Annual Report 2013-14 Kallam Spinning Mills Limited 22 ...€¦ · AuditorsM/s Brahmayya&co., Chartered Accountants ... Phones: 2344010, 2344017 fax: 0863-2344000 E-mail: [email protected],

Kallam Spinning Mills Limited Kallam Spinning Mills Limited22nd Annual Report 2013-14 22nd Annual Report 2013-14

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CoMPAny InfoRMAtIon

Company Information

Board of Directors : v Sri K. Haranadha Reddy, non Executive Chairman

v Sri P.Venkateswara Reddy, Managing Director

v Sri G .V Krishna Reddy, Joint Managing Director

v Sri M. V Subba Reddy, Whole time Director

v Sri M.R. Naik, Director

v Sri V.S.N Murthy, nominee Director of IREDA

v Sri A.Krishna Murthy, Director

v Sri S. Pulla Rao, Director

Listed With : Bombay Stock Exchange Limited

Bankers : v Andhra Bank, Main Branch, Kothapet, Guntur-522001.

v Indian Bank, Main Branch, naaz Centre, Guntur-522001

v Bank of Baroda, Guntur Branch, near Hindu College, Guntur-522001.

Auditors : M/s Brahmayya&co., Chartered Accountants,

10-3-21, Sambasivapet, Guntur-522001

Cost Auditors : P.Srinivas, Cost Accountant

97/2 Rt Vijaya nagar Colony,

Besides Masab tank, Hyderabad-500 057

Registred office & Spinning division : n.H.5, Chowdavaram, Guntur-522019

Phones: 2344010, 2344017

fax: 0863-2344000

E-mail: [email protected], [email protected]

Registrars & Share transfer Agents : Big share Services Pvt. Ltd.,

306, 3rd floor, Rigt Wing, Amrutha Ville,

opp. yashodha Hospital, Raj Bhavan Road, Somajiguda,

Hyderabad – 500 082.Ph no.040-23374967

fax no.040-23370295.

Email : [email protected]

Kallam Spinning Mills Limited 22nd Annual Report 2013-14

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2 3Contents

ContEntS

S.no. Content Page no.

1 Company Information 2

2 Directors Biodata 4 - 7

3 notice to Shareholders 8

4 Director’s Report 11

5 Management Discussion and Analysis 24

6 Corporate Governance Report 27

7 Managing Director & Chief financial officer Certificate 35

8 Auditors’ Certificate on Corporate Governance 35

9 Independent Auditors’ Report 36

10 Balance Sheet 39

11 Statement of Profit & Loss 40

12 Cash flow Statement 41

13 Statement on Accounting Policies 42

14 notes on Accounts 44

15 E-Voting Instructions 63

16 Proxy form and Attendance Slip 65

17 financial Highlights 66


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4 5Directors Biodata

Sri Kallam Haranadha ReddyChairman

K. Haranadha Reddy is the founder and promoter

of KSML and presently he is acting as non Executive

Chairman of the Board. He is aged about 78 years,

holds a Masters Degree in Arts and graduate in Law.

He has about 49 years of rich experience in cotton

and spinning business. further he got good

experience in the Ginning, pressing, oil Mills,

Chillies, Rice Business etc. He has associated with

the company since its inception.

Sri K.Haranadha Reddy is a director on the Board of

M/s Kallam Housing and Real Estates (P) Ltd. He is

not a member of any committee within the meaning

of clause 49 of the listing agreement with the stock

exchanges.

Shri K. Haranadha Reddy is also a Philanthropist. He

started Kallam Academy of Educational Society, in

the name of “Kallam Haranadha Reddy Institute of

technology” in Chowdavaram. Every year he gives

education scholarships to poor students.


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4 5Directors Biodata

Sri P.Venkateswara ReddyManaging Director

Mr. P.V.Reddy is the Managing Director of KSML

aged 63 years. Mr. P.V.Reddy, hailing from an

agricultural family, is having lot of dedication,

commitment and hard work and a much disciplined

personality. He has over 40 years of experience in

Cotton, Ginning, Pressing and Spinning. Mr

P.V.Reddy handles purchase of Raw Cotton and

looks after all the Civil construction activity of the

company.

Sri G.V. Krishna ReddyJoint Managing Director

Mr. G.V.K. Reddy is the Joint Managing Director of

KSML and aged 57 years. He is a graduate in

Mechanical Engineering with distinction from

Andhra University and also University 1st Rank

Holder. He is post graduate in Marine Engineering

from Royal naval Engineering College, Plymouth,

UK. He has served in Indian navy in various positions

and took premature retirement as commander to

start the family business of spinning in 1993. He has

extensively toured of India with chairman to select

suitable machinery for the spinning unit in 1993. He

organised construction of spinning plant and

erection of machinery in a record time. He also

played a key role in organising public issue of the

company in 1995. Mr. G.V.K. Reddy takes active part

in day to day management, manufacturing,

technical and laisioning with financial Institutions,

banks, other Govt. Departments of the company. He

is responsible for Hydro Electric plants operation

and weaving & Dyeing unit.


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M.V.Subba Reddy is the whole time director of KSML

aged 57 years. He is associated with the company

since 1996 as purchase in charge (raw material) He is

post graduate in commerce. He gained excellent

knowledge in procurement of raw material sales of

yarn and waste. He is also having experience in

Accounts and looks after day to day administration of

office, Accounts Department, Purchase of Raw

Material for Ginning Unit.

M.R.Naik is a non-Executive Independent Director

of KSML. He is aged about 76 years retired as IAS

officer, he served the community in various

capacities in central and state Goverment

organization and also served as a member in the

consumer forums constituted by the state

government and rendered valuble judgments in

favour of consumers on serveral complaints came

before for hearing. His knowledge and experience

will be of great help to the company complying

with various government and other institutional

rules procedures and regulations.

V.S.N.Murthy is a nominee director of IREDA. He is

aged about 74 years. He is a post graduate in

commerce from Andhra University. He worked 7

years in M/s Singareni Collieries Ltd. He joined in

1970 in APIDC as a Chief Accountnat and served for

27 years holding different positions in the Accounts

and finance Division. He retired in the year 1997 as

Chief General Manager (financial Services) He is the

Chairman of the Audit Committee. He takes keen

interest in analysing the Balance Sheet, advising the

company in expansion programmes.

Sri M.V.Subba ReddyWhole time Director

Sri M.R. NaikDirector

Sri V.S.N. Murthynominee Director of IREDA


6 Directors Biodata


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Mr. A.Krishna Murthy is a non-Executive Independ-

ent Director of KSML. He is aged about 73 years, is a

post graduate in law. He was selected as Asst. La-

bour officer through Group-II-A, conducted by

Andhra Pradesh Public Service Commission in 1966.

He has retired as Joint Commissioner of Labour, in

Labour, Employment & training in 1999, after ren-

dering 33 years of service in various capacities. He is

practicing as Labour Law consultant and Advocate

at Guntur for last 14 years. He has rich experience in

the fields of Labour Law, Industrial Law Human Re-

sources and personal Administration.

Mr. S.Pulla Rao is a non-Executive Independent Di-

recotr of KSML. He is aged about 69 years. He is a

Commerce Graduate from Andhra University. He

joined in Indian Revenue Service and retired as Joint

Commissioner of Income tax in June 2005 after ren-

dering about 40 years of Service in various capaci-

ties in Income tax Department. He advises the com-

pany in tax related matters.

Sri A.Krishna MurthyDirector

Sri S.Pulla RaoDirector


7Directors Biodata


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NOTICE TO SHAREHOLDERSnotICE is hereby given that the twenty-Second Annual General Meeting of the members of KALLAM SPINNING MILLS LTD will be held on Saturday, September 27, 2014 at 3.00 P.M. at the Registered office of the Company at nH-5, Chowdavaram, and Guntur-522 019, to transact the following business:

Ordinary Business1. to receive, consider and adopt the Audited Statement of Profit and Loss for the year ended March 31, 2014 and the Balance

Sheet as at that date together with the reports of the Board of Directors and Auditors thereon.

2. to declare a dividend on equity shares for the financial year 2013-14.

3. to appoint a Director in place of Shri M.V.Subba Reddy (DIn-00018719) who retires by rotation and being eligible, offers himself for re-appointment.

4. Appointment of Auditors and fix their remuneration

To consider and if thought fit to pass with or without modification the following resolution as an Ordinary resolution: “RESoLVED that pursuant to the provision of section 139 and other applicable provisions, if any, of the Companies Act, 2013

and Rules framed there under, as amended from time to time M/s Brahmayya & Co., Chartered Accountants (firm Registration no-000153S), be and is hereby re-appointed as Auditors of the Company, to hold office from the conclusion of this Annual General meeting till the conclusion of the twenty-fifth Annual General Meeting of the Company to be held in the year 2017(subject to ratification of their appointment at every AGM) at such remuneration as may be mutually agreed between the Board of Directors of the Company and the Auditors.”

