Directors' Report 1. Your Directors have great pleasure in presenting their 69th Report on the business and operations of the Company together with the audited statement of accounts for the year ended 31st March 2015. 2. DIVIDEND Your Directors recommend a Dividend of Rs.7.50 (75%) per equity share of Rs.10/- each for the financial year ended 31st March 2015 amounting to Rs.3.61 Crores on which Dividend distribution tax comes to Rs. 0.74 Crores. The Dividend will be paid to members whose names appear in the Register of Members as on 28th August 2015 and in respect of shares held in dematerialized form, it will be paid to members whose names are furnished by National Securities Depository Limited and Central Depository Services (India) Limited, as beneficial owners as on that date. 3. SHARE CAPITAL The paid up Equity Share Capital as on March 31, 2015 was Rs.4.82 crores. During the year under review the company has not issued any shares or any convertible instruments. 4. PERFORMANCE REVIEW, MANAGEMENT DISCUSSIONS, ANALYSIS REPORT AND OUTLOOK FOR THE CURRENT YEAR The year under review has been a challenging one for the textile industry at large and units in Tamilnadu mills faced more problems due to the poor power situation, forcing mills to buy most of the power required from outside sources. The windmill power evacuation continues to be going from bad to worse, this year too nearly 3 Crore units produced by the company did not get evacuated, causing a huge loss to our company. Textile markets in India and globally was severely impacted as the prices of raw materials kept dropping right through the financial year, creating a steady loss in the inventories. Domestic markets remain weeker than international markets. The total term loans stand at Rs.308.52 Crores reduced from Rs.341.12 Crores at the end of last fiscal year. Our efforts to deleverage and reduce overall debt is on track. During the first half of the year, our garment turnover dropped, as our main buyer of our Italian company was doing stock correction at their end in view of falling prices. However the order booking picked up in the second half and continues to be strong. We have enjoyed cordial relationship with all our stake holders. We have won several export awards, 5S awards, QC awards and recognition for our CSR full conduct of business. New businesses : During the year a 3.3 MW solar power plant has been commissioned at Sattur unit, this is expected to produce nearly 50 lac units per year. Loyal International Sourcing Private Limited is wholly owned subsidiary company of Loyal Textile Mills Limited has been incorporated and commenced its operations during the year, which will source garments for overseas retail chains. A Joint Venture has been established in Portugal to secure orders for fashion garments from higher end brand names together with a small manufacturer in Portugal, who has the capability of developing a collection and making small orders for fast turnaround. Italian Joint Venture Italian Joint Venture is performing satisfactorily, and has made a profit of 4.67 Lakh Euros pre tax and 2.99 Lakh Euros post tax despite a drop in turnover. 5. TRANSFER TO INVESTOR EDUCATION AND PROTECTION FUND All amounts which are due to be transferred to the Investor Education and Protection Fund are regularly monitored and transferred. During the year, the Company has transferred a sum of Rs.6.34 Lakhs, being the amount due and payable and remaining unpaid for a period of 7 years, as provided under Section 205C of the Companies Act, 1956 read with the Investor Education and Protection Fund (awareness and protection of investors) Rules 2001. Members who have not encashed the Dividend warrants for the financial year ended 2006-2007 and/or any subsequent years are requested to write to the Company with necessary details before 01.09.2014. 6. EXPORTS During the year under review, the company exported goods to the tune of Rs. 1220.25 Crores (Previous year Rs.1282.29 Crores). 7. MODERNISATION A sum of Rs.57.11 Crores (previous year Rs.52.01 Crores) was spent on modernization/ replacement of plant and machinery during the year under review. 8. CREDIT FACILITIES / FINANCE During the year, the company availed term loans to the tune of Rs.34.79 Crores and repaid loans to the extent of Rs.67.39 Crores to Banks/Financial institutions. 9. FIXED DEPOSITS During the year all deposits were repaid and there is no unpaid deposits held in our company. 10. DONATION During the year 2015-16 the Company has paid a donation of Rs.136 Lakhs. 11. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule, 8 of The Companies (Accounts) Rules, 2014, is annexed herewith as Annexure -A. 12. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The information required pursuant to Section 197(12) read with Rule 5(2) and Rule 5 (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company and Directors is attached as Annexure - B to this report. Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014 are provided in the Annexure - B to this report. 13. REPORT ON CORPORATE GOVERNANCE A detailed report on Corporate Governance is annexed to this report as Annexure - C. The Company has complied with the conditions of corporate governance as stipulated in Clause 49 of the Listing Agreement. The Managing Director has given a certificate of Compliance with the Code of Conduct, which forms part of Annexure - C as required under Clause 49 of the Listing Agreement. The Statutory Auditors of the Company have examined the requirements of Corporate Governance with reference to Clause 49 of the Listing Agreement and have certified the compliance, as required under Clause 49 of the Listing Agreement. The Certificate in this regard is attached as Annexure-D to this Report. The Managing Director and Chief Financial Officer (CFO) certification as required under Clause 41 of the Listing Agreement is attached as Annexure -E to this report. 