DIRECTORS' REPORT

TO THE MEMBERS

To,

The Members,

Zodiac Clothing Company Limited.

Your Directors hereby present the 31st Annual report with the Audited Statements of Accounts for the financial year ended 31st March 2015.

1. BUSINESS

Operational Revenue & Profits: During the financial year ended 31st March 2015, the operational revenue of the company on a Standalone basis was Rs. 32,501 lakhs vs. Rs. 34,906 lakhs last year(For a like-to-like comparison, net of Excise duty Rs. 32,501 lakhs vs. Rs. 34,851 lakhs last year, i.e. a decrease of Rs. 2350 lakhs i.e. 6.74%.). Profit Before Tax was Rs. 1,185 lakhs vs. Rs. 2,217 lakhs in the previous year, while the net Profit after Tax for the financial year ended 31st March 2015 was Rs. 949 lakhs vs. Rs. 1,493 lakhs in the previous year.

On a consolidated basis the operational revenue of the company decreased to Rs. 39,395 lakhs from Rs. 41,111 lakhs last year. (For a like-to-like comparison, net of Excise duty Rs. 39,395 lakhs vs. Rs. 41,056 lakhs last year, i.e. a decrease of Rs. 1,661 lakhs, i.e. 4.04%). The Consolidated Profit Before Tax fell to Rs. 1,267 lakhs vs. Rs. 3,054 lakhs in the previous year, the Net Profit being Rs. 902 lakhs vs. Rs. 2,201 lakhs in the previous year.

OPERATIONAL REVENUE - STANDALONE

Turnover across industries has been discouraging during 2014-15, the company being one of many faced with this situation.

The scenario was highly unsettled in the branded clothing industry. Although the year started well with the euphoria of having a stable government after decades, this did not sustain. Reforms/ initiatives to be undertaken has and will take some time to roll out, as it could not be done all at once. Furthermore, the positive effects of these reforms are likely to be felt in the economy with a lag, particularly that on customer sentiment/demand. It wa0 not realistic to expect that the situation would reverse overnight.

Growth in the branded business was impacted by brands discounting/offering lavish consumer schemes. Further, the aggressive online offers by e-commerce players, though not directly impacting the company’s target customer, took away a large share of the consumers’ wallet by inducing spending on other goods such as mobile phones/ electronic goods, etc.

The company's turnover in the branded business ended the year flat this year, despite growth in its own retail. The company's own Web store has shown a high double digit increase, albeit on a low base.

The economic scenario enabled the company to negotiate somewhat better terms for fresh store leases. In keeping with our focus on own retail, we accelerated the pace of store openings, even though this would entail longer gestation, given the economic conditions. As of 31st March 2015, the company’s own stores, numbered 128. (New stores opened 16, stores closed 1, Net Addition 15). Four Existing stores were refurbished.       

Company Owned Retail Stores - Graph

Though the current year has been subdued so far for the branded business, the medium to Long term prospect continues to look promising. However, real growth will be visible only when the reforms/ initiatives taken have percolated into change in consumer sentiment. The company will continue to invest in brand building, market development and opening of new stores. The company believes it is important to have a long term view in these challenging times.

The competitiveness of India as a country for export of clothing has been eroded considerably, not least because of the Rupee having become over-valued, The RBIs estimate of REER shows a 8% appreciation in the real value of the Rupee over 2013-14 and by 22% over 2004-05. Simplification of laws, most importantly, for import of raw material (benchmarked to best practices in competing countries) is a crying need, to unshackle the competitive strength of the industry.

There has been fierce competition in the international markets due to tepid to negative growth in various markets. The fallout of the European crisis has been that suppliers to the EU have unleashed a price war, in Europe, as well as in other markets.

The Euro has depreciated sharply, and has been extremely volatile. There have been large spending cuts in the EU. In the US, revised GDP data shows that the economy shrank by 20 basis points during January - March 2015 (quarter-on-quarter). However compared to the corresponding quarter of 2014, growth (year-on-year) was strong at 2.9%. Basically the acceleration evident in the summer of 2014 (Q2 and Q3) petered out. Retail sales in the US have been subdued during all but one month of the second half of 2014. Due to cautious buying, the quantities per article declined sharply, resulting in higher fabric cost due to upcharge for lower quantity per article.

