Elgi Equipments Ltd Directors Report.

Dear Shareholders,

Your Directors hereby present the 61st Annual Report along with the audited accounts for the year ended 31st March, 2021.

Financial Results

The highlights of the performance of your Company during the fiscal are given hereunder:

( In Million)

Particulars 2020 - 21 2019 - 20
Profit before depreciation, exceptional items & tax 1,755.21 1644.45
Less : Depreciation 353.29 366.52
: Exceptional items
Profit Before Tax 1401.92 1277.93
Less: Provision for tax (Net of tax expenses) 351.02 273.69
Net Profit 1050.90 1004.24
Add: Opening balance in retained earnings 5184.71 4677.91
Less : Dividend & dividend distribution tax paid during the year (497.42)
: Transfer to general reserve
: Remeasurement of post-employment benefit obligation, net of tax 9.74 (0.02)
: Transfer to retained earnings of gain on FVOCI equity instruments 2.13
Add : Other adjustments
Closing balance in P&L account 6247.48 5184.71

Review of Business Operations

The Company realized an operating revenue of 11,001 Million as against 10,811 Million in 2019-20. The details of division wise performance and other operational details are discussed at length in the Management Discussion and Analysis section.

There was no change in the nature of business of the Company during the financial year ended 31st March, 2021.

Transfer to reserves

The Company has not transferred any amount to the General Reserve during the year under review. However, an amount of 1050.90 million of the current profits has been carried forward under the head retained earnings.

Dividend

For the financial year 2020-21, the Board of Directors at their meeting held on 21st May, 2021, has recommended a dividend of 0.80/- per share (80%) on the paid-up share capital of 31,69,09,016 equity shares. Subject to the approval of shareholders, an amount of 253.52 million will be paid as dividend after deducting applicable taxes. (Previous Year 261.45 million)

Pursuant to Regulation 43A of The SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (as amended), the Dividend Distribution Policy of the Company can be accessed on the Company’s website at the link https://www.elgi.com/in/wp-content/uploads/2020/02/ Dividend-Policy.pdf.

Share Capital

The paid-up share capital of the Company as at 31/03/2021 stood at 31,69,09,016/- divided into 31,69,09,016 equity shares of 1/- each.

During the year under review, pursuant to the resolution passed by the members through Postal Ballot on 18th September, 2020, the Board of Directors of the Company at their meeting held on 28th September, 2020 has issued and allotted 15,84,54,508 equity shares of 1/- each as bonus equity shares in the proportion of 1 (one) equity share for every 1 (One) existing equity share held by the members by capitalizing the securities premium account of the Company in compliance with the provisions of the Companies Act, 2013 and SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

Transfer of Unclaimed Dividend/Shares to Investor Education and Protection Fund

In terms of Sections 124 and 125 of The Companies Act, 2013, unclaimed or unpaid Dividend relating to the financial year 2013-14 is due for remittance to the Investor Education and Protection Fund established by the Central Government.

Further, pursuant to Section 124(6) of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, 1,21,859 equity shares of 1/- each on which dividend had remained unclaimed for a period of 7 years have been transferred to the credit of demat account identified by the IEPF Authority during the year under review. Further, the Company has also transferred 4,29,106 bonus equity shares of 1/- each which were allotted during the year under review to the credit of demat account identified by the IEPF Authority in respect of shares which have already been transferred to the Investor Education and Protection Fund.

Annual Return

The Annual Return of the Company for the financial year 2020-21 as required under Section 92(3) of the Companies Act, 2013 is available on the website of the Company and can be accessed on the Company’s website at the link "https://www.elgi.com/in/financials/".

Board Meetings and its Committees conducted during the period under review

During the year under review, 6 (six) Meetings of the Board of Directors, 5 (five) Meetings of the Audit Committee, 2 (two) Meetings of the Nomination and Remuneration Committee, 2 (two) Meetings of the Corporate Social Responsibility Committee, 1 (one) meeting of the Risk Management Committee, 1 (one) meeting of the Compensation Committee and 13 (Thirteen) Meetings of the Stakeholders Relationship Committee were held. Further, the details of the same have been enumerated in the Corporate Governance Report annexed herewith.

Statement on compliance with Secretarial Standards

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and such systems are adequate and operating effectively.

Directors’ Responsibility Statement

Pursuant to the requirement under Section 134(3)(c) of The Companies Act, 2013, with respect to Directors’ Responsibility Statement, it is hereby confirmed that –

a. in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departures from those standards;

b. the Directors have 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 at the end of the financial year and of the profit of the Company for that period;

c. the Directors have taken proper and sufficient care for 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;

d. the Directors have prepared the annual accounts on a going concern basis;

e. the Directors have 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 the applicable laws and such systems were adequate and operating effectively.

Details in respect of frauds reported by Auditors under Section 143(12) of The Companies Act, 2013 other than those which are reportable to the Central Government

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit pursuant to Section 