Directors’ Report 1. Your Directors have pleasure in presenting the Twenty fourth Annual Report of the Company together with the Audited Statement of Accounts for the financial year ended March 31, 2016 2. Operations of the Company Your Company is into 100% exports of cotton garments especially Infantswear. The Company exports its products to United States and European Markets. a) Performance review Your Company achieved a higher turnover of around 8% and the total gross revenues touched Rs. 56,563 lakhs and profit before depreciation and taxes recorded was Rs. 17,105.50 Lakhs which is also up by 20.74% as compared to previous years. With investment in high level of modernization and technology upgradation, the effort put in by 4119 dedicated employees and the management staff and with the support of Banks, suppliers and customers your company could attain these levels or performance. The earnings per equity share (of face value of Rs.1/-) for the year increased from Rs.20.74 to Rs.23.68. Your Directors are pleased to report that consistent efforts and policy to cut down the cost has resulted in reduction in per unit cost and consequently enabled the company to achieve better margins and face competitors more efficiently. Kitex USA LLC opened its office in Delaware on October 5, 2015. The Company is yet to commence its operations. In the consolidated Accounts for the period ended 31st March, 2016, except for appropriation of Rs.240.04 lakhs in the net profit after taxes, there has not been any significant changes for the investment made in Kitex USA LLC for the capitalization of $.7,00,210 as on 31st March, 2016 in their accounts. No 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. b) Dividend As you are aware your Directors had recommended a 1st Interim dividend of Rs.0.75 per equity share of Rs.1/- each on October 19, 2015. The company has earned a net profit of Rs. 11,209.50 lakhs for the year ended March 31, 2016 and accordingly your Directors have recommended a final dividend of Rs.0.75 per equity share of face value Rs. 1/- making it to a total of Rs. 1.50 per equity share of Rs. 1/- each which is 150% dividend against the previous years dividend of 125%. The proposed final dividend is subject to the approval of the members at the ensuing Annual General Meeting. The total dividend appropriation (excluding dividend tax) for the current year is Rs. 712.50 lacs as against 593.75 lacs in the previous year. The Company has paid dividend distribution tax of Rs.145.05 lacs for the current year. c) Share Capital During the year under review, there was no change in the Company’s issued, subscribed and paid-up equity share capital. On March 31, 2016, it stood at Rs. 475 lacs divided into 4,75,00,000 equity of Rs. 1 each. d) Transfer to Reserve Your Company has earned a total profit after tax of Rs. 11,209.50 lakhs out of which a sum of Rs. 2000.00 lakhs (which include Rs. 10.00 Crores which had been provisioned during the declaration of 1st Interim Dividend on 19.10.2015) has been transferred to General Reserve for the purpose of future expansions and acquisitions. e) Transfer of amount to Investors Education and Protection Fund The Company has transferred unclaimed dividend of Rs. 4,51,897 for the financial year 2007-08 to Investors Education Protection Fund (IEPF) on 30.10.2015. 3. Capital Expenditure As on 31st March, 2016, the gross Fixed Assets stood at Rs. 26,830.03 lakhs and net fixed assets Rs. 17,298.88 lakhs. Additions during the year amount to Rs. 642.08 lakhs. Your Directors have approved an expenditure of a total of Rs. 642 lakhs for upgrading technology, modernization and infrastructural developments during the year under review. 4. Future Prospects The US market trend shows a stabilization of its GDP at 2.50% for the year 2016. With better GDP growth, increase in capital formation, per capita income growth and lower unemployment data, your company expects the Consumer Sector to show more strength and hence there is further scope for improvement on the upswing with a chance for reduction in Federal deficit gap. With an anticipated CAGR of 4.1% on an average, the Childrenswear market in US is valued at about $ 70.1 billion by 2018. The Cotton consumption world over have deteriorated significantly from 116 million bales to under 109 million bales. In China, the consumption fell by about 5 million bales while outside China it fell by less than 1 million bales. This decline in production implies that despite worsening consumption, destocking has continued at an even faster rate than initially expected. This is expected to keep the input cost under check. The Global growth, currently estimated at 3.1 percent in 2015 is projected at 3.4 percent in 2016. The pickup of global activity is projected to be more gradual during the current year, especially in emerging market and developing economics. The ongoing slowdown and rebalancing of the Chinese economy, lower commodity prices, and strains in some large emerging market economics will continue to weight on growth prospects in 2016- 17. The risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in global economy as a generalized slowdown in emerging market economies with China trying to rebalance its internal economic conditions. While the growth in China and other Asian market is expected to slow to 6.3 percent in 2016, primarily reflecting weaker investment growth, India and the rest of emerging Asia are likely to grow at a robust pace, although with some countries are facing strong headwinds from China’s economic rebalancing and global manufacturing weakness. With stiff competition continuing, the international buyers show preference to your company’s products due to its excellent quality, timely delivery and introduction of new designs based on new market trends and hence your Directors are confident of