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EATON FLUID POWER LIMITED
ANNUAL REPORT 2010-2011
DIRECTOR'S REPORT
To the Members,
Your Directors present their 46th Annual Report together with Audited
Statement of Accounts for the year ended 31st March, 2011.
Financial Results:
2010-2011 2009-2010
Rs. In million Rs. In million
Total Income 2103.91 1539.00
Profit (Loss) Before Tax 151.98 164.47
Total Tax Expense/(Income) 67.02 (8.11)
Net Profit (Loss) After Tax 84.96 172.59
Balance brought forward 159.02 (13.57)
from previous year
Surplus/(deficit) carried to 243.98 159.02
Balance Sheet
Operating Results:
Your Company reported a total Sales of Rs.2080 m (40% over last year).The
profit before tax as a percentage of sales has reduced by 3.7% over last
year due to steep increase in material cost globally the impact of which
has been successfully passed on to the customers after March 2011. In the
current year your Company expects to sustain a profitable growth.
Dividend:
In order to conserve the resources for future expansion plans, your
Directors do not recommend any dividend for the year under review.
Eaton's Shareholding:
97.61% of paid equity share capital of the Company is held by Eaton
Hydraulics LLC, USA, which is the holding Company.
Directors:
Mr. Kok Meng Tang resigned as Alternate Director to Mr. David Foster,
Director w.e.f. December 9, 2010. The Board wishes to place on record its
appreciation of the services rendered by Mr. Kok Meng Tang during his
tenure as Alternate Director of the Company.
Mr. Neeraj Goel was appointed as an Additional Director on Board of the
Company w.e.f. January 20, 2011. He holds office up to forthcoming Annual
General Meeting of the Company. Notice from a shareholder proposing name of
Mr. Neeraj Goel as a Director of the Company has been received by the
Company.
Mr. Yan Jin was appointed as an Additional Director on Board of the Company
w.e.f. January 20, 2011. He holds office up to forthcoming Annual General
Meeting of the Company. Notice from a shareholder proposing name of Mr. Yan
Jin as a Director of the Company has been received by the Company.
Mr, Ajay Patil resigned as Director w.e.f. February 5, 2011. The Board
wishes to place on record its appreciation of the services rendered by Mr.
Ajay Patil during his tenure as Director of the Company.
Mr. Curtis Hutchins ceased to be an Alternate Director to Mr. Ajay Patil
w.e.f. February 5, 2011 consequent to Mr. Ajay Patil's resignation as
Director.
Mr. Nitin Chalke resigned as Managing Director w.e.f. February 28, 2011.
However, he continued as Director of the Company.
Mr. Nitin Chalke was appointed as Managing Director w.e.f. March 1, 2011,
inaccordance with Notification No. G.S.R. 70(E) dated February 8, 2011,
issued by Ministry of Corporate Affairs, Government of India, vide which an
amendment to Schedule XIII of the Companies Act was made. The appointment
is subject to the approval of the shareholders. The said approval, by means
of special resolution, is being sought at the forthcoming Annual General
Meeting of the Company.
Mr. Curtis Hutchins was appointed as Alternate Director to Mr. Yan Jin,
Director of the Company, w.e.f. March 1,2011.
Mr. David Foster resigned as Director w.e.f. August 5,2011. The Board
wishes to place on record its appreciation of the services rendered by Mr.
David Foster during his tenure as Di rector of the Company.
In accordance with provisions of the Companies Act, 1956 and the Articles
of Association of the Company, Mr. Nitin Chalke, Director, retires by
rotation and being eligible offers himself for re-appointment.
Corporate Governance:
Since equity shares of Eaton Fluid Power Limited are delisted from the
Mumbai Stock Exchange, and the Pune Stock Exchange Ltd., Clause 49 of the
Listing Agreement.
with the Stock Exchanges pertaining to Report on Corporate Governance
regarding compliance of conditions of Corporate Governance is not
applicable to the Company.
Conservation of Energy, Technology Absorption and Foreign Exchange earnings
& outgo:
The information required under Section 217 (1) (e) of the Companies Act,
1956, read with the Companies (Disclosure of Particulars in the Report of
Board of Directors) Rules, 1988, is annexed hereto (Annexure - 1) and forms
part of this report.
Particulars of Employees in accordance with Section 217(2A) of the
Companies Act, 1956:
Additional Information as required under Section 217(2A) of the Companies
Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975
and forming part of the Directors' Report for the year ended 31st March,
2011 is annexed hereto (Annexure-2) and forms a part of the Report.
Industrial Relations:
During the year industrial relations continued to remain cordial.
Qualifications by Auditors and Directors' explanation thereon:
Information as required under Section 217(3) of the Companies Act, 1956 is
annexed hereto (Annexure - 3) and forms a part of the Report.
