The Directors present the Fifty-Fifth (55th) Annual Report together
with the Audited Financials of your Company for the 18 months period
ended March 31, 2016.
FINANCIAL RESULTS
(Rs. In Lakhs)
Eighteen
Eighteen Months
PARTICULARS Months Period Period
ended
ended March September
31 2016 30, 2014
Profit /(Loss) before (31,837.53) (19,019.26)
Depreciation and Taxation
Less : Depreciation 7,587.65 7,224.56
Less: Provision for Taxation - -
Profit / (Loss) after Taxation (39,425.18) (26,243.82)
Add : Balance brought forward (64,963.05) (38,719.23)
from previous year
Add : Adjustment on account of
depreciation (279.36) -
Balance carried to Balance Sheet (1,04,667.59) (64,963.05)
Basic and Diluted Earnings Per
Share of face value of Rs. 10/- (59.45) (65.07)
each. (in Rs.)
BUSINESS OPERATIONS
During the period under review, your Company's net sales were Rs.
84,232 Lakhs compared to the net sales of Rs. 99,679 Lakhs for the
eighteen months period ended September 30, 2014. The operations
resulted in a loss of Rs. 39,425 Lakhs for the period under review
compared to a loss of Rs. 26,244 Lakhs in respect of the previous
eighteen months period.
The Company continued to face numerous challenges due to negative
growth of the OEM market for some period, uncertain power scenario and
sharp decline in the price of end products. The Sriperumbudur Unit
(SPU) ramp-up with debottlenecking of capacity constraints and
stabilization of production processes was slowed down.
MATERIAL CHANGES AND COMMITMENTS
Your Directors confirm that there are no material changes and
commitments affecting the financial position of the Company which have
occurred between the end of the financial year of the Company and the
date of this report.
DIVIDEND
In view of loss for the period under review, no dividend has been
recommended by the Board of Directors (Board).
TECHNOLOGY UPGRADATION/MODERNIZATION
The Company has invested substantially in energy efficient technologies
and has implemented various processes which minimize waste.
Commissioning of various equipment such as Maus Fettling Machine, Vent
Drilling Machine and the improved material handling of cores has
resulted in reduction of wastage, improved productivity and fewer
breakages.
Capacity was added in the machine shop to handle more castings in
finished form thereby increasing value addition and becoming a more
preferred supplier of castings as the OEMs get ready to assemble
components.
The particulars required under Rule 8 of the Companies (Accounts)
Rules, 2014 on conservation of energy, technology absorption and
foreign exchange earnings and outgo to the extent applicable are
furnished in Annexure - A to this report.
PUBLIC DEPOSITS
The Company has not accepted any fixed deposits from public within the
meaning of Section 73 (1) of the Companies Act, 2013 during the period
under review.
AUTHORISED CAPITAL
During the period under review, the Company had, with the approval of
members, increased its authorized capital from Rs. 550,00,00,000
(Rupees Five Hundred Fifty Crores only) to Rs. 1000,00,00,000 (Rupees
One Thousand Crores only).
FUND RAISING
(i) Global Depository Receipts (GDR)
Pursuant to the approval of the members of the Company vide a special
resolution passed through postal ballot, the Company had successfully
completed an Offering of 11,200 Global Depository Receipts (non -
voting) each representing 12,000 Equity Shares of par value of Rs. 10
at an Offering Price of U.S. $ 5,351.33701 per Global Depository
Receipt, aggregating 59,934,974.51 USD, equivalent to Rs. 3,998,400,000
Accordingly, your Company had issued and allotted 134.40 million equity
shares of face value of Rs. 10 each at a price of Rs. 29.75 per equity
share (including a premium of Rs. 19.75 per share) held by ICICI Bank
Limited as the domestic custodian to the order of The Bank Of New York
Mellon, Depository, such shares representing the underlying Equity
Shares to 11,200 GDRs (non - voting) of an aggregate value of Rs.
3,998.40 million issued to overseas investors.
(ii) Term Loan
During the period under review, the Company has borrowed monies
aggregating to Rs. 27,922 Lakhs.