Special Business5. to consider and if thought fit to pass with or without modification the following resolution as an ordinary resolution:

“RESoLVED that pursuant to the provisions of Sections 196, 197 Schedule V and other applicable provisions, if any, of the Companies Act, 2013, Shri M.V. Subba Reddy (DIn-00018719) be and is hereby re-appointed as Whole-time Director of the Company, for a period of 3 years with effect from and including June 1, 2014 on such remuneration and terms and conditions as may be agreed between the Board of Directors and Shri. M.V Subba Reddy.

6. to appoint Shri M R naik (DIN : 01628537) as an Independent Director and in this regard to consider and if thought fit to pass with or without modification the following resolution as an ordinary resolution:

“RESoLVED that pursuant to the provisions of Sections 149,152 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, read with Schedule IV to the Act, as amended from time to time Shri M R naik ( DIn no:01628537), a non executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, be and is hereby appointed as an Independent Director of the Company with effect from September 27, 2014 up to September 26, 2019.”

7. to appoint Shri S Pulla Rao (DIN : 02360239) as an Independent Director and in this regard to consider and if thought fit to pass with or without modification the following resolution as an ordinary resolution:

“RESoLVED that pursuant to the provisions of Sections 149,152 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, read with Schedule IV to the Act, as amended from time to time Shri S Pulla Rao (DIn no:02360239), a non executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, be and is hereby appointed as an Independent Director of the Company with effect from September 27, 2014 up to September 26, 2019.”

8. to appoint Shri A Krishna Murthy (DIN : 00018725) as an Independent Director and in this regard to consider and if thought fit to pass with or without modification the following resolution as an ordinary resolution:

“RESoLVED that pursuant to the provisions of Sections 149,152 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, read with Schedule IV to the Act, as amended from time to time Shri A Krishna Murthy (DIn no:00018725), a non executive Director of the Company, who has submitted a declaration that he meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, be and is hereby appointed as an Independent Director of the Company with effect from September 27, 2014 up to September 26, 2019.”

9. to appoint Smt. V.Bhargavi (DIN : 06950741) as an Independent Director and in this regard to consider and if thought fit to pass with or without modification the following resolution as an ordinary resolution:

“RESoLVED that pursuant to the provisions of Sections 149,152 and other applicable provisions, if any, of the Companies Act, 2013 and the rules framed thereunder, read with Schedule IV to the Act, as amended from time to time Smt. V.Bhargavi (DIn no: 06950741), who has submitted a declaration that she meets the criteria for independence as provided in section 149(6) of the Act and who is eligible for appointment, be and is hereby appointed as an Independent Director of the Company with effect from September 27, 2014 up to September 26, 2019.”

notice to Shareholders

Place : ChowdavaramDate : 11.08.2014

By order of the Board of DirectorsP. Venkateswara Reddy

Managing Director


8 9notice to Shareholders

NOTES :1. A member entitled to attend and vote at the meeting is entitled to appoint a proxy to attend, and vote on a poll, instead of

himself / herself and such proxy need not be Member. the proxy form is enclosed which should be deposited at the Registered office of the Company duly completed and signed, not later than 48 hours before the commencement of the Meeting.

2. the Register of Members and Share transfer Books of the Company will remain closed from September 22, 2014 to September 27, 2014 (both days inclusive).

3. the accounts, the reports and all other documents required under the law to be annexed thereto will be available for inspection during working hours at the Registered office of the Company on any working day prior to the date of the Annual General Meeting.

4. Dividend recommended by Directors, if approved by the members at the Annual General Meeting will be paid on or after 2nd october 2014 to those members whose names appear on the register of members as on 27th September 2014. In respect of shares held in electronic form the dividend will be payable on the basis of beneficial ownership as at the close of 22nd September 2014 as per the details furnished by national Securities Depository limited/Central Depository service (India) Limited for the purpose as on that date.

5. Members desiring to seek any information on the Annual Accounts to be explained at the meeting are requested to send their queries in writing to the Company at the Registered office so as to reach at least 7 days before the date of the meeting to make the required information.

6. Members holding shares in physical form are requested to notify/send the following to the Company’s Registrar and transfer Agent at: Bigshare Services Private Limited, 306, 3rd floor, Right Wing, Amrutha Ville, opp. yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082 at the earliest not later than 16-09-2014.

l Any change in their address/mandate/Bank details; and

l Particular of their Bank Account, in case the same has not been sent earlier.

7. Members holding shares in the electronic form are advised to inform change in address/bank mandate directly to their respective Depository Participants. the address/bank mandate as furnished to the Company by the receptive Depositories viz. nSDL and CDSL will be printed on the dividend warrant.

8. Shareholders should note that as per statutory provisions, if the dividend amount remains unpaid/unclaimed for 7 years from the due date, the said unpaid/unclaimed amount has to be transferred to Investor Education & Protection fund (IEPf) set up by Central Government. As such the unpaid / unclaimed amount in Dividend Accounts fy 2006-2007 has been transfered to IEPf. Shareholders who have not received / claimed the said dividend are requested to claim the same before due date.

EXPLANATORY STATEMENT U/S 102 OF THE COMPANIES ACT 2013 & INFORMATION UNDER CLAUSE 49 OF THE LISTING AGREEMENT REGARDING RE-APPOINTMENT OF DIRECTORS(Pursuant to Clause 49VI (A) of the Listing Agreement with the Stock Exchanges)

Item No.3

Shri M.V.Subba Reddy is the Whole time Director/Director (finance) of Kallam Spinning Mills Limited. He is associated with the company since its inception as purchase in-charge (Raw Material). He is Post graduate in commerce having experience in cotton purchase for the last 16 years with the company gained excellent knowledge in procurement of raw material sales of yarn and waste. He is also having experience in accounts.

Item No. 5Pursuant to Section 198 and other applicable provisions of the Companies Act, 1956 read with Schedule XIII to the said Act, the shareholders at their 19th Annual General Meeting held on 27th August, 2011, appointed Shri M.V. Subba Reddy as Whole time Director of the Company for a period of three years with effect from 01.06.2011. the term of his appointment would come to an end on 31st May 2014. It is necessary to re-appointment him for another period of three years. Hence the Board at their meeting held on 27-05-2014 decides to reappointment him as Whole time Director for another period of three years on the recommenda-tion of the Remuneration Committee.

Pursuant to Section 196, 197 and other applicable provisions, if any, of the Companies Act, 2013 read with Schedule V to the said act and subject to approval of the shareholders in General Meeting, Shri M.V. Subba Reddy be proposed to re-appoint as Whole time Director of the Company for a period of three years with effect from and including 1st June 2014 on such remuneration as per the details given below:

I. Remuneration:a) Salary : including dearness and other allowances Rs. 45000/- p.m with a yearly increment of Rs. 3000/-P.A.

b) Perquisites : i) House Rent Allowance Rs. 8000/- p.m

ii) Children’s education allowance: Rs400/- p.m. per child Subject to a maximum of two children

iii) the Company shall provide a telephone at residence and Mobile phone

iv) Incentive: In order to encourage in-house ginning, a incentive of Rs. 5/-(five) for each pressed bale in the ginning unit.


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By order of the Board of DirectorsP. Venkateswara Reddy

Managing Director

c) Insurance Premium : the Company agrees to bear health insurance premium for self and family of such amount determined for sum of assured of Rs. 5,00,000/- for each self and family members.

d) the company also agrees to reimburse the additional medical expenditure upto maximum of Rs.2,00,000/- lakhs if any in-curred in excess of the insurance claim or claim not payable.

e) Accidental insurance premium : the Company agrees to bear the premium to the extent of Rs 4000/- p.af) Payment of Gratuity at the end of the tenure shall not exceed 15 days salary for each completed year of service or at the rate

as may be notified by the government from time to time.g) Reimbursement of leave travel concession for self and family once in a year subject to a maximum of one month salary.

II Minimum Remuneration :not with standing anything to the contrary herein contained, where in any financial year during the currency of the tenure of Shri M.V.Subba Reddy, the Company has no profits or its profits are inadequate, the Company will pay remuneration by way of salary, incentive, remuneration, benefits, perquisites and allowances as specifies above.Item No. 6-9

Shri M R naik , S.PullaRao and A.Krishna Murthy are Independent Directors of the Company and have held the position as such for more than 5 (five) years. It is proposed to appoint Shri M R naik , S.PullaRao, A.Krishna Murthy and V.Bhargavi as Independent Directors under section 149 of the Act and Clause 49 of the Listing Agreement to hold office for 5 (five) consecutive years for a term up to the conclusion of the 27th Annual General Meeting of the Company in the year 2019.

notice to Shareholders

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10 11Director’s Report

Director’s ReportTO THE MEMBERS OF THE KALLAM SPINNING MILLS LIMITED,

your directors have pleasure in presenting the twenty-Second Annual Report of the Company together with the Audited State-ments of Accounts for the year ended 31st March 2014.