achieving better working results in the coming year. Consequent to incorporation of Kitex USA LLC by your company, the new entity has been able to introduce new private label LAMAZE during the year under review. The first shipment is likely to move off Indian Coast in July – Sept 2016. Your Directors are also pleased to inform you that a few more buyers in USA have evinced interest in your product range and are in the final stages of discussion, the sales to them is expected during the current financial year. 5. Awards and Recognition a) Forbes Award Your Directors are pleased to inform that your company was selected one among the “Best under A Billion” award by the Editors of Forbes Media LLC for the year 2015 from the 200 odd companies in Asia pacific region. Your Company received the award at a glittering function on November 2, 2015 at Kuala Lumpur, Malaysia. b) EY Entrepreneur of the year 2015 Your Directors are pleased to inform that Mr. Sabu M Jacob, Chairman & Managing Director was among the 19 Entrepreneur selected for the EY Entrepreneur of the year 2015. Mr. Sabu M Jacob was facilitated at the function held on 28th December, 2015 in Mumbai. c) Jockey Great Partnership 2015 Your Directors like to inform that in the Annual meeting of Vendors in Hong Kong in January, 2016, your company was selected and awarded the “JOCKEY Debra S Waller Award for great partnership 2015”. 6. Change in the Nature of Business During the year under review, there was no change in the nature of the business. 7. Listing The Equity Shares of the Company continue to remain listed on BSE Limited and National Stock Exchange of India Limited. 8. Fixed Deposit The Company has not accepted any deposit within the meaning of Chapter V of the Companies Act, 2013 and the Rules framed there under. 9. Particulars of Loans, Guarantees or Investments Particulars of investments made during the period under review, are provided in the standalone financial statement (Please refer to Note. 29 to the standalone financial statement). There were no Loan given, guarantees given and securities provided by the Company during the reporting period. 10. Extract of Annual Return Details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as “Annexure A”. 11. Directors and Key Managerial Personnel Mrs. Sindhu Chandrasekhar retires in the forthcoming Annual General Meeting and being eligible offers herself for reappointment. Brief particulars of Mrs. Sindhu, her expertise in various functional areas is given in the Notice convening the Annual General Meeting. Mr. C. Mohan, Director resigned from the Board of the Company with effect from February 08, 2016. The Board places on record its deep sense of appreciation for the valuable guidance and counsel provided by Mr. C. Mohan during his tenure as a Director of the Company. During the year under review, Mr. Boby Micheal, General Manager – Finance & Chief Financial Officer who was appointed as Key Managerial Personnel, has resigned with effect from the closing hours on January 7, 2016. Mr. Sabu M Jacob who has been holding the post of Chairman & Managing Director is re-designated as Chairman & Managing Director and Chief Financial officer with effect from 25.01.2016 until such time as the Board may decide. Mr. C.P. Philipose (DIN 01125157) was appointed as Additional Director of the Company with effect from July 20, 2015 and holds office upto the date of forthcoming Annual General Meeting. Pursuant to the provisions of Sections 149, 150, 152 and other applicable provisions of the Companies Act, 2013 and the rules made thereunder, read with Schedule IV to the Companies Act, 2013, your Directors recommended the appointment of Mr. C.P Philipose as Independent Director of the Company to hold office for a period of five years with effect from June 10, 2016, subject to approval by the members in the ensuing Annual General Meeting and his office as Independent Director shall not be subject to retirement by rotation. Details of the proposal for appointment of Mr. C. P. Philipose are mentioned in the Explanatory Statement under Section 102 of the Companies Act, 2013 of the Notice of the ensuing Annual General Meeting. In compliance with Reg 36(3) of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, brief resume of all the Directors proposed to be appointed / re-appointed are attached along with the Notice to the ensuing Annual General Meeting. During the year under review, 4 (Four) meetings of the Board of Directors, Board Committees were held, details of which are set out in the Corporate Governance Report which forms a part of this Report. 11.1. Declaration by Independent Directors and Familiarisation Programme Pursuant to sub section (6) of Section 149 of the Companies Act, 2013 and Reg 16(1) (b) of the SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015, the Independent Directors of the Company viz. Mr. Benni Joseph, Mr. E. M. Poulose, Mr. C. P. Philipose and Mr. K.L.V. Narayan have given declaration to the Company that they qualify the criteria of independence as required under the Act and the regulations. 11.2. Annual Board Evaluation and Familiarizing programme The Board has carried out an annual evaluation of its own performance, the directors and also committees of the Board based on the guideline formulated by the Nomination & Remuneration Committee. Board composition, quality and timely flow of information, frequency of meetings, and level of participation in discussions were some of the parameters considered during the evaluation process. A note on the familiarizing programme adopted by the Company for the orientation and training of the Directors and the Board evaluation process undertaken in compliance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is provided in the Corporate Governance Report which forms part of this Report. Further, the Independent Directors of the Company met once during the year on January 25, 2016 to review the performance of the Non-executive directors, Chairman of the Company and performance of the Board as a whole. 