Your directors have pleasure in presenting the 39th Annual Report together with the
Audited Accounts for the year ended March 31, 2013 (the year).
|Total Yarn Sales
|Conversion charges earned
|Wind Energy Converter Power sold to third party
|Gross profit [Profit before interest and depreciation & Tax]
|Cash profit/(loss) [profit/(loss)before depreciation & Tax]
|Profit/(loss) before tax [PBT]
|Profit/(loss) after tax [PAT]
With a view to conserve and improve the resources of the Company, your directors have
not recommended any dividend for the year ended 31.3.2013.
Management discussion and analysis
Core business of the company is manufacture and sale of cotton yarn. The management
discussion and analysis given below discusses the key issues of the cotton yarn spinning
(a) Industry performance
(i) Industry`s performance during the year has recorded significant improvement over
the previous year even though the last couple of years had seen almost all the economies
of the world go through tumultuous times and India has been no exception. Worsening
Current A/c deficit and weakening Indian Rupee have had deleterious impact on balance of
payment due to increased import of Gold, Crude Oil and Petroleum Products. Fiscal deficit
also increased due to foreign commercial borrowings. Tighter liquidity situation and the
monetary regulatory measures taken by the Reserve Bank of India to tame inflation, have
had cumulative effect on the industrial sector in India which continued to witness
dampening economic activity.
(ii) During the year under review price of Cotton and yarn has stabilized. But the
power situation in the state continued to pose serious threat and the cost of generating
power using diesel gen-sets during the severe power cut period, ranging from ten to twelve
hours a day, increased the cost of production. This resulted in rendering textile products
in Tamil Nadu less competitive in the market, exerting severe pressure on profit margin.
(b) Company`s performance
(i) In order to cope-up with the market conditions, several cost reduction measures
were adopted by the Company such as optimum utilization of the diesel gen-sets and power
purchase from Indian Power Exchange supported by your Company`s Wind Turbine generated
power. This helped to achieve improved level of plant utilization to maintain the
production and quality of the product.
(ii) Your company`s Wind Electric Generators (WEGs) recorded very good generation of
electric power of the value of Rs.1455 lakhs during the year (Rs.914 lakhs - 2011-12)-
increase of about 60% over the previous year, which resulted in considerable saving in
(iii) However, Bank interest rates continued to increase further during the year.
Management`s conscious decision to exercise strict control on inventory levels helped to
reduce the working capital requirement resulting in considerable saving up to 22% in the
finance cost during the year.
(c) Outlook for 2013-14
Since the cotton price and the yarn price have almost stabilized, the industry expects
to improve its margin during the year. Demand for your Company`s products continues to be
appreciable in domestic market as well as export market. Your directors hope to see
further improvement in the export market, based on the flow of orders from countries like
China, Peru, Japan, Indonesia and European countries. If the incentives for exports
offered by Government of India provide relief packages, it will further boost exports. In
view of this situation, the Company`s performance is expected to improve further.
(d) Strategies and Future plans
In line with the Tamil Nadu Government`s directions for industries in the state to
install Solar Power Plants to augment the power supply to meet the growing needs of
industries, your directors are planning to install Solar Power Plants with the approval of
share holders to venture into this sphere of business stated in Clause III C (5) of the
Memorandum of Association of the Company. For this purpose, a Special Resolution has been
included in the Notice of the ensuing annual general meeting of the Company for members`
In order to gain the maximum benefit from the captive power plants already installed
(wind turbines) and to be installed (solar power plants) even during the power cut period,
your directors are taking action to secure dedicated feeder line from the E.B substation
to each of the three units of your Company. This will ensure uninterrupted power supply to
the spinning mills of your company which will reduce the dependence on diesel generated
power and also maximize production through out the day. Further life of the electrical
components could be enhanced due to avoidance of down time during frequent power cuts and
thereby quality of product could be maintained/improved further.
As part of future plans, the deferred expansion/diversification will be taken up for
implementation, at the appropriate time. This will help improve value addition as well as
captive consumption of the yarn produced by the company.
(e) Internal control and systems
Your company has in place well established internal control procedures covering various
areas such as procurement of raw materials, production planning, quality control,
maintenance planning, marketing, cost control and debt servicing. Steps are taken without
loss of time, whenever any weakness is observed, to correct the same.
Your Company is certified ISO 9001, 14001 and 18001 for the systems. Further, your
Company`s laboratory is also certified by NABL.
