MODERN THREADS (INDIA) LIMITED DIRECTORS' REPORT

The Members,

Your Directors are pleased to present the 35thAnnual Report on the business and operations of the Company together with Audited Financial Statements for the financial year ended 31stMarch, 2016.

FINANCIAL RESULTS

                  (Rs.in crores) 

OPERATIONS 

The performance of Woollen division of the Company has been satisfactory over past few years inspite of stiff competitions in the domestic and International markets. During the year under review ,the turnover of the Woollen Division of the Company was Rs.151 crores as against Rs.143 crores in the previous year . Your company has been able to generate net profit of`Rs.8.93 crores during the year under review as against Rs.7.48 crores in previous year. The Yarn division of the Company situated at Raila continued to remain closed during the year under review on account of continuing strike by the workers and sealing of the entire plant and machinery by Ajmer Vidyut Vitran Nigam Limited. In view of accumulated losses, your directors are unable to declare any dividend for the year under review.

TRANSFER TO RESERVES

The Company has not transferred any amount to reserves during the year under review.

EXPORTS

The company is one of the largest exporter of worsted and blended woollen yarn from India . During the year under review , Woollen Division of the Company achieved export turnover of Rs.112 crores as against Rs.95 crores in previous year showing 18% growth . Consistent efforts are being made by the Woollens Division of the Company to ensure sustainable leadership for its products in global market. Woollen division has also initiated efforts to retain existing customers base and contacting newer customers in overseas market with different product range in worsted yarn so as to achieve improved performance and profitability in the ensuing period. 

 FUTURE PROSPECTS

The worsted yarn segment of Textile Industry is moving ahead and likely to grow fast in coming years. The turn of woollens as a fashion fabric in global as well as domestic markets, coupled with renewed attention on speciality and high value added yarns will be growth drivers for woollen division of the Company. Inspite of various challenges including rising input costs, restrictive labour laws and intensified competition from other low cost countries, the growth prospects of the Woollen division of the Company are bright due to ongoing efforts of management for improving operational efficiency, cost reduction and better management of available financial resources .Your company is expecting improved performance of woollen division in coming years . 

FIXED DEPOSITS 

The Company has an unpaid amount of fixed deposits and interest thereon outstanding as on 31stMarch, 2016, the detail of which have been given in the Note No. 4 annexed with financial statements. In view of petition filed by the Company, the Hon'ble Company Law Board has passed an order on 17/04/2002 that The repayment of fixed deposits shall be made by the Company in accordance with the revival scheme as and when approved by BIFR under the provisions of SICA. However, payments on compassionate ground are continued to be made as per the decision of the Committee formed by Hon'ble Company Law Board for this purpose.

The Company has neither accepted nor renewed any fixed deposits during the year under review within the meaning of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014.

STATUS OF PROCEEDINGS AT BIFRPursuant to the direction of Hon'ble BIFR and discussions with Operating Agency, the Company has filed revised Draft Rehabilitation Scheme with the Hon'ble BIFR which is under examination and consideration. All hearing listed from October, 2015 onwards have been postponed till further order as per notification of BIFR. 

DIRECTORS AND KEY MANAGERIAL PERSONNEL

The Board of Directors at its meeting held on 27thJune, 2016, has re-appointed Shri Rajesh Ranka as Chairman and Managing Director of the Company with remuneration for a further period of three years with effect from 1stJuly, 2016, subject to the approval of the members. Shri Brij Mohan Taparia and Shri Naresh Devpura have been appointed as an additional directors of the Company by the Board of Directors with effect from 1stJuly, 2016. In accordance with the provisions of section 152 of the Companies Act, 2013, Smt. Veena Jain, Director of the Company retires by rotation and being eligible offers herself for re-appointment. Appropriate resolutions for the appointment/re-appointment of the aforesaid Directors is being moved at the ensuing Annual General Meeting, which the Board recommends for your approval.

During the year under review, Shri Pushp Kumar Jain, has resigned from the Directorship of the Company with effect from 1stJuly, 2016 and Shri Pradeep Kumar has ceased to be Special Director of the Company by Board For Industrial Financial Reconstruction (BIFR) with effect from 3/2/2016. The Board places on record its sincere thanks and gratitude for the valuable contribution made by Shri Pushp Kumar Jain and Shri Pradeep Kumar towards the growth and development of the company during their tenure as Director of the Company. There was no change in the Key Managerial Personnel during the year.

Declaration of Independent Directors

The Company has received declarations from all theIndependent Directorsof the Companythat they meet the criteria of independence as laid down under section 149(6) of the Companies Act, 2013 andthe SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015.

