DIRECTORS' REPORT TO THE MEMBERS, Your Directors are pleased to present the 26th Annual Report and Audited Financial Statements for the year ended 31st March 2015, together with the Auditors' Report thereon. STATE OF THE AFFAIRS OF THE COMPANY Pearl Global Industries Limited is one of India's largest listed garment exporters, manufacturing from multiple sourcing regions within India and countries within South Asia. A preferred long-term vendor to most leading global brands, we are amongst the leading players in our industry. Our mainstay business is to create value from competitively manufacturing and exporting fashion garments to leading global brands. We have now also ventured into e-retail through established digital channels and our own e-com portal "Sbuys.in" giving consumers access to global fashion at attractive values. Our product range includes knits, woven and bottoms (basic and complex designs) across men, women and kids wear segments. We have a well-diversified and de-risked manufacturing base across India, Indonesia and Bangladesh. We have a total capacity to manufacture around 5 million garments per month (including own and outsourced facilities). Our revenue structure is primarily export based, with a major contribution coming from exports to the United States. We provide total supply chain solutions to customers - value retailers and high-end fashion brand retails in the United States and Europe. Our business model enables us to offer superior quality products across various countries, catering to all kinds of consumers. Our esteemed global clientele include premium retailers in USA and Europe, including GAP, Banana Republic, Kohl's, Macy, Ralph Lauren, Tom Tailor and Next, among others. We strive to be the most preferred vendor to the top global apparel brands and be ranked amongst the top garment manufacturers in the world, in terms of quality, service standards and ultimately - customer satisfaction, keeping in line with our broader vision. With additional capacities and promising growth in new markets and geographies, we bettered our operational performance during the year. We continued to amplify our strengths, while diversifying our footprint in the global market. Currently, ~90% of our sales are accounted by United States. However, the seasonal decline in sales of wovens during the fall season (August-November) results in lower capacity utilization at our Indian facilities. Hence, we are continuously endeavouring to diversify our sales to newer geographies in Australia, UK, Germany, Canada, Mexico, Chile and South Africa Our Capabilities • Fabric Development Centres We have Fabric Development Centres in China and India as well as Design and Product Development teams across the globe. Our Fabric Development teams circulate the latest fabric ideas amongst the designers, who develop a product profile. This profile is shared with manufacturing facilities for the purpose of product development. Our design and product development teams support all three streams of our business across all the locations. • In-house hand-work set up in North India and Bangladesh We have one of the largest in-house embroidery facility with a capacity of 500 installed heads in North India and another 100 installed heads in Bangladesh. • In-house washing capacity Our in-house washing capacity is established in North India and Bangladesh with a capacity of 50,000 pieces a day and 35,000 pieces a day, respectively. • Garment dyeing facility A garment dyeing facility has been established in Bangladesh, with a capacity of 10,000 pieces a day. Multi-Speciality Manufacturing: We have a strong foothold in the prominent garment manufacturing hubs - in India and across the globe. This enables us to diversify our manufacturing capabilities and to customize our products to market needs. DIVIDEND Your Directors have recommended dividend Rs. 2.25/- per Equity Share of Rs. 10/- each (Previous year Rs. 2/- per equity share) for the financial year 2014-15, amounting Rs. 584.90 Lacs (inclusive of tax on dividend). The dividend payout is subject to approval of the members at the ensuing Annual General Meeting. DIRECTORS AND KEY MANAGERIAL PERSONNEL In accordance with the provisions of the Companies Act, 2013 and the Articles of Association of your Company, Mr. Deepak Seth, Chairman and Mr. Pulkit Seth, Vice-Chairman and Managing Director would retire by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The Board of Directors of your Company met four times on May 26, 2014, August 14, 2014, November 14, 2014 and February 13, 2015, during the financial year 2014-15. The Board has appointed Mr. Raj Kumar Chawla as Chief Financial Officer of the Company with effect from 26th May, 2014. Mr. Sandeep Sabharwal is Company Secretary of the Company since 1st May, 2008. The Board has re-appointed Mr. Vinod Vaish and Mrs. Shefali Seth as Whole-Time Director of the Company with effect from 19th January, 2015. The Resolutions for their re-appointment are