialty films and already developed some new products for the market such as Digital Printable Films, films for Solar PV application, films for Lidding application, Coated Films for Label, Medium Shrink Films for Label and films with High Infrared heat rejection for automobiles. These films will mainly cater to the export market. 7. Research & Development Your company is continuously in development of new products and new applications in the fields of Polyester Film and Solar Control Window Film. Apart from development of new products, R&D Department is also focusing on cost reduction measures by developing cost effective alternative raw materials and processes. Company's R&D Centre is accredited by the Department of Scientific and Industrial Research, Ministry of Science andTechnology, Government of India. R&D team works hand-in-hand with production team to establish new products at the plant and to improve the product quality and plant efficiencies. All the manufacturing plants / pilot plants and laboratories are upgraded with latest equipment to upgrade the product quality and to achieve the stringent quality requirements of demanding customers. 8. Functioning of R & D Department R&D activities are carried out as an independent activity. In this center various pilot plants are installed for development of Polymers, film extrusion and different types of coating. All new polymers and coatings are first produced in these plants and extensively tested in specially developed test facilities before commencing trials on the main plant. All the new product trials are taken under supervision of very senior R&D personnel and test marketing is done before producing them in bulk quantities. Our laboratories are equipped with state-of-the-art latest testing equipments and many specialty test rigs are used as per the end product applications. 9. Information Technology (IT) > The Company has implemented CCTV security surveillance system in production. > The Company is in process to implement SAP HR Payroll to integrate HR process to the existing SAP ERP system. > The Company is in process to implement SAP BI system to facilitate KPI driven reporting and Dashboard to management by taking advantage of SAP ERP business database. > The Company has upgraded its existing Windows operating system along with hardware baseline from Windows XP to Windows 8 to mitigate operating system vulnerability on account of Windows XP technical support stopped by Microsoft. 10. Awards and Recognitions During this year, your Company has been honored with ten Safety Awards at National as well as State Levels by various Authorities, viz. National Safety Council of India (NSCI), and Maharashtra State Chapter of National Safety Council (NSC - MC). Out of these ten awards, two awards were won by the Company's employees for their contribution in State Level Safety Slogan Competition. 11. Human Resource Development Company's Human Resources team is running successfully its talent acquisition, retention and development agenda during the year. Company's senior management team was strengthened through hiring of leaders in various domains. The Company's HR policies and processes are aligned to effectively drive its business and other emerging opportunities. The focus on employee development through training modules that were created in-house continued. More than 164 training programs were conducted during the year, over 86% of them through in-house trainers and business leaders. The programs added up to over 16,528 man-hours / 2,066 man-days of training. This has been achieved by continuously investing in learning and development programs by arranging target oriented training programs, creating appropriate work environment and maintaining a structured recognition system. HR has been working to provide an enabling working environment where innovation and performance thrive. Employees are empowered and we believe that it is people who ultimately deliver results. 12. Manufacturing and Quality Initiatives With innovative approaches in manufacturing techniques and product optimization, the productivity in the manufacturing segment has significantly gone up. The quality culture of your Company ensures that the products are benchmarked as best in class by the customers. Our quest for excellence both in manufacturing and quality continue as before. Your Company is regarded as best in class for quality and reliability. In order to keep the plants in excellent running condition the company has upgraded the manufacturing plants with various new equipment to produce quality products. 13. Consolidated Financial Statement The Consolidated Financial Statements of the Company are prepared in accordance with relevant Accounting Standards AS-21, AS-23 and AS-27 issued by the Institute of Chartered Accountants of India and forms a part of this Annual Report. 14. Subsidiary Companies Garware Polyester International Limited-UK and Global Pet Films Inc.-USA, continue to be subsidiaries of the Company. Pursuant to Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the statement containing salient features of the financial statements of the Company's Subsidiaries (in Form AOC-1) is attached to the financial statements. 15. Safety, Health & Environmental Protection Being a responsible corporate citizen, your Company has continued to sustain various initiatives for the continual improvement in Safety, Health and Environment (SHE) at the works and surroundings. Some of the prominent activities include - Safety audits of Thermic Fluid System and Electrical System by external expertise (M/s Jacobs Engineering), Internal Safety survey of plants, Field Safety rounds after monthly safety review meetings, EMS training and field rounds, periodical SHE inspections and trainings, schemes on the efficient usage of energy and the conservation of natural resources, activities for the enhancement of employee participation in SHE and the support in emergency management operations at public places. Your Company is a recipient of various safety laurels from the Regulatory Authorities on the State and National level, as stated above during the year. Safety and security system of your company has been upgraded, your company carries out various safety awareness training and emergency execution drills from time to time to prepare its workforce for emergency situations. 16. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability confirm that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) 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, 2015 and of the profit of the Company for the year ended on that date; c) the Directors 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; d) the Directors have prepared the annual accounts on a 'going concern' basis; e) the Directors have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively. f) the Directors have advised proper systems to ensure compliance with provisions of applicable laws and that such system were adequate and operating effectively. 17. Directors and Key Managerial Personnel In accordance with the provisions of the Act and the Articles of Association of the Company, Mrs. S. S. Garware and Mr. M. S. Adsul, Directors of the Company, retire by rotation at the ensuing Annual General Meeting and being eligible have offered themselves for re-appointment. During the year under review: (a) Ms. Sonia Garware became Non-Executive & Non-Independent Director from Executive & Non-Independent Director. (b) The Company appointed Mr. Nilesh R. Doshi as Independent Directors of the Company with effect from November 12, 2014 for a period of five consecutive years. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and under Clause 49 of the Listing Agreement entered with the Bombay Stock Exchange Ltd. 18. Number of meetings of the Board Four meetings of the Board were held during the year. For details of the meetings of the Board, please refer to the corporate governance report, which forms part of this report. 19. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, a structured questionnaire was prepared after taking into consideration of the various aspects of the Board functioning, composition of the Board and its Committees, culture, execution and performance of specific duties, obligations and governance. This performance evaluation of the Independent Directors was completed. The performance evaluation of the Chairman and the Non-Independent Directors was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process. 20. Policy on Directors' Appointment and Remuneration and Other Details The Company's policy on directors' appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the directors' report. 21. Internal Financial Control Systems and their Adequacy The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report. 22. Audit Committee The details pertaining to composition of Audit Committee are included in the Corporate Governance Report, which forms part of this report. 23. Statutory Auditors Pursuant to the provisions of Section 139 of the Act and the rules framed there under, M/s. Manubhai & Shah, Chartered Accountants, were appointed as Statutory Auditors of the Company from the conclusion of the 57th Annual General Meeting (AGM) held on September 25, 2014 till the conclusion of the 62nd AGM to be held in the year 2019, subject to ratification of their appointment at every AGM. However, the Company has received a special notice under Section 115 of the Company's Act, 2013 proposing the name of M/s. Kirtane & Pandit, LLP, Chartered Accountants as Joint Auditors, subject to member's approval at the ensuing Annual General Meeting. The Auditors, M/s. Manubhai & Shah and M/s. Kirtane & Pandit, have conveyed their eligibility and willingness to act as joint auditors of the Company, if appointed at the ensuing Annual General Meeting. Board recommends that appointment of Joint Auditors shall be commensurate with the nature and size of operation of the Company. As required under the provisions of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from M/s. Manubhai & Shah and M/s. Kirtane & Pandit that their appointment, if made, would be in conformity with the limits specified in the said Section. Cost Auditor As per the requirement of central government and pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Rules, 2014 as amended from time to time, your company has been carrying out the audit of cost records. The Board of Directors, on the recommendations of Audit Committee, has appointed M/s. M. R. Pandit & Co., Cost Accountants, Aurangabad as Cost Auditors to audit the cost accounts of the company for financial year 2015-16. As required under Companies Act, 2013, a resolution seeking member's approval for ratification of remuneration payable to the Cost Auditors forms a part of the notice convening the Annual General Meeting. 24. Auditors' Report and Secretarial Auditors' Report The observations made in the Auditor's Report and Secretarial Auditor's Report are self-explanatory and therefore, do not call for any comments. The Auditors' Report and Secretarial Auditors' Report does not contain any qualifications, reservations or adverse remarks. Report of the Secretarial Auditor is given as an annexure which forms part of this report. 25. Risk Management The Board of the Company has formed a Risk Management Committee to frame, implement and monitor the risk management plan for the Company. The Audit Committee is responsible for reviewing the risk management plan and ensuring its effectiveness. 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. The development and implementation of risk management policy has been covered in the management discussion and analysis, which forms part of this report. 26. Particulars of Loans, Guarantees and Investments The particulars of loans, guarantees and investments have been disclosed in the financial statements. 