NOMINATION AND REMUNERATION POLICY

As per the provisions of section178of the Companies Act, 2013and the rules made thereunder, theBoard has constituted aNomination and RemunerationCommittee.The Board has, on the recommendation of the Nomination and Remuneration Committee, framed and adopted a policyi.e. Nomination and remuneration Policy for selection and appointment of Directors, Senior managerial personnel and their remuneration.

The Non-Executive/ Whole-time/Managing Director, Key Managerial Personnel (KMP) and other employees shall be of requisite qualification, high integrity and should have relevant expertise and experience.

In case of appointment of Independent Directors, the Committee shall satisfy itself with regard to the independent nature of the Directors and also ensure that the candidate identified for appointment as an Independent Director is not disqualified for appointment under Section 149 and 164 of the Companies Act, 2013.The detail of Committee members are as follows :

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulation, 2015, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee. Standard parameters was prepared after taking into consideration various aspects of the Board functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance.

A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Company, who were evaluated on parameters such as level of engagement and contribution, independence of judgment, safeguarding the interest of the Company and its minority shareholders etc. The performance evaluation of the Independent Directors was carried out by the entire Board and the performance evaluation of the Chairman and the Non Independent Directors of the Company was carried out by the Independent Directors who have expressed their satisfaction with the evaluation process.

Number of Board Meetings

The Board meets regular intervals to discuss and decide on business strategies and policies and review the financial performance of the Company. The notice and detailed agenda alongwith other material information are sent in advance separately to each Directors.

In the Financial Year 2015-16, the Board met four times. The Meetings were held on 18thJune, 2015, 24thSeptember, 2015, 28thDecember, 2015 and 28thMarch, 2016.The intervening gap between the meetings was within the period prescribed under section 173 of the Companies Act, 2013.

AUDITORS AND AUDITORS' REPORT

Statutory Auditors

M/s S.S. Surana and Co., (Firm Registration No. 001079C), Chartered Accountants, Jaipur were appointed as Statutory Auditors of the Company at the Annual General Meeting held on 22ndSeptember, 2014 for a period of three years subject to ratification by members at every consequent Annual General Meeting. Accordingly, the re-appointment of M/s S.S. Surana and Co., Chartered Accountants, as statutory auditors of the Company, is placed for ratifications by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013.

The observations made in the Auditors' Report read together with relevant notes thereon are self explanatory and hence, do not call for any further comments under Section 134 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 M/s R.K. Jain and Associates, Company Secretaries, Bhilwara to undertake the Secretarial Audit of the Company for the financial year ended 31stMarch, 2016. The Secretarial Audit report is annexed asAnnexure -Ato the Board's report.

The observations in Secretarial Audit Report which pertains mainly to listing agreement requirements, Stock Exchange compliances etc. It is clarified that the Company will take necessary action on implementation of rehabilitation scheme pending for examination and approval of BIFR.  

Cost Auditors

Pursuant to the provisions of Section 148 of the Companies Act, 2013 and The Companies (Cost Records and Audit) Rules, 2014, as amended from time to time, the Company has appointed M. Goyal and Co., Cost Accountants, Jaipur (Firm Registration No. 000051) to undertake the Cost Audit of the Company.

As required under the Companies Act, 2013, a resolution seeking members Approval for the remuneration payable to the Cost Auditors forms part of the Notice convening Annual General Meeting for their Ratification.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The company has not given any loans or guarantees and made investments covered under the provisions of section 186 of the Companies Act, 2013.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The 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 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 is also initiating action for strengthening the systems and procedures to ensure effective Internal Financial Controls in accordance with Section 134(5) (e) of the Companies Act, 2013. An Internal Audit process is in place under the overall supervision of the Audit Committee of the Board, Qualified and experienced professionals are engaged to ensure effective and independent evaluation of the Internal Financial Controls.  

The Audit Committee of the Board of Directors, Statutory Auditors and the Business Heads are periodically apprised of the internal audit findings and corrective actions are being taken. 

INDUSTRIAL RELATIONS AND PARTICULARS OF EMPLOYEES

The Company has enjoyed healthy and cordial industrial relations throughout the period except that the workers of �Yarn Division' are still on strike. The information required pursuant to Section 197 read with rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the members at the Registered office of the company during business hours on working days of the Company up to the date of ensuing Annual General Meeting. If any member is interested in inspecting the same, such member may write to the Company Secretary in advance.

DIRECTOR'S RESPONSIBILITY STATEMENT

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that :

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures;

(b) 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 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 this Act 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 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)The directors had devised proper systems 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 EARNINGS AND OUTGO

The information on 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 of the Companies (Accounts) Rules, 2014 is annexed asAnnexure-Bto the Board's Report. 