2. RESULTS OF OPERATIONS:

Consequently, the design-driven international business has seen quite difficult times, both in terms of turnover (lower quantity, lower realisation in both USD and INR terms), impacting contribution and profit.

From the UAE, the exported quantity has grown 3% and the value has risen more or less in tandem, due to slightly lower realisation per unit.

The design-driven international business is being pursued vigorously by your Company nevertheless, because it keeps on its toes, both in terms of competitiveness, as well as in keeping itself aligned to the cutting edge fashion. However the global situation has to change before one can see return to full normalcy.

After appreciating in the second quarter, the Rupee has been stable against the USD upto December 2014. From January 2015, it has depreciated somewhat, but experts opine that the Rupee is overvalued, largely due to very high inflows into equity and debt in India. This has hurt the competitiveness of the clothing industry, which yielded a large part of the gains made earlier in the year.

The Government held a workshop, inviting suggestions for actionable reforms to achieve success in the "Make in India" vision of the Hon.Prime Minister. Players from 25 different industries (including Textile & Clothing) were invited to interact with the concerned Minister and Secretary to the Government. It concluded with a presentation to the Head of the Government with each Secretary submitting targets for rolling out various initiatives, for which each Secretary of the respective Ministry will be held accountable. This accountability is something never seen hitherto, and holds great promise.

Policy framework is being strengthened with measures to improve competitiveness (Skill India / Digital India), reduced onerousness nature of labour law compliance, encouragement of state governments to take initiative to modernise labour regulations, rationalisation of petroleum subsidies, auctioning of coal and spectrum, barriers to foreign investment substantially diluted with opening sectors of insurance, pension, defence and railways for private investment, both domestic and foreign.

Decisive political leadership, empowered bureaucracy, accelerated GDP, CAD down 1.6%, subdued inflation, WPI inflation negative, greater preparedness to meet exogenous uncertainties have brought back India on the radar of Foreign Investors, despite the Indian and global environment having changed.

The success of these measures will be contingent upon fulfilling regulatory changes in labour law application, more reliable information and ease of doing business. The contribution of these measures to restoring competitiveness of the clothing industry, could be tremendous. The need to address the export of India's taxes is the single most important measure that the exporting community, including the clothing industry, need post haste.

The EU has begun to pursue India to resume negotiations on the proposed FTA, which negotiations one hopes should commence soon. The Treaty, when signed, would restore India's competitiveness in that market considerably. The EU Ambassador has reportedly told the Press that the business between the EU/India would double from Euro 100 billion to Euro 200 billion in 4 years, once the Agreement is signed.

The company continues to strive to control/reduce cost, for which a number of measures have been put in place. We have made notable investments in equipment to enhance productivity, as well as improve quality standards, as international retailers/brands have become more demanding, both on price as well as on quality.

Finance cost as a percentage of turnover has risen marginally, 0.68%(LY 0.62%). This is largely on account of higher forward premiums having to be paid to hedge the "borrowings" in foreign currency (we hedge 100% of principal, as well as interest , to avoid any currency risk). These premiums have been high, partly due to the interest rate differential between India and the countries in whose currency we borrow. The all inclusive cost was still lower than the cost of borrowing in Rupees.

3. SUBSIDIARY COMPANIES

The Company has five (5) subsidiaries as on March 31, 2015. There are no associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). There has been no material change in the nature of the business of the subsidiaries.

Pursuant to provisions of Section 129(3) of the Act, a statement containing salient features of the financial statements of the Company's subsidiaries in Form AOC-1 is attached as Annexure 5 to this report.

Pursuant to the provisions of section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company.

4. CONSOLIDATED FINANCIAL STATEMENT

In accordance with the requirements of Accounting Standards AS-21 the Consolidated Accounts of the company and its subsidiaries are annexed to this Report.

5. RATING

ICRA (an associate of Moody's Investor Service) has reaffirmed the Company's rating of A1+ for its short-term fund-based/non-fund based facilities at Rs. 8,000 lakhs. ICRA has also reaffirmed the Company's rating of A1+ for Commercial Paper of Rs. 2,000 lakhs.

A1 is the highest credit quality rating assigned by ICRA to short term debt instruments, which carry the lowest credit risk in the short term. Within this category, certain instruments are assigned the rating of A1+ to reflect their relatively stronger credit quality.