(iii) Repayment
During the period under review, the Company has repaid Loans as follows
:
Term loan - Rs. 27,498 Lakhs
Decrease in working capital loans - Rs. 14,222 Lakhs
CORPORATE GOVERNANCE
Your Company is fully compliant with the norms on corporate governance
laid out in the notification dated September 2, 2015 of the Securities
and Exchange Board of India enacting the Securities and Exchange Board
of India (Listing Obligations and Disclosure Requirements) Regulations,
2015 ("New Listing Regulations") which have replaced the erstwhile
Listing Agreement. All the Directors and the senior management
personnel have affirmed in writing their compliance with and adherence
to the Code of Conduct adopted by the Company. The details of the Code
of Conduct are furnished in the Corporate Governance Report attached as
Annexure-B to this Report. The Chief Executive Officer has given a
certificate of compliance with the Code of Conduct which forms part of
Annexure-B, as required under the New Listing Regulations.
The Statutory Auditors of the Company have examined the requirements of
Corporate Governance with reference to the New Listing Regulations and
have certified the compliance, as required under the New Listing
Regulations. The Certificate in this regard is attached as Annexure-C
to this Report. Management Discussion and Analysis Report is attached
in Annexure - D.
The certification by the Chief Executive Officer / Chief Financial
Officer (CEO/CFO) as required under the New Listing Regulations is
attached as Annexure-B to this Report..
MEETINGS OF BOARD OF DIRECTORS
Annual calendar of meetings of the Board/ Committees is finalized well
before the beginning of the year after seeking concurrence of all
Directors. Attempts are made to ensure that the scheduled meetings are
made convenient to attend by the Directors. Where circumstances
preclude the Chairman from attending the meeting, he entrusts an
Independent Director or a non-executive Director to chair the meeting.
Wherever possible, Directors who are not able to attend the meetings
physically, participate in the proceedings through video conferencing
or other audio visual means. Further, in order to facilitate the
smooth functioning of the Company and to address exigent matters, the
Board approves resolutions by circulation between two Board meetings.
During the period under review, the Board of Directors met ten times
viz. on November 20, 2014, January 27, 2015, February 9, 2015, March
11, 2015, May 13, 2015, August 13, 2015, November 3, 2015, January 13,
2016, January 25, 2016 and February 9, 2016. The time gap between any
two Board meetings did not exceed four months.
DIRECTORS
Changes that had taken place in the composition of the Board of
Directors of the Company during the period under review and subsequent
thereto are given below:
Appointments:
(i) Mr. Markus Wermers was appointed as Chief Executive Officer with
effect from February 1, 2015 and Managing Director with effect from
August 13, 2015.
(ii) Mr. Vijay Vaid was appointed as an Additional Director on March
11, 2015 and based on the declaration of independence received from him
as prescribed under Section 149 (7) of the Companies Act, 2013, he has
been classified as an Independent Director subject to the approval of
the members at the ensuing annual general meeting of the Company.
(iii) Mr. Sudhanshu K Tripathi and Mr. Sridharan Kesavan were appointed
as Additional Directors on August 13, 2015 to hold office till the
conclusion of the 55th Annual General Meeting.
(iv) Dr. C. Bhaktavatsala Rao and Ms. Bhumika Batra were appointed as
Additional Directors on November 3, 2015 and based on the declarations
of independence received from them as prescribed under Section 149 (7)
of the Companies Act, 2013, they have been classified as Independent
Directors subject to the approval of the members at the ensuing annual
general meeting.
(v) Mr. A.R. Chandrasekharan was appointed as an Additional Director on
May 11, 2016 to hold office till the conclusion of the 55th Annual
General meeting. He was also appointed as an Executive Director.
The Independent Directors of the Company have declared that they meet
the criteria of independence in terms of Section 149(6) of the
Companies Act, 2013 and that there is no change in their status of
independence as on date.
We seek your confirmation for appointment of Mr. Vijay Vaid, Dr. C
Bhaktavatsala Rao and Ms. Bhumika Batra as Independent Directors for a
term of three consecutive years on a non-rotational basis and Mr.
Sudhanshu K Tripathi and Mr. Sridharan Kesavan as Directors of the
Company, liable to retire by rotation. Your approval is also sought
for the appointment of Mr.A.R.Chandrasekharan as Executive Director for
a period of 3 years with effect from May 11, 2016.
