Eaton Fluid Power Ltd


BSE: 505875 | NSE: VICKERSYS | ISIN: INE762B01015 
Market Cap: [Rs.Cr.] 124 | Face Value: [Rs.] 10
Industry: Engineering

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Director's Report

DIRECTORS

To the Members,

Your Directors present their 48th Annual Report together with AuditedStatement of Accounts for the year ended March 31,2013.

Financial Results

2012-2013 2011-2012
Rs. In million Rs. In million
A Total Income 1,879.97 2,426.57
B (Loss)/Profit Before Tax (206.12) 78.42
C Total Tax Expense 47.77 40.44
D=(B-C) (Loss)/Profit After Tax (253.90) 37.98
E Surplus brought forward from previous year 281.96 243.98
F=(D+E) Surplus carried to Balance Sheet 28.06 281.96

Operating Results

Your Company reported revenue from operations (net) of Rs. 1,859.99 Mn (Current YoYgrowth is -23% in comparison to 15.92% of previous year, the decrease in YoY growth is dueto slow down of growth in global economy, from which the company is expecting to recoverin near future. The profit before tax as a percentage of total revenue has reduced by14.2% over last year due to increase in material cost & inflated value of imports dueto exchange rate fluctuations. Company is expecting to recover in near future.

Dividend

In order to conserve the resources for future expansion plans, your Directors do notrecommend any dividend for the year under review.

Eaton's Shareholding

97.61% of paid up equity share capital of the Company is held by Eaton Holding 2Limited, Mauritius, which is the holding Company.

Directors

Mr. Raja Kochar resigned as Director w.e.f. January 21, 2013. The Board wishes to placeon record its appreciation of the services rendered by Mr. Raja Kochar during his tenureas Director of the Company.

Mr. Nitin Chalke reigned as Managing Director of the Company w.e.f. March 5, 2013, butcontinues as a Non-Executive Director of the Company w.e.f. March 6,2013.

Mr. Subhasis Chatterjee was appointed as an Additional Director on Board of the Companyw.e.f. March 5,2013 and Managing Director of the Company w.e.f. March 6, 2013. Mr.Chatterjee holds office of Director up to forthcoming Annual General Meeting of theCompany. The approval of the members is being sought at the ensuing Annual General Meetingfor his appointment as a Director retiring by rotation as well as Managing Director.Notice from a shareholder proposing name of Mr. Subhasis Chatterjee as a Director of theCompany has been received by the Company.

CORPORATE GOVERNANCE

Since equity shares of Eaton Fluid Power Limited are delisted from the Bombay StockExchange Ltd, and the Pune Stock Exchange Ltd., Clause 49 of the Listing Agreement withthe Stock Exchanges pertaining to Report on Corporate Governance regarding compliance ofconditions 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, readwith 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, 1956read with the Companies (Particulars of Employees) Amendment Rules, 2011 and forming partof the Directors' Report for the year ended March 31, 2013 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 annexedhereto (Annexure - 3) and forms a part of the Report.

Auditors

M/s. S. R. Batliboi & Associates LLP, Chartered Accountants and Statutory Auditorsof the Company for the year 2012-2013 would be retiring at the conclusion of theforthcoming Annual General Meeting and are eligible for reappointment. The members arerequested to consider their reappointment, at a remuneration to be decided by the Board ofDirectors, for the financial year ending on March 31, 2014, as set out in the noticeconvening the Annual General Meeting.

Cost Auditors

The Company had appointed M/s C.S. Adawadkar & Co., Cost Accountants (FirmRegistration Number: 100401 and Membership Number 22758) as cost auditors for thefinancial year 2012-2013, for the first time, as per section 233B (2) of the CompaniesAct, 1956 read with General Circular Number 15/2011 - 52/5/CAB-2011 dated April 11, 2011issued by Ministry of Corporate Affairs. The cost audit report for the financial year2012-2013 will be filed in due course.

Directors' Responsibility Statement

Pursuant to the requirement under Section 217 (2AA) of the Companies Act, 1956, withrespect to Directors' Responsibility Statement, it is hereby confirmed:

I. that in the preparation of the accounts for the year ended March 31, 2013, theapplicable accounting standards had been followed and there was no material departure fromthe accounting standards.

ii. that the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that were reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the loss of the Company for that period;

iii. that the Directors had taken proper and sufficient care for the maintenance ofadequate 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 andother irregularities;

iv. that the Directors had prepared the accounts for the year ended March 31,2013, on a'going concern' basis.