11.3. Policy on Nomination and Remuneration and Performance evaluation of Directors, KMP and Senior Management Personnel The Company believes that a diverse and inclusive culture is integral to its success. A diverse Board, among others, will enhance the quality if decisions by utilizing different skills, qualifications, professional experience and knowledge of the Board members necessary for achieving sustainable and balanced development. Accordingly, Board based on the recommendation of the Nomination and Remuneration Committee has formulated a policy on remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. The policy covers the appointment, including criteria for determining qualification, positive attributes, independence and remuneration of its Directors, Key Managerial Personnel and Senior Management Personnel. The Nomination and Remuneration Policy is annexed as Annexure – B to this report. 12. Board Committees Detailed composition of the mandatory Board committees namely Audit Committee, Nomination and Remuneration Committee, CSR Committee, Risk Management Committee, Stakeholders Relationship Committee, number of meetings held during the year under review and other related details are set out in the Corporate Governance Report which forms a part of this Report. There have been no situations where the Board has not accepted any recommendation of the Audit Committee. 13. Directors’ Responsibility Statement The Directors confirm that – a) in the preparation of the annual accounts for the financial year ended March 31, 2016, the applicable accounting standards had been followed and there were no 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 as at March 31, 2016 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 to be followed by the company and that such internal financial controls are adequate and were operating effectively. f) the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 14. Employees’ Stock Option Scheme The Company has not granted any Employee Stock Option within the meaning of section 62 (1) (b) of the Companies Act, 2013 read with its Rules framed there under and respective SEBI regulations. 15. Subsidiary & Associate Company As on March 31, 2016, the Company has a Associate Company, Kitex USA LLC, accounts of which shall be made available to the shareholders of the Company seeking such information at any point of time. The Consolidated Financial Statements of the Company along with its Associate prepared for the year 2015- 16 in accordance with relevant Accounting Standard issued by Institute of Chartered Accountants of India forms part of this Annual Report. A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies as per the Companies Act, 2013 is provided as Annexure–C. The Company does not have any subsidiary as on reporting date. During the year under review, companies does not have become or ceased to be Company’s subsidiaries, joint ventures or associate companies. 16. Corporate Social Responsibility The Company undertakes “Corporate Social Responsibility” initiatives directly to the public of Kizhakkambalam Panchayat in improving the quality of life. During the year 2015-16, the Company has undertaken many initiatives through a policy framework for expanding some of the present initiatives and undertaking newer CSR initiatives in the year to come. The CSR Policy may be accessed on the Company’s website at the link: http://www.kitexgarments.com/ wp-content/uploads/2015/11/CSR-POLICY.pdf Our vision on Corporate Social Responsibility, where we dream to make Kizhakkambalam Panchayat the best in the state among the total 978 Panchayaths. The Annual Report on CSR Activities in prescribed format is enclosed with this as Annexure - D. Detailed composition of the CSR Committee, number of meetings held during the year under review and other related details are set out in the Corporate Governance Report which forms a part of this Report. 17. Management’s Discussion and Analysis Report Management’s Discussion and Analysis Report for the year under review, as stipulated under Reg 34 of SEBI (Listing Obligations & Disclosure Requirements) Reg 2015 with the Stock Exchanges in India, is presented in a separate section forming part of the Annual Report. 18. Corporate Governance The report on Corporate Governance as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from the Secretarial Auditors of the Company confirming compliance with the conditions of corporate governance is attached to the report on Corporate Governance. 19. Business Risk Management During the year under review, Board has constituted a Risk Management Committee with Mr. Sabu M. Jacob as the Chairman and Mr. Benni Joseph and Mr. E. M. Paulose as the members. The Committee has been entrusted with the responsibility to assist the Board in (a) Reviewing and approving the Company’s enterprise wide risk management framework; and (b) Monitoring the risks which the Company faces such as Commodity Price Risks, Uncertain Global economic environment risk, Interest rate risk, Foreign Exchange Risk, Human Resource Risk, Competition Risk, Compliance Risk, Industrial Safety – Employee Health Risk and other risks have been identified and that procedure has been laid down to inform members of the Board of Directors about risk management plan for the minimization of risk. The Risk Management Policy has been adopted by the Committee. The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives. A detailed report on Risk Management is included in Management Discussion and Analysis which forms part of this Report. The report clearly states development and implementation of a risk management policy for the company including identification therein of elements of risks along with risk mitigation plan. 20. Internal Financial Control Details in respect of adequacy of internal financial controls with reference to the Financial Statements are stated in Management Discussion and Analysis which forms part of this Report. 