Resignation :
(i) Mr. GRV Rajan resigned as a member of the Board and Managing
Director of the Company with effect from March 11, 2015.
(ii) Mr. R Seshasayee resigned from the Board and Chairmanship of the
Company on June 12, 2015.
(iii) Mr. S Ragothaman, an independent Director resigned from the Board
on November 18, 2015.
(iv) Mr. Markus Wermers resigned as a member of the Board and Managing
Director of the Company with effect from April 4, 2016.
The Board of Directors wish to place on record their sincere
appreciation for the valuable contributions made by Mr.GRV Rajan, Mr.R.
Seshasayee, Mr.S. Ragothaman and Mr. Markus Wermers during their
tenure as Directors.
The casual vacancies caused by the resignations were not filled-up.
Director retiring by rotation:
In terms of Article 106 of the Articles of Association of the Company,
Mr. Dheeraj G Hinduja is liable to retire by rotation at the ensuing
Annual General Meeting (AGM) and being eligible, offers himself for
re-appointment.
KEY MANAGERIAL PERSONNEL
Mr. D M Reddy was appointed as Chief Executive Officer and Key
Managerial Personnel on April 4, 2016.
Mr. D M Reddy, Chief Executive Officer, Mr. K R Ravi Shankar, Chief
Financial Officer and Mr. S Venkatasubramanian are the whole-time Key
Managerial Personnel of the Company.
COST AUDIT0RS
As per Section 148 of the Companies Act, 2013, the Company is required
to have the audit of its cost records conducted by a Cost Accountant in
practice. The Board of Directors of the Company has, on recommendation
of the Audit Committee, approved the appointment of M/s. Geeyes & Co.
(Firm Registration Number 000044) as the Cost Auditor of the Company to
conduct cost audits pertaining to product(s) Steel (Castings) in
compliance with the Companies (Cost Records and Audit) Rules, 2014, for
the 18 months period ended March 31, 2016. As required under the
Companies Act, 2013, the remuneration payable to the cost auditor is
required to be placed before the members in a general meeting for their
ratification. Accordingly, a resolution seeking ratification of the
members for the remuneration payable to M/s Geeyes & Co., Cost Auditors
is included at Item No. 10 of the Notice convening the Annual General
Meeting.
Cost Audit Reports for the financial year ended September 30, 2014 were
filed in a timely manner. The Cost Audit Reports for the 18 months
period ended March 31, 2016 will be filed with the Ministry of
Corporate Affairs in a timely manner.
The Board of Directors, subject to the approval of the Central
Government, has appointed M/s. Geeyes & Co. as Cost Auditors for
conducting cost audit for the financial year 2016-17.
INTERNAL CONTROL:
The Company has an internal control system commensurate with the size,
scale and complexity of its operations. Internal control systems
comprising of policies and procedures are designed to ensure
reliability of financial reporting, timely feedback on achievement of
operational and strategic goals, compliance with policies, procedures,
applicable laws and regulations and that all assets and resources of
the Company are safeguarded against loss from wastage, unauthorised use
and removal. The Internal Auditors are an integral part of the internal
control mechanism of the Company. To maintain its objective and
independence, the Internal Auditors report to the Audit Committee of
the Board of Directors.
The internal control system of the Company is supplemented by
documented policies, guidelines and procedures. The Internal Auditors
monitor and evaluate the efficacy and adequacy of internal control
systems in the Company, its compliance with the operating systems,
accounting procedures and policies at all locations of the Company and
its subsidiaries. Based on the report of the Internal Auditors, process
owners undertake corrective action in their respective areas and
thereby strengthen the controls. Significant audit observations and
corrective actions thereon are presented to the Audit Committee of the
Board.
The Audit Committee oversees the adequacy of the internal control
systems. The Company reviews its policies, guidelines and procedures of
internal control on an ongoing basis in view of the ever changing
business environment.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant material orders passed by the regulators or
courts which would impact the going concern status of the Company and
its future operations.