Audit Committee

Your Company has already formulated an Audit Committee pursuant to the provisions ofsection 292A of the Companies Act, 1956, which consists of Mr. Subhasis Chatterjee,Managing Director and Mr. Nitin Chalke, Director and Mr. Sachit Nayak, Director.

BIFR Updates:

Eaton Industrial Systems Private Limited ("EISPL") (a fellow subsidiary and a100% subsidiary of the Eaton Group) is a "sick industrial company" as persection 3(1 )(o) of the Sick Industrial Companies (Special Provisions) Act, 1985("SICA"), and is at present under reference of the Board for Industrial andFinancial Reconstruction, New Delhi ("BIFR"). On July 4, 2012, the Board ofDirectors of the Company and EISPL at their respective Board meetings approved the draftScheme of Amalgamation of the Company with EISPL with retrospective effect from

April 1, 2012. The above amalgamation is proposed for the rehabilitation of EISPL'soperations and will require to be sanctioned by the BIFR under section 18(1)(c)(ii) andother applicable provisions of the Sick Industrial Companies (Special Provisions) Act,1985. The draft Scheme was subsequently approved through a Special Resolution passed bythe shareholders of the Company and EISPL at their respective Annual General Meetings heldon September 28,2012 and September 29,2012 respectively. The draft Scheme at present isunder consideration of the BIFR. As per the draft Scheme, subject to the approval of theBIFR, in consideration of the above amalgamation, the shareholders of the Company notbelonging to the Eaton Group are proposed to be paid cash by EISPL of Rs 330 for everyEquity Share of the Company held by them based on the fair value of the Equity Share ofthe Company determined by an independent valuer M/s Price Waterhouse & Co., CharteredAccountants, and the shareholders of the Company belonging to the Eaton Group are proposedto be issued Compulsorily Convertible Preference Shares by EISPL.

Acknowledgment

Your Directors wish to place on record their deep appreciation of the continued supportof the Shareholders of the Company. Your Directors acknowledge the cooperation andassistance received from Bankers of the Company and Government authorities. The Board ofDirectors appreciates continued support, dedication and committed efforts of employees.

For and on behalf of the Board
Subhasis Chatterjee Sachit Nayak
Managing Director Director
Date : August 29, 2013
Place : Pune

ANNEXURES TO THE DIRECTORS' REPORT Annexure-1

Conservation of Energy, Technology Absorption and Foreign Exchange Earnings & 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, andforming part of the Directors' Report for the period ended March 31,2013.

1. CONSERVATION OF ENERGY

(i) Energy conservation initiatives

• Installation of variable frequency drives on heavy duty motors on new servicetest stands to reduce energy consumption and control maximum demand.

• Installation of solar street lights at remote places in company premises.

• Replaced mercury vapor lamps with T5 in Heat Treatment.

• Retrofitting of Hitch valve test stand with Variable frequency drive.

(ii) Initiatives in progress

• LED lighting in new areas of shop floor.

• Using Evaporative cooling system in new Gear Pump area

(iii) Impact of measures taken

• The adoption of energy conservation measures of the type indicated above willresult 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 ISO 6022 cylinders for industrial applications

• Design & development of power units for customized applications

(ii) Benefits derived as a result of above R&D:

• Indigenous R&D efforts have resulted in obtaining new business in the mobileand industrial area

(iii) Future Plan of Action:

• Provide system solution with pumps, valves and hydraulic components to themobile and industrial customers

(iv) Expenditure on R&D :

• Recurring Rs. Nil (2012-Rs. Nil)

• R&D expenditure is Nil %of total income(2012-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 beenadapted 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 Mobile Application Since 2000 Being absorbed
Steering Control 2007 Being absorbed

3. FOREIGN EXCHANGE EARNINGS AND OUTGO

Earnings in foreign currency : Rs. 152.37 Mn (P.Y. 69.39 Mn) Expenditure in foreigncurrency : Rs. 820.55 Mn (P.Y. 1,152.24 Mn)

For and on behalf of the Board

Date : August 29, 2013 Subhasis Chatterjee Sachit Nayak
Place : Pune Managing Director Director

Annexure-2

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, 1956read with the Companies (Particulars of Employees) Amendment Rules, 2011 and forming Partof the Directors' Report for the year ended March 31,2013

Name Designation/ Nature of Duties Gross Remuneration (Rupees) Qualifications Date of Commencement of Employment Age (Years) Experience (Years) Last Employment held Designation/Organization
Subhasis Chatterjee Managing Director (w.e.f., March 6, 2013) 7,790,284/- BE Mech, MBA October 15, 2003 (EFPL DOJ August 20, 2007) 50 29 Director. MKTG Product/ Program Management
Nitin Chalke Managing Director (upto March 5, 2013) 12,264,180/- BE Mech, MBA April 15, 2009 48 25 Schindler India (Director, New Installations Schindler Elevators)

Notes:

• The nature of employment is contractual.

