DIRECTORS REPORT Dear Shareholders, Your Directors hereby present the 26th Annual Report along with the audited statements of the Company for the year ended 31st March 2015. Outlook and Financial Highlights The revival in demand in major markets such as US and Europe enabled India to witness a double digit growth in export of ready-made garments from FY 2014 to FY 2015. Export of readymade garments from India has grown faster than those shipped from China for a bulk of 2014. India's garment exports were growing at the rate of over 15% and this is a clear cut indication that India is emerging as one of the top sourcing and compliant destinations for the buyers in the World. The other fundamentals which would boost export of readymade garments is the government's focus on "Make in India" theme facilitating exports, export incentives from the government and increase in manufacturing costs in China. The shift in demand for garment from China to India due to rise in labour and power costs have made production in China expensive compared to India. With an encouraging scenario on the global front, the industry would still face challenges in terms of availability of skilled labour and stringent labour laws of the Country. Your Company recorded total revenues of Rs.205.87 crs as against Rs.235.31 crs last year. During the year under review, your Company relocated one of its manufacturing facilities and consolidated its operations in its existing facilities thereby causing reduction to capacities. However with improved operational efficiencies and greater control on costs, the Operational EBITDA margins stood at Rs.13.84 crs as compared to Rs.10.36 crs previous year; Other Income were at Rs.3.58 crs against Rs.1.36 crs. The Company re-aligned its Depreciation Policy in accordance with Schedule II, Companies Act, 2013. Consequently, with effect from 1st April 2014, the carrying value of assets is now depreciated over its revised remaining useful life. Where the remaining useful life of the assets are NIL as on 1st April 2014, carrying value of assets amounting to Rs.1.12 crs have been adjusted against opening reserves. Consequent to the above, the Net losses for the year were at Rs.2.29 crs against Rs.1.63 crs previous year. (before extraordinary income of rupees 9.97 crs) Finance and Accounts There is no provision for Income Tax, due to the losses incurred by the Company in the earlier years. The Company has recognized Deferred Tax Asset in unabsorbed depreciation and accumulated losses to the extent of corresponding deferred tax liability on the difference between the book balance and written down value of fixed assets under Income Tax. The net worth of the Company as on 31st March 2014 has turned positive under the provisions of Sick Industries Companies Act. Accordingly, the Company filed for discharge under the purview of SICA before BIFR. BIFR vide its order dated 04th August 2014 has discharged the Company from the purview of BIFR. The Company has not accepted any deposits within the meaning of Section 73 of the Companies Act 2013. During the year under review, the Board of Directors of your Company at their Meeting held on 13th November 2014, have decided to delete the name of the wholly owned subsidiary Company Celebrity Clothing Limited from MCA records. Accordingly Celebrity Clothing Limited has filed with Ministry of Corporate Affairs (MCA) for striking off its name from the MCA records under FTE mode on 23rd December 2014 and the name has been removed from the records of MCA. Hence the requirement of presenting annual report of CCL does not arise. Also the shares of Celebrity Clothing Limited held by your Company stands cancelled pursuant to the same. The Accounts of the Company have been prepared on the basis of 'going concern concept'. Your Company continued to focus on cash generation. The focus on managing optimal levels of inventory, sound business performance, operating efficiencies and cost savings across the organization to mitigate the problem and to improve the financial health of the Company. Share Capital The Company made preferential allotment of 26,50,000 Equity Shares at the face value of Rs.10/- per share to the promoter, Mr. V. Rajagopal during year under review towards his contribution to Equity. The object of this issue is for working capital purposes and to improve the net worth position of the Company. The above preferential allotments were approved by the Shareholders in the ExtraOrdinary General Meeting held on 16th July 2014. Consequent to the above, the Equity Share Capital of the Company increased by Rs.2.65 crs. Dividend In view of the accumulated losses, no dividend is being recommended. Cash flow Statement In conformity with the provisions of Clause 32 of the Listing Agreement with Stock Exchanges, the Cash Flow Statement for the year ended 31st March 2015 is annexed hereto. Related Party Transactions All the transactions with the Related Parties are in the Ordinary Course of Business and on Arm's length basis. The details on Related Party Transactions have been disclosed in the notes to accounts. Your Company has framed a policy on Related Party Transaction and the same has been displayed on the Company's website: www.celebritygroup.com The details of related party transactions pursuant to clause (h) of sub-section (3) of section 134 of the Act is enclosed in form no. AOC-2 as Annexure - II Corporate Governance Report The Company is committed to maintain the highest standards of corporate governance and adhere to the corporate governance requirements set out by SEBI. The report on Corporate Governance as stipulated under Clause 49 of the Listing Agreement forms a part of the Annual Report. The requisite certificate from the Auditor, M/s CNGSN & Associates LLP confirming the compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreements with the Stock Exchanges forms a part of this report. Management's Discussion