CORPORATE SOCIAL RESPONSIBILITY

As per the provisions of section 135(1) of the Companies Act, 2013, the Company has constituted the Corporate Social Responsibility Committee. The Board has, on the recommendation of the Corporate Social Responsibility Committee, framed and adopted a policy for CSR. The company does not meet the criteria of Section 135 (5) of Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, so there is no requirement to spend any amount on CSR activities during the financial year 2015-16.

The detail of Committee members are as follows :

VIGIL MECHANISM

Pursuant to the provision of Section 177 (9) and (10) of the Companies Act, 2013, the Company has formulated and implemented the Whistle Blower Policy/Vigil Mechanism. This has provided a mechanism for Directors and employees of the Company and other persons dealing with the Company to report genuine concerns about unethical behavior, actual or suspected fraud and violation of the Company's code of conduct and ethics. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns.

ENVIRONMENT AND SAFTY

The Company is conscious of the importance of environmentally clean and safe operations to ensure about safety of all concerned, compliances of environmental regulations and prevention of natural resources.

The Company has zero tolerance towards sexual harassment at the workplace and has a proper management system to prevention, prohibition and redressal of sexual harassment at workplace in line with the provisions of the Sexual Harassment of women at Workplace (Prevention, Prohibition and Redressal ) Act, 2013 and the Rules made thereunder. During the financial year 2015-16, the Company has not received any complaints of sexual harassment.  

CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

In accordance with the provisions of section 188 of the Companies Act, 2013 and rules made thereunder, all related party transactions that were entered into during the financial year were on arm's length basis and were in the ordinary course of business, the details of which are included in the notes forming part of the financial statements. There were no materially significant related party transactions which may have a potential conflict with the interests of the Company at large. Accordingly, information in Form AOC-2 is not required. 

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary, Joint venture or Associate Company as on 31stMarch, 2016.

EXTRACT OF ANNUAL RETURN

In accordance with Section 134 (3)(a) of the Companies Act, 2013, an extract of the annual return in the prescribed format (MGT-9) is annexed asAnnexure - Cto the Board's Report.

CODE OF CONDUCT

In compliance of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013, the Company has framed and adopted a Code of Conduct and Ethics. The code is applicable to the Board of Directors, Key Managerial Personnel and all other employees in the course of day to day business operations of the Company. The Code lays down the standard procedure of business conduct which is expected to be followed by the Directors, Key Managerial Personnel and all other designated employees of the Company in their business dealings and in particular on matters relating to integrity in the work place, in business practices and in dealing with stakeholders. 

BUSINESS RISK MANAGEMENT

In compliance of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 and the Companies Act, 2013, the Board of Directors of the Company formally adopted a Risk Management Policy for framing, implementing and monitoring the risk management plan for the Company. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and resolving risks associated with the business. The policy establishes a structured and disciplined approach to Risk Management. In the challenging and competitive environment, strategies for mitigating inherent risks in accomplishing the growth plans of the Company are imperative. The common risks of the Company inter alia are financial risk, human resource risk, technology obsolescence, regulatory risk and strategic risk etc. As a matter of policy, these risks are assessed and appropriate steps are taken to mitigate the same.

AUDIT COMMITTEE

Audit Committee of the Board of Directors is entrusted with the responsibility to supervise the Company's internal controls and financial reporting process. The composition, quorum, powers, role and scope are in accordance with Section 177 of the Companies Act, 2013 and the provisions of Regulation 18 of the Listing Regulation. All members of the Audit Committee are financially literate and bring in expertise in the fields of Finance, Taxation, and Economics etc.Thedetail of Committee members areasfollows:

GENERAL

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Issue of equity shares with differential rights as to dividend, voting or otherwise.

2. No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statement relate and the date of this report.

3. No significant or material orders were passed by the regulators or Courts or Tribunals which impact the going concern status and Company's Operations in future.

 ACKNOWLEDGEMENTS

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

              Sd/

          ( RAJESH RANKA)

Place : Mumbai        Chairmanand Managing Director   

Dated : 27thJune, 2016     DIN : 03438721

The performance of Woollen division of the Company has been satisfactory over past few years inspite of stiff competitions in the domestic and International markets. During the year under review ,the turnover of the Woollen Division of the Company was Rs.151 crores as against Rs. 143 crores in the previous year . Your company has been able to generate net profit of Rs. 8.93 crores during the year under review as against Rs. 7.48 crores in previous year. The Yarn division of the Company situated at Raila continued to remain closed during the year under review on account of continuing strike by the workers and sealing of the entire plant and machinery by Ajmer Vidyut Vitran Nigam Limited. In view of accumulated losses, your directors are unable to declare any dividend for the year under review.

In terms of Section 134 (5) of the Companies Act, 2013, the directors would like to state that : (a) In the preparation of the annual accounts, the applicable accounting standards have been followed alongwith proper explanation relating to material departures; (b) 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 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 this Act 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 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) The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.