• Designation connotes nature of duties of the employee.

• The employee mentioned above is not a relative of any Director of the Company.

• The employee mentioned above Mr.Nitin Chalke continued as Managing Director tillMarch 5, 2013 and Mr.Subhasis Chatterjee was appointed as Managing Director from March 6,2013.

For and on behalf of the Board

Date : August 29, 2013 Subhasis Chatterjee Sachit Nayak
Place : Pune Managing Director Director

ANNEXURE - 3

Qualifications by Auditors and Directors' explanation thereon

Information as required under Section 217(3) of the Companies Act, 1956 forming a partof the Report

Qualification Board's explanation
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 to fixed assets made in the previous three years for which the details of quantity and location of such assets is not updated. The Company has carried out the physical verification of Fixed Assets as per Company's Policy. The reconciliation between physical verification records and Fixed Assets Register is in progress. The Company has initiated actions to add appropriate details in Fixed Assets Register and initiating other appropriate action to ensure completeness.
(b) All fixed assets were physically verified by the management in the previous year, except tools /moulds lying with third party which is pending for reconciliation with fixed assets register, in accordance with a planned programme of verifying them once in three years which, in our opinion, is reasonable having regard to the size of the Company and the nature of its assets. No material discrepancies were noticed on such verification.
Para (iv) of the Annexure to the Auditors' Report
The Company has significant purchases of inventory items from the ultimate holding company and fellow subsidiaries. According to the information and explanation given to us these items are of specialized nature, for which alternative sources are not available to obtain comparable quotations and hence, in such cases, comparison of prices with the market rates are not made. However, the internal control system for purchases of inventory (including purchases from third party), fixed assets and sale of services should be further strengthened for timely accounting and recording of transactions. In our opinion, this is a continuing failure to correct major weakness in the internal control system. In our opinion and according to the information and explanations given to us, there is adequate internal control system commensurate with the size of the Company and the nature of its business for the sale of goods. Management has reviewed the Invoice Booking process and will implement actions to ensure timeliness of Invoice Booking. There is no impact due to this delay since appropriate accruals are made in time.
Para (v) (b) of the Annexure to the Auditors' Report
In respect of transactions made in pursuance of such contracts or arrangements and exceeding the value of Rupees five lakhs entered into during the financial year, because of the unique and specialized nature of the items involved and absence of any comparable prices, we are unable to comment whether the transactions were made at prevailing market prices at the relevant time. All the international transactions for F.Y. 2011 -12 with Eaton overseas entities has been certified by independent Transfer Pricing consultants which were on arm's length price & same exercise is under process for the transactions pertaining to F.Y. 2012-13.
Para (ix) of the Annexure to the Auditors' Report Steps are being taken to ensure statutory payment within due dates.
(a) Undisputed statutory dues including provident fund professional tax, investor education and protection fund, employees' state insurance, income-tax, sales-tax, wealth-tax, service tax, customs duty, excise duty, cess and other material statutory dues have generally been regularly deposited with the appropriate authorities though there have been slight delay in few cases in deposit of withholding tax, professional tax, provident fund and employee state insurance, and serious delay in large number of cases in deposit of sales tax and service tax. There are no statutory dues towards investor education and protection fund. Due to Change in rule of Service Tax in July 2012 and change in procedure of Sales Tax as guided by Vat Auditors in December 2012, there was shortfall in payment resulted for earlier months which was recalculated and paid subsequently.
(b) According to the information and explanations given to us, undisputed amounts payable in respect of service tax, sales-tax, excise duty, cess and other undisputed statutory dues were outstanding, at the year end, for a period of more than six months from the date they became payable, are as follows: (Refer Table 1 below)
(c) According to the information and explanation given to us, there are no dues to custom duty, service tax, wealth tax and cess which have not been deposited on account of any dispute. The dues outstanding of income-tax, sales-tax, excise duty and property tax on account of any dispute, are as follows: (Refer Table 2 below)

Table 1

Name of the Statute Nature of the Dues Amount (Rs.) Period to which the amount relates Due Date Date of Payment
MVAT Act, 2002 Value added tax 653,071 2010-11 Various dates Not paid
Finance Act, 1994 Service tax payable on royalty 507,064 2010-11 Various dates Not paid
The Income Tax Act, 1961 Withholding tax under various section 1,064,320 2011- 12 and 2012- 13 Various dates Not paid
The Central Excise Act, 1944 Excise duty payable on inventory provision 4,510,372 2010-11, 2011-12 and 2012-13 Various dates Not paid

There are no undisputed amounts payable in respect of provident fund, wealth-tax,customs duty, cess and other material statutory dues were outstanding, at the year end,for a period of more than six months from the date they became payable. There are nostatutory dues towards investor education and protection fund.