27. Transactions with Related Parties All transactions entered by the Company during the financial year with related parties were in the ordinary course of business and at an arm's length pricing basis. The Audit Committee granted omnibus approval for the transactions (which are repetitive in nature) and the same was reviewed by the Audit Committee and the Board of Directors. There were no materially significant transactions with related parties during the financial year 2014-15 which were in conflict with the interest of the Company. Your Directors draw attention of the members to take note of Note No. 35 to the financial statement which sets out related party disclosure. 28. Corporate Social Responsibility The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a CSR Policy indicating the activities to be undertaken by the Company, which has been approved by the Board. The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure I of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.The CSR Policy may be accessed on the Company's website at <http://www.garwarepoly.com>. The Company has established Garware Community Centre at Chikalthana, Aurangabad in the year 1994 primarily to cater to the social needs of workmen largely staying in the CIDCO, Aurangabad area and other members of the society as a not-for-profit trust through which the Company could channelize social welfare initiatives. The Society is also registered separately under the Societies Act for carrying out social activity at Garware Bal Bhawan primarily for the children from all strata of the society and to give scope for the talent and to grow the same is doing excellent job and has been recognized by the National Bal Bhawan, New Delhi for expanding various activities. One more Community Centre has been started in Waluj at Aurangabad in the year 2013 considering the need of the villagers and workmen staying in the village. Over the years, the Community Centre has initiated, guided and conducted several programs in education by way of Study Centre, organizing speeches from renowned guest speakers on career guidance, etc. In addition various other activities are carried out at the center such as sports, judo & karate, bharat natyam, yoga and suryanamaskar, library, reading room etc. and has been successful in bringing about a positive change in the lives of the underprivileged sections of society. The Company would also undertake other need based initiatives in compliance with Schedule VII to the Act. During the year, the Company has spent Rs. 60.00 Lakhs (around 2.43% of the average net profits of last three financial years) on CSR activities which does not include the expenses made on the activities carried out by the Garware Community Center and Garware Bal Bhawan. 29. Extract of Annual Return As provided under Section 92(3) of the Act, the extract of Annual Return of the Company is annexed herewith as Annexure II in the prescribed Form MGT-9, which forms part of this report. 30. Particulars of Employees and related disclosures Three Whole-time Directors/Employees employed throughout the year were in receipt of remuneration of Rs. 60 Lac per annum or more amounting to Rs. 8.47 Crore and one whole-time director/ employee employed for the part of the FY 2014-15 was in receipt of remuneration of Rs. 5 Lac per month or more amounting to Rs. 0.83 Crore were relative(s) of Shri S. B. Garware Chairman & Managing Director of the Company. During FY 2014-15 the Company had 1169 nos. of permanent employees. The information required under Section 197(12) of the Companies Act, 2013 read with Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and forming part of the Directors' Report for the year ended March 31, 2015 is given in a separate Annexure to the Report. The above Annexure is not being sent along with this 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. 31. Other Laws During the year under review, there were no cases filed pursuant to the provisions of sexual harassment of women at work place (Prevention, Prohibition and Redressal) Act, 2013. 32. Corporate Governance The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements as set out by SEBI. The Company has also implemented several best corporate governance practices as prevalent globally. The report on Corporate Governance as stipulated under the Listing Agreement forms an integral part of this Report. The requisite certificate from the Practicing Company Secretary, confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance. 33. Vigil Mechanism The Vigil Mechanism of the Company, which also incorporates a whistle blower policy in terms of the Listing Agreement, includes an Ethics & Compliance Task Force comprising senior executives of the Company. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone line or a letter to the Task Force or to the Chairman of the Audit Committee. The Policy on vigil mechanism and whistle blower policy is available on the Company's website at the www.garwarepoly.com 34. Deposits From Public The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet. 35. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, are provided in Annexure III to this Report. 36. Industrial Relations The relations between the Employees and the Management remained cordial during the year under review. Your Directors wish to place on record their appreciation of the contributions made by the employees at all levels. 37. Acknowledgements Your Directors take this opportunity to thank the customers, supply chain partners, employees, Financial Institutions, Banks, Central and State Government authorities, Regulatory authorities, Stock Exchange and all the various stakeholders for their continued cooperation and support to the Company. For and on behalf of the Board of Directors For Garware Polyester Limited S. B. GARWARE Chairman & Managing Director Date : August 06, 2015 Place : Mumbai |