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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MANAGMENT AND DISCISIOUN ANALYISIS

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

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