SECRETARIAL AUDIT
Pursuant to provisions of Section 204 of the Companies Act, 2013 read
with Rule 9 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, your Company engaged the services of
Ms. B. Chitra, Company Secretary in Practice, Chennai to conduct the
secretarial audit of the Company for the 18 months period ended March
31, 2016.
The Secretarial Audit Report (in Form MR-3) is attached as Annexure-E
to this Report. The report is unqualified.
STATUTORY AUDITORS
M/s. B S R and Company, Chartered Accountants, retire at the close of
this Annual General Meeting and are eligible for re-appointment.
The Company has received a letter from M/s. B S R and Company that
they are unwilling to be considered for re-appointment.
In their place, the Company has proposed the appointment of B S R & Co.
LLP who are also a member firm of B S R and Affiliates network of
firms, registered with ICAI and who have given consent and confirmed
their eligibility under Section 139 and 141 of the Companies Act, 2013
read with the Companies (Accounts) Rules, 2014 for appointment as the
Auditors of the Company.
The Audit Committee and the Board of Directors have recommended B S R &
Co. LLP, a Limited Liability Partnership Firm for appointment as
Auditor of the company for a term of 5 years subject to ratification by
the members at every Annual General Meeting.
The necessary resolution is being placed before the members for
approval.
EXTRACT OF ANNUAL RETURN
As provided under Section 92(3) of the Companies Act, 2013, the details
forming part of the extract of the Annual Return in Form MGT-9 are
furnished in Annexure - F.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of our knowledge and belief and on the basis of the
information and explanations obtained by us, your Directors make the
following statements in terms of Section 134(3)(c) of the Companies
Act, 2013:
a) in the preparation of the annual financial statements for the 18
months period ended March 31, 2016, the applicable Accounting Standards
had been followed. There are no material departures.
b) for the 18 months period ended March 31, 2016, such accounting
policies as mentioned in the Notes to the financial statements have
been applied consistently and judgments and estimates that are
reasonable and prudent have been made so as to give a true and fair
view of the state of affairs of the Company and of the Profit and Loss
and Cash Flow of the Company for the 18 months period ended March 31,
2016.
c) 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.
d) the annual financial statements have been prepared on a going
concern basis.
e) that internal financial controls were followed by the Company and
that such internal financial controls are adequate and were operating
effectively.
f) that proper systems to ensure compliance with the provisions of all
applicable laws were devised and that such systems were adequate and
operating effectively.
REMUNERATION POLICY OF THE COMPANY
The Remuneration policy of the Company comprising the policy followed
by the Company on the appointment and remuneration of its Directors,
Key Managerial Personnel and Senior Executives including criteria for
determining qualifications, positive attributes, independence of a
Director and other related matters has been provided in the Corporate
Governance Report which is attached as Annexure-B to this Report.
In terms of Rule 5 of the Companies (Appointment and Remuneration of
Managerial Personnel) Rules, 2014, the Directors of the Company are
entitled to a sitting fee of Rs. 20,000 for every meeting of Board/
Committee attended by them. In the absence of profits, no commission
was paid to them. The median remuneration of employees for the same
period was Rs. 4 Lakhs. The ratio of median remuneration of employee to
the remuneration of Managing Director was 1:30.
The Company had 1647 permanent employees on the rolls of the Company as
on March 31, 2016.
The Company has effected increment in general on the remuneration to
all employees after a span of three years. The average increase per
employee was Rs. 6,750 p.m.
During the period under review, the Company also made a revision of
remuneration to the Chief Financial Officer [CFO] and Company Secretary
[CS] to reflect the market/industry standards to the extent possible
commensurate with the performance of the Company and individual. The
above remuneration is as per Remuneration policy of the Company.
RISK MANAGEMENT POLICY
Risks are events, situations or circumstances which may negatively
impact the Company's business. Risk management is a structured approach
to manage uncertainty. The Company is adopting a formal approach to
risk management in such a way that key risks be managed within a
unitary framework.
The Company has constituted a Risk Management Committee which met on
August 13, 2015 and reviewed that the Company has an appropriate and
effective Enterprise Risk Management system with appropriate policies
and processes which carries out risk assessment.
The details of Risk Management as practiced by the Company are provided
as part of Management Discussion and Analysis Report attached as
Annexure - D to this Report.