I. FINANCIAL RESULTS :

the financial results for the year ended 31st March 2014 are summarized below :

S.no. Particulars 2013-2014 (Rs.in lacs) 2012-2013 (Rs.in lacs)

01 Revenue from operation 21464.04 18302.65

02 other income 472.95 350.59

03 Increase/(Decrease) in stock 396.53 -387.56

04 operating Expenditure 17967.06 14919.08

05 Profit before Interest, Depreciation & tax 4366.45 3346.60

06 Depreciation 780.62 757.22

07 Interest 1474.25 1404.46

08 Profit before tax 2111.58 1184.92

09 Provision for income tax

i) Current year tax 451.00 255.00

ii) Deferred tax 193.67 -314.43

10 Profit after tax 1466.90 615.49

11 Earning per share 21.41 8.98

Transfers & appropriations from the profit are as detailed below :

12 net Profit after tax 1466.90 615.49

13 Balance brought forward from previous year 3746.53 3131.04

14 Profit for appropriations 5213.43 3746.53

APPROPRIATIONS

15 transfer to General Reserve 37.00 -

16 Proposed Equity Dividend 81.21 -

17 tax on Proposed Equity Dividend 13.97 -

18 Balance carried forward 5080.25 3746.53

the turnover of the company for the period under review increase to Rs.21464.04 Lakhs as compared to Rs. 18302.65 Lakhs reg-istering a growth of Rs 117.27 percent on annualized basis. the profit before interest and taxes of the company has increased by 138.48% on annualized basis from Rs 2589.38 lakhs in previous year to Rs.3585.83 lakhs in the period under review.

II. DIVIDEND :

In view of the company’s profitable performance, your directors are pleased to recommend for approval of Shareholders a final Dividend of 12% on 68,51,100 Equity shares of the company in respect of the financial year 2013-2014.

the paid up capital of the company remained unchanged at Rs 685.11 Lakhs. Earnings per share was Rs 21.41 and cash per earning share was Rs 32.80.

III. EXPANSION & MODERNISATION :

During the financial year under review the following expansion cum modernization had taken place in various divisions.


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A) KSML RING SPINNING DIVISION :

Kallam Spinning Mills Limited started its production on 22 March 1995 with 12096 spindles. KSML is an ISo 9001-2000 Certified Company by tUV since 2000. the unit is located on Golden Quadrilateral nH-5 connecting Chennai and Calcutta. KSML today operates 56400 spindles of Ring Spinning out of which 31488 spindles are compact.

the premium quality yarn is exported to number of customers across the world. the company relies on consistent supply of international standard quality yarn. Having clear vision, well placed systems, guided by a team of professionals & steered by an enterprising management, KSML continues to diversify its products and extend its customers reach.

Product Range :

Ring Spinning yarn : ne.30s to ne.80s combed warp / compact.

tfo yarn : ne.30/2 to ne.80/2 combed warp / compact.

Production per Month : Ring Spinning yarn, 420 tons.

Maintenance of Machines :

the company strictly follows all scheduled activities which are routine and preventive activities are followed as per its documented plans in quality manual. on regular basis internal system audits as well as machine audits are carried out to ensure the effectiveness of the preventive maintenance. the mill follows machines maintenance as per SItRA recommendation and as per its own experience. the maintenance activity is given at most priority. All the spares are replaced as per machine manufacturer’s suggestion and are purchased directly from the Machine manufacturers to get quality parts. the mill replaces capital machines on regular basis with the latest technology.

Quality Control Measures :

Raw material inspection will be carried out on Uster HVI Spectrum and Uster Afis Pro -2 for 2.5% SL, uniformity, MIC, Strength, Short fiber content % and neps /grm. Bale management system is followed for consistent superior yarn quality, and for this, cotton stock required for minimum 5 – 6 months is maintained. Carding and combing process optimized for nRE of 75% to 85% and 65% to 70% respectively. RIEtER D35 /D40 draw frames are maintained for a % less than 0.50. In ring frame breakages are maintained below 5 to 6 breaks per 100 spindle hour. In autoconer utmost care is taken for achieving 85% splice strength with defect-free packages. Apart from in process inspection system, mill has adopted very stringent final inspection procedure before dispatching yarn to its customers.

We maintain regional quality test center, do extensive testing of cotton yarn for mills in and around Guntur. the quality testing dept is a profit center on its own.

B) KSML Open End Spinning Division :

KSML established its open End unit in the year 2009-10 with an initial capacity of 1248 Rotors. the total Rotors capacity of open End Unit was increased to 2912.

KSML have proved its oE yarn quality in the international market and have continuous demand in the market. Repeated orders are getting continuously. the premium quality yarn is exported to number of customers across the world. the company relies on consistent supply of international standard quality. Having clear vision, well placed systems, guided by a team of professionals and steered by an enterprising management. KSML continues to diversity its products and extend its customer reach.

Product Range :

oE yarn : ne10s to ne20s

tfo yarn : ne oE 20s/2

Production Capacity : 18000 kg / day.

Consistent commitment to high quality standards and innovations has been the secret of success. Superior open end unit ensures the supply of consistent quality yarn to manufacture the cloth.

C) KSML Ginning Division :

KSML started its Ginning Division in March 2011 with 24 ginning machines. these ginning machines are increased to 28 nos. It has most modernized Automatic bale pressing unit and auto seed booster compressor to seed storage tank. this is one of the best and most modern tMC units in entire Guntur district.

Machinery Infrastructure :

Roller Ginning : nipha

Auto Seed Boosting & Collection : Auditya Quality

Automatic Bale Press : Karunanand

the Ginning Division has capacity to press 200 bales /day and 50,000 bales in a year.

Director’s Report


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D) HYDRO ELECTRIC DIVISION :

our company has three hydro electric plants with 4.0 MW capacities at nelakondapally Mandalam, Khammam District of Andhra Pradesh. these plants are on 16th & 17th branch canal of nagarjuna Sagar project left main canal. the canal flows for 7 to 8 months in a year. typically the canal is opened in Aug/Sep and closed by end April. the first two projects of 0.8 MW and 1.6 MW were commissioned in Jan 2002 and third hydro electric plant of 1.6 MW capaciting March 2011. All the generators produce electricity at 6.6 KV voltage level. the generated voltage is enhanced to 33 KV by a power transformer and fed to the state electricity grid. the hydel power generation solely dependent on the canal water flow. the 0.8 MW hydro electric projects is financed by IREDA, new Delhi and remaining two nos. of 1.6 MW hydro electric projects are financed by Andhra Bank. We have good electrical and mechanical engineering team at the hydro electric plants. they ensure the availability of the plant by more than 98% when water is flowing in the canal. During the financial year 2013-14 we have generated 1,15,21,954 Units. out of the generation 70% of the units are wheeled and consumed in spinning mill and 30% of the units are sold to AP nPDCL.

E) WEAVING UNIT :

the Company had completed the civil work for the 250 Looms Project at Kunkupadu village, Addanki mandalam, Prakasam district, Andhra Pradesh. the Project cost is 146 crores and Indian Bank had sanctioned a term loan of Rs. 106.92 crores.

our plant capacity of production is one Lakh meter per day of woven fabric including 70% yarn dyed shirting and 30% of bottom weight fabric. We have the state of art machineries in weaving preparatory, weaving loom shed and sophisticated testing equipment and instruments aimed at continuing to be a market leader in quality during the future years.

We, Kallam Spinning Mills Limited is one of the leading textile manufacturers. We create emotions. our possibilities of fabrics are boundless, such as Dobby yarn dyed shirting, fabrics with cotton 100% and blended with lyrcra stretch, polyester, nylon, Linen and viscose fabrics. It does not which fabric or design is concerned. our name guarantees perfect workmanship at all time. the weaving industry is professionally managed with techno-commercial professionals at the helm of affairs.

We have the state-of-the-art machines from various leaders of manufacturers around the world. We have procured from the countries of Belgium, Japan, Swiss, Spain, German, China and Italy.

WEAVING PREPARATORY

We have plan to install the following type of machines for our green field weaving project.

Karlmayer Direct warpping Machine Prashanth Gamma tex Sectional Warpping Machine

1. Direct warpping Machines (2 no’s)

a) Karlmayer - Germany with 784 creel and PLC controlled

b) Prashanth West Point India with 690 creel and PLC controlled

2. Sectional Warpping Machines (2 no’s)

a) Prashanth Gamma tex: Indo – Italy collaborated with fully automatic microprocessor control and lasertonic system.

