wabco india ltd Directors report

The Directors have pleasure in presenting the 19^th Annual Report of ZF Commercial Vehicle Control Systems India Limited (‘the Company) along with the audited financial statements for the financial year ended 31^st March 2023.

1. FINANCIAL HIGHLIGHTS

Rs in lakhs

	Stand alone		Consol idated
Particulars	Year ended 31.03.2023	Year ended 31.03.2022	Year ended 31.03.2023**	Year ended 31.03.2022*
Revenue from Operations	344,458.60	254,335.39	344,424.53	254,335.39
Other Income	6,701.31	3,752.92	6,698.21	3,752.92
Total Income	351,159.91	258,088.31	351,122.74	258,088.31
Profit before interest depreciation and tax	53,731.74	29,007.64	53,733.88	29,007.64
Finance Costs	566.54	190.18	566.54	190.18
Depreciation	10,476.38	9,243.17	10,477.68	9,243.17
Profit before tax Provision for taxation	42,688.82	19,574.29	42,689.66	19,574.29
(including deferred tax and tax relating to earlier years)	10,921.48	5,366.85	10,922.48	5,366.85
Profit after tax Other Comprehensive	31,767.34	14,207.44	31,767.18	14,207.44
Income / (Loss) for the year net of tax Total Comprehensive Income for the year	12.69	(353.58)	12.69	(353.58)
Net of Tax	31,780.03	13,853.86	31,779.87	13,853.86

* Consolidation of financials for FY 2021-22 was considered for 3 months since

incorporation of Wholly owned subsidiary Company (ZF CV Control Systems Manufacturing India Private Limited) w.e.f. 5^th January 2022.

** Consolidation of financials for FY 2022-23 is considered for 15 months, as first financial year is ending on 31^st March 2023 for the Wholly owned subsidiary Company (ZF CV Control Systems Manufacturing India Private Limited).

2. DIVIDEND

The Board of Directors has recommended a dividend of Rs 13/- per share for the year ended 31^st March 2023 and dividend payout ratio of 7.76%, absorbing a sum of Rs 2,465.79/- lakhs, for approval of the shareholders at the ensuing annual general Meeting.

Transfer of Unclaimed Dividend to IEPF:

Dividends that are unclaimed/unpaid for a period of seven years are required to be transferred to the Investor Education and Protection Fund (“IEPF”) administered by the Central Government, as per Companies Act 2013. An amount of Rs 3,56,680/- (Rupees Three Lakhs Fifty-Six Thousand Six Hundred and Eighty only) being unclaimed Final dividend of the Company for the financial year ended 31^st March, 2015 was transferred in September, 2022 to IEPF.

3. PERFORMANCE

During the year 2022-23, the Company achieved highest ever total income of Rs 3,512 crores as against Rs 2,581 crores in the previous year. The profit before tax was Rs427 crores as against

Rs 196 crores in the previous year and the Profit after tax was Rs 318 crores as against Rs 142 crores in the previous year. There has been no change in the nature of business of the Company during the financial year ended 31^st March 2023.

4. CAPITAL EXPENDITURE

Capital expenditure of Rs 88.88 Crores was incurred during the year 2022-23 as against the revised estimate of Rs 121 Crores. Capital Expenditure of Rs 278 Crores is planned for the year 2023-24.

5. DIRECTORS

Mr. Alexander De Bock has resigned from the Board with effect from the close of business hours on 30^th March 2023 due to his resignation from the ZF Group. The Board expressed its deep sense of appreciation for Mr. Alexs leadership and acknowledges his immense efforts and contributions towards his financial expertise and business decisions.

Retirement by rotation

Mr. Philippe Colpron, Non-executive and non-independent director, whose office is liable to retire at the ensuing AGM, being eligible, offer himself, for reappointment at the 19^th AGM of the Company scheduled to be held on 27^th July 2023.

The composition of the Board is in compliance with the Companies Act, 2013 (“the Act”) and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing regulations”) - three independent directors, two non-executive non-independent directors and an executive director as on date.

Independent Directors:

In terms of Section 149 of the Act and SEBI Listing Regulations, Mr. M Lakshminarayan, Dr. Lakshmi Venu and Mr. Mahesh Chhabria are the Independent Directors of the Company as on date of this report.

All Independent Directors of the Company have given requisite declarations under Section 149(7) of the Act, that they meet the criteria of independence as laid down under Section 149(6) of the Act along with Rules framed thereunder, Regulation 16(1)(b) of SEBI Listing Regulations and have complied with the Code of Conduct of the Company as applicable to the Board of Directors and Senior Management. In terms of Regulation 25(8) of the SEBI Listing Regulations, the Independent Directors have confirmed that they are not aware of any circumstance or situation, which exists or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgement and without any external influence. The Company has received confirmation from all the Independent Directors about their registration on the Independent Directors Database maintained by the Indian Institute of Corporate Affairs, in terms of Section 150 read with Rule 6 of the Companies (Appointment and Qualification of Directors) Rules, 2014.

In the opinion of the Board, the Independent Directors possess the requisite expertise and experience and are persons of high

integrity and repute. They fulfill the conditions specified in the Act as well as the Rules made thereunder and are independent of the management.

6. AUDITORS

M/s. B S R & Co. LLP, Chartered Accountants, holding firm Registration No 101248W / W-100022 have been appointed as statutory auditors of the Company by the shareholders for a term of five consecutive years from the conclusion of 15^th Annual General Meeting up to the conclusion of the 20^th Annual General Meeting as per the Section 139 of the Companies Act, 2013.

The Consolidated remuneration paid to Auditors / affiliated firms / entities for Audit and services rendered in other capacities is provided in the notes to the standalone financial statements.

The Auditors report for the financial year 2022-23 does not contain any qualification, reservation or adverse remark or disclaimer and the same is attached with the annual financial statements.

7. SECRETARIAL AUDITOR

M/s. S Krishnamurthy & Co., Company Secretaries have carried out Secretarial Audit under the provisions of Section 204 of the Act, for the financial year 2022-23 and submitted their report, which is annexed to this report. The report does not contain any qualification, reservation or adverse remark or disclaimer.

8. COST AUDITOR

As specified by the Central Government under Section 148(1) of the Companies Act, 2013, the cost records are required to be maintained by the Company and accordingly such accounts and records are being maintained. The Board of Directors of the Company upon recommendation made by the audit committee has re-appointed M/s A. N Raman & Associates, Cost Accountants, as Cost Auditor of the Company for the financial year ending 31^st March 2024 and has recommended his remuneration to the shareholders for their ratification at the ensuing Annual General Meeting.

The cost audit report for the year 2021-22 has been filed with the Ministry of Corporate Affairs in the prescribed form within due date. The cost audit report for the year 2022-23 will also be filed within the stipulated time.

During the year under review, the Statutory Auditors, Cost Auditors and Secretarial Auditor have not reported any instances of frauds committed in the Company by its Officers or Employees to the Audit Committee under Section 143(12) of the Companies Act, 2013.

9. KEY MANAGERIAL PERSONNEL

In terms of Section 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Key Managerial Personnel of the Company for the FY 2022-23 are:

Mr. P Kaniappan - Managing Director

Mr. R S Rajagopal Sastry - Chief Financial Officer

Ms. Muthulakshmi M - Company Secretary

10. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS During the year under review, the Company has not provided any Loan nor Guarantee nor security to any person or other body

corporate under Section 186 of the Act.

The Company had invested a sum of ^ 175 Lakhs as paid-up share capital (1,750,000 equity shares of Rs 10 each) in Enerparc Solar Power 3 Private Limited on 21^st March 2023 as part of Captive Power Purchase.

11. WHOLLY OWNED SUBSIDIARY

ZF CV Control Systems Manufacturing India Private Limited was incorporated with effect from 5^th January 2022 as a wholly owned subsidiary (WoS) of the Company, to Manufacture, buying, selling and trading in auto ancillary parts for domestic and export markets (Commercial Vehicle (CV) Control Systems).

The Share capital of the WoS is Rs 100 Lakhs and it has commenced its commercial production with effect from 03^rd March 2023. The Revenue from Operations of WoS was at Rs 62.98 Lakhs for the financial year ended 31^st March 2023 and the Profit after Tax for the year ended 31^st March 2023 was at Rs 1.60 Lakhs. The Board of WoS has not recommended any dividend as it has just kick started its operations. Statement containing salient features of the financial statement of Subsidiary is given in Annexure 4 and forms part of this Report.

12. ANNUAL EVALUATION OF THE BOARDS PERFORMANCE

The Board adopted a formal mechanism for evaluating its performance and as well as that of its Committees and Directors, including the Chairman of the Board as per the requirements as specified in the guidance note issued by the Securities Exchange Board of India (SEBI) and the provisions of the Companies Act, 2013. The performance evaluation exercise was carried out through a structured evaluation process (by circulation of detailed evaluation matrix to all the Directors and was reviewed & confirmed by each Director) covering various aspects of the functioning of the Board and Committees such as their composition, experience & competencies, performance of specific duties & obligations, governance issues etc.

NRC reviewed the performance of individual Directors on the basis of criteria as specified in the Guidance note and in a separate meeting of independent directors, performance of Non-Independent Directors and the Board as a whole was evaluated. The above evaluations were then discussed in the Board meeting and performance evaluation of Independent directors was done by the entire Board, excluding the Independent Director being evaluated and the Board was satisfied with their performances, which reflected the overall engagement of the Board, Committees and the directors with the Company.

13. VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company believes in the conduct of the affairs of its constituents in a fair and transparent manner by adopting the highest standards of professionalism, honesty, integrity and ethical behaviour. In line with the ZF Code of Conduct (‘CoC), any actual or potential violation, howsoever insignificant or perceived as such, would be a matter of serious concern for the Company. The role of the employees in pointing out such violations of the CoC cannot be undermined. Hence, the Company has established a vigil mechanism through “ZF

Commercial Vehicle Control Systems India Limited Whistle Blower Policy” to enable employees, trainees, directors and Vendors of the Company, to report genuine concerns, unethical behavior, actual or suspected fraud, violation of Companys Insider Trading Code, any unlawful act or violation of the Companys Code of Conduct. The mechanism provides for adequate safeguards against victimization of the whistle blower and also provides for direct access to the Chairman of the audit committee.

There were no whistle blower complaints received by the Company during the year.

14. BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORTING

SEBI has mandated that the Business Responsibility and Sustainability Reporting (BRSR) shall be applicable to the top 1,000 listed entities (by market cap) for reporting on a mandatory basis from FY 2022-23. For the FY 2021-22, the company had published BRSR report voluntarily.

The Company is in 218^th Position (BSE) as per the market cap as on 31^st March 2023 and hence as per the SEBI Regulations, the Company has prepared the BRSR for the year ended March 31, 2023 as per the prescribed format which forms part of the annual report.

Mr. P Kaniappan, Managing Director of the Company is responsible for the implementation and oversight of the Policies relating to various principles of BRSR and to take forward the ESG initiatives.

15. STATUTORY STATEMENTS

15.1 Conservation of energy, Research & Development Expenses and foreign exchange earnings and outgo

Information regarding conservation of energy, research & development expenses and foreign exchange earnings and outgo is given in Annexure 1 to this report, as per the requirements of Section 134(3)(m) of the Act.

During the financial year 2022-23, the Company had incurred a capital expenditure of ^ 244.48 lakhs towards installation of roof top solar panels at MWC Plant w.r.t. renewable energy commitments. Total of 55 energy reduction projects implemented during the year which yielded energy savings of 11.62 Lakhs units and cost savings of ^ 110.39 Lakhs per annum.

15.2 Corporate Social Responsibility

As required under Section 134(3)(o) of the Act, details about policy developed and implemented by the Company on Corporate Social Responsibility initiatives taken during the year ended 31^st March 2023 are given in Annexure 2 to this report.

15.3 Directors Responsibility Statement

Pursuant to Section 134(3)(c) of the Act, it is hereby confirmed that;

a. I n the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures.

b. The directors had selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the

state of affairs of the Company as at 31^st March 2023 and of the profit of the Company for the year ended on that date;

c. That directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d. The directors had prepared the annual accounts on a going concern basis;

e. The directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and

f. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively

16. DISCLOSURES UNDER COMPANIES ACT, 2013

16.1 Extract of the Annual Return:

In accordance with the Companies Act, 2013, the annual return in the prescribed format is available at https://www.zf.com/mobile/en/company/investor_relations/zf_cvjndiajnvestor_relations/zf_cvjndiajr.html

16.2 Number of Board Meetings:

The Board of Directors met six times during the year 2022-23. The details of the Board meetings and the attendance of the Directors is provided in the Corporate Governance Report.

16.3 Committees of Board of Directors:

Details of memberships and attendance of various committee meetings are given in Corporate Governance Report. The Board has accepted / considered all recommendations made by the Committees to the Board during the financial year.

16.4 Related Party Transactions:

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no related party transactions made by the company with promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

Approval of shareholders through postal ballot was obtained for the material related party transactions entered for the year ended 31^st March 2023 between the Company and M/S. ZF CV Systems Global GmbH & ZF CV Systems Europe BV, fellow subsidiaries of the Company, on 15.01.2022 and the actual transactions for the year ended 31^st March 2023 with these two entities was enclosed as Annexure - 5 to this report.

Also, prior approval of shareholders for the proposed material related party transactions for the financial year 2023-24 between the Company and M/s. ZF CV Systems Global GmbH & M/s. ZF CV Systems North America LLC, fellow subsidiaries of the company, were obtained through postal ballot on 12.03.2023.

The Company pays royalty to M/s ZF CV Systems Europe BV, a fellow subsidiary and related party at the rate of 4% per annum

on the net sales (Total sales (less) inter-company sales (less) intercompany purchases) effective 1^st January 2016 for the intellectual property, knowhow and processes supplied by ZF CV Systems Europe BV. M/s ZF CV Systems Europe BV charges Royalty to all its associated entities in line with the global practices and transfer pricing norms.

For the FY 2022-23, royalty of ^ 87.37 crores was paid to M/s ZF CV Systems Europe BV which amounts to 3.39 % of the total turnover for the financial year 2021-22.

All transactions with related parties are placed before the audit committee and prior approval of the audit committee is obtained. The Company has developed a Related Party Transactions Policy for the purpose of identification and monitoring of such transactions. Details of material Related Party Transactions entered by the company as required under Section 134(3)(h) of the Act and the Listing regulation are given in Annexure 5 to this report.

17. POLICIES

The following policies approved by the Board of Directors of the Company were uploaded and are available in the Companys website at the web link:

https://www.zf.com/mobile/en/company/investor_relations/zf_cvjndia investor_relations/zf_cvjndiajr.html

17.1.1 Code of Business conduct and ethics by the Board Members & Senior Management

17.1.2 Corporate Social Responsibility Policy

17.1.3 Related Party Transaction Policy

17.1.4 Nomination and Remuneration Policy

17.1.5 Whistle Blower Policy

17.1.6 Policy for Prohibition of Insider Trading

17.1.7 Policy on Criteria for Determining Materiality of Events

17.1.8 Dividend Distribution Policy

17.1.9 Corporate Governance Policy

17.1.10 Policy on Familiarisation of Independent Directors and Other Programs

17.1.11 Material subsidiary policy

17.2 Companys policy on directors appointment and remuneration including criteria determining for qualification, positive attributes, independence of a director and other matters provided under Section 178(3) of the Act is provided in the Corporate Governance Report.

18. PARTICULARS OF DISCLOSURES AS REQUIRED UNDER SECTION 197 OF THE COMPANIES ACT, 2013

18.1 The ratio of the remuneration of each director to the median remuneration of the employees for the financial year and such other details as required are as given below:

Name	Ratio
Mr. P. Kaniappan, Managing Director	45.98:1
Mr. M. Lakshminarayan, Independent Director	2.65:1
Mr. Mahesh Chhabria, Independent Director	2.98:1
Dr. Lakshmi Venu, Independent Director	2.09:1

Directors other than those mentioned above have not drawn any remuneration including Sitting Fees & Commission, for the financial year 2022-23.

18.2 The percentage increase in remuneration of each Director, Managing Director, Chief Financial Officer and Company Secretary in the financial year are as follows:

Mr. M. Lakshminarayan, Independent Director	42.86
Mr. Mahesh Chhabria, Independent Director	17.18
Dr. Lakshmi Venu, Independent Director	20.72
Mr. P. Kaniappan, Managing Director	9.85
Mr. R.S Rajagopal Sastry, Chief Financial Officer	11.55
Ms. M. Muthulakshmi, Company Secretary	16.08

18.3 The percentage increase in the median remuneration of employees in the financial year: 10%

18.4 The number of permanent employees on the rolls of company as on 31^st March 2023: 2181.

18.5 Average percentage increase already made in the salaries of employees other than the managerial personnel in the last financial year: 10.25% Percentage increase in the managerial remuneration in the last financial year: 22.65%. There are no exceptional circumstances for increase in the managerial remuneration. With respect to the Managerial Personnel, variable component is paid in the form of incentive, as per the remuneration policy of the Company and based on the financial and non-financial parameters and based on their individual performance and the performance of the Company. The Board at its meeting dated 24^th May 2023, approved the commission to be paid to nonexecutive independent directors as Rs 30 Lakhs to Mr. M. Lakshminarayan, Rs 35 Lakhs to Mr. Mahesh Chhabria and Rs 25 Lakhs to Dr. Lakshmi Venu respectively.

18.6 The key parameters for any variable component of remuneration availed by the directors: Independent directors have been paid sitting fees for attending meetings of the Board and Committees and paid a profit related commission, but not exceeding 1% of the net profit of the Company for the financial year. No sitting fee and commission is paid to non-executive and non-independent Directors of the Company. However, variable component is paid in the form of incentive, as per the Remuneration Policy of the Company and based on the financial and non-financial parameters, to Mr. P. Kaniappan, Managing Director.

18.7 The remuneration of Directors and employees are as per the remuneration policy of the Company.

18.8 The statement of particulars of employees as per Section 197 of the Companies Act, 2013, read with Rule 5(2) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014, for the year ended 31^st March 2023, is given in Annexure 6 and forms part of this Report.

19. CORPORATE GOVERNANCE

The Company has complied with the provisions of the Listing Regulations concerning corporate governance and a report to this effect is attached, as required by Under Schedule V of the Listing Regulation. The certificate issued by the auditors of the Company regarding compliance with the corporate governance requirements is also annexed to this report. The Managing Director (CEO) and the Chief Financial Officer (CFO) of the Company have certified to the board on financial statements and other matters in accordance with Regulation 17(8) of the Listing Regulations pertaining to CEO / CFO certification for the financial year ended 31^st March 2023. Further, applicable Secretarial Standards have been complied with. The management discussion and analysis report, as required by the Listing Regulation and various disclosures required under the Act is also attached and forms part of this report.

20. FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

The Company has a structured familiarization program for independent Directors of the Company which also extends to other Non-Executive Directors to ensure that Directors are familiarized with their function, role, rights, responsibilities and the nature of the company Business viz., automotive component industry and ZF global business model, etc. The Board of Directors has complete access to the information within the Company. Presentations are made to the Board of Directors at all the Meetings and all Committees of the Board on various matters, where Directors get an opportunity to interact with Senior Management. Presentations, inter alia, cover the Companys strategy, business model, operations, markets, organization structure, product offerings, finance, risk management framework, quarterly and annual results, human resources, technology, quality and such other areas as may arise from time to time.

The Company also issues appointment letters to the Independent Directors which also incorporates their role, duties and responsibilities. Further, regulatory updates on regulatory changes are also periodically placed before the Board. The details of familiarisation programme have been hosted in the web site of the Company under the weblink https://www.zf.com/mobile/en/company/investor_relations/zf_cvjndiajnvestor_relations/zf_cvjndiajr.html

21. OTHER PARTICULARS

• The Company has not accepted any deposits from the public within the meaning of Sections 76 of the Companies Act, 2013 for the year ended 31^st March 2023.

• There are no significant and material orders passed by regulators or courts or tribunals, which would impact the going concern status of the Company and its future operations.

• The Company does not have any associate or joint venture during the financial year 2022-23, apart from one wholly owned subsidiary.

• The Company has not raised any funds during the year.

• The Company has not taken any loan during the year and neither there are any outstanding loans as on 31^st March 2023. Hence there were no instances of any one time settlement nor any valuation done in this regard.

• The Company neither filed an application during the year under review nor there are any proceedings pending against the Company under the Insolvency and Bankruptcy Code, 2016 as at March 31,2023.

• The Company has not transferred any amount to general reserves during the year ended 31^st March 2023.

• There are no material changes and commitments, affecting the financial position of the company which have occurred between the end of the financial year 31^st March 2023 and at the date of this report.

• DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 - The Company has adopted the AntiSexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. In compliance with the provisions under Section 4 of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013, Internal Complaints Committee (ICC) of the Company has been constituted to redress complaints regarding sexual harassment. No complaint was received during the year 2022-23.

Acknowledgement

The directors thank the vehicle manufacturers, distributors, vendors and bankers for their continued support and assistance. The directors gratefully acknowledge the support rendered by ZF Friedrichshafen AG. The directors wish to place on record their appreciation of the excellent work done by employees of the Company at all levels during the year. The directors specially thank the shareholders for the confidence reposed by them in the Company.

	For and on behalf of the board
	M. LAKSHMINARAYAN
Chennai	Chairman
24th May 2023	DIN: 00064750