6. CAPEX

Capex on Standalone Rs. 1,870 lakhs v/s Rs. 1,113 lakhs was incurred predominantly on the new  company-run stores (Rs. 900 lakhs), factory building at Bangalore and Umbergaon (Rs. 413 lakhs), new equipment (Processing) at Bangalore (Rs. 357 lakhs), Corporate Head Quarters (Rs. 166 lakhs) and others (Rs. 34 lakhs).

Rental deposits (Rs. 1,903 lakhs total as of FY15) are not booked as Capex.

On a consolidated basis, the Capex was Rs. 2,106 lakhs as against Rs. 1,629 lakhs last year.

7. LIQUIDITY

The Debt Equity ratio as on 31st March, 2015 was 0.29 on a Standalone basis and 0.21 on a Consolidated basis.

The cash and bank balances/cash equivalents along with liquid investments (free reserves - on consolidated basis) were Rs. 2,900 lakhs in March 2015, as against Rs. 3,549 lakhs last year.

8. SHARE CAPITAL

During the year under review, the company has allotted 121,201 Equity shares against the exercise of options granted under Zodiac Employees Stock Option Plan 2006 thereby increasing the paid-up share capital of the Company to 19,511,199 Equity shares of Rs. 10/- each.

9. APPROPRIATIONS

Dividends - Your Directors have recommended a final dividend of Rs. 2.50/- per equity share of Rs. 10/-each on 19,511,199 equity shares. The company had distributed an interim dividend of Rs. 0.60 each per equity share during the year. The total dividend for the year will be Rs. 3.10/- (previous year Rs. 4.50/-) per equity share. The total dividend amount (when approved by the members) including dividend distribution tax would be Rs. 705 lakhs (previous year Rs. 1,021 lakhs). Dividend (including dividend distribution tax) as a percentage of Profit after Tax is 74.28% on a Standalone basis and 80.66% on a consolidated basis.

Transfer to Reserves: Your Directors propose to transfer Rs. 100 lakhs to the General Reserve. An amount of Rs. 10,865 lakhs is proposed to be retained in the statement of Profit & Loss Account.

10. CORPORATE GOVERNANCE

The company has complied with all the mandatory requirements regarding Corporate Governance as required under the revised Clause 49 of the Listing Agreement with the Stock Exchange(s). The report on Corporate Governance, Management Discussion and Analysis, as well as the Auditors Certificate on the compliance of Corporate Governance form part of the Annual Report.

11. CONTRACTS AND ARRANGEMENT WITH RELATED PARTIES

In line with the requirements of the Companies Act, 2013 and Equity Listing Agreement, The Company has formulated a Policy on Related Party Transactions which is also available on Company's website at www.zodiaconline.com. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties.

This Policy specifically deals with the review and approval of Material Related Party Transactions keeping in mind the potential or actual conflicts of interest that may arise because of entering into these transactions. All Related Party Transactions are placed before the Audit Committee for review and approval and wherever applicable omnibus approvals are obtained for Related Party Transactions.

All Related Party Transactions entered into during the year were in Ordinary Course of the Business and on Arm's Length basis. No Material Related Party Transactions, i.e. transactions exceeding ten percent of the annual consolidated turnover as per the last audited financial statements, were entered into during the year by your Company. Accordingly, the disclosure of Related Party Transactions as required under Section 134(3) (h) of the Companies Act, 2013 in Form AOC 2 is not applicable.

12. QUALITY

The company continues to focus on quality, as well as productivity, and innovation is pursued to sustain/grow value addition. We have made notable investments in equipment in our pursuit of these objectives.

13. BRAND BUILDING

Despite very challenging market conditions emanating from highly subdued consumer sentiment the company invested in building brand salience and strength.

In the market place most brands offered huge discounts, easy credit terms and stock correction on unsold goods to the trade, while we were unflinching in adhering to our credit terms and no returns policy. We continue with our strict policy of non-discounting.

Product innovations in ZOD! Club Wear & Z3 Relaxed Luxury coupled with very high quality 100% Linens in ZODIAC were offered to consumers. At the fine tailoring end, we introduced sleeveless Jodhpur jackets in pure wool and 100% linen. The advertising spends on the three brands were focused on television and the digital medium. 