3. Sizing Machine (2 no’s)

➥ Karlmayer – Germany, with 20 beams creel and beam to beam

Director’s Report

Prashanth weat point direct warpping


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sizing capacity & Prashanth west point US collaborated width beam to beam sizing for yarn dyed shirting.

4. Automatic Drawing in

➥ Staubli Delta-110-fully automatic with camera control and 100% fault free machine.

➥ this is the world’s no.1 machine for auto drawing. It saves lot of man power and time.

WEAVING LOOM SHED

1. PICANOL OMNI PLUS SUMMUM AIRJET (102 no’s)

High speed air jet loom with 1150 RPM capacity to produce 300 mtrs to 650 mtrs in a loom per day as per pick density. these are Belgium made machines. these are the state of art machine for producing the 100% cotton and blended with polyester, viscose, linen and Lycra fabric. the loom working width is 190 cm. and it has 800mm & 1000mm beam flanges. the machine will have very sturdy side frames and back rest systems to match with our requirements for producing bottom weight and yarn dyed shirting. Picanol omni plus Summum is the most advance loom with sumo motor and ELSy motion, cramming motion, multiple weft insertion and Lycra Stretch Systems. SUMo motor is the pattent righted for Picanol, since the sumo motor will work with software control to increase and decrease the RPM within a fraction of a minute. Whereas the old system stake minimum half an hour to reduce or increase the speed changing the pulleys. ELSy motion is the electronic selvedge motion with separate control of selvedge of ends to bring more designs in selvedge alone. Picanol is the only loom in the world which will have this system cramming motion is the most advanced technology to control the take up motion to bring the exclusive design in weft way. this Summum brand is running one more special advantage in filling cutter for multi-color weft control

Karlmayer Sizing Machine Staubli Delta Automatic Drawing

Picanol omni plus Summum Airjet

Director’s Report


14 15

facility. this will work in different timings of weft filling according to the color and count varieties. the machine works without belt drive to ensure the zero defects in the fabric. Where the all other brands will have belt drive only.

2. PICANOL OPTIMAX RAPIER LOOMS (42 no’s)

this is the most modernized Belgium made loom with 20 shaft dobby made by Staubli-Swiss. this machine is more suitable rapier technology to produce endless colors in wrap way and 8 colors in weft way. 20 shaft dobby motions is suitable for any critical dobby yarn dyed shirting fabrics. the rapier technology with flexible drive system to ensure the zero breaks down and to increase the utilization. Picanol optimax rapier looms are most sophisticated looms of rapier weft insertion followed by their earlier types of Picanol, GtM, GtX, GtMAS, GAMMA and GAMMAX. this machine is also having Sumo motor, ELSy selvedge crank motion, multiple weft insertion and so many other facilities like touch screen micro software to against the settings according to the qualities. the machine has three set cards to transfer the settings from one loom to another loom and

Picanol optimax Rapier looms

Director’s Report

preserve the settings exclusively. the loom installed RPM is 650. All dobby weave fabrics as well normal yarn dyed products may be produce with zero defect.

3. TOYOTA JAT 810 AIR JET (104 no’s)

this is toyota-Japan make who are the leaders in loom manufacturers in last two centuries. this is high speed air jet technology looms which is suitable for yarn dyed shirting, bottom weight and suiting with 100% cotton and blended with polyester, linen, nylon, viscose and lyera stretch fabrics. toyota first time in India offering JAt 810 Air jet looms to produce 380 to 700 mtrs per day in one machine. this machine is having special feature of crank to non-plain fabric separately, also we have 7 shafts and 1681 type Staubli cam box attachment to run various weave designs like twill, drill, sateen, matt & oxford etc. this is the fault free loom to produce zero defect fabric with minimum maintenance cost and maximum utilization. the toyota Air jet has earlier models like JAt 610 & JAt 710. this model JAt 810 is more beneficial for air consumption control by their “P” monitor attachment. Also the machine has very friendly software for monitoring the loom mechanical setting and fabric settings. the


16 17

machine has more facilities to arrest the fabric damages like bumping mark, starting mark, etc. the special Lycra stretch system will be suitable for producing Lycra weft fabric which is most popular in the market.

Weaving Project Status as on 31st March, 2014.

the company has commenced trial runs, some machinery is yet to be received and Permissions from various Govt agencies and Govt Departments to be received.

Machine Installed : As on 31.03.2014 the company had commenced trial runs on the 40 Looms, Direct Warping machine, and Sizing Machine.

Machinery Yet to be Received /Installed : Preparatory : a) Direct Warper b) Sectional Warper-1

c) Sectional warper-2

d) Beam to beam sizing Machine.

e) Auto Drawing in Machine.

f ) Reed Cleaning Machines.

g) Rewinding Machines.

Weaving Loom Shed : a) Picanol Airjet Looms-62 Looms b) toyata Airjet Looms-104 Looms

c) Picanol Rapier Looms-42 Looms

Inspection Machines : a) Inspection machines-12 nos b) Lab testing Machines.

Winding Machines : a) Cone Winding Machines. Humidification Plants : a) All Six Humidification Plants from Luwa. Ducting and False Ceiling : a) the Ducting and false Ceiling yet to be completed. Boiler : a) Boiler is yet to be received and installed.

toyota JAt 810 AIR JEt

Director’s Report


16 17

Air Compressors : a) Centri fugal Compressors ZH7000 2nos to be Received installed from Atlas Copco. Trolleys : a) trolleys are yet to be received/installed.

Permissions from Various govt agencies and Govt Departments:a) Pollution Control board is yet to give Cfo for plant commercial operation. they have only given CfE for installation and trials.b) Inspector of factories had given permission for installation of machinery and they are yet to give permission for commercial production.c) Labour Department Permission yet to be given for commercial operation.d) Industries Dept. Permission from industries dept. for commercial production is yet to be given.

Machines are put into trial, Quality Production is yet to be established.

F) DYEING UNIT:

the Company had taken up dyeing of cotton yarn 5000 kgs per day production. the project is being implemented at cost of Rs. 12.5crores and Bank of Baroda is financing Rs.9.90 crores by means of term loan.

1. PROJECT CAPACITY /EQUIPMENT

DYEING – 11 MACHINES FROM 3 KGS TO 500 KGS/MACHINE

the project is catering to yarn dyed shirting in weaving and will require small to large quantities of dyed yarn in various shades, depending upon the customer order. We have facility to run the dyeing vessel from 100% to 50% capacity without change in MCR ration with air pad technology.

Each machine has 2 carriers are in the machine & second ready for next loading. Each carrier has several spindles and maximum of 10 cones /spindle can be loaded based on the machine capacity. We have scheduled dyeing Machines; with a capacity of 2110 kgs /load. Based on an average of light/medium, dark shades & bleach, we will be able to dye 2.5 lots/day of 24 hours. thus the maximum capacity of plant of 5275 kgs.

2. HYDROEXTRACTOR-DETTIN -ITALY

Cotton after wet dyeing usually has moisture and has to be squeezed or extracted by centrifugal rotation of the material. Earlier technology was to dump all cones into a perforated basket and rotate at high speed, thus removing around 50 % moisture and retaining 50% to be dried on the radio frequency drier. the cones are loaded onto individual cone spindles and each cone rotates at high speed on its own axis, thus achieving same as earlier results, but without de-shaping the cones, as it is not manually handled. the capacity of BERtA 36 model matches the dyeing capacity of 275 kgs/hr. the machine operates continuously.

3. RADIO FREQUENCY DRYING.

Subsequent to dyeing and extraction on dyeing machine, the moisture content is to be brought down from 50% to 10% and we need to dry the yarns. Earlier drying was done by passing steam through the cheeses, which was very expensive and time consuming. We have adopted the latest Radio frequency system, wherein the drying is carried out by acting only on moisture at a particular frequency. Although this consumes high power, [105 Kw] ,the yarn strength does not reduce as in older technology and the process is continuous and instantaneous. the capacity is matching our dyeing requirement of 275 kgs/hour.

Director’s Report

Hydro extractor machines

Radio frequency


18 19

4. AUTO DYE WEIGH & AUTO LIQUID CHEMICAL DISPENSING

[ ELLIAR –AUTO LIQUID DISPENSING]

Until recently all dyes and chemicals were manually weighed, prepared and dispensed. this manual activity gave scope for errors and thus added one more variable for shade differences between lots. over last few years there has been lot of work on auto dispensing, and it has been observed that in addition to reducing costly errors in weighing, there is atleast 10 to 15% savings in chemicals by avoiding spilling and excess use due to approximations. Also the auto system is connected to online system, which indicates real time, stock, consumption; re-order levels highlighting etc reducing clerical work and consequent errors. By going for bulk dispensing we also save in getting chemicals in larger containers instead of smaller cans manually.

the bulk auto dispensing is mainly meant for savings, less manual intervention apart from accuracy. In case of laboratory auto dispensing tecnorama mentioned separately in this write it is mainly for accuracy at very low scale levels of few milliliters.

