MANAGEMENT DISCUSSION AND ANALYSIS Industry Conditions and Review of Operations The cotton textile industry in India had to contend with major challenges during the year. Yarn prices remained debrssed on lower demand in both the export as well as the domestic markets even though the cotton prices were lower compared to earlier years. The policy changes by Chinese Government on usage of their cotton reserves and reduction of import of cotton made a major impact on cotton yarn exports and hence on the yarn price. Though, the policy of stocking by Cotton Corporation of India to support Indian farmers to realize Minimum Support prices fixed by Government had arrested significant decline in cotton prices, cotton yarn exports from India were not competitive due to lower cotton prices internationally. Excess capacities and significant erosion in margins due to severe competition have had a negative impact on the profitability of the industry. Consequently, the operations of your company also came under severe strain during the year under review resulting in lower sales and losses. Sale of yarn and price realization in both the domestic and export markets have been lower this year by nearly 10% on account of poor demand for yarn and fabrics. Company Outlook During the current year the cotton production in India is expected to decline by around 5% due to decline in cotton prices as farmers may shift to alternate crops. Though the cotton availability in India is expected to remain comfortable and further improve from that of brvious year 2014-15 with higher carry forward stock and decline in export of cotton to China, there will be an impact on quantity and quality cotton being produced in current cotton year due to anticipation of a below normal monsoon. The cotton prices are expected to be subdued since Chinese Government is planning to dilute their stock reserves and decline in manmade fibre prices due to lower crude oil prices internationally. The policy of stocking by Cotton Corporation of India will continue to have an impact on cotton prices and competitiveness of cotton yarn exports from India. The target of new Government to improve the industry production and GDP to 8% may improve the cotton yarn demand in the second half of current year. Lower crude oil prices and initiatives by RBI to reduce the lending rates due to significant decline in inflation rates will improve the economic condition of the country. Measures are being taken to save costs and rationalize operations, which are likely to yield positive results. Opportunities, Risks and Concerns The formation of a stable government at the centre is expected to boost consumer confidence, which will in turn improve demand for textile products. However, competition from other exporting countries with lower cotton cost and significant strengthening of the Indian Rupee against the US Dollar may affect the profitability. Lack of availability of quality manpower in Andhra Pradesh and Tamil Nadu where the units are located are having significant impact on utilization of capacity at the optimum level. The operating margins are also under brssure due to input cost increase towards Electricity and manpower. Dividend Due to losses incurred by the Company during the year under review the Directors have not recommended any Dividend for the year ended 31st March 2015. Transfer to Reserves Due to losses incurred by the Company during the year under review the company is unable to transfer any amount to its reserves. Transfer of Unclaimed Dividend to Investor Education and Protection Fund In terms of Section 205A & 205C of the Companies Act, 1956, an amount of Rs. 6,42,276/- being unclaimed dividend (2006-07) was transferred during the year to the Investor Education and Protection Fund established by the Central Government. The unclaimed dividend for the year 2007-08 is due for remittance on 28th October 2015 to the Investors Education and Protection Fund during this year. Share Capital The issued, subscribed and paid-up share capital of the Company as at 31.03.2015 stood at Rs. 5,50,00,000/-divided into 5,50,00,000 equity shares of Rs. 1/- each. During the year under review the Company has not made any fresh issue of shares. Extract of Annual Return The extract of Annual Return in the brscribed Form No.MGT-9 pursuant to Section 92(3) read with Rule 12 of the Companies (Management and Administration) Rules, 2014 is furnished as Annexure 1 and is attached to this Report. Board Meetings Conducted During the Period under Review The Company had conducted Four (4) Board meetings during the period under review. Further details on the Board and Committee meetings held during the year have been enumerated in the Corporate Governance Report which is annexed to this report. Directors' Responsibility Statement Pursuant to the requirement under Section 134(3)(c) of the Companies Act, 2013, with respect to Directors' Responsibility Statement, it is hereby confirmed that: (a) in the brparation of the annual accounts, the applicable accounting standards had been followed and there are no material departures from those standards; (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 and of the 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 brventing and detecting fraud and other irregularities; (d) the directors had brpared 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 operating effectively and (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. Declaration of Independent Directors The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as brscribed under both the Companies Act, 2013 and Clause 49 of the Listing Agreement with the Stock Exchanges. Company's Policy Relating to Directors Appointment, Payment of Remuneration and other matters provided Under Section 178(3) of the Companies Act, 2013. The Company's Policy relating to appointment of Directors, payment of Managerial remuneration, Directors' qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013 is furnished in Annexure 2 and is attached to this report and can also be accessed on the Company's website at the link http://www.superspinning.com/ wp-content/uploads/2015/07/Nomination-and-Remuneration-Policy.pdf. Auditors' Report There were no qualifications, reservations, adverse remarks or disclaimers made by the M/s.Reddy, Goud and Janardhan, Statutory Auditors and Mr.M.D.Selvaraj of MDS & Associates, Secretarial Auditor in their report. Particulars of Loans, Guarantees or Investments made under Section 186 of the Companies Act, 2013 The Company has not granted any loans or given any security or made any investments pursuant to the provisions of Section 186 of the Companies Act, 2013 during the year under review. However, the details in respect of investments made by the Company in the earlier years is disclosed in the notes to the financial statements. Particulars of contracts or arrangements with Related Parties All transactions entered into with related parties as defined under the Companies Act, 2013 during the financial year 2014-15 were in the ordinary course of business and on an arm's length basis. Since there are no transactions which are not on arm's length basis and material in nature the requirement of disclosure of such related party transactions in Form AOC-2 does not arise. The policy on related party transactions as approved by the Board of Directors of the Company has been uploaded on the company's website and may be accessed through the link at http://www. superspinning.com/wp-content/uploads/2015/01/ Policy-on-Related-Party-Transactions.pdf. Material changes and commitments affecting the financial position of the Company There have been no material changes and commitments affecting the financial position of the Company which has occurred between the financial year ended 31st March, 2015 and the date of the report. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earnings and outgo as required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is attached herewith as Annexure 3 to this report. Statement concerning development and implementation of Risk Management Policy of the Company The Company has a structured risk management policy. The Risk management process is designed to safeguard the organization from various risks through adequate and timely actions. It is designed to anticipate, evaluate and mitigate risks in order to minimize its impact on the business. The potential risks are inventoried and integrated with the management process such that they receive the necessary consideration during decision making. Whistle Blower Policy (Vigil Mechanism) The details of the composition of the Audit Committee have been enumerated in the Corporate Governance Report which forms a part of the Board's report. The Company has formulated a whistle blower policy in line with the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the listing agreement to enable the directors and employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the company's code of conduct or ethics policy. The policy also provides for adequate safeguards against victimization of director(s) / employee(s) who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee in exceptional cases. The Whistle Blower policy has been uploaded on the company's website and may be accessed through the link at http://www. superspinning.com/wp-content/uploads/2015/01/ Whistleblower-Policy.pdf. Details of Policy Developed and Implemented by the Company on its Corporate Social Responsibility initiatives The Board has constituted a Corporate Social Responsibility Committee comprising of the following directors as its members; 1. Mr. C S K Prabhu - Chairman 2. Mr. Sumanth Ramamurthi - Member 3. Mr. A.S.Thirumoorthy - Member The company has adopted a Corporate Social Responsibility Policy defining therein the CSR activities to be undertaken by the Company in line with the provisions of Schedule VII of the Companies Act, 2013. The Corporate Social Responsibility Committee of the Board is responsible for the implementation and effective monitoring of the CSR activities of the Company. The Company was however not required to incur any expenditure on the CSR initiatives during the year under review as the average net profits of the brceeding three financial years of the company was in the negative. The Annual Report on Company's CSR activities of the Company is furnished in the brscribed format as Annexure 4 and attached to this report. Report on Corporate Governance Annual evaluation of the Board on its own performance and of the Individual Directors In accordance with the criteria suggested by the Nomination and Remuneration Committee, the Board of Directors evaluated the performance of the Board, having regard to various criteria such as Board composition, Board processes, Board dynamics etc. The Independent Directors, at their separate meetings, also evaluated the performance of non-independent directors and the Board as a whole based on various criteria. The performance of each Independent Director was evaluated by the entire board of directors on various parameters like engagement, leadership, analysis, decision making, communication, governance etc. The Board and the Independent Directors were of the unanimous view that performance of the Board of Directors as a whole was satisfactory. The performances of all the Committees were evaluated by the Board having regard to various criteria such as committee composition, committee, processes, committee dynamics etc. The Board was of the unanimous view that all the committees were performing their functions satisfactorily. Directors & Key Managerial Personnel During the year under review, the Members have approved the appointment of Mr. C.S.K. Prabhu, Mr.B.Vijayakumar, Mr.Sudarsan Varadaraj, Mr.Vijay Venkataswamy, Mr.C.G. Kumar and Mrs.Suguna Ravichandran as the Independent Directors of the Company for a period of 5 years. The Members at the Annual General Meeting held on 10th September 2014 approved the appointment of Mr.Sumanth Ramamurthi and Mr.A.S.Thirumoorthy as the Executive Chairman and the Managing Director respectively with effect from 1st April 2014. Mr.N.Hemanand was appointed as the Chief Financial Officer of the Company with effect from 1st April 