14. CONSERVATION OF ENERGY, RESEARCH AND DEVELOPMENT, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNING AND OUTGO:

(A) Conservation of Energy

The company has embraced technology and innovation in its approach to energy efficiency, which continues to remain a focus area for the organisation. Continuous monitoring of existing systems by independent third party energy audits, upgradation of machines as well as processes using the latest technology, extensive use of occupancy and lux level sensors, combined with energy efficient lights, motors, equipment and aggressive replacement of computers with those using the latest generation of chip technology, coupled with moving data onto energy efficient cloud storage, have all resulted in a considerable drop in units of electricity consumed on a like-to-like basis. This, despite an increase in the total numbers of such equipment installed. Similarly, optimization using software, batch planning, and energy efficient boilers has resulted in considerable savings on fossil fuel consumed by the company.

(B) Pollution Control

The company is very sensitive about the environment. Its belief in running its business in an ecologically responsible manner has not only become a way of life, but is also one of its business goals. This quest for excellence has resulted in a natural teaming up with the best resources available globally in the field of air and water. As a consequence of joint research with leading equipment manufacturers internationally, made-to-order, state-of-the-art equipment has been installed, which will lead to a massive drop in water requirement for its processes. Furthermore, also as a result of this joint research, a high tech water treatment plant has been commissioned, the salient feature being that it runs at zero liquid discharge. This has become a benchmark of sorts in an industry where inputs are of a very dynamic nature resulting in a continuous challenge to recycle discharge. We look forward to building on these successes to scale even greater heights in the years ahead.

(C) Technology, Absorption, Adaptations and Innovation:

The Company continues to use the latest technologies for improving the productivity and quality of its services and products. The Company's operations do not require significant import of technology

15. CORPORATE SOCIAL RESPONSIBILITY

Corporate Social Responsibility (CSR) is traditionally driven by a moral obligation and philanthropic spirit. The Company has an heritage of being engaged in such activities. The Company is committed sustainability and all business decisions take in to account its social and environmental impact.

The Company has constituted a CSR committee as per the provisions of Section 135 of the Companies Act 2013, details of which are given in the Corporate Governance Report forming part of this report. The Board has also framed a CSR policy for the Company on the recommendation of the CSR Committee. The said policy has also been posted on the website of the Company.

The Report on CSR activities as required under Companies (Corporate Social Responsibility) Rules, 2014 including a brief outline of the Company's CSR Policy, total amount to be spent under CSR for the Financial Year, Amount unspent and the reasons thereof is set out at Annexure 2 forming part of the report.

16. DIRECTORS & KEY MANEGERIAL PERSONNEL

During the year, two of our respected Board members, Mr. Deepak Parekh and Mr. S.M. Datta, had to step down from the Board of the Company by virtue of the new limits placed on the maximum number of board seats directors can occupy.

We would like to thank Mr. Parekh and Mr. Datta for their valuable guidance, contribution and support during the decades of their directorship of the company. We would also like to thank them for having kindly agreed to continue to guide us by agreeing to be members of the three member Advisory Board, the third member being Mr. Anil Kapoor.

Mr. Anil Kapoor, Chairman Emeritus of Ulka Advertising, has been associated with the company for almost 25 years. He has successfully contributed to the company's marketing and competitive strategy over the decades, and we look forward to his contribution as member of the Advisory Board. 

The Board of Directors had, on the recommendation of the Nomination and Remuneration Committee, appointed Mr. Saumitra Chaudhuri as Additional Director on 12th November, 2014.

Mr. Chaudhuri is a respected Economist, who was Economic Advisor to ICRA for over a decade; he was on the Prime Minister's Economic Advisory Council for nearly a decade and a Member, Planning Commission for 5 years (both positions in the rank of Minister of State, Government of India).

Section 149(1) of the Companies Act, 2013 read with Rule 3 of The Companies (Appointment & Qualifications of Directors) Rules, 2014 and Clause 49(II)(A)(1) mandates appointment of woman director on the Board of the Company. The Board of Directors had on the recommendation of the Nomination and Remuneration Committee, appointed Ms. Elizabeth Jane Hulse on 11th February 2015 as an Additional Director on the Board of the Company.

Ms. Hulse has 4 decades of experience in the clothing industry in the UK and was Head of a highly successful UK operation for Zodiac for over a decade.

The resolution seeking approval of the member for the Appointment of Mr. Saumitra Chaudhuri and Ms. Elizabeth Jane Hulse have been incorporated in the notice of the forthcoming annual general meeting of the Company along with brief details about them. The Company has received notices under Section 160 of the Act along with the requisite deposit proposing their appointments.