We also have gone for semi - auto dye weighing wherein the actual weighing of dyes is done automatically and errors avoided by means of bar-coding of dye drums and real time stock maintenance.

However we need to dispense the dyes after dissolving & preparation manually onto the individual dye machines.

5. DYED CONE REWINDING

Subsequent to the R.f. Drying ,the yarn cones are unloaded, weighed, checked for evenness of dyeing are rewound as soft packages on Schlafhorst auto-coners, so that it is ready for warping or for weft insertion in weaving section. We need around 5 machines of 60 spindles each for our capacity and need segregation of each machine, to avoid fluff contamination of one shade onto the other. It is helpful if humidification air changes are provided, so that fluff is going into the return trench and not flying around in the winding area.

6. LABORATORY QUALITY CONTROL

Subsequent to dyeing, drying, we need to check various parameters for fastness of dyeing.

We need to carry out following checks.

a. WASH FASTNESS TESTS-

Here we simulate the domestic washing in a wash tester wherein the volume of water, quantity of soap used, temperature of washing etc are controlled based on the level of fastness required. the dyed sample is sandwiched between two scoured white standard on both sides, and after washing the comparison of staining of the adjacent whites is assessed by a standard GREy SCALE and rating of fastness given [pass/fail]

b. RUBBING OR CROCKING TEST -

Here the dyed sample is rubbed onto a white standard fabric 20 times with controlled pressure and the staining on the adjacent white is assessed and rated. the same fastness can be done as dry rub fastness and wet rub fastness. All tests are simulating extreme conditions

Director’s Report

Auto dye weigh

Dyed cone rewinding

Luwa humidication


18 19

of customer use and are constantly upgraded based on new end user requirements.

c. PERSPIRATION FASTNESS

We use a perspirometer, wherein the fastness to human perspiration is tested by using certain chemicals which match the perspiration properties synthetically. there are acid and alkaline perspiration chemicals .Based on the diet of the person [vegetarian or otherwise] and also ethnicity of the people, there are alkaline or acidic perspiration. Both are tested in all cases and rated.

d. LIGHT FASTNESS –

It is common that certain shades fade to sunlight exposure than others. this is tested by simulating sunlight over long periods by Xenon lamps of high energy and the test takes 4 to 8 hours but gives effect of several days of light exposure through sunlight.

the light fastness is purely dependant on type of dyes used, and we will select suitable dyes of high light fastness. once selection is done, there is no need to test each time. It is not process related. Generally light shades have less fastness compared to darker shades and thus tests are done at various depth levels.

7. SHADE MATCHING EQUIPMENT IN LABORATORY.

a. INFRA RED DYEING OF 5gm to 20 gm SAMPLES

Before going for bulk dyeing, there is a lot of home-work done at the Laboratory stage. A few decades back dyeing was considered as a skill and experience was very critical to the results. However with advent of technology and electronics, robotics etc. most of the manual functions like weighing dyes / chemicals ,dissolving the same ,controlling of dye process temperature, time of treatment etc. thus many of the manual errors have been eliminated. However despite all this experience and systems plays a very important part in achieving high quality dyeing results. We still cannot control many parameters within the dyeing process, especially selection of dyes, chemicals, compatibility, keeping in mind the cost and time of process.

the first step before bulk dyeing is to set up a recipe of dyes & a process sequence. for this we start with dyeing 5 gm hanks in a pot on InfRA RED DyEInG LAB MACHInE. Here we add dyes in certain proportions based on base data and experience, and have to carry out several iterations to come close to customers target shade. Initially it takes more effort and as we build up more recipe we will reduce the iterations, since we can bank upon past lab data.

b. COMPUTER COLOR MATCHING.

During last few decades’ lot of work has been done on measuring color in the visible regions of human eye. this has enabled to quantify color based on some mathematical values, considering human eye, light source under which it is measured and the color of target. Color is described in terms of hue [tone] depth [darker/lighter] and chroma [brightness/dullness] With these broad parameters color is measured and described by delta H, L AnD C[ difference in hue, depth and brightness] . the cumulative value is described as DELtAE oR CoLoR DIffEREnCE BEtWEEn StAnDARD AnD SAMPLE DyED. Based on the calibrations of various dyes being used, the CoLoR MAtCHInG CoMPUtER predicts various recipes purely mathematically. We then fix limits of metamarism, compatibility of dyes fastness characteristics etc and the zero in to a few practicable recipe and carry out 5 gm samples on IR DyEInG in lab. We then also get corrected recipe of the samples. this if used in conjunction with experience, can reduce the iterations needed for reaching a target shade. the same computer can be also used for bulk dyed lots and is a very helpful tool for the dyer to reduce errors and time of process. It is generally observed that if system is used diligently, substantial savings in dyes is possible compared to manual predictions.

c. AUTO WEIGHING, SOLUTION MAKER, DISPENSING, AND DYEING – TECNORAMA-ITALY

Great efforts are made in last few decades to achieve perfection in the laboratory, so that we can achieve near perfection in bulk dyeing. At present the tECnoRAMA SyStEM has succeeded in carrying out all the manual functions except loading and unloading the samples. thus a good number of error possibilities are minimized in laboratory. As seen in InfRA RED DyEInG of 5 gm sample the flow characteristics are different from a package or cone. Also a 5 gm Sample is too small to be scaled up to 25 kgs or higher bulk lots. As such it becomes essential that we carry out ̀ 100-200 gm cone samples, which exactly simulates the thermodynamic flow characteristics of bulk package dyeing with In to oUt and oUt to In fLoW with fixed trimmings of interchange. thus on tECnoRAMA , we can get much closer results and can then directly transfer the recipe and process to 25 kg or 50 kg machines. further tuning can be done on bigger machines based on this.

8. EFFLUENT TREATMENT OF DYED LIQOURS.

this is an area of great concern for maintaining a proper environment and avoid pollution of the environment around us. During the last few decades ,the laws on pollution have been less stringent ,and even so the various dyeing units have flouted these norms and caused immense damage to the water to the water table below ground by drawing of excess ground water have increased the harmful parameters. off late, this has led to the Pollution Authorities enforcing more stringent norms. Earlier it was common that part of the less harmful portion of effluent was allowed for ground discharge within the units premises for cultivation after some minor chemical treatment. However now they have introduced ZLD [ZERo LIQUID DISCHARGE] which means no water is allowed to be discharged into ground even after treatment. In other words we have to

Director’s Report


20 21

excessively treat the effluent, such that it is almost like fresh water and fit to be reused into process again. thus our drawing of ground water is hardly required, maintaining the ground table and quality of sources.

We have now decided to treat 180 m3/day partially [biological treatment, filtration] and use for our plantations at site. the remaining HtDS effluent [high total dissolved solids] stream of 150 m3/day will be further treated by ultra-filtration, reverse osmosis -2 stages, nano-filtration etc to basically recover good water at each of these stages and bring down the water to the bare minimum for the very expensive multistage evaporation [MEE].thus from 150 m3/day we narrow down to only 20 m3/day for evaporation. After lot of deliberations with some of the best Italian and Indian effluent plant suppliers we finally decided that in terms of technology, quality of instruments and components, experience with Indian norms and conditions, ConfIDEnt EnGInEERInG PVt LtD. [CEPL] on a total turnkey basis to be completed in 6 months including civil works. they are also responsible for achieving the final results as per the norms of APPCB. Also we have entered into a operations/maintenance contract for 5 years, so that we can concentrate on the core production area of dyeing and avoid divided attention.

9. MULTI-STAGE EVAPORATOR

As mentioned earlier subsequent to reducing the effluent volume to 20 m3/day, we need to evaporate the same by going through 3 stages of evaporation. Since this is a high steam consuming process, we have gone for a MEE from KEtAV ConSULtAntS, wherein we use fresh steam only at first stage evaporation and reuse the steam. Additionally we have installed tVR [tHERMo VAPoUR RECoMPRESSoR] wherein by means of venturi the steam pressure is enhanced and saves the consumption. We have gone for total automation and PLC to reduce labour and manual intervention. We are also going for turnkey basis, so that the execution will be taken care by suppliers.

After evaporation, we wil l be able to recover 96 % of fresh water for process and 2 m3/day of salt slurry passes through a Pusher Centrifugal [mechanical extraction] which finally gives us salt with only 10 % moisture, to be collected and disposed off through Ramky who are designated effluent waste management concern.

the MEE is located between boiler and EtP so that we minimize the pipelines and to enable handling all aspects economically.

