abc bearings ltd Directors report

To the Members,

Your Directors are pleased to present the Fifty-Sixth Annual Report with the Audited Statements of Accounts for the year ended 31st March, 2017.

FINANCIAL RESULTS:

	Year ended 31.03.2017	Year ended 31.03.2016
	R in Lacs	R in Lacs
Gross Profit before Finance Costs, Depreciation and Tax	3538.54	2787.65
Less: Finance Costs	513.37	697.84
Depreciation	1257.74	1251.49
Profit before Tax	1767.43	838.32
Less: Provision for tax
Current Tax	380.00	180.00
MAT credit entitlement	(83.95)	(172.98)
Deferred Tax (Charge)/Credit	286.68	283.35
Profit after Tax	1184.70	547.95
Add: Balance brought forward from previous year	1168.43	998.51
Amount available for appropriations	2353.13	1546.46
Appropriations:
Proposed Dividend*	–	231.00
Tax on proposed dividend*	–	47.03
Transfer to General Reserves	–	100.00
Balance carried to Balance Sheet	2353.13	1168.43
	2353.13	1546.46

*As per Accounting Standard 4(Revised), provision for Proposed Dividend is no longer required to be made in the financial statements.

OPERATIONS: Automotive Division:

The sales of Commercial Vehicles segment in which your Company is focused progressed well upto October 2016 registering a good growth of 7%, however, thereafter it was strongly affected by demonetization and further by the mandatory shift to introduction of Bharat Stage IV norms. Retail sales of Commercial Vehicles further slowed down as buyers delayed their decision to purchase vehicles in the anticipation of savings in purchase price through introduction of GST.

The Commercial Vehicle Industry registered a modest growth of 3% for the year.

The sales of tractors was more encouraging than commercial vehicles however, the effects of demonetization and introduction of GST hampered the annual numbers. The Domestic Industry grew at healthy rate of 16%.

The commercial vehicle and tractor industries are more prone to cyclic effect and the Company’s sale was in line with the cyclic effect of these two segments.

The Company has taken steps to ensure continuous growth in sales in other segments. The efforts put in by the Company have started giving positive results as shown below:

For 2017-18, monsoon is expected 96% of the normal. Government initiatives in the budget for rural economic growth and the GST implementation planned from July, 2017 should bring good market conditions across all the segments though we expect some disruption during the first half of this year.

Industrial and Big Bearing Division:

There are more than 2000 bearings in this segment. The applications for the bearings supplied are very critical and therefore the bearings need to pass through many quality and approval processes at the users end leading to long validation period. Due to this, the users are reluctant to change over from their current source of supply, posing an additional challenge for entry for new customers. The Company has initiated many plans to mitigate the various challenges faced with sales and production of the bearings manufactured in this Division. While the process is slow these bearings are gradually being accepted by customers and the sales trend is positive.

The trend in sales of industrial bearings is shown below:

SALE OF SHARES:

During the year under review the Company has sold its entire 2.5% equity stake in NSK-ABC Bearings Private Ltd. to NSK India Sales Company Pvt. Ltd., pursuant to the terms of a the Share Purchase Agreement.

PROPOSED MERGER:

The Board of Directors at its meeting held on 4th July, 2017 has approved the merger of the Company into Timken India Limited through a Scheme of Amalgamation and Arrangements.

The Scheme is subject to the approval of the shareholders and creditors of ABC Bearings Limited, approval of the regulatory authorities and the sanction of the National Company Law Tribunal.

FIXED DEPOSITS:

During the year, the Company has not accepted any fixed deposits under the Companies Act, 2013.

QUALITY CERTIFICATIONS:

Your Company continues to enjoy the TS 16949 as well as the ISO 140001 certifications. The Original Equipment customers continue to repose their confidence with self-certification status for the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT:

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, the work performed by the internal, statutory, cost and secretarial auditors and the reviews performed by the Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company’s internal financial controls were adequate and effective during the year ended 31st March, 2017. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, based on the above and the representations received from the Operating Management, the Board of

Directors, to the best of their knowledge and ability confirm that: i. in the preparation of the annual accounts, the applicable accounting standards have been followed and that there were no material departures therefrom; ii. they have, in the selection of the accounting policies, consulted the statutory auditors and have applied their recommendations consistently and made judgements 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 31st March, 2017 and of the profit of the Company for the year ended on that date; iii. they have taken proper and sufficient care 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; iv. they have prepared the annual accounts on a going concern basis; v. they have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively during the year ended 31st March, 2017; and vi. proper system has been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively during the year ended 31st March, 2017.

DIRECTORS:

In accordance with the provisions of Section 152 of the Companies Act, 2013, Mr. P.M. Patel retires by rotation and being eligible, offer himself for reappointment. Necessary resolution is being proposed for his reappointment as Director at the ensuing Annual General Meeting of the Company. A brief resume and particulars relating to him are given separately under the report on Corporate Governance.