In accordance with the provisions of Section 152 of the Companies Act 2013, Mr. S.Y. Noorani, Managing Director & President retires by rotation at the ensuing Annual General Meeting and being eligible, has offered himself for re-appointment.

On the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the Company, at their meeting held on 27th May 2015, have approved the amendment to the terms of appointment of Mr. A. Y. Noorani, Vice-Chairman & Managing Director w.e.f 1st April 2015. Accordingly as mutually agreed, by Mr. A. Y. Noorani will be entitled to only variable pay in the form of performance linked bonus/commission of such percentage of the net profits of the Company or such amount as may be decided by the Board of Directors ("Board" which term shall be deemed to include the Nomination and Remuneration Committee of the Board) for each financial year or part thereof w.e.f. 1st April 2015, subject to however the same not exceeding the limits as permissible under the Companies Act 2013. 

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of Independence as prescribed both under the Act and Clause 49 of the Listing Agreement with the Stock Exchanges.

The Company has devised a policy for performance evaluation of Independent Directors, Board, Committees and other Individual Directors which includes criteria for performance evaluation of the non- executive directors and executive directors.

The performance of the Board was evaluated after seeking inputs from all the directors on the basis of criteria such as Board Composition and structure, effectiveness of Board processes, information and functioning etc. The Committees were evaluated by the Board after seeking inputs from the Committee Members on the basis of criteria such as composition of the Committees, effectiveness of the Committee meetings etc.

The Board and the Nomination and Remuneration Committee ("NRC") 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 details of programmes for familiarization of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are posted on the website of the Company at the link http://www.zodiaconline.com. 

17. NUMBER OF MEETINGS OF" THE BOARD:

Six Meetings of the Board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report.

18. DIRECTORS' RESPONSIBILITY STATEMENT:

Your Directors state that:

(i) In the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same;

(ii) The Directors have selected such amounting policies and applied them consistently and made judgements 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;

(iii) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the 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 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

(vi) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and are operating effectively.

19. MATERIAL CHANGES AFFECTING FINANCIAL POSITION OF THE COMPANY:

There are no material changes or commitments, affecting the financial position of the company which have occurred between 31st March 2015 and the date of this report.

20. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND OTHER DETAILS

The Company's remuneration policy for determining qualifications, positive attributes and independence of the director and criteria for director's appointment and remuneration features the following: The board shall draw members from diverse fields such as finance, law, management, technical, marketing etc. and other disciplines relating to the company's business while constituting the Board.

A Director shall be a person of integrity, possessing relevant expertise and experience and shall uphold ethical standards of integrity, probity, and at objectivity and constructiveness. He shall exercise his responsibilities in a bonafide manner in the interest of the Company and shall devote sufficient time and attention to his professional obligations for informed and balanced decision making.

An Independent Director should meet the requirements of the Companies Act 2013 and clause 49 of the Listing Agreement on the independence of the directors. The Company shall also obtain certification of independence from the independent directors in accordance with the Companies Act and the Listing Agreement.

The objective of the policy is to have a compensation framework that will enable the Company to attract, reward and retain talent. Remuneration will be such as to ensure that there is a correlation of remuneration to performance and enables the Company to meet the performance benchmarks.

The remuneration details of the Executive and Non-Executive Directors is disclosed in the Corporate Governance report which forms part of the Directors Report.

21. PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS:

The particulars of loans and investments have been disclosed in the financial statements. The Company has not given any guarantees.

22. HUMAN RESOURCE MANAGEMENT :

The company recognises the need of continuous growth and development of its employees to meet the challenges posed by a rapidly growing consumer facing organization, besides fulfilling their own career path objectives. Consequently the role of Human Resources continues to remain  vital and strategic to the company. Employee recruitment, training, and development are a key focus area, with policies, processes and extensive use of technology to attract, retain, and build on skills of high calibre employees. In keeping with its philosophy of a healthy and safe work environment, regular independent third party audits, certification, and training programs are carried out. Industrial relations have continued to be harmonious throughout the year.

23. ZODIAC EMPLOYEES' STOCK OPTION PLAN 2006

In terms of the Employee Stock Option Plan 2006, Eighty Thousand Eight Hundred (80,800) options were exercised during the year at an exercise price of Rs. 346/- resulting in allotment of One Lakh Twenty One Thousand Two Hundred and One (1,21,201) Equity Shares.