IV.FIXED DEPOSITS :

your company has not accepted any public deposits from the public, except some of the unsecured loans brought by promoters Directors and their relatives and as such no amount on account of principal or interest on public deposits was outstanding on the date of the Balance Sheet.

V.FUTURE OUTLOOK :

the company is projecting Rs 250 crores turnover during the current financial year. the o.E. Unit and Ginning Units are expected to add bottom line to the company.

VI.DIRECTORS :

In accordance with the provisions of the Companies Act, 1956 and Articles of Association of the Company Sri.M.V.Subba Reddy will retire by rotation at the ensuing Annual General Meeting and being eligible offers themselves for re-appointment. none of the Directors of the Company are disqualified for being appointed as Directors as specified in Section 274 of the Companies Act, 1956.

VII. ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE :

Additional information on conservation of energy, technology absorption, foreign exchange earnings and outgoings as required to be disclosed in terms of 217(1) (e) of the Companies act, 1956 read together with the companies (Disclosure of particulars in the Report of Board of Directors ) Rules, 1988 is annexed herewith and forms part of this report.

VIII. PARTICULARS OF EMPLOYEES :

there were no employees coming under the purview of Section 217 (2A) of the companies Act, 1956.

lX. AUDITORS :

the Statutory Auditors M/s. Brahmayya & Co., (Regd.no.000153S) Chartered Accountants, Guntur, retire at the ensuring Annual General Meeting and have confirmed their eligibility and willingness to accept office , if reappointment. your Directors propose the reappointment of M/s Brahmayya &Co., as Statutory Auditors to hold office until the conclusion of the next Annual General Meeting of the Company.

X. COST AUDITORS:

Pursuant to the provisions of the Section 233B of the Companies Act, 1956, the Board of Directors of your Company have re-appointed subject to the approval of the Central Government Mr. P. Srinivas Cost Accountant, Hyderabad to carry out an audit of Cost accounts of the Company in respect of textiles for accounting year ending 31st March 2014.

XI. CORPORATE GOVERNANCE :

your Directors are pleased to inform that your Company has implemented all the stipulations prescribed under clause 49 of listing agreement with the stock exchange(s). A Certificate from the Statutory Auditors of the Company in line with Clause 49

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year Date of Declaration of Dividend Due date for transfer to IEPf

2006-07 10-09-2007 15-10-2014

2007-08 20-09-2008 25-10-2015

2008-09 19-09-2009 24-10-2016

2009-10 18-09-2010 23-10-2017

2010-11 27-08-2011 02-10-2018


for and on behalf of the Board of DirectorsP. Venkateswara Reddy

Managing Director

Director’s Report

is annexed to and forms part of the Directors Report.

XII. REGISTRAR’S AND SHARE TRANSFER AGENTS :

your Registrar and Share transfer Agents of the Company M/s Big share Services Private Limited, 306, 3rd floor, Right Wing, Amrutha Ville, opp. yashodha Hospital, Raj Bhavan Road, Somajiguda, Hyderabad – 500 082.

XIII. CASH FLOW ANALYSIS:

In conformity with the provisions of Clause 32 of the Listing agreement the Cash flow Statement for the year ended 31.03.2014 is annexed hereto.

XIV. DIRECTORS RESPONSIBILITY STATEMENT :

Pursuant to the requirement under Section 217(2AA) of the Companies Act, 1956 with respect to Directors responsibility statement, it is here by confirmed that;

a) In the preparation of the annual accounts, the applicable Accounting standards have been followed, in the opinion of the Board of Directors, along with proper explanations for material departures if any;

b) the directors have selected such accounting 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, 2014 and the profit of the Company for the year ended on that date;

c) the directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the companies Act, 1956 for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; and

d) the directors have prepared the annual accounts on a ‘going concern’ basis.

XV. TRANSFER OF UNPAID AND UNCLAIMED AMOUNT TO IEPF :

Pursuant to the provisions of section 205A(5) of the companies Act 1956, the declared dividends which remained un paid or unclaimed for a period of seven years, have been transferred by the company to the Investor Education and Protection fund (IEPf) established by the Central Government pursuant to section 205C of the Said Act.

the following are the details of dividends paid by the Company and respective due dates for transfer of unclaimed dividend to IEPf.

XVI. ACKNOWLEDGEMENTS:

your Directors wish to express their grateful appreciation for the assistance, co-operation and support received from Bankers, financial institutions and various other Departments of both State and Central Governments. your directors also wish to convey their appreciation for the personnel as well as collective contribution and the hard work of employees across all levels without their commitments dreams and hard work. Shareholders appreciation of the managements efforts at the General Meeting of the Company and otherwise is also a great fillip to strive for better performance year after year.


22 23

ANNEXURE - I TO THE DIRECTORS’ REPORT :Information as per Section 217(1) (e) read with the Companies (Disclosure of Particulars in the report of the Board of Directors) Rules, 1988, and forming part of the Directors’ Report for the year ended March 31, 2014.

A. CONSERVATION OF ENERGY :

Conservation of energy continues to be accorded high priority. our R&D team continuously reviews ongoing processes.

Form A: (Form for disclosure of particulars with respect to conservation of energy)

S.No. Particulars Current Year Previous Year

1. Electricity

a) Purchased units (KWH) 31846505 30464710

total amount in Rs. 194963353 177803886

Rate per unit Rs. 6.12 5.83

b) Own Generation

i) through Diesel Generator

Units Generated (KWH) 1500 11250

total Amount Rs. 25000 190125

Cost per unit Rs. 16.67 16.90

ii) through Steam Generation -- --

iii) through Hydel Generation

Units generated – KWH 11521954 755830

Units consumed – KWH 7393642 3823853

total Cost Rs. 39186277 17207341

Cost per KWH Rs. 5.30 4.50

2. Coal -- --

3. Furnace Oil

4. Other Internal Generation

b) CONSUMPTION PER UNIT OF PRODUCTION (NO. OF UNITS/KG.)

1 Electricity 1.49 1.88

2 Coal -- --

3 furnace oil -- --

4 Hydel -- --

B. TECHNOLOGY ABSORPTION, ADAPTAION AND INNOVATION:

1. Efforts, in brief made towards technology absorption, adaptation and innovation Continuous efforts are being made to-wards technology absorption, adaptation and innovation. Quality being the thrust area, the company has taken effective steps to continue to improve quality to compete with international quality standards.

2. Benefits derived as a result of the above efforts :

Improved capability and productivity to meet the customer requirements.

3. Imported Technology :

--- nil ----

C. FOREIGN EXCHANGE EARNINGS AND OUTGOINGS:

foreign exchange earnings during the year under review amounted to Rs 3905.27 lakhs. the foreign exchange utilized dur-ing the year amounted to Rs 27.40 lakhs.

Director’s Report


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24 25Management Discussion and Analysis

MANAGEMENT DISCUSSION AND ANALYSIS :1. INDUSTRY STRUCTURE & DEVELOPMENT:

the core business of the company is manufacture and sale of cotton yarn and cotton fabrics. the management discussion and analysis given below discusses the key issues of the cotton yarn spinning and weaving sector.

a) Industry structure

textile industry has an overwhelming presence in the economic life of the country. Apart from providing one of the basic necessities of life, the textile industry also plays a pivotal role through its contribution to industrial output, employment generation and the export earnings of the country. It contributes about 14% to the industrial production, 4% to the GDP and 17% to the country’s export earnings. It provides direct employment to over 45 million people. India earns about 27% of its total foreign exchanges through textile exports. the textile sector is the second largest provider of employment after agriculture. Hence, growth and all around development of cotton and cotton industry has a vital bearing on the overall development of the Indian economy.

b) Industry performance

India’s share of the global textile industry is predictable to grow from 4.5% to 8% by 2012-13 and the share of apparel in the export basket is to reach US$80 billion by 2020. A Vision 2010 for textile formulated by the government after exhaustive interaction with the industry and export promotion councils to capitalize on the positive atmosphere aims to increase India’s share in the world’s textile trade from the current 4.5% to 8% by 2013 and to achieve export value of US $80 billion in 2020. formation of 12 million new jobs in the textile sector and modernization and consolidation for creating a globally for competitive textile industry.

c) Company’s performance

the turnover of the Company for the year under review increased to Rs. 21464.04 lakhs as compared to Rs. 18302.65 lakhs in the previous financial year, registering a growth of 117.27 percent. the profit before interest and tax of the company has increased by 138.48 percent on annualized basis from Rs. 2589.38 lakhs in previous year to Rs. 3585.83 lakhs in the current financial year. the net profit for the year under report was affected and registered a increased to Rs. 1466.90 lakhs from Rs. 615.49 lakhs.

your company’s Hydel power project generated power of the value of Rs 488.92 lakhs as against Rs. 194.50 lakhs in the previous year resulting a marginal increase of 151.37%.

d) Strategies and Future plans

the Company’s spindle age capacity was 56400 spindles, open End Plant and Ginning Division is added considerable revenue to the Company. the global fabric sourcing is shifting to India, the encouragement given by Ministry of textile with tUf and one time Capital Subsidy the future shifting in fabric sourcing. the company is starting green field weaving and yarn dyeing Projects at Kunkupadu Village, Addanki Mandal Praksam District.