2014. Mr.Sumanth Ramamurthi, Executive Chairman of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for re-appointment. Your Directors recommend his re-appointment. Subsidiaries, Joint Ventures and Associate Companies The Company has two subsidiaries namely M/s.Sara Elgi Arteriors Limited - a wholly owned subsidiary and M/s.Elgi Building Products Limited - step down subsidiary. A report containing the salient features of the subsidiaries as required under Section 129(3) of the Companies Act, 2013 has been annexed herewith in Form AOC-1 and is attached as Annexure 5 to this report The company does not have any material subsidiaries whose individual transactions exceeds 20% of the annual consolidated net worth of the holding company as per the last audited financial statements of the Company. The policy on determination of material subsidiaries of the company as approved by the Board of Directors has been uploaded on the website of the Company and can be accessed at the link http://www. superspinning.com/wp-content/uploads/2015/01/ Policy-on-Subsidiaries.pdf. The consolidated financial statements of the company and its subsidiaries have brpared in accordance with the applicable accounting standards have been annexed to the Annual Report. The annual accounts of the subsidiary companies are posted on the website of the Company viz. www. superspinning.com and will also be kept open for inspection by any shareholder at the Registered Office of the Company. The Company shall also provide the copy of the annual accounts of subsidiary companies to the shareholders upon their request. Fixed Deposits Since the Company has not accepted any fixed deposits covered under Chapter V of the Companies Act, 2013, there are no deposits remaining unclaimed or unpaid as on 31st March 2015 and accordingly, the question of default in repayment of deposits or payment of interest thereon, during the year, does not arise. Details of Significant and Material orders passed by the regulators or Courts or Tribunals impacting the going concern status and Company's operation in future There is no significant and material order passed by the regulators or courts or tribunals impacting the going concern status and company's operation in future. Internal Control Systems and their Adequacy The Company has adequate internal control systems to monitor internal business process, financial reporting and compliance with applicable laws. The Company periodically reviews the adequacy and effectiveness of the control systems. The Audit committee of the Board reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the company, recommendations made for corrective action and the internal audit reports. The committee reviews with the statutory auditors and the management, key issues, significant processes and accounting policies. AUDITORS Statutory Auditors M/s.Reddy, Goud & Janardhan, Chartered Accountants, Bangalore retire at the ensuing Annual General Meeting and are eligible for re-appointment. The Audit Committee & the Board of Directors recommend the re-appointment of M/s. Reddy, Goud & Janardhan, Chartered Accountants as the Statutory Auditors of the Company. Further, company has received a certificate from the Statutory Auditors to the effect that their re-appointment, if made, would be within the limits brscribed under Section 139 of the Companies Act,2013. 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.M.D.Selvaraj, MDS & Associates, Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The report of the Secretarial report is annexed herewith as Annexure 6 to this report. Cost Auditors The Board of Directors on the recommendation of the Audit Committee, have appointed M/s.S.Mahadevan & Co., Cost Accountants, as the Cost Auditors of the company for the financial year 2015-16. Pursuant to Section 148 of the Companies Act 2013 read with the Companies (Cost Records and Audit) Rules, 2014, the remuneration payable to the Cost Auditors is subject to the approval of the members in a general meeting. The Board recommends the ratification of their remuneration. Pursuant to Section 209(1)(d) of the Companies Act, 1956, the Cost Audit Report for the financial year ended 31st March 2014 was submitted to the Central Government on 29th September 2014. Particulars of Employees The disclosure 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 herewith as Annexure 7 and is attached to this report. The disclosure referred to the Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 does not apply to the Company as there were no employees who are in receipt of remuneration in the aggregate at the rate of not less than Rs. 60,00,000/- if employed throughout the year or Rs. 5,00,000/- per month if employed for part of the year. Corporate Governance As per Clause 49 of the Listing Agreement with the Stock Exchanges, a report on Corporate Governance together with the Auditors Certificate regarding compliance of the conditions of Corporate Governance, Management Discussion and Analysis statement forms part of the Annual Report. Disclosure under the Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place a policy on Sexual Harassment of Women at workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The company has constituted an internal complaints committee to address the complaints regarding sexual harassment. All employees are covered under this policy. The company has received some complaints and all the complaints are properly settled after conducting inquiry. Personnel Relations Staff and Labour relations during the year at all units of the company continued to be cordial. Acknowledgements Your Directors wish to thank the Company's Bankers, Financial Institutions, Customers and Suppliers for their unstinted support and co-operation. Your Directors wish to place on record their apbrciation of the confidence reposed by the shareholders in the Company at all times. The Board of Directors also wishes to thank the employees at all levels for their excellent support and contribution made by them. By Order of the Board Sumanth Ramamurthi Executive Chairman DIN: 00002773 Coimbatore 27th May 2015 |