DIRECTORS' REPORT

To,

The Members,

PIONEER EMBROIDERIES LIMITED

Your Directors present the Twenty Fourth Annual Report of your Company on the business and operations for the year ended 31st March, 2016

YEAR IN RETROSPECT

Profit before Other Income, Finance Costs, Depreciation, Tax and Exceptional Items for the year stood at Rs.2,152 lacs (Rs.2,520 lacs). The net profit for the year is Rs.1,646 lacs as against a net profit of Rs.212 lacs in the previous year. The Company has generated a cash profit of Rs.1,211 lacs during the year under report (previous year Rs.1,319 lacs).

Turnover of the Company for the year under review stood at Rs.25,536 lacs as against Rs.27,155 lacs in the previous year, primarily due to drop in revenues of the Dope Dyed Polyester Yarn (DDPY) business.

During the year, the DDPY business recorded a turnover of Rs.19,221 lacs, a drop of 8.4% over previous year, essentially owing to a steep fall in prices of crude oil, its major input material. The operating profit for the DDPY business during the year stood at Rs.2,341 lacs as against Rs.2,486 lacs. The fall in operating profit was protected by a better product mix and cost control, as a result of which the operating margins for the DDPY business increased by around 30 basis points to 12.2% over previous year.

The Embroidery and Laces division showed a marginal improvement in turnover, as it rose to Rs.6,196 lac from Rs.5,875 lacs. However, due to increased competition and cost pressures, there was a significant erosion in the division's operating profits in FY16 to Rs.393 (Rs.679 lac) and operating margins to 6.34% (11.5%).

There are no material changes or commitments affecting the financial position of the Company, which have occurred between the end of the financial year and the date of this report.

TRANSFER TO RESERVES

The Board does not propose to carry any amounts to reserves.

CHANGE IN NATURE OF BUSINESS

There is no change in nature of Business of the Company.

INDUSTRY OVERVIEW

The overall textile industry recorded export earnings worth USD 41.67 bn in FY15, a growth of 3% over previous year, and was the second largest contributor to the country's overall exports during the year. Growth in exports of certain segments were high, such as handicrafts (17%), carpets (15%), readymade garments (12%), silk (13%) wool and woolen textiles (18%)

The textile sector's export-led growth was aided by lower cotton prices, falling interest rates, firm overseas demand from consuming countries, labor cost advantage over competitors and favorable exchange rates.

The government is continuing its efforts to grow the textile sector, as it contributes approximately 5% of the country's GDP and is the largest employer outside agriculture. Steps such as setting up new textile parks, textile development in North Eastern region, promotion of technical textiles, skilling initiatives in textiles, etc. are being taken to facilitate overall sector growth.

The domestic demand is likely to improve if good monsoons are witnessed, as higher consumer spending and disposable income coupled with lower interest rates are expected to bolster consumption. However, the textile and garment export sector may be negatively affected in the medium term depending upon the implementation of the Trans-Pacific Partnership, a duty-free trade agreement between 12 nations which include US, Canada and Japan, key countries to which India's textile and garment exports are substantial.

YEAR IN PROSPECT

Pioneer continues its efforts to position itself as a major player and a preferred supplier for its customers in the DDPY segment. The concentration is on value addition like twisting, doubling and air texturising of yarn, to keep away from the price structure of commodity products prevalent in the industry. Product development, improved efficiency, strengthened marketing network, etc., are being seriously pursued.

The Company is in the midst of expanding its DDPY capacity in order to meet the expected demand in the coming years. The current installed capacity of 12,000 MT is set to be increased by 6,200 MT by the year FY17-18.

Operations in the Embroideries and Laces division continue to be bogged down by older, low-speed machines, high cost of operations and competitive pressures. Increased investments are required in the business, and only after that there could be a sustained growth in revenues and profitability of this division.

A detailed review of the performance during the year is given under the section - Management Discussion and Analysis Report, and forms part of the Directors' Report.

BANK BORROWINGS

The Company's continued efforts in the previous years towards debt resolution have yielded desired results. The payment obligations under OTS arrived with State Bank of India have been completed, and with Corporation Bank are underway. The total secured borrowings as on year-end FY16 stand only at about Rs. 7,610 lac, including working capital of Rs.950 lac, substantially lower than the outstanding amount 3-4 years ago.

LISTING

The Equity Shares of the Company are listed with the BSE, NSE, and the Company has paid listing fee for the year to BSE & NSE.

The shares of the Company were earlier listed with Kolkata Stock Exchange and Delhi Stock Exchange also. However, the Company had submitted application for delisting of its shares from these Stock Exchanges in the year 2007 as approved by the shareholders in the Annual General Meeting held on 29th December, 2006.

DIVIDEND

In view of accumulated losses, the Directors do not recommend any dividend for the year.