Mr. S. S. Patel was appointed as Additional Executive Director at the Board Meeting held on 19.10.2016. Necessary resolution is being proposed for his appointment as Director at the ensuing Annual General Meeting of the Company. A brief resume and particulars relating to him are given separately under the report on Corporate Governance.

An ordinary resolution is proposed to appoint Mr. S. S. Patel as Executive Director for a period of 3 years with effect from 20th September, 2017.

Special Resolutions are proposed to reappoint Mr. S. M. Patel, Executive Chairman and Mr. P. M. Patel, Managing Director for a period of three years with effect from 2nd May, 2017 and 1st August, 2017 respectively. A brief resume and particulars relating to them are given separately under the report on Corporate Governance.

KEY MANAGERIAL PERSONNEL (KMP):

Pursuant to provisions of Sections 2(51) and 203 of Companies Act, 2013 read with Rule 8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 following persons are acting as KMP as on 31st March, 2017:

• Mr. P.M. Patel, Managing Director

Mr. S.K. Choudhary, Chief Financial Officer

• Mr. S.B. Desai, Company Secretary

None of the Key Managerial Personnel has resigned during the year ended 31st March, 2017.

FORMAL ANNUAL EVALUATION:

Pursuant to the provisions of the Companies Act, 2013 and Regulation 25(4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Independent Directors have carried out annual performance evaluation of the Board of Directors as a whole and have come to the conclusion that the Board meets expectations.

INDEPENDENT DIRECTORS’ DECLARATION:

The Company has received the declarations in the prescribed format from each Independent Director confirming that they meet the criteria of independence as envisaged in the provisions of Section 149 of the Companies Act, 2013, read with Regulation 16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

CORPORATE SOCIAL RESPONSIBILITY:

The Corporate Social Responsibility Committee comprises of Mr. S. M. Patel, Chairman, Mr. T. M. Patel, and Mr. Jal R. Patel, are members which is as per Section 135 of Companies Act, 2013. Your Company has formulated a Comprehensive CSR policy in line with the Companies Act, 2013. In line with the CSR policy, the following activities are undertaken by the Company:

• Shouldering Education Responsibility.

In this field we are supporting an English Medium School, in rural area of Gujarat, which has an enrolment of approximately

600 students.

• We provide facility for outdoor and indoor sports and activities through a Sports Complex at Bharuch.

• For the Youth:

An Academy is established to coach youngsters in cricket and other outdoor sport.

• Providing shelter and food to the needy in disaster situation.

• We have established facility for processing part of the waste generated by the Company to produce organic fertilizer. We assist neighbouring establishments to set up such facilities. The fertilizer produced is not only used by the Company but also public at large and whoever requires the same.

The Annual Report on CSR activities in accordance with the Companies (Corporate Social Responsibility) Rules, 2014, is set out as "Annexure (A)".

AUDITORS: Statutory Auditors:

The term of existing auditor viz. M/s. Parikh & Shah, Chartered Accountants, will expire at the conclusion of ensuing 56th Annual General Meeting pursuant to the provisions of Section 139(2) of the Companies Act, 2013. The Board proposes to appoint M/s. Chokshi and Chokshi LLP, Chartered Accountants, bearing Firm Registration No. 101872W-W100045 as the Statutory Auditors as recommended by Audit Committee for a term of 5 years commencing from the conclusion of 56th Annual General

Meeting till the conclusion of 61st Annual General Meeting subject to ratification by Members in each Annual General Meeting. As required under the provisions of Section 139 and Section 141 of the Companies Act, 2013, the Company has received a written certificate from the Statutory Auditors, to the effect that their appointment, if made, would be in conformity with the limits specified in the said Section.

A proposal seeking appointment of M/s. Chokshi and Chokshi LLP, Chartered Accountants, as the statutory Auditors of the Company is provided as a part of the Notice convening the ensuing 56th Annual General Meeting.

Secretarial Auditor:

Mr. D.M. Dalal, a Practising Company Secretary, was appointed as Secretarial Auditor, to carry out Secretarial Audit of the Company. In terms of provisions of Section 204 of the Companies Act, 2013, a Secretarial Audit Report has been annexed to this Report Annexure "(B)".

Cost Auditors:

M/s. B.J.D. Nanabhoy & Co., Cost Accountants, were appointed as Cost Auditors to carry out the audit of the cost records of the Company for the Financial Year ended 31st March, 2017. Based upon the declaration on their eligibility, consent and terms of engagement, your Directors propose their re-appointment for the year ending 31st March, 2018.

Explanation or Comments on disqualifications, reservations, adverse remarks or disclaimers in the auditors’

There have been no disqualifications, reservations, adverse remarks or disclaimers in the auditors’ reports, requiring explanation or comments by the Board.

ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO:

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is set out as Annexure "(C)" to this Report.

RELATED PARTY TRANSACTIONS:

During the financial year 2016-17, the Company has entered into transactions with a related party as defined under Section 2(76) of the Companies Act, 2013 read with Companies (Specification of Definitions Details) Rules, 2014, all of which were in the ordinary course of business and on arm’s length basis and in accordance with the provisions of the Companies Act, 2013, read with the Rules issued thereunder and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Further, there were no transactions with related party which qualify as material transactions under the Listing Regulations. The transactions with related party were reviewed and approved by the Audit Committee. The policy on Related Party Transactions as approved by the Board is posted on the Company’s website.