and Analysis Report A detailed review on the operations and performance of the Company along with the outlook is presented separately under the Management Discussion and Analysis Report which forms part of this Annual Report. Compliance with Code of Conduct Your Company has put in place a Code of Conduct for its Board Members and Senior Management Personnel. Declaration of Compliance with Code of Conduct has been received from all the Board Members and Senior Management Personnel. A Certificate to this effect from Mr. Charath Ram Narsimhan, Managing Director forms part of this Report. Corporate Social Responsibility (CSR) As there have been carry forward losses, provisions of section 135 pertaining to corporate social responsibility are not applicable to the Company. The particulars relating to CSR committee and policy have been detailed in Corporate Governance Report. Establishment of Vigil Mechanism Your Company has in place a vigil mechanism pursuant to which a Whistle Blower Policy has been adopted by the Board Members. The Whistle Blower Policy covering all employees and directors is hosted on the Company's Website @ www.celebritygroup.com Directors During the year under review your company has come out of the purview of BIFR. Hence continuance of Mr Ramji Sinha as Special Director inducted by BIFR is withdrawn. Pursuant to Section 152 of the Companies Act 2013, Mrs. Rama Rajagopal retires by rotation at the ensuing Annual General Meeting and being eligible, offers herself for reappointment. All Independent Directors have give declaration that they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 and clause 49 of the Listing Agreement. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as "Annexure - III" Meeting of Board The particulars relating to the meeting of Board of Directors has been detailed in the Corporate Governance Report which forms part of the report Key Managerial Personnel To comply with requirement of Section 203 of the Companies Act, Mr. Charath Narsimhan Managing Director, Mrs. L. Visalakshi, CFO and Mr. K.Senthil Kumar, Company Secretary have been designated as the Key Managerial Personnel of the Company. Remuneration Policy The particulars relating to remuneration policy has been detailed in Corporate Governance Report which forms part of the report. Particulars of Loan, Guarantees or Investments The Company has not given any loans or guarantees covered under the provision of section 186 of the Companies Act, 2013. The details of the investments made by the company are given in the notes to the financial statements. Material changes & Commitment, if any affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statement relate and the date of the Report- Nil Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out an evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Appointment & Remuneration Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. Report as per Section 134 read with Rule 8 sub rule 5 of Companies Accounts Rules 2014: Change in nature of business, if any: Nil Details of Director or KMP appointed or resigned: Nil (only designated) Name of Companies which become or cease to be its subsidiaries, JV or associate during the year - Celebrity Clothing Ltd Details relating to deposits covered under Chapter V of Companies Act 2013: Nil Details of deposits which are not in compliance with the requirements of Chapter V of Companies Act 2013: Not Applicable 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: The Company was not in receipt of any orders from the regulator / courts / tribunals impacting the going concern status of future operation of the Company. The Company was in receipt of the notice / order from statutory authorities during the year for claim not acknowledged by the company as debts. The details of the same have been provided in Note 29 of the financial statements. Internal control systems and their adequacy: The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee of the Board & to the Chairman & Managing Director. The Internal Auditor monitors and evaluates the efficacy and adequacy of internal control system in the Company, its compliance with operating systems, accounting procedures and policies at all locations of the Company Based on the report of internal audit function, process owners undertake corrective action in their respective areas and there by strengthen the controls. Significant audit observations and recommendations along with corrective actions thereon are presented to the Audit Committee of the Board Business Risk Management: Pursuant to section 134 (3) (n) of the Companies Act, 2013 & Clause 49 of the listing agreement, the company has constituted a business risk management committee. The details of the committee and its terms of reference are set out in the corporate governance report which form part of the Boards report. At present the company has not identified any element of risk which may threaten the existence of the company. Familiarisation Programme for Independent Director: The Board members are provided with necessary documents / brochures, reports and internal policies to enable them to familiarize with the Company's procedures and practices. The details of such familiarization programmes for the Independent Directors are posted on the website of the Company (for details, please visit www.celebritygroup.com ) Auditors M/s. Anil Nair & Associates and M/s. CNGSN Associates LLP, Chartered Accountants, Chennai are the Auditors of the Company. They were appointed in the 25th Annual General Meeting of the Company till the conclusion of third consecutive Annual General Meeting of the Company and subject to ratification by the shareholders at every Annual General Meeting. A motion for ratification will be placed before the Members of the Company in the 26th Annual General Meeting for their approval. M/s Anil Nair & Associates have applied for re-evaluation of certificate