21. 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 - E to this Report. 22. Auditors: 22.1. Statutory Auditors Messrs Kolath & Co, Chartered Accountants (Firm Regn No. 008926S), Statutory Auditors of the Company were appointed as the Statutory Auditors of the Company at the Annual General Meeting held on December 30, 2010. They have completed a period of seven years as on the date of this ensuing Annual General Meeting. M/s. Kolath & Co has informed the Board of Directors of your company that they are not seeking re-appointment. Hence Company has proposed the appointment of Messrs Varma & Varma, Chartered Accountants (Firm Registration No. 004532S) as the Independent Statutory Auditors of the Company. The Auditors if appointed shall hold office from the conclusion of this Annual General Meeting till the conclusion of next Annual General Meeting. The Company has received a letter from the M/s. Varma and Varma, Chartered Accountants to the effect that the approval of their appointment, if made at the forthcoming Annual General Meeting, would be in accordance with the limits prescribed under 141 (3) (g) of the Act. There is no qualification, disclaimer, reservation or adverse remark made by the Statutory Auditors in Auditors’ Report. Your Board of Directors recommend their appointment as Independent Auditors for the financial year 2016-17. 22.2. Secretarial Auditors Pursuant to the provisions of Section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of the Directors of the Company had appointed M/s. SVJS & Associates, Company Secretaries to undertake the Secretarial Audit of the Company for the year ended March 31, 2016. The Secretarial Auditors have submitted their report and the Board took note of the same. The Secretarial Audit Report is annexed as Annexure – F. 22.3. Internal Auditor The Board had appointed Messrs. Ernst and Young LLP as Internal Auditors for the financial year 2015-16. 23. Related Party Transactions All Transaction entered into with the Related Parties during the financial year under the review were on an arm’s length basis and were in the ordinary course of business. There was no materially significant transaction with the Company’s Promoters, Directors, Management or their relatives that could have had a potential conflict with the interests of the Company. All Related Party Transaction upto March 31, 2016 were placed before the Audit Committee as also the Board for approval. The policy on Materiality of and dealing with Related Party transactions as approved by the Board is uploaded on the Company’s website on the below link: http://www. kitexgarments.com/wp-content/uploads/2015/11/ related-party-transaction.pdf None of the Directors has any pecuniary relationships or transactions except to the extent of remuneration drawn by the directors. Since all related party transactions entered into by the Company were in ordinary course of business and were on an arm’s length basis, form AOC - 2 is not applicable to the Company. 24. Significant and Material Order There were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and company’s operations in future for the year under review. 25. Whistle Blower Policy (Vigil Mechanism) Pursuant to Section 177 of the Companies Act, 2013 the rules made thereunder and the Regulation 22 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company has established a Vigil Mechanism for directors and employees to report genuine concerns about any instance of any irregularity, unethical practice and/or misconduct. The Details of the Vigil policy is explained in the Corporate Governance Report. 26. Disclosure as per Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 Considering gender equality, the Company has zero tolerance for sexual harassment at workplace. The Company has an Anti Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013. An 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. The following is a summary of sexual harassment complaints received and disposed off during the year 2015-16: • No. of complaints received: Nil • No. of complaints disposed off: Nil The Company has filed Annual Report for the year ended December 31, 2015 under the Act with District officer. 27. Particulars of Employees The Disclosure as required under Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure – G and forms a part of this report. Information relating to remuneration of Directors under Section 197 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 has been given Annexure I to the Director’s Report 28. General • Neither the Managing Director nor the Wholetime Directors of the Company receive any remuneration or commission from any of its subsidiaries. • During the period under review, there were no frauds reported by the auditors under provisions of the Companies Act, 2013 29. Acknowledgements Your Directors thank various Central and State Government Departments, Organizations and Agencies for the continued help and co-operation extended by them. The Directors also gratefully acknowledge all stakeholders of the Company viz. customers, members, dealers, vendors, banks and other business partners for the excellent support received from them during the year. The Directors place on record their sincere appreciation to all employees of the Company for their unstinted commitment and continued contribution to the Company For and on behalf of the Board of Directors Kitex Garments Limited Sd/- Sabu M. Jacob Chairman & Managing Director (DIN: 00046016) Place: Kizhakkambalam Date: April 4, 2016 |