2. OPPORTUNITIES AND THREATS:

A SWot Analysis.

Strengths

1. the management team is well experienced with hands on experience in all areas of operations and key members of the team are able to access to trend forecasts and strategic planning at macro and micro levels

2. Since cotton sourcing is the single most important element in the spinning industry, our focus has been to develop competencies in this area. We source directly from the market and have created long-standing relationship with our suppliers. our international relationships give us the leeway to source instantly from global markets if so desirable.

3. We use the latest machines and equipment, scientifically monitor our labour productivity and have adopted a policy of constant improvement. In addition, we also use MIS tools for operating at optimal efficiency. We have provided adequate attention to many other related areas, like shipping and logistics, spare parts sourcing and financial planning to increase our overall efficiency.

4. Most of our customers are repeat customers. this is testimony to our product quality and standardization. our aim has been to always lead in the area of product development.

5. our fair policies and consistent quality have earned us significant goodwill in the markets we operate in, giving us an advantage against competition.

6. By following a proactive labour policy, we have been able to develop a workforce that identifies themselves as a part of a family rather than as mere employees. our units have enjoyed the distinction of never having suffered any labour unrest from inception.

7. With our quality yarn we can weave fabric at a lower price and better quality. We also benefited by meaning of packing cost and taxes.


24 25

Weaknesses

1. the demand pattern in the state is observed to be most seasonal.

2. there is also a disadvantage in the form of increased power tariff, fuel cost etc.

3. the product diversification in the sector is insignificant

Opportunities and Threats

though the quota liberalization has opened up bigger markets for Indian Spinning Industries, the competition from China, thailand and other countries is increasing. Any fluctuation in the cotton prices due to the vagaries of monsoon etc. and the fluctuating foreign currencies against Rupee could become a real threat to the industry at large. the rising interest cost in the country also could create pressure on the margins during the current year.

3. SEGMENTAL REVIEW AND ANALYSIS:

your company is one of the leading quality makers of 100% cotton combed yarn and fabric. the company depended mostly on exports for its business. the power generated by its Hydro Power Plants is used for captive consumption of spinning division.

SPINNING DIVISION :

During the year your company has operated at 56400 spindles full capacity. the oE plant and new Automatic Ginning and Pressing Unit had commenced its operation in during the financial year 2010-11. your Company has made balanced approach towards export and domestic market. In domestic market most of the buyers are corporate entities and they in turn export fabric ornaments. We see that maximum product value is accrued to the Company. the company relies on consistent supply of international standard quality yarn. the company had clear vision and mission, well placed systems, team comprises with expertise professionals and strategic management expertise to diversify its qualitative products.

HYDEL POWER DIVISION :

Keeping in view the outstanding performance of the Hydel project for the past five years, the company 3rd power plant had commenced its commercial operation during the year-2010-11.

During the year under review, with the plenty of water available in Krishna Basin the Hydel power generation had Increased from 7,55,830 units to 1,15,21,954 units. Most of the power generation was for the captive consumption of the spinning division.

4. RISKS AND CONCERNS:

1) Industry risk

the main twin risks in this industry, especially in the cotton yarn spinning sector, procurement prices for cotton for its quality and the yarn realisation vis a vis the cotton cost. Raw material prices, as is common with every industry, are conditioned by their supply position in the market. this problem invariably gets compounded by the impact of import duty on cotton which sometimes renders the prices uneconomical.

In the case of marketing of yarn, the price realisation depends on the demand from garment manufacturers and power loom sector. In recent times the competition from the emerging economies in the neighbouring countries such as Sri Lanka, China and Pakistan with their comfortable status endangered by the preferential treatment in USA and EU markets poses a real challenge to the textile yarn spinning units in our country.

2) Currency risk

Derivative instruments associated with import of cotton and machinery equipments and export of yarn can cause significant adverse results if not properly hedged. your company is taking the requisite ongoing steps to closely monitor the exchange rate movements.

3) Leverage risk

A company poised on expansion mode runs the risk of adverse debt leveraging which may affect its financials significantly. Realising this, a close watch is being kept on optimum utilisation of the funds raised and consequently your company does not envisage the said risk to adversely affect the company.

4) Quality risk

Quality of yarn manufactured is the single most important factor that will take a company forward in its success story. your company has been aware of the said importance from its inception and the progress that it has made through the years was mainly because of the strict adherence to the quality of its yarn which has resulted in the company reaping the best possible price for its yarn, both in the internal and international markets.

5. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY :

the company has in place well established internal control procedures covering various areas such as procurement of raw

Management Discussion and Analysis


26 27

materials, production planning, quality control, maintenance, planning, marketing, cost control and debt servicing and steps are taken without loss of time, whenever any weakness is observed, to correct the same.

Regular internal audits and checks are carried out to ensure that the responsibilities at various levels are executed effectively and adequate systems are in place. the Management continuously reviews the internal control systems and procedures to ensure orderly and efficient conduct of business. the review includes adherence to the management policies, safeguarding the assets of the company and ensuring the timely and accurate financial information.

6. HUMAN RESOURCE DEVELOPMENT :

Employees are your company’s most valuable resource. your Company continues to create a favourable environment at work place. your Company has various welfare measures both government sponsored and privately envisaged. the Company is providing good accommodation facilitates by constructing new quarters / apartments. the company also recognises 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, your company is able to attract and retain well trained and dedicated workforce. the fact that the relationship with the employees continued 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.

7. CAUTIONARY STATEMENT :

Statements in the Management Discussion and Analysis describing the Companies objectives, projections, estimates, expectations may be “forward looking statements” within the meaning of applicable security laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make difference to the company’s operations include, among others, economic conditions effecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors.

Management Discussion and Analysis


26 27Corporate Governance Report

ANNEXURE TO THE DIRECTORS’ REPORTREPORT ON CORPORATE GOVERNANCE FOR THE PERIOD APRIL 1, 2013 TO MARCH 31, 2014.

the detailed report on Corporate Governance as per the format prescribed by SEBI and incorporated in Clause 49 of the Listing Agreement is set out below.

1. Company’s philosophy on Corporate Governance Kallam’s Philosophy on Corporate Governance envisages achieving the highest standard of accountability, transparency,

integrity and equity in all its spheres and in all its dealings with its stakeholders. the Company is committed to establish and diligently follow the high standards of Corporate Governance practices in its pursuit of profitable growth and enhancement of shareholders value. Corporate Governance practices are driven by strong board oversight, timely disclosures, transparent accounting polices and high level of integrity in decision making. the company is in compliance with the requirement of the guidelines on corporate governance as stipulated under clause 49 of the listing agreement with stock exchanges.

2. Composition of Board : the Company has an optimum combination of executive and non executive Directors in accordance with the provision of

clause 49 (1) (A) of the listing Agreement. As on 31-03-2014 the Board consists of eight Directors, of which five are non executive Directors. the Company has a non-executive chairman. three Directors of the Board are executive Directors. five Directors of the Company are non-Executive directors. the non-Executive Directors bring external and wider perspective in the Board’s deliberations and decisions. the composition of board is in conformity with clause 49 of listing agreement entered into with the stock exchanges.

none of the directors on the board is a member of more than 10 Board level committees or chairman of more than 5 committees across all the listed and unlisted public companies in which he is a director. necessary disclosures regarding committee positions and other directorship held in public companies as on March 31, 2014 have been made by the directors.

the independent directors have confirmed that they satisfy the criteria of independence as stipulated in clause 49 of the listing agreement.

No. of Board Meetings held during the year along with the dates of the Meetings

During the financial year ended March 31, 2014 five Board Meetings were held on 15th April 2013, 30th May 2013, 27th July 2013, 31st october 2013, and 05th february 2014.

Attendance of each Director at the Board Meetings, last Annual General Meeting (AGM) and the number of Companies and Committees where he is Director / Member (as on the date of Directors’ Report)

Name of theDirector

Category ofDirectorship

Category ofDirector

ship

No of Board meetings Held /

attended

Attendanceat last AGM

No. of Directorships

held in all pub-lic companies

No. of committeesin position held

in other ltd. Com-pany.