Auditors:
M/s. S.R. Batliboi & Associates, Chartered Accountants and Statutory
Auditors of the Company for the year 2010-2011 would be retiring at the
conclusion of the forthcoming Annual General Meeting and are eligible for
reappointment. The members are requested to consider their reappointment,
at a remuneration to be decided by the Board of Directors, for the
financial year ending on March 31, 2012, as set out in the notice convening
the Annual General Meeting.
Directors' Responsibility Statement:
Pursuant to the requirement under Section 217 (2AA) of the Companies Act,
1956, with respect to Directors' Responsibility Statement, it is hereby
confirmed:
i. that in the preparation of the accounts for the year ended 31st March,
2011, the applicable accounting standards had been followed and there was
no material departure from the accounting standards.
ii. that the Directors had selected such accounting policies and applied
them consistently and made judgments and estimates that were reasonable and
prudent so as to give a true and fair view of the state of affairs of the
Company at the end of the financial year and of the profit of the Company
for the year under review;
iii. that the Directors had 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;
iv. that the Directors had prepared the accounts for the year ended 31st
March, 2011, on a 'going concern' basis.
Audit Committee:
Your Company has already formulated an Audit Committee pursuant to the
provisions of section 292A of the Companies Act, 1956, which consists of
Mr. Nitin Chalke, Managing Director and Mr Neeraj Goel, and Mr. Raja
Kochar, Directors.
Acknowledgment:
Your Directors wish to place on record their deep appreciation of the
continued support of the Shareholders of the Company. Your Directors
acknowledge the cooperation and assistance received from Bankers of the
Company and Government authorities. The Board of Directors appreciates
continued support, dedication and committed efforts of employees.
For and on behalf of the Board
Nitin Chalke Neeraj Goel
Managing Director Director
Place: Pune
Date : September 2, 2011
ANNEXURES TO THE DIRECTORS' REPORT:
ANNEXURE 1:
Conservation of Energy, Technology Absorption and Foreign Exchange earnings
and outgo:
Information under Section 217 (1) (e) of the Companies Act, 1956, read with
Companies (Disclosure of particulars in the Report of the Board of
Directors) Rules 1988, and forming part of the Directors' Report for the
period ended 31st March, 2011.
1. CONSERVATION OF ENERGY:
(i) Energy conservation measures taken:
* Retrofitted old conventional test stands with Variable frequency drives
* In Series 5 bay
* Replaced metal Halide lamps with T5 Light fittings
* Introduced Poly carbonate sheets for proper illumination in day time.
* Placed the sun reflecting glasses on Windows.
* Used Eaton Bus bars instead of cables.
* Shared DG sets with other entities to optimize use of DG sets
* Thyrister controlled drives installed in Heat treatment furnace
* Reduced the frequent shut downs of heat treatment furnace to reduce the
heat losses in cooling & startup energy losses.
* Combined & Transferred Gear Pump pressure bush operations on CNC milling
to Vertical Machining center.
(ii) Improvements under consideration:
* Horizontal deployment of T5 Fittings, Poly carbonate sheets in Gear Pump
bay.
* Simultaneous cutting cycle of Tandem Gear pumps on test stands to reduce
the cycle time
(iii) Impact of measures taken:
* The adoption of energy conservation measures of the type indicated above
will result in significant savings in energy consumption.
2. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION:
(A) Research and Development (R&D):
(i) Specific Areas in which R&D is carried on by the Company:
* Modification of existing products to meet OE customer needs.
* Design & development of cylinders for industrial applications
* Designs development of power units for customized applications
* Design of GD4 pump for Low displacement applications
(ii) Benefits derived as a result of above R&D:
* Indigenous R&D efforts have resulted in obtaining new business in the
mobile and industrial area
(iii) Future Plan of Action:
* Provide system solution with pumps, valves and hydraulic components to
the mobile and industrial customers
ANNEXURES TO THE DIRECTORS' REPORT:
(iv) Expenditure on R&D:
* Recurring Rs. Nil (2010-Rs. Nil)
* R&D expenditure is Nil % of total income (2010-Nil)
(B) Technology Absorption, Adaptation and Innovation:
(i) Efforts, in brief, made towards technology absorption, adaptation and
innovation:
* Application and Systems support received from Eaton Group Companies have
been adapted for local use.
(ii) Benefits derived as a result of the above efforts:
* Systems Quality Improvement.
* Development of New Business.
* Increase in Market base.
