DIRECTORS' REPORT TO, THE MEMBERS, Your Directors have pleasure in presenting their Twenty Seventh Annual Report on the business and operations of the Company and the accounts for the financial year ended March 31st, 2015. 2. DIVIDEND Your Directors are pleased to recommend a dividend of Rs. 1.50 per share. Dividend if approved by the shareholders, at the Annual General Meeting, will absorb Rs. 64.50 Lacs. 3. RESERVES The Board proposes to transfer Rs. 1 Lac to General Reserve. 4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT Industry structure & developments The Textile & Garment Industry is booming - there are excitements all around and new opportunities to surge further ahead. Opportunities and Threats Market is growing both locally and internationally. There's an unprecedented retail boom on domestic front and the possibilities are immense although with consequent keen price war. Segment wise or product wise performance Men's and Ladies tops still dominate the market although bottom wears also have made deep inroads. A lot of young fashion wears are surfacing to form a major block in between. Outlook It's a bright future ahead. The young fashion segment will dominate a fair segment of the emerging market. Risk and concerns Compliances are very much in place for overall required international expectations. Internal control systems and adequacy As an extension of above, there is a machinery function to regulate and control the expected parameters to ensure a first class work situation and consequent quality output. Discussion on financial performance with respect to operational performance. Against an emerging market and consequent changes of product movements, we too have had to go through a different product mix to flow along with. The impact, financial and /or otherwise, is being investigated. Material development in Human Resources / Industrial relation front including number of people employed In the field that we are in it is a must that we tune well with the changes around us which not only mean changes in product lines as required but also realignment of the human resources available in order that the Company moves ahead in the competitive environment. 5. CHANGE IN NATURE OF BUSINESS The Company continues to undertake the garment activity and during the year under review there is no change in the nature of its business. 6. MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF REPORT There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of the report. 7. SUBSIDIARY COMPANIES The Company does not have any subsidiary/Associate Company. 8. CORPORATE GOVERNANCE As per Clause 49 of the Listing Agreement with the Stock Exchanges, a separate section on corporate governance practices followed by the Company, together with a certificate from a Company Secretary in Whole Time Practice confirming compliance forms an integral part of this report. Refer Annexure 'D'. 9. EXTRACTOFANNUALRETURN The details forming part of the extract of the annual return in form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this Report as Annexure-A and forms an integral part of this report. 10.DIRECTORS During the year under review there is no change in directors of the Company. All Independent Directors have given declarations 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. As per provisions of Section 152 of the Companies Act, 2013, one third of the total strength of directors is required to retire by rotation at every Annual General Meeting and they can offer themselves for reappointment, if eligible. At present the total strength of Board of directors of the Company is Six Directors out of which four are Independent Director and two are executive director. All independent directors were appointed for a period of 5 years with effect from 1st April 2014. The executive directors namely Mr. Umesh M. Katre was appointed as Managing Director for a period of 3 years with effect from 1st November, 2012. Mrs. Seema U. Katre, the Whole Time Director was appointed for a period of 3 years with effect from 11th November, 2013. Since the Independent directors are not required to be calculated for the purpose of determining the directors liable to retire by rotation and the executive director are appointed for a particular period as per the terms of employment, no directors are retiring by rotation atthe forth coming Annual General Meeting. 12.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 the various aspects of the Board's functioning, composition of the Board and its Committees, execution and performance of the specific duties obligations and governance. The 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. 13.NUMBER OF MEETINGS OF THE BOARD OF DIRECTORS The details of the number of meeting of the Board held during the financial year 2014-15 forms part of the Corporate Governance Report. 14. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY The Company has not given any loans or guarantees covered under the provisions of section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the notes to the financial statements. 15.WHISTLE BLOWER POLICY The company has a whistle blower policy to report genuine concerns and grievances. The Whistle Blower Policy has been posted on the website of the company (www.spiceislandsapparelslimited.in). 16.REMUNERATION AND NOMINATION POLICY The Board of Directors has framed a policy which lays down a framework in relation to remuneration of Directors, Key Managerial Personnel and Senior Management of the Company. This policy also lays down criteria for selection and appointment of Board Members. The detail of this policy is available on the website of the Company. 17. RELATED PARTY TRANSACTION All contracts / arrangement / transactions entered by the Company during the financial year with the related parties were in the ordinary course of business and on an Arm's length basis. During the year, the Company had not entered into any contract/arrangement/transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of Related Party Transactions. The Policy of materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on Company's website (www.spiceislandsapparelslimited.in). Your Directors draw attention of the members to Note 36 to the financial statement which sets out related party disclosure. 18.SIGNIFICANT AND MATERIAL ORDERS PASSED BYTHE REGULATORS OR COURTS There are no significant and material orders passed by the Regulators / Courts that would impact the going concern status of the Company and its future operations. 