Chairman Member

Sri K.Haranadha Reddy Chairman nInE 5 5 yes nil nil nil

Sri P. Venkateswara Reddy MD nIE 5 5 yes nil nil nil

Sri G.V. Krishna Reddy JMD nIE 5 5 yes nil nil nil

Sri M.V. Subba Reddy Whole time Director nIE 5 5 yes nil nil nil

Sri M.R. Naik Director I&n.E.D 5 3 no nil nil nil

Sri V.S.N. Murthy nominee Director nominee Director 5 5 no 5 1 1

Sri A. Krishna Murthy Director I&n.E.D 5 5 yes nil nil nil

Sri.S.Pulla Rao Director I&n.E.D 5 5 no nil nil nil

nInE- non-Independent and non Executive Director, nIE- non-Independent and Executive Director, I & n.E.D – Independent and non-Executive Director

Directors retiring by rotation and seeking reappointment

the information is provided in the notes appended to the Explanatory Statement under the heading “Additional information on Directors recommended for appointment / seeking re-election at the ensuing Annual General Meeting”.

During the financial year 2013-14 information as mentioned is Annexure-IA to clause 49 of listing agreement such as annual


28 29Corporate Governance Report

operating plans, budgets, financial results of the Company, materiality important litigation if any has been placed before the Board for its consideration.

Disclosure of transactions where Non Executive Directors have pecuniary interest.

none of the non-executive Directors have any pecuniary relationship or transactions vis-a-vis the Company. the directors periodically disclose their interest in different companies and transactions/contracts of the Company with such companies are taken on record in the Board Meetings.

3. Audit Committee:

a) Brief description of terms of reference

the terms of Reference of this committee cover the matters specified for Audit Committees under Clause 49 of the Listing Agreement as well as in Section 292A of the Companies Act, 1956, and are as follows:

a. oversight of the Company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.

b. Recommending the appointment and removal of external auditor, fixation of audit fee and also approval for payment for any other services.

c. Reviewing with management the annual financial statements before submission to the Board, focussing primarily on:

- Any changes in accounting policies and practices

- Major accounting entries based on exercise of judgment by management

- Qualifications in draft Auditors’ Report

- Significant adjustments arising out of audit

- the going concern assumption

- Compliance with stock exchange and legal requirements concerning financial statements

- Any related party transactions i.e. transactions of the company of material nature, with promoters or the management, their subsidiaries or relatives etc., that may have potential conflict with the interests of the Company at large.

d. Reviewing with the management, external and internal auditors, and the adequacy of internal control systems.

e. Reviewing the adequacy of internal audit function, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.

f. Discussion with internal auditors of any significant findings and follow up there on.

g. Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.

h. Discussion with external auditors, before the audit commences, the nature and scope of audit as well as have post audit discussion to ascertain any area of concern.

i. Reviewing the Company’s financial and risk management policies.

j. other matters as assigned/specified by the Board from time to time.

(b) Composition, Meetings and Attendance during the year :

the Audit Committee comprises of three Independent non-Executive Directors. During the financial year ended March 31, 2014 the committee met four times on 30th May 2013, 27th July 2013, 31st october 2013 and 05th february 2014 the attendance of the each member of the committee is given below:

At the invitation of the Company, internal auditors, cost auditors and statutory auditors also attended the Audit Committee meetings to respond to queries raised at the Committee meetings.

4 Remuneration Committee:

(a) Terms of Reference

the Company had constituted the Remuneration Committee on 26th June 2004. the broad terms of reference are to determine

Directors Chairman/Member Category No.of meetings attended

Sri V.S.n.Murthy Chairman nominee Director 4

Sri S.Pulla Rao Member I & n.E.D. 4

Sri M.R.naik Member I & n.E.D. 2


28 29

Directors Chairman/Member Category

Sri A. Krishna Murthy. Chairman I & n.E.D.

Sri M.R.naik. Member I & n.E.D.

Sri V.S.n Murthy. Member nominee Director

and recommend to Board, Compensation payable to Executive Directors, appraisal of the performance of the Managing Directors / Wholetime Directors and to determine and advise the Board for the payment of annual commission/compensation to the non-Executive Director.

(b) Composition, Meetings and Attendance during the year

the Remuneration Committee comprises of total three Independent non-Executive Directors.

The committee comprises as follows:

(c) Remuneration of Directors

the Company pays remuneration to its Managing Directors / Whole time Directors by way of salary, perquisites and allowances (a fixed component) and commission (a variable component). Salary is paid within the range approved by the shareholders. Commission is calculated with the reference to the net profits of the Company in a particular financial year and is determined by the Board of Directors at the end of the financial year based on the recommendations of the Remuneration Committee, subject to the overall ceiling as stipulated in the Companies Act. the Company pays sitting fees to all the non-Executive Directors at the rate of Rs. 5000/- for attending each meeting of the Board, and Rs.5000/- for attending each Audit committee meeting thereof.

Name of Directors Salary Benefits Commission Sitting Fees Total

Sri.P.Venkateswra Reddy 1200000 132751 2228219 - 3560970

Sri.G.V.Krishna Reddy 1200000 131084 2228219 - 3559303

Sri.M.V.Subba Reddy 426000 117737 - - 543737

Sri.MR.naik - - - 25000 25000

Sri.V.S.n.Murthy - - - 45000 45000

Sri.A.Krishna Murthy - - - 25000 25000

Sri.S.Pulla Rao - - - 45000 45000

5. Shareholders/Investor Grievance Committee

The terms of reference shall be as per Clause 49 of the Listing Agreement.

the terms of reference shall be as per Clause 49 of the Listing Agreement

1) A Shareholders/Investor Grievance Committee” to specifically look into the redressal of Shareholders’ / Investors’ Grievances and of investors such as transfer or credit of shares to demat accounts, on receipt of dividend /notices /annual returns etc.

2) the Committee functions under the Chairmanship of Mr. A. Krishna Murthy, a non- executive and independent Director. the other members of the Committee are Mr. G.V.Krishna Reddy and Mr.M.V.Subba Reddy.

3) the Company received a total of 6 complaints from its shareholders for the period 01.04.2013 to 31.03.2014, all of which were resolved within 15 days to the satisfaction of the shareholders.

4) name, designation and address of the compliance officer Mr. P. Venkateswara Reddy, Managing Director, Kallam Spinning Mills Ltd ,nH-5, Chowdavaram, GUntUR, A.P-522019.

6. Share Transfer Committee :

At present the Share transfer Committee functions with Mr. G.V. Krishna Reddy as Chairman, and Mr.P.Venkateswara Reddy and Mr. M.V. Subba Reddy, as other Members. the Committee meets frequently to approve the Memorandum of share transfers, sub-division / consolidation of share certificates, transmission of shares and issue of duplicate share certificates, which are submitted by the Share transfer Agents after completing their formalities. the committee met 8 times during the year 2013-14. Share transfers approved by the Committee are placed at the Board Meeting from time to time. During the period under review 4,500 Equity shares were transferred.

there are no pending Share transfers as on date of this Report.

Corporate Governance Report


30 31

7. Annual General Meetings :

Details of location of the last three Annual General Meetings of the Company are given below :

Date of AGM Time Place

27th August, 2011 3.00 P.M Regd. office at nH-5, Chowdavaram, GUntUR – 522 019

22nd September, 2012 3.00 P.M Regd. office at nH-5, Chowdavaram, GUntUR – 522 019

21st September, 2013 3.00 P.M Regd. office at nH-5, Chowdavaram, GUntUR – 522 019

8. Disclosures

1. Disclosures of related party transaction :

the Company places at every meeting of the Audit Committee and the Board in summary from all the transactions with related parties in the ordinary courses of business for its approval/ratification. there are no materially significant related party transaction i.e transactions of the company of material nature, with its promoters, the directors or the management their subsidiaries or relatives etc. that may have potential conflict with the interest of company at large. the Details were mentioned in point 30 of the notes forming part of the Accounts.

2. Details of non-compliance by the Company, penalties, and strictures imposed on the Company by Stock Exchange or SEBI or any statutory authority, on any matter related to capital markets, during the last three years : Nil

3. Disclosure of Accounting treatment: In the preparation of financial statements, the company has followed the accounting standards notified under section 211 (3c) of the Companies Act, 1956 and the pronouncements of the Institute of Chartered Accountants of India. the significant accounting policies which are consistently applied have been set out in the notes forming part of the financial statements for the year ended March 31, 2014.

4. Internal Cont

Documents

Annual Report 2013-14 Kallam Spinning Mills Limited 22 ...€¦ · AuditorsM/s Brahmayya&co., Chartered Accountants ... Phones: 2344010, 2344017 fax: 0863-2344000 E-mail: [email protected],