SHARE CAPITAL

The paid up equity share Capital of the Company stood at Rs.1,854.91 lacs comprising 1,85,49,094 equity shares of Rs.10/- each as at March 31, 2016.

The Company has issued 8,50,000 Equity shares of Rs.10/- each at a premium of Rs.25/- to Edelweiss Asset Reconstruction Company Ltd. Trustee of EARC Trust-SC 23 as approved by shareholders through a resolution dated 12th March, 2015 passed by postal Ballot.

As on March 31, 2016, none of the Directors of the Company hold instruments convertible into equity shares of the Company.

EMPLOYEES STOCK OPTION SCHEME 2016

During the year under review, the Company has designed an Employee Stock Option Scheme (ESOP) for the benefit of its permanent employees. The necessary permissions for the scheme - PEL ESOP 2016 - is being obtained from members by way of postal ballot, which began on 25th April, 2016.

SUBSIDIARY COMPANIES

None of the Subsidiaries of the Company had any activity during the year.

The Company has increased its shareholding in Hakoba Lifestyle Ltd.(HLL) during the year by Rs.3,496.90 lacs, following a right issue by HLL. The Company further acquired 20,24,117 equity shares of Rs.10/- each from a minority shareholder of HLL during the year. HLL has now become a wholly-owned subsidiary of the Company.

In view of the continuous losses in its wholly-owned subsidiary, S.R Investment Ltd, Mauritius (SRIL), the Company has decided to liquidate SRIL. The liquidation process is expected to be completed in the financial year FY16-17. Accordingly, the Company has made provision for its entire investment in SRIL.

The statement of subsidiaries in Form AOC-1 (pursuant to first proviso to sub section (3) of section 129 of the Companies Act, 2013) is provided as Annexure - A to the Consolidated Financial Statement and hence not repeated here for the sake of brevity.

JOINT VENTURE

The Company had invested USD 4.96 mn. in a proposed overseas Joint Venture with M/s Super Industries DMCC, made out of FCCBs funds. As the Joint Venture has failed completely, the Company has decided to consider the investment as doubtful of recovery and accordingly, it has made provision for the entire amount of USD 4.96 mn. during the year. The unpaid, accrued service charge of USD 2.44 mn., levied on the investment/loan amount upto FY 2012-13, has also been considered as non-recoverable. The Company has treated the interest reversal as monetary item and debited the same to Statement of Profit & Loss and treated the principal amount as non-monetary item and debited the same to Capital reserve.

CONSOLIDATED ACCOUNTS

The Consolidated Financial Statements of the Company are prepared in accordance with the applicable accounting standards and form a part of the Annual Report.

CORPORATE GOVERNANCE

Pursuant to Regulation 34(3) read with Schedule V of the SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015, a Report on Corporate Governance with Auditors Certificate confirming compliance, is attached and forms an integral part of this Report.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9, as required under Section 92 of the Companies Act, 2013, is included in this report as Annexure - A and forms an integral part of this Report.

DIRECTORS

Mr. Raj Kumar Sekhani (DIN 00102843) who retires by rotation and being eligible, offers himself for reappointment.

BOARD PERFORMANCE

The performance evaluation of the non-executive directors is done by the Board annually. This evaluation is based on the attendance and contribution of the member at the board/ committee meetings. The process also considers core competency, expertise, personnel characteristic, and specific responsibility of the concerned director.

The performance evaluation of the Chairman and the Managing Director was carried out by the Independent Directors. The Board of Directors expressed their satisfaction with the evaluation process.

DECLARATION BY AN INDEPENDENT DIRECTOR(S) AND RE-APPOINTMENT, IF ANY

All the Independent Directors have provided the declaration of Independence, as required pursuant to Section 149(7) of the Companies Act, 2013, stating that they meet the criteria of independence as provided in sub-section (6).

BOARD MEETINGS

The details of number of meetings of the Board, held during the year forms part of the Corporate Governance Report.

PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS BY THE COMPANY

Details of the Loans, Guarantees and Investment covered under the section 186 of the Companies Act 2013, are given in the Financial Statements.

WHISTLE BLOWER POLICY

The whistle blower policy adopted by the Company has been posted on its website (www.pelhakoba.com).

NOMINATION AND REMUNERATION POLICY

The Committee has framed a policy to determine the qualification and attributes for appointment and basis of determination of remuneration of all the Directors, Key Managerial Personnel and Senior Management. A copy of the policy is annexed as Annexure -B.

RELATED PARTY TRANSACTIONS

All transactions entered into with Related Parties for the year under review were on arm's length basis and in the ordinary course of business and thus provisions of Section 188 of the Companies Act, 2013 and the Rules made thereunder are not attracted. Thus, disclosure in Form AOC-2 in terms of Section 134 of the Companies Act, 2013, is accordingly, not required.