19.PREVENTION OF INSIDER TRADING The Company has adopted a Code of Conduct for Prevention of Insider Trading with a view to regulate trading in securities by the Directors and designated employees of the Company. The Code requires pre-clearance for dealing in the Company's shares and prohibits the purchase or sale of Company shares by the Directors and the designated employees while in possession of unpublished price sensitive information in relation to the Company and duringthe period when the Trading Window is closed. The Board is responsible for implementation of the Code. All Board of Directors and the designated employees have confirmed compliance with the Code. 20.DIRECTOR'S RESPONSIBILITY STATEMENT To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3) (c) of the Companies Act, 2013: (a) that 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, if any; (b) 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) that 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 preventingand detecting fraud and other irregularities; (d) the annual accounts have been prepared on a going concern basis; (e) that 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) that 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. 21.STATUTORY AUDIT Messrs T D Jain and D I Sakaria, Chartered Accountants, (Firm Registration No: 002491S) who are Statutory Auditors of the Company and holds office upto forthcoming Annual General Meeting and are recommended for re-appointment to audit the accounts of the Company for the financial year 2015-16. As required under the provisions ofSection 139 of the Companies Act, 2013, the Company has obtained written confirmation from Messrs TD Jain and DI Sakaria that their appointment, if made, would be in conformity with the limits specified in the said Section. 22.COST AUDIT Pursuant to the provisions of Section 148 of the Companies Act, 2013, the Company had carried out audit of cost records for the year ended 31st March, 2014 and the Cost Audit Report for the financial year 2013-14 was filed with the Ministry of Corporate Affairs on 2nd January, 2015. The Companies (Cost Records and Audit) Rules 2014, as notified with effect from 30th June, 2014 lays down in detail the rules for applicability of maintenance of cost records and the audit thereof. None of the criteria are applicable to the Company and accordingly no audit of the cost records is carried out for the year ended 31st March, 2015. 23.SECRETARIAL AUDIT Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made there under, the Company has appointed Messrs Nitesh Jain & Co., a firm of Company Secretaries in practice (C.RNo.8582) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure B and forms an integral part of the Report. It may be noted that with effect from 29th May, 2015 the Company has appointed Whole Time Company Secretary in terms of provisions of section 203 of the Companies Act, 2013. This replies to the observation of Secretarial Auditor. Except this there are no qualifications in Secretarial Audit Report. 24.INTERNAL CONTROL SYSTEM AND THEIR ADEQUACY The Company has in place proper and adequate internal control systems commensurate with the nature of its business and size and complexity of its operations. Internal control systems comprising of policies and procedures are designed to ensure reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedure, applicable laws and regulations, and that all assets and resources are acquired economically, used efficiently and adequately protected. The Audit Committee of the Board of Directors actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism. 25.RISK MANAGEMENT During the year under review, steps were taken to identify and evaluate elements of business risk. Consequently a revised robust Business risk management framework is in place. The risk management framework defines the risk management approach of the Company and includes periodic review of such risks and also documentation, mitigating controls and reporting mechanism of such risk. Some of the risks that the Company is exposed to are; Financial Risks The Company's policy is to actively manage its foreign exchange risk within framework laid down by the Company's forex policy approved bythe Board. Given the interest rate fluctuations, the Company has adopted a prudent and conservative risk mitigation strategy to minimize interest cost. Commodity Price Risk The Company is exposed to risks of price fluctuation of raw materials. The Company proactively manages these risks through inventory management and vendor loyalty practices. The Company's reputation for quality, product differentiation and service mitigates the impact of price risk on finished goods. Regulatory Risk The company is exposed to risks attached to various statutes and regulations. The Company is mitigating these risks through regular review of legal compliances carried out through internal as well as external audits. The Company continuously reviews the policies to avoid any statutory and regulatory risk. Human Resources Risks Retaining the existing talent pool and attracting new talent are major risks. The Company has initiated various measures including training and development activities to preserve the valuable employees and is liberal in pay package so as to give them the safety and dedication to the Company. 26.INFORMATION PURSUANT TO RULE 5 (2) OF COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 The Company does not have any employee (s) who are in receipt of remuneration exceeding the limits specified under Rule 5 (2) of Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014. 27.CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company does not have any obligation to fulfill under corporate social responsibility as none of the criteria are applicable to the Company. 28.STATUTORY INFORMATION The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure - C to this report. The Company has not accepted any deposits, within the meaning of Section 73 of the Companies Act, 2013, read with the Companies (Acceptance of Deposits) Rules, 2014. 29.GENERAL Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013. 30.CAUTIONARY STATEMENT Statements in the Director's Report & Management Discussion and Analysis describing the Company's objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the Company's operations include raw material availability and its prices, cyclical demand and pricing in the Company's principle markets, changes in Government regulations, Tax regime, economic developments within India and the countries in which the Company conducts business and otherancillary factors. 31.ACKNOWLEDGEMENT Your Directors would like to express their sincere appreciation for the assistance and co-operation received from the banks, Government authorities, customers, vendors and members during the year under review. Your Directors also wish to place on record their deep sense of appreciation for the committed services by the Company's executives, staff and workers. For and on behalf of the Board of Directors, SPICE ISLANDS APPARELS LIMITED UMESH M. KATRE (Chairman & Managing Director) PLACE : MUMBAI DATE : 29th May, 2015. |