from ICAI and the process is on-going. As on the date of signing this Balance Sheet, the Chartered Accountant Firm, M/s Anil Nair & Associates is yet to the receive the certificate from the Peer Review Board. Consequently as a matter of abundant prudence, M/s Anil Nair & Associates have abstained from signing the Balance Sheet of the Company. The Annual Accounts of the Company including its Balance Sheet, Statement of Profit and Loss along with Cash Flow Statement have been audited and signed by M/s CNGSN & Associates, LLP. Secretarial Auditor 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. Bhaskar, Company Secretary in Practice, to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed as "Annexure - IV". Cost Auditor Since the Company is not in the purview of Cost Audit, the appointment of Cost Auditor under the requirement of the provisions under Section 148 of the Companies Act, 2013 is not required for the financial year 2015-16. Management response with respect to Statutory Auditor's / Secretarial Auditor Qualification: The Report of Statutory Auditors on the Financial Statements of the Company for the financial year ending 31st March 2015 and Secretarial Audit Report for the financial year 2014-15 contains qualifications. The response from the Management with respect to the qualifications is appended below: a) The delays in remitting the unclaimed dividend amounts to Investor Education and Protection Fund were due to delays in receipt and reconciliation of data from the Bank. Immediately upon receipt of data, the Company has remitted the amount of Rs.33,799/- to Investors Education and Protection Fund. b) During the year under review, the Company has arrived at an out-of-court settlement with its tenant and has entered into a fresh lease deed and memorandum of understanding. The Company has recognized a rental income of Rs.1.26 crs pertaining to previous year and the same has been included under Other Income. Along with the same, the Company has recognized the rental income for the Current Year during the last quarter of the financial year. The service tax amounts of Rs.30 lakhs on the rental income were pending to be remitted as on 31st March 2015. The Company is taking steps to remit the same at the earliest. c) In accordance with the re-structuring package sanctioned to the Company by State Bank of India, an amount of Rs.18.22 crs was to be repaid by 31st March 2015 from the sale of proceeds of one of properties of the Company. Pending disposal of the property, the amount of Rs.18.22 crs remained unpaid to State Bank of India. The Company is taking necessary steps for disposal of the property and for repayment of term loans. As at 31st March 2015, interest on working capital and term loans amounting to Rs.1.10 crs were pending to be serviced since February 2015. The Company has serviced the same in April 2015. d) The accumulated losses of the Company have exceeded 50% of its networth as on 31st March 2015. The accounts of the Company have been prepared on Going Concern' basis. Your Company's Management Team constantly strives to mitigate the problems, improve the financial health of the Company by controlling the losses and the Company foresees signs of revival. Listing Fee The equity shares of your company are listed on the Bombay Stock Exchange Limited and National Stock Exchange of India Limited. Your Company has paid the applicable listing fee to the Stock Exchanges up to date. Personnel The Board wishes to place on record its appreciation to all the employees in the Company for their sustained efforts and contributions during these tough times. Policy on Prevention of Sexual Harassment of Woman at Workplace: Your Company has in place a Policy on Prevention, Prohibition and Redressal of Sexual Harassment and Non-discrimination at Work Place in line with the requirements of Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. All employees (permanent, contractual, temporary, trainees) are covered under this policy. An Internal Complaints Committee (ICC) was set up to redress complaints received regarding sexual harassment and discrimination at workplace. During the year ended March 31, 2015, the ICC has received no complaints pertaining to sexual harassment / discrimination at work place. Directors Responsibility Statement In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed with explanation related to material departures if any. ii) The directors have selected such accounting policies and applied them consistently and made judgments and estimates that were 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 or loss of the Company for the year under review. iii) The directors have 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. iv) The directors have prepared the annual accounts on a going concern basis. v) 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. vi) The directors had devised proper system to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively. Conservation of Energy / Technology Absorption / Foreign Exchange i. Conservation of Energy: The operations of the Company are not energy-intensive. However, wherever possible, the Company strives to curtail the consumption of energy on a continuing basis. ii. Technology absorption: Not applicable. iii. Foreign Exchange Earning and Outgo: Total Foreign exchange earned (FOB Value) Rs.160.44 crs Total Foreign exchange outgo Rs. 48.80 crs Appreciation The Directors are sincerely thankful to you - the esteemed shareholders, customers, business partners and State Bank of India for the faith reposed and valuable support provided by them in the Company and its Management. The Directors wish to place on record the co-operation extended and the solidarity shown by the employees in assisting the organization to control its losses and contributing for a good turnaround. For and on Behalf of the Board V. Rajagopal Chairman Date : 21st May 2015 Place : Chennai |