being proposed in the Notice calling this Annual General Meeting. DIRECTORS' IDENTIFICATION NUMBER (DIN) The following are the Directors Identification Number (DIN) of your Directors: The Company has received necessary declaration from each independent Director of the Company under Section 149(7) of the Companies Act, 2013 that the Independent Directors of the Company meet with the criteria of their Independence as laid down in Section 149(6) of the Companies Act, 2013. The Company had already constituted Nomination and Remuneration Committee as required under Sub-Section (1) of Section 178 of the Companies Act, 2013 Comprising three nonexecutive Independent Directors Mr. S.B. Mohapatra, Chairman, Mr. Rajendra Kumar Aneja and Mr. Anil Nayar, Members of the Committee. The Company has also formulated a Policy for performance evaluation of Board, Committees, Independent Directors and other individual Directors which included criteria for performance evaluation of the non-executive Directors and executive Directors. The Nomination and Remuneration Policy of the Company is annexed herewith as Annexure-I with this report. BOARD EVALUATION The Board of Directors has carried out an annual evaluation of its own performance, committees and individual Directors pursuant to the provisions of the Companies Act, 2013 and Rules made there under. The performance of the Board was evaluated by the Board after seeking inputs from all the Directors on the basis of the criteria such as the Board composition and structure, effectiveness of Board processes, information and functioning, etc. The performance of the committees was evaluated by the Board after seeking inputs from the committee members on the basis of the criteria such as the composition of committees, effectiveness of committee meetings, etc. The Board and the Nomination and Remuneration Committee reviewed the performance of the individual Directors on the basis of the criteria such as the contribution of the individual Director to the Board and committee meetings like preparedness on the issues to be discussed, meaningful and constructive contribution and inputs in meetings, etc. In addition, the Chairman was also evaluated on the key aspects of his role. In a separate meeting of independent Directors, performance of non-independent Directors, performance of the Board as a whole and performance of the Chairman was evaluated, taking into account the views of Executive Directors and Non-Executive Directors. The same was discussed in the Board meeting that followed the meeting of the Independent Directors, at which the performance of the Board, its committees and individual Directors was also discussed. INTERNAL FINANCIAL CONTROLS The Company has in place adequate internal financial controls with reference to financial statements. During the year, such controls were tested and no reportable material weakness in the design or operation was observed. The Audit Committee comprises two Independent Directors, namely Mr. Anil Nayar, Chairman, Mr. S.B. Mohapatra, Member and one executive Director, Mr. Vinod Vaish, as Member of the Committee. All the recommendations made by the Audit Committee were accepted by the Board. VIGIL MECHANISM The Company has set up a Vigil Mechanism, which also incorporates a whistle blower policy in terms of Listing Agreement. Protected disclosures can be made by a whistle blower through an e-mail, or dedicated telephone no. or a letter through to the Vigilance Officer or to the Chairman of the Audit Committee. The policy on vigil mechanism and whistle blower policy may be accessed on the Company's website at the link: <http://pearlglobal.com/> investors-policy.asp CORPORATE SOCIAL RESPONSIBILITY The Corporate Social Responsibility Committee of the Company has formulated a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at <http://pearlglobal.com/investors-policy.asp> Your Company has identified an area of education for underprivileged children for engagement under CSR activities. The Company has earmarked Rs. 15.00 Lakh for spending on the area of education, out of which Rs. 4.00 Lakh have already been spent. The Annual Report on CSR activities is annexed herewith as Annexure-II. SUBSIDIARY COMPANIES During the year under review, Companies listed in Annexure-III to this report have become or ceased to be Company's subsidiaries, joint ventures or associates Companies. Pursuant to Section 129(3) of the Companies Act, 2013, a statement containing the salient features of the financial statements of the subsidiary companies is attached to the Financial Statements in Form AOC-1. The Company will make available the said financial statements and related detailed information of the subsidiary companies upon the request by any member of the Company. These financial statements will also be kept open for inspection by any member at the Registered Office of the Company. The financial statements of the Company, consolidated financial statements along with the relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company. The Policy of determining material subsidiaries as approved may be accessed on the Company's website at <http://pearlglobal.com/> investors-policy.asp AUDITORS In terms of Section 139 of the Companies Act, 2013, M/s S. R. Dinodia & Co. LLP, Chartered Accountants, (Regn. No. 001478N/ N500005), New Delhi, were appointed by the Members in its 25th Annual General Meeting held on 26th September, 2014 as Statutory Auditors of the Company for a period of three years. A Resolution for ratification of their appointment as Statutory Auditors is proposed in the Notice calling the Annual General Meeting. SECRETARIAL AUDITOR The Board has appointed Mr. Deepak Somaiya, Practising Company Secretary, proprietor of M/s. Deepak Somaiya & Co. Company Secretary, to conduct Secretarial Audit for the financial year 201415. The Secretarial Audit Report for the financial year 2014-15 is annexed herewith as Annexure-IV. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. COST AUDITOR The Board has appointed M/s. D A & Associates, Cost Accountants, for conducting the audit of cost records of the Company for the financial year 2014-15. INTERNAL AUDITOR The Board has appointed M/s. Narula & Gupta, Chartered Accountants, New Delhi (FRN 013532N), as Internal Auditor for the financial year 2014-15. EXTRACTS OF ANNUAL RETURN Extract of Annual Return of the Company is annexed herewith as Annexure-V to this Report. RELATED PARTY TRANSACTIONS Particulars of Contracts or Arrangements with Related Parties referred to in Section 188(1) of the Companies Act, 2013 in Form AOC-2 is annexed as Annexure-VI. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS Particulars of Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 is annexed as Annexure- VII. FIXED DEPOSITS Your Company has not accepted any Fixed Deposits from Public or Shareholders during the year, nor has any unclaimed or unpaid deposits at the end of the financial year. RISK MANAGEMENT The Company has implemented procedures and policies in place for risk management including identifying risk which may threaten the existence/operations of the Company. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to the requirement under Section 134 (5) of the Companies Act, 2013, with respect to Directors Responsibility Statement, your Directors state that: a) in the preparation of the annual accounts for the financial year ended 31st March 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures. 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 at the end of the financial year 31st March, 2015 and of the profit and loss of the Company for that period; 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 have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. LISTING The shares of your Company are listed at BSE Limited, Mumbai and National Stock Exchange of India Limited, Mumbai. The listing fees to the Stock Exchanges for the year 2014-15 have been paid. REGISTRAR AND SHARE TRANSFER AGENT Link Intime India Pvt. Ltd is Company's Registrars and Share Transfer Agent (RTA) as common agency both for physical and demat shares, as required under Securities Contract (Regulation) Act, 1956. The detail of RTA forms part of the Corporate Governance Report. CORPORATE GOVERNANCE Report on Corporate Governance along with the certificate of the Auditors, confirming compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement, forms part of the Annual report. MANAGEMENT DISCUSSION AND ANALYSIS A detailed review of operations, performance and future outlook of the Company is given separately under the head "Management Discussion and Analysis". PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES The 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 is annexed as Annexure-VIII to this report. Particulars of employees as required under Rule 5(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed as Annexure-IX to this report. 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 under Section 134(3)(m) is annexed as Annexure-X to this report. 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 No significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company's operations in future. REPORT ON SEXUAL HARASSMENT-INTERNAL COMPLAINTS COMMITTEE Pursuant to the provisions of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal) Act, 2013, Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. There were no complaints received during the financial year 2014-15. ACKNOWLEDGEMENT The Directors of your Company are thankful to Bankers, Business Associates, Customers, Members, Government Bodies & Regulators for the continuous support received from them and place on record their appreciation for the sincere services rendered by the employees at all level. For and on behalf of the Board for PEARL GLOBAL INDUSTRIES LIMITED (VINOD VAISH) Whole-Time Director DIN 01945795 (PULKIT SETH) Managing Director DIN 00003044 Place: Gurgaon Date: May 22, 2015 |