14. CONSOLIDATED FINANCIAL STATEMENT The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS 21, and AS 27 prescribed under Companies (Accounting Standards) Rules, 2006. 15. SUBSIDIARIES AND JOINT VENTURES 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 and Joint Ventures (in Form AOC-1) is attached to the financial statements. Loyal International Sourcing Private Limited (100 % Wholly Owned Subsidiary Company) is started during the year. The Equity Shares of M/s. Shri Teyem Processors Limited and M/s. Uniloyal Expotex Limited which were hitherto held in investment, have been sold during the year. 16. CORPORATE SOCIAL RESPONSIBILITY (CSR) In terms of section 135 and Schedule VII of the Companies Act, 2013, the Board of Directors of your Company have constituted a CSR Committee. The Committee comprises of three Directors out of which two Directors are Independent Directors and other Director is a Whole Time Director. CSR Committee of the Board has developed a CSR Policy under Health Care activities and Educational Activities which is enclosed as part of this report Annexure - F. The CSR Policy is available at www.loyaltextiles.com under investor info/ policy documents / CSR Policy link. The company has contributed to a Charitable Trust a sum of Rs. 70. Lakhs which is more than the amount required to be spent u/s.135 of the Companies Act, 2013. The details of amount spent and category, will be published in the next report. 17. VIGIL MECHANISM / WHISTLE BLOWER POLICY In pursuant to the provisions of section 177(9) & (10) of the Companies Act, 2013, a Vigil Mechanism for Directors and employees to report genuine concerns has been established. The Vigil Mechanism Policy has been uploaded on the website of the Company at <http://www.loyaltextiles.com> under investor info/ policy documents/ Whistle Blower Policy link. 18. RELATED PARTY TRANSACTIONS Related party transactions that were entered during the financial year were on an arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. Transactions with related parties entered by the Company in the normal course of business are periodically placed before the Audit Committee for its omnibus approval. Particulars of contracts or arrangements with related parties referred to in section 188(1) of the companies Act, 2013 in the prescribed form AOC-2 is attached as Annexure - G. Also Refer Note No.47 of Financial statement which sets out the transactions with related parties. The Board of Directors of the Company has, on the recommendation of the Audit Committee, adopted a policy to regulate transactions between the Company and its Related Parties, in compliance with the applicable provisions of the Companies Act 2013, the Rules there under and the Listing Agreement. This Policy was considered and approved by the Board has been uploaded on the website of the Company at www.loyaltextiles.com under investor info/ policy documents Related Party Transaction Policy link. 19. RISK MANAGEMENT POLICY In accordance with Clause 49 of the Listing Agreement the board members were informed about risk assessment and minimization procedures after which the board formally adopted steps for framing, implementing and monitoring the risk management plan for the company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to risk management, in order to guide decisions on risk related issues. In today's challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the company are imperative. The common risks inter alia are: regulations, competition, business risk, technology obsolescence, investments, and retention of talent and expansion of facilities. Business risk, inter-alia, further includes financial risk, political risk, fidelity risk and legal risk. As a matter of policy, these risks are assessed and steps as appropriate are taken to mitigate the same. 20. REMUNERATION POLICY OF THE COMPANY The remuneration policy of the company comprising the appointment and remuneration of the Directors, Key Managerial Personnel and Senior Executives of the Company including criteria for determining qualifications, positive attributes, independence of a Director and other related matters has been provided in the Corporate Governance Report which is attached as Part III to Para- 2 of Annexure - C to this report. 21. DIRECTORS, KEY MANAGERIAL PERSONNEL & COMMITTEES At the 68TH Annual General Meeting of the company held on 11th September, 2014 the company had appointed the existing independent directors Shri K.J.M Shetty (DIN 00033296), Shri.S.Venkataramani (DIN 00053043), Shri.R.Poornalingam (DIN. 00955742), Shri. Shridhar Subrahmanyam (DIN. 01780475) and, Shri. M. Madhavan Nambiar (DIN. 03487311) as independent directors not liable to retire by rotation under the companies Act, 2013 for 3 consecutive years for a term up to the conclusion of the 71st Annual General Meeting. The Key Managerial personnels namely Company Secretary Mr.M.Arumugam was appointed in the Board Meeting held on 12th August 2013 and Chief Financial Officer Mr.R.Mohan was appointed during the year in the Board Meeting held on 01st August 2014. All independent directors have given declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and Clause 49 of Listing Agreement. At a Board Meeting held on 11th February 2015 the board had appointed Smt. Valli M Ramaswami (DIN 00036508) as an Additional director (Woman director) and in the same Board Meeting she was appointed as a Whole Time Director of the company. 22. INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has adequate system of internal control to safeguard and protect from loss, unauthorized use or disposition of its assets. All the transactions are properly authorized, recorded and reported to the Management. The Company is following all the applicable Accounting Standards for properly maintaining the books of accounts and reporting financial statements. The internal auditor of the company checks and verifies the internal control and monitors them in accordance with policy adopted by the company. 23. DIRECTORS' RESPONSIBILITY STATEMENT To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the Directors have selected such accounting policies and applied them consistently and made judgements 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 March 31, 2015 end 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 that such internal financial controls are adequate and are operating effectively; and f) the Directors had devised proper system to ensure that systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 24. LISTING The Company's equity shares continue to be listed on the Bombay Stock Exchange, Mumbai. The listing fee for the financial year 2014 - 2015 has been paid to BSE and the Annual Custodian fee has been paid to the NSDL and CDSL for the financial year 2014-15 25. AUDITORS 25.1 STATUTORY AUDITORS M/s. Suri & Co (Firm Regn No:004283S.), Chartered Accountants, have been appointed as statutory auditors of the company at the 68th Annual General Meeting held on 11.09.2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Therefore, ratification of appointment of Statutory Auditors is being sought from the members of the Company at the ensuing AGM. The Statutory Auditors' Report to the shareholders does not contain any qualification. 25.2 SECRETARIAL AUDITORS Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules,2014, the Company has appointed Mr. Krishna Sharan Mishra (FCS No.6447) representing KSM Associates, Company Secretaries, Chennai, to undertake the secretarial audit of the company. The Secretarial Audit Report is annexed herewith as Annexure - H. The Secretarial Auditors' Report to the shareholders does not contain any qualification. 25.3 INTERNAL AUDITORS M/S. SLSM & CO, Associates, Chartered Accountants performs the duties of internal auditors of the company and their report is reviewed by the audit committee from time to time. 25.4 COST AUDITOR Mr.V.Balasubramanian, Cost Accountant was appointed as Cost Auditor for auditing the cost accounts of your Company for the year ended 31st March, 2015 by the Board of Directors. The Cost Audit Report for the year 2013-14 has been filed under XBRL mode within the due date of filing. 26. EXTRACT OF ANNUAL RETURN An extract of the Annual return in form- MGT- 9 as on March 31, 2015 is attached as Annexure - I to this report. 27. PARTICULARS OF LOANS GIVEN, INVESTMENTS MADE, GUARANTEES GIVEN AND SECURITIES PROVIDED Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or investments or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement (Refer Note No. 11). 28. BUSINESS RESPONSIBILITY STATEMENT 1. The company shall comply with all the statutes and the rules of regulating authorities. 2. It is the responsibility of the company to share the wealth of the company with our Share holders. 3. When it comes to the caring of environment, Loyal does not believe in seeking benefits from the government but leaving it with the government for greater good and being morally fair to our customers, employees, suppliers etc., The Company has great respect for environment. 4. Believe in empowering the society through education. 29. GENERAL A. Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: 1. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Neither the Managing Director nor the Whole-time Directors of the Company receive any remuneration or commission from any of its subsidiaries. 4. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. Attention is drawn to the Note No. 39 regarding letter from BSE for which suitable reply has been filed. B. A copy of the Financial Statements including Consolidated Financial Statements, Directors Report, Auditors Report etc., is available at the Registered office of the Company for the inspection of the members of the company during the office hours up to the date of Annual General Meeting. C. The Company has not furnished the statement of Changes in Equity as the required format has not yet been prescribed. D. Your Directors further state, as per information furnished by POSH Committee, during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. 30. ACKNOWLEDGEMENT Your Directors wish to acknowledge the co-operation and assistance extended by Exim Bank, Central Bank of India, State Bank of India, Karur Vysya Bank Ltd., Indian Bank and State Bank of Mysore. Your Directors appreciate the continued cooperation extended by staff and workers of the company and look forward to the same cordial relationship in the coming years. For and on behalf of the Board of Directors P. MANIVANNAN Whole Time Director MANIKAM RAMASWAMI Managing Director Place: Chennai Date: 28th May 2015 |