(f) Human resources management
Employees are your Company`s most valuable resource. Your Company continues to create a
favourable environment at work place. Your Company has formulated and implemented various
welfare measures for the employees. The Company also recognizes the importance of training
and consequently deputes its work force in various work related courses/seminars including
important issues like Total Quality Management (TQM). Because of these labour welfare and
improvement measures, your company is able to attract and retain well trained and
The fact that the relationship with the employees continue to be cordial is testimony
to the Company`s ability to retain high quality workforce. In view of the aforesaid
relationship no man days were lost during the year under report.
(g) Corporate Social Responsibility (CSR)
S.Palaniandi Mudaliar Memorial Hospital (SPMM Hospital) run by S.Palaniandi Mudaliar
Charitable Trust was promoted by Sambandam family in 1975 with the objective of helping
poor people to meet their education and health care needs. With a view to implement this
objective, the trust started a 100 bedded Multi Specialty Hospital in Salem in 1997 and
the trust has been running the hospital very efficiently with highly qualified Doctors and
Para-medical staff. From the beginning, the hospital has been treating every year more
than 5000 poor patients with different ailments including surgical care at highly
concessional charges. The hospital, jointly with Rotary International, is performing heart
surgeries for children with congenital heart defects and has carried out more than 50
surgeries during last three years free of cost. Further, the hospital has treated patients
including a three month-old child and a pregnant woman on whom open heart surgery cannot
be done for the congenital heart defects like ASD (Atrial Septal Defect) and PDA (Patent
Ductus Arteriosus) - in both the conditions there exists mixing of pure and impure blood
in the heart which leads to retarded growth and finally death. But, the SPMM Hospital has
treated such patients by way of Interventional therapy; a method called `Device closure`
and saved their lives free of charges. For these treatments, the hospital got financial
support from an organisation called `Gift of Life` in USA, which granted the support after
verifying the facilities available in the hospital. This kind of treatment is done oniy in
higher centers at metros like Chennai. This hospital is also providing free artificial
limb fitment to nearly 100 beneficiaries every year and Calipers for polio affected
children right from its inception. Therefore your directors thought it fit and proper to
donate Rs.60 lakhs this year in discharge of the Company`s Corporate Social
(h) Cautionary note
Statements in the Directors` report and the management discussion and analysis
describing the Company`s objectives, expectations or predictions may be forward looking
within the meaning of applicable securities laws and regulations. Actual results might
differ materially from those expressed in the statement. Important factors that could
influence the Company`s operations include global and domestic demand and supply
conditions affecting selling prices of finished goods, input availability and prices,
changes in government regulations, tax laws, economic developments within the country and
other related factors such as litigation and industrial relations.
Sri S. Dinakaran, Joint Managing Director of the Company continues to be the Chairman
of the Southern India Mills` Association (SIMA) for the second year in succession. He is
also a member of the Committee of Administration of the Cotton Textiles Export Promotion
Council(TEXPROCIL), Mumbai and the Confederation of Indian Textile Industry(CITI), Delhi.
By virtue of the offices he holds, Sri Dinakaran has been representing to the Industries
and Finance Ministries to get relief to the ailing Textile Industry.
COST AUDIT REPORT
As per the directions of the Cost Audit Branch of the Ministry of Corporate Affairs,
M/s.S.MAHADEVAN & CO., Cost Accountants, Coimbatore, were appointed Cost Auditors for
audit of Cost Accounts of the Company and their report for the year ended 31st March 2012
was submitted on 23.01.2013 to the Ministry of Corporate Affairs (VIDE SRN S 19989235
dated 23.01.2013). Due date for submission of that Cost Audit Report in XBRL fomat was
M/s. S. Mahadevan & Co. were again reappointed for Audit of Cost Accounts of the
Company for the year ended 31.3.2013. Their reports for the year ended 31.3.2013 will be
filed before the due date.
Sri V. Mahadevan and Dr.V.Gopalan, Directors, retire by rotation and they are eligible
for reappointment. Company`s Code of Conduct applicable to the board has been adopted by
the board and all the directors of the company have confirmed compliance with the Code of
Auditors, M/s. M.S. Krishnaswami & Rajan, Chartered Accountants, retire at the
ensuing annual general meeting and they have confirmed their eligibility and willingness
to accept office, if re-appointed.