CORPORATE SOCIAL RESPONSIBILITY (CSR) INITIATIVES
Pursuant to Section 135 of the Companies Act, 2013, your Company is not
required to constitute Corporate Social Responsibility Committee.
However, as part of social initiative, the Company has undertaken a
programme known as B.VOC degree(3 year work integrated programme
conducted by Tata Institute of Social Sciences approved by AICTE/ GOI)
in order to enhance the skill of the society to enable them to get
employed.
BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and the New
Listing Regulations, Independent Directors at their meeting without the
participation of the Non-independent Directors and Management,
evaluated the Board's performance, performance of the Chairman and
other Non- independent Directors.
The Board subsequently evaluated its own performance, the working of
its Committees (Audit, Nomination and Remuneration and Stakeholders
Relationship Committee) and Independent Directors (without
participation of the relevant Director).
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
Pursuant to Section 177(9) of the Companies Act, 2013 read with Rule 7
of the Companies (Meetings of Board and its Powers) Rules, 2014 and the
New Listing Regulations, the Board of Directors had approved the Policy
on Vigil Mechanism/ Whistle Blower and the same has been hosted on the
website of the Company. This Policy inter alia provides a direct access
to the Chairman of the Audit Committee.
Your Company hereby affirms that no Director/ employee has been denied
access to the Chairman of the Audit Committee and that no complaints
were received during the year. Brief details about the policy are
provided in the Corporate Governance Report attached as Annexure-B to
this Report.
POLICY ON PREVENTION OF SEXUAL HARASSMENT
The Board of Directors have approved the "Sexual Harassment Policy" in
terms of the Sexual Harassment of Women at Workplace (Prevention,
Prohibition and Redressal) Act, 2013. The said policy is uploaded on
the website of the Company.
During the year under review, there were no complaints received from
any regular/contract employee or from any of the outsiders who visited
our office for official purpose.
PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES
Your Company has successfully implemented a voluntary retirement scheme
at the Company's unit located at Ennore, Tamilnadu. All employees of
the Company's Ductron casting unit located at Hyderabad, Telangana had
sought voluntary separation from the Company, which was agreed and
implemented. Consequently the unit had to be closed down. Your Company
has successfully concluded Long Term Settlement (LTS) with workers at
Sriperumbudur (SPU) and Ennore units.
In terms of the provisions of Section 197(12) of the Companies Act,
2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and
Remuneration of Managerial Personnel) Rules, 2014, a statement showing
the names and other particulars of the employees drawing remuneration
in excess of the limits set out in the said Rules are provided in the
Annexure forming part of the Annual Report.
Disclosure pertaining to remuneration and other details as required
under Section 197(12) of the Act read with Rule 5(1) of the Companies
(Appointment and Remuneration of Managerial Personnel) Rules, 2014 are
furnished in Annexure-G.
FORWARD LOOKING STATEMENTS
This Report together with the annexures contains forward looking
statements that involve risks and uncertainties. When used in this
report, the words "anticipate", "believe", "estimate", "expect",
"intend", "will", and other similar expressions as they relate to the
Company and/or its business are intended to identify such forward
looking statements. Neither the Company nor the Directors undertake any
obligation to publicly update or revise any forward looking statements,
whether as a result of any new information, future events, or
otherwise.
We cannot, of course, guarantee that these forward looking statements
will be realized, although we believe we have been prudent in our
assumptions. The achievement of results is subject to risks,
uncertainties and even inaccurate assumptions. Should known or unknown
risks or uncertainties materialize, or should underlying assumptions
prove inaccurate, actual results could vary materially from those
anticipated, estimated or projected.
ACKNOWLEDGEMENT
The Directors wish to acknowledge and place on record their
appreciation of the valuable advice and support received from Hinduja
Automotive Ltd., UK (formerly LRLIH Limited) and Ashok Leyland Limited.
The Directors wish to express their gratitude to the Government of
India, Government of Tamil Nadu, Government of Telangana and other
Government agencies. They also thank the Company's Bankers, members,
Customers and Suppliers and all the employees for their continued
support.
By Order of the Board
Chennai Dheeraj G Hinduja
May 11, 2016 Chairman |