Table 2

Name of the Statute Nature of Dues Amount (Rs.) Period to which the amount relates Forum where dispute is pending
The Central Excise Act, 1944 Cenvat credit not reversed on write off value of spares & tools, material transfer from Mumbai to Pune Office on discount, rejection of cenvat credit for reprocessed items etc including interest and penalty. 9,034,390 2001- 02, 2002- 03 and 2003-04 Appellate Tribunal
The Central Excise Act, 1944 Penalty on Cenvat credit availed on input used for manufacture of gear pumps and test stand which have been consumed captively. 623,717 2003-04 Joint Commissioner Pune, Maharashtra
The Central Excise Act, 1944 Non - availability of Excise exemption on clearance of goods to Vallur Power Project on account of defect in documentation 836,910 2012-13 Commissioner (Appeals)
Central Sales Tax Act, 1956/Bombay Sales Tax Act, 1959 Liability for non submission of various forms and various other matters including interest and penalty. 71,219,900* 2003-04 to 2005-06 Joint Commissioner
Central Sales Tax Act, 1956/Bombay Sales Tax Act, 1959 Liability for non submission of various forms and various other matters including interest and penalty. 1,715,704** 2002-03 The Maharashtra Sales Tax Tribunal
Income Tax Act, 1961 Disallowance of Bonus / Ex-gratia and contribution to Superannuation Fund. 393,612 1979-80 1983- 84 and 1984- 85 Bombay High Court
Income Tax Act, 1961 Disallowance of certain expenditure charged to Statement of profit and loss and non payment of tax deducted at source 1,167,745 2004-05 and 2010-11 Commissioner of Income Tax (CIT) Appeals
Income Tax Act, 1961 Disallowance under section 92 CA of the Income Tax Act, 1961, for certain transactions with Associate enterprise and other disallowance of certain expenses 25,639,286*** 2007- 08 and 2008- 09 Income Tax Appellate Tribunal
Pimpri-Chinchwad Municipal Corporation Dues of property tax in dispute with the Pimpn-Chinchwad Municipal Corporation (PCMC) 4,201,091 Various Years -- Bombay High Court

* Net of amount paid under protest Rs 5,960,000.

** Net of amount paid under protest Rs 3,030,000.

*** Net of amount paid under protest Rs 46,404,780.

Para (x) of the Annexure to the Auditors' Report
(a) The Company has no accumulated losses at the end of the financial year but it has incurred cash losses in the current financial year. In the immediately preceding financial year, the Company had not incurred cash losses. Company has taken several steps to reduce the cost during the year, however incurred cash losses due to Major Market slow down resulting into lower cost absorption and depreciation of rupee.
Para (xvii) of the Annexure to the Auditors' Report
(a) According to the information and explanations given to us and on an overall examination the balance sheet of the Company, we report that funds amounting to Rs. 26,720,997 raised on short term basis in the form of loan from related parties have been used for long-term investment representing acquisition of fixed assets and funding of losses. In view economic slowdown, short term loan is raised from related parties to fund the losses and completing the assets work in progress and required assets for the business.

 

For and on behalf of the Board

Date : August 29, 2013 Subhasis Chatterjee Sachit Nayak
Place : Pune Managing Director Director
   

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Key Information

Key Executives:

Nitin Chalke , Director  

Sachit Nayak , Director  

Yan Jin , Director  

Charles Sims , Director  


Company Head Office / Quarters:
145 Off Mumbai-Pune Road,
Pimpri,
Pune,
Maharashtra-411018
Phone : 91-020-27474407/8/9
Fax : 91-020-27431395
E-mail :
Web : http://
Registrars:
Link Intime India Pvt Ltd
BNo 2 Akshay Compl
Off Dhole Patil Road
Near Ganesh Mandir
Pune-411001

Fund Holding

 
Scheme Name No. of Shares
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