The Applicable disclosures as stipulated under the SEBI Guidelines as on 31st March 2015 with regards to the Employees Stock Option Plan 2006 has been provided in the Annexure 1 to this report.

The Company is in the process of obtaining a Certificate from the Auditors stating that the ESOP has been implemented in accordance with SEBI (ESOS & ESPS) Guidelines, 1999 and the resolution of the Company passed in the Annual General Meeting held on 31st August 2006.

24. COMPLIANCE WITH THE CODE OF CONDUCT

The Code of Conduct adopted by the Company for its Board of Directors, Senior Management Personnel and Functional Heads has been uploaded on the Company's website. The Declaration of the Compliance with the code of conduct has been received from all Board members and managerial personnel. A certificate to this effect from Mr. A.Y Noorani, Vice-Chairman and managing Director forms part of this report.

25. FIXED DEPOSIT

The company has not accepted any Fixed Deposits from the public under Section 73 of the Companies Act, 2013.

26. COMPANY'S WEBSITE

The Financial Statements, Annual Report, including Corporate Governance Report, Shareholding Pattern, etc., are displayed interse with the other information on the company's website, viz. www. zodiaconline.com.

27. DONATIONS

During the financial year, the company has, besides CSR, contributed Rs. 6,042,154 to various deserving causes.

28. INSURANCE

All the properties/assets, including buildings, furniture/fixtures, etc. and insurable interests of the company are adequately insured. The international debtors who avail of credit are also insured, despite their flawless record, as a measure of abundant precaution.

29. AUDITORS

The Auditors, M/s. Deloitte Haskins & Sells, LLP, Chartered Accountants, who are Statutory Auditors of the Company hold office up to the 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 of Section 139 of the Companies Act, 2013, the Company has obtained written confirmation from M/s. Deloitte Haskins & Sells, LLP, Chartered Accountants that their appointment, if made, would be in conformity with the limits specified in the said Section.

30. COST AUDITOR:

In terms of the Companies (Cost Records and Audit) Amendment Rules, 2014, the Company is not covered under the purview of Cost Audit from the FY 2014-15.

31. SECRETARIAL AUDIT-

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and Rules made thereunder, the Company has appointed M/s Robert Pavrey & Associates, Company Secretaries in Practice (CP No- 2928) to undertake the secretarial audit of the Company. The Secretarial Audit report is included as Annexure 4 and forms an integral part of this report.

32. AUDIT COMMITTEE

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of this report.

33. RISK MANAGEMENT

The Board of the Company has formed a risk management committee to frame, implement and monitor the risk management plan for the Company. The committee is responsible for reviewing the risk management plan and ensuring its effectiveness. The audit committee has additional oversight in the area of financial risks and controls. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuing basis.

34. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new/ revised standard operating procedures. The Company's internal control system is commensurate with its size, scale and complexities of its operations. The internal and operational audit is entrusted to M/s KPMG. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

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.

The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal Audit fillings and corrective action taken. Audit plays a key role in providing assurance to the Board of Directors. Significant audit observations and corrective actions taken by the management are presented to the Audit Committee of the Board. To maintain its objectivity and independence, the Internal Audit function reports to the Chairman of the Audit Committee.

35. ANTI SEXUAL HARASSMENT POLICY

The Company has in place an Anti Sexual harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 & the Rules made thereunder. Internal Complaints Committee (ICC) has been set up to redress Complainants received regarding sexual harassment. All employees, permanent, contractual, temporary, and trainees are covered under the policy. Your Directors further state that during the year under review, there were no cases filed pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

36. EXTRACT OF ANNUAL RETURN

Extract of Annual Return of the Company is attached herewith as Annexure 3 to this Report.

37. ACKNOWLEDGEMENTS

The Directors would like to record their grateful thanks for the co-operation, support and assistance received from the customers, shareholders, the Government, other statutory bodies, Banks, Solicitors, Distributors, Suppliers and other business associates during these most turbulent times.

The Directors also express their sincere appreciation of the employees at all levels for having risen to meet the several challenges encountered and look forward to their valuable support and commitment in the times ahead.  

For and on behalf of the Board

M.Y. NOORANI

Chairman    

Place : Mumbai  

Dated : 10th June, 2015