Annexure to this report details statement on directors` responsibility, conservation of
energy, technology absorption, Research and Development and foreign exchange earnings and
outgo. None of the employees of the Company has drawn remuneration exceeding Rs.5 lakhs
per month or Rs.60 lakhs per annum during the year. As such the information required
pursuant to Sec. 217(2A) of the Companies Act, 1956 is not applicable to the Company.
Your directors thank the Company`s customers, vendors and investors for their continued
support during the year. Your directors place on record their appreciation for the
contribution made by employees at all levels. Your Company`s consistent growth has been
made possible by the hard work, solidarity, cooperation and support of the management
Your directors thank State Bank of India, Karnataka Bank Limited, IDBI Bank Limited,
Axis Bank Limited, Canara Bank, Indian Overseas Bank and Central Bank of India, Government
of Tamil Nadu and other government agencies for their support, and look forward to their
continued support in future.
||For and on behalf of the Board
|May 27, 2013
||Chairman and Managing Director
Annexure to Directors` Report
Directors` Responsibility Statement as per section 217(2AA) of the Companies Act, 1956.
Responsibility in relation to financial statements
The financial statements have been prepared in conformity, in all material respects,
with the applicable Accounting Standards in a consistent manner and supported by
reasonable and prudent judgments and estimates. The Directors believe that the financial
statements reflect true and fair view of the financial position as on 31.3.2013 and of the
result of operations for the year ended 31.3.2013.
The financial statements have been audited by M/s M.S. Krishnaswami & Rajan,
Chartered Accountants in accordance with generally accepted auditing standards, which
include an assessment of the system of internal controls and tests of transactions to the
extent considered necessary by them to support their opinion.
In the opinion of the Directors, Company will be in a position to carry on its existing
spinning of yarn business and accordingly it is considered appropriate to prepare the
financial statements on the basis of going concern.
Maintenance of accounting records and Internal controls
Company has taken proper and sufficient care for maintenance of adequate accounting
records as required by various Statutes.
Directors have overall responsibility for the Company`s internal control system, which
is designed to provide a reasonable assurance for safeguarding of assets, reliability of
financial records and for preventing and detecting fraud and other irregularities.
The internal audit function encompasses the examination and evaluation of the adequacy
and effectiveness of the system of internal control and quality of performance in carrying
out assigned responsibilities. Internal Audit Department interacts with all levels of
management and the Statutory Auditors and reports significant issues to the Audit
Committee of the Board.
Audit Committee supervises the financial reporting process through review of accounting
and reporting practices, financial and accounting controls and financial statements. Audit
Committee also periodically interacts with internal and statutory auditors to ensure
quality and veracity of the Company`s accounts.
Internal Auditors, Audit Committee and Statutory Auditors have full and free access to
all the information and records as considered necessary to carry out their
responsibilities. All the issues raised by them have been suitably acted upon and followed
(ii) Conservation of energy, technology absorption and research and development and
foreign exchange earnings and outgo
A. Conservation of energy
|(a) Power and fuel consumption -
|(i) Purchased units*
|*net of units generated thro` wind energy converters
|(ii) Own generation
|1) Through diesel generator
|Units per litre of diesel
|2) Through steam turbine/generator
|3) Through Wind energy converters
|Generated units(fed toTNEB Grid)
|*Cost includes maintenance charges, interest and depreciation
|3. Furnace oil
|(b) Consumption per unit of production
|Consumption of electricity
|Consumption per kg. of Yarn
|B. Technology absorption and research and development
|C. Foreign exchange earnings and outgo
|(a) Activities relating to exports
|Yam exports (including merchandise exports)
|(b) Total Foreign exchange used and earned
|1) CIF value of Imports
|Capital goods*Rs. lakhs
|Spares for Capital goods*
|Raw materials - cotton*
|*exclusive of net exchange difference
|2) Other expenditure in foreign currency
|3) Foreign exchange earned
(III) Particulars of employees-information pursuant to section 217(2A)of the Companies
|(a) Employed throughout the year and in receipt of remuneration aggregating to
Rs.60,00,000 or more during the year
|(b) Employed for part of the year and in receipt of remuneration of Rs.5,00,000 or
more per month
Note : Remuneration includes salary and value of perquisites, nature of employment
(iv) Code of Conduct for the Senior Management
As required under Clause 49(1)(D) of the Listing Agreement with the Stock Exchanges, I
hereby declare that all the Board members and senior management personnel of the
Company have complied with the Code of Conduct of the Company for the year ended March
|May 27, 2013
||Chairman and Managing Director