All related party transaction are placed before the Audit Committee as also to the Board for approval.

DETAILS RELATING TO DEPOSITS COVERED UNDER CHAPTER V OF THE ACT

The Company has never accepted any deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014, or under Chapter V of the Act.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATOR OR COURTS

There are no significant and material orders passed by the Regulators / Courts that would impact the going concern status of the Company and its future operations.

DIRECTORS' RESPONSIBILITY STATEMENT

To the best of knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statement in terms of Section 134(3)(c) of the Companies Act, 2013:

(i) that in the preparation of the Annual Accounts for the year ended March 31, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures, if any;

(ii) that the accounting policies selected and applied are consistent and the judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at March 31, 2016 and of the net profit of the Company for the year ended on that date;

(iii) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

(iv) that the annual accounts have been prepared on a going concern basis;

(v) that the Directors had laid down adequate internal financial controls to be followed by the Company and these are operating effectively;

(vi) that adequate and proper systems to ensure compliance with all applicable laws have been devised and such systems are operating effectively in the Company.

STATUTORY AUDIT

M/s M B A H & CO, Chartered Accountants (Registration No. 121426W), statutory auditors of the Company, were appointed for a period of 3 years in the last Annual General Meeting to hold office of Statutory Auditor to audit accounts of the Company till the conclusion of 26th Annual General Meeting of the Company. M/s M B A H & CO have submitted written confirmation to the Company that their appointment, is in conformity with the limits specified under Section 139 of the Companies Act, 2013.

There is no qualification, reservation or adverse remark or disclaimer made by the Statutory Auditors in its report and therefore, there are no further explanations to be provided for in this report.

COST AUDIT

The Board of Directors, on the recommendation of Audit Committee, has appointed M/s Vipul Bhardwaj & Co., Cost accountants, as Cost Auditor to audit the cost accounts of the Company for the year 2016-17 at a remuneration of Rs.50,000 plus service tax as applicable and reimbursement of out of pocket expenses. A resolution seeking member's approval for the remuneration payable to the Cost Auditor forms part of the Notice convening the Annual General Meeting.

SECRETARIAL AUDIT

As required under Section 204 of the Companies Act 2013, and rules made thereunder, the Company has appointed M/s Sanjay Dholakia & Associates, a firm of Company Secretaries in Practice (Registration No. 2655) to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is included as Annexure - C and forms an integral part of this Report.

Auditor's Observation

The Company has not appointed Whole-time Company secretary as Compliance Officer as required pursuant to Regulation 6(1) of SEBI, Listing Obligations and Disclosure Requirements) Regulations 2015.

The management reply to the observations of the Secretarial Auditor is as under:

Your Directors state that the Company had complied the same after 31st March 2016.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your company has an effective internal control and risk mitigation system, commensurate with its size. The Audit Committee of the Board actively reviews the adequacy and effectiveness of the systems.

RISK MANAGEMENT

There is a continuous process for identifying, evaluating and managing significant risks faced through a risk management process designed to identify the key risks facing business. Risks would include significant weakening in demand from core-end markets, inflation uncertainties and any adverse regulatory developments, etc. During the year a risk analysis and assessment was conducted and no major risks were noticed.

CORPORATE SOCIAL RESPONSIBILITY

The provisions of CSR activities under Companies Act 2013 do not apply to your Company. SAFETY, HEALTH & ENVIRONMENT

As hitherto, all efforts were taken to ensure safety in the operation of the Plants, promote health and protect the environment. The health of the Employees is being continuously monitored and environment improvement measures in and around the Plant area are being given due care and attention.

HUMAN RESOURCE

The Company takes pride in the commitment, competence and dedication shown by its employees in all areas of business. The Company takes various HR initiatives to align the HR policy to the growing requirements of business.

Your company regularly conducts technical and safety training programmes.

DISCLOSURE AS PER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

Pursuant to Section 22 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14, the internal committee constituted under the said act has confirmed that no complaint/case has been filed/pending with the Company during the year.

MANAGERIAL REMUNERATION

a) Details of the remuneration of each director to the median remuneration of the employees of the Company and other details as required pursuant to Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure -D.

b) The Company doesn't have any employee falling within the preview of Section 197 of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 hence, no such details to be provided.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The particulars as prescribed under Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014, are attached as Annexure-E to this report.

ACKNOWLEDGMENT

The Management of your Company is grateful to the Government authorities, Shareholders, Valued Customers, Company's Bankers, Raw Material Suppliers, and other Business Associates for their continued support and co-operation.

The Directors also wish to place on record their appreciation of the co-operation, active involvement and dedication of the employees, which enabled the Management to contribute to the revival of your Company.

For and on behalf of the Board of Directors

RAJ KUMAR SEKHANI

Chairman DIN 00102843  

Place : Mumbai.

Date : May 12, 2016