(iii) Technology imported during the last 5 years:
Technology Imported Year of Import Status
Control valve for Since 2000 Being absorbed
Mobile Application
Steering Control 2007 Being absorbed
3. FOREIGN EXCHANGE EARNINGS AND OUTGO:
Earning in foreign currency : Rs. 16 m
Expenditure in foreign currency : Rs. 922 m
For and on behalf of the Board
Nitin Chalke Neeraj Goel
Managing Director Director
Place: Pune
Date : September 2, 2011
ANNEXURE- 3:
Qualifications by Auditors and Directors' explanation thereon:
Information as required under Section 217(3) of the Companies Act, 1956
forming a part of the Report
Qualification:
Para 3 of the Directors' Report:
We draw attention to note 11 of Schedule 22, relating to Intercompany
payables aggregating to Rs. 215,215,579 which are in the process of being
reconciled and wherein the reconciliation differences aggregating to Rs
45,810,458, in the absence of relevant information relating to subsequent
receipts, have been accounted for as goods in transit. With regards to the
aforesaid matters, we are unable to comment on the adjustments to the
financial statements, if any, that may arise subsequent to completion of
reconciliation by the management.
Board's explanation:
The Statutory Auditors have observed reconciliation differences in
Intercompany payables.
The Company has noted this comment and has initiated the implementation of
an automatic reconciliation process with help of independent Team to ensure
completeness of Inter-Company reconciliation at the earliest. Further, the
Company is taking suitable steps to ensure invoice wise tracking of goods
in transit to be implemented on regular basis.
Para(i) of the Annexure to the Auditors' Report:
a. The Company has maintained proper records showing full particulars,
including quantitative details and situation of fixed assets except for
additions during the year.
b. Fixed assets have been physically verified by the management during the
year and material discrepancies were identified on such verification. These
have been properly dealt with in the books of accounts.
c. There was no disposal of a substantial part of fixed assets during the
year.
Board's explanation:
The Statutory Auditors have observed that proper records in respect of
addition of fixed assets have not been maintained. Further, material
discrepancies have been identified in physical verification of assets.
The Company has carried out the Physical verification of Fixed Assets
during the year as per Company's Policy. The write offs during the year, as
a result of physical verification, have been mainly due to retired and
fully depreciated assets. The Company has initiated actions to add
appropriate details in Fixed Assets Register and initiating other
appropriate action to ensure completeness.
Para(iii)(a) of the Annexure to the Auditors' Report:
a. According to the information and explanations given to us, the Company
has not granted any loans, secured or unsecured to companies, firms or
other parties covered in the register maintained under section 301 of the
Companies Act, 1956. Accordingly, the provisions of clause 4(iii)(a) to (d)
of the Companies (Auditors Report) Order, 2003 (as amended) are not
applicable to the Company and hence not commented upon.
b. The Company has taken loans from two companies covered in the register
maintained under Section 301 of the Companies Act, 1956. The maximum amount
involved during the year was Rs. 225,000,000 and the year-end balance of
loans taken from such parties was Rs. 199,536,986.
c. In our opinion and according to the information and explanations given
to us, the rate of interest and other terms and conditions for such loans
are not prima facie prejudicial to the interest of the Company.
d. In respect of loans taken, repayment of the principal amount is as
stipulated and payment of interest has not been very regular.
Board's explanation:
As per agreement with lender the interest was compounded and paid with
principal as per due date.
Para(iv) of the Annexure to the Auditors report:
The Company has significant purchases of inventory items from the holding
company and fellow subsidiaries. According to the information and
explanation given to us these items are of specialized nature, and hence,
in such cases, it is not possible to make comparison of prices with the
market rates or with purchases from other parties. However, the internal
control system for purchases of inventory and fixed assets is inadequate
since a few purchases are made without purchase orders and inviting
quotations. In our opinion, this is a continuing failure to correct a major
weakness in the internal control system. Read with above, in our opinion
and according to the information and explanations given to us, there are
adequate internal control system commensurate with the size of the Company
and the nature of its business for the sale of goods and services.
Board's explanation:
The Statutory Auditors have observed certain weakness in the internal
control system for purchases.
The Company has proper purchase Orders for all Direct purchases, However in
some cases purchase orders were not initiated for some urgent indirect
purchases.
Management has initiated a full review of purchasing policy and will
implement actions accordingly.
Para(ix)(a) of the Annexure to the Auditors' Report:
Undisputed statutory dues including provident fund, income-tax, service
tax, employees' state insurance, sales-tax, wealth-tax, service tax,
customs duty, excise duty, cess have generally been regularly deposited
with the appropriate authorities though there has been slight delay in few
cases. There are no statutory dues towards investor education and
protection fund.
Board's explanation:
Steps are being taken to ensure statutory payment within due dates.
For and on behalf of the Board
Place: Pune Nitin Chalke Neeraj Goel
Date : September 2, 2011 Managing Director Director
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