In terms of provisions of Section 134(3)(h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, Form AOC-2 is set out in Annexure "(D)".

EXTRACT OF ANNUAL RETURN:

The details forming part of the extract of the Annual Return in Form MGT-9 in accordance with Section 92(3) of the Companies Act, 2013 read with the Companies (Management and Administration) Rules, 2014, are set out herewith as Annexure "(E)" to this Report.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES:

In terms of the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the names of the top ten employees in term’s of remuneration drawn and employees drawing remuneration in excess of the limits set out in the said rules forming part of this report is given in the Annexure to this Report. However, pursuant to provisions of Section 136(1) of Companies Act, 2013 all reports and accounts are sent to all the shareholders of the Company except this annexure. Any shareholder, interested in inspecting this report, can visit our registered office or write to the Company Secretary for a copy of it.

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) rules, 2014, have been appended to this Report Annexure "(F)".

MANAGEMENT’S DISCUSSION AND ANALYSIS:

Pursuant to Regulation 34 read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, detailed review of operations, performance and future outlook of the Company is covered under separate Annexure to this report as Management’s Discussion and Analysis Annexure "(G)".

CORPORATE GOVERNANCE:

A separate Section on Corporate Governance is included in the Annual Report in accordance with SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 along with Auditors’ Certificate confirming the compliance of conditions on

Corporate Governance and the same is annexed thereto Annexure "(H)".

AUDIT COMMITTEE:

The Audit Committee comprises of Mr. Jal R. Patel, Chairman, Mr. Nalin M. Shah and Mr. S.M. Patel are members. Further details relating to the Audit Committee are provided in the Corporate Governance Report, which forms part of this report.

The Board has accepted all the recommendations made by Audit Committee during the year.

VIGIL MECHANISM / WHISTLE BLOWER POLICY:

The Company has established a Vigil Mechanism/Whistle Blower Policy for Directors and Employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company’s Code of Conduct. The Audit Committee oversees the vigil mechanism complaints. During the year, no complaints were received under vigil mechanism policy. The Vigil Mechanism/ Whistle Blower Policy is available on Company’s website at http://www.abcbearings.com/index.php/whistle-blower-policy/.

POLICY ON NOMINATION AND REMUNERATION:

The Company’s policy on Nomination and Remuneration is framed with objectives as under:

1. To formulate criteria and advise the Board in matters of determining qualifications, competencies, positive attributes and independence of Directors, and policies relating to their appointment and removal;

2. To review corporate goals and objectives, to set norms of performance evaluation and to lay out remuneration principles for Directors, KMP and Senior Management linked to their effort, performance and contribution towards achievement of organisational goals;

3. To evaluate performance and give recommendations to the Board on remuneration payable to the Directors, KMP and Senior Management; and

4. To review and recommend to the Board, measures to retain and motivate talent including KMP and Senior Management Personnel with a view to ensuring long term sustainability and competitiveness of the organisation.

Criteria and Qualification for Nomination and Appointment:

A person to be appointed as Director, KMP or at Senior Management level should possess adequate and relevant qualification, expertise and experience for the position that he/she is being considered for. The Nomination and Remuneration Committee

(NRC) will evaluate whether qualification, expertise and experience possessed by a person is sufficient/satisfactory for the concerned position and the NRC will make appropriate recommendations to the Board of Directors.

Policy on Remuneration:

1. The remuneration (including revisions) to Directors is recommended by NRC to the Board for approval. The remuneration (including increments) to the Directors, so recommended by NRC to the Board, should be within the limits under the Companies Act, 2013 read with the Rules thereunder and as approved by the shareholders of the Company.

2. None of the Directors (including Independent Directors) shall be entitled to any stock option of the Company.

3. While determining Remuneration to KMP, Senior Management Personnel and other employees, the Company encourages superior performance. The objective is to set the total remuneration at levels to attract, motivate, and retain high-calibre, and high potential personnel in a competitive market.

MEETINGS:

During the year five Board Meetings, four Audit Committee Meetings, three Nomination and Remuneration Committee Meeting, one Corporate Social Responsibility Committee Meeting and thirteen Stakeholders Relationship Committee Meeting were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Board meetings was within the period prescribed under the Companies Act, 2013.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY COMPANY:

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to Financial Statements.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013:

The Company has in place Sexual Harassment Policy in line with the requirement of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under the policy. No complaints have been received by the Committee during the year.

ACKNOWLEDGEMENT:

The Directors wish to place on record their deep sense of appreciation for the committed services of the employees of the Company at all levels. The Directors also express their sincere appreciation for the assistance and co-operation received from Banks, Customers and Dealers, during the year.

	For and on behalf of the Board
Place : Mumbai	S. M. PATEL
Date : 4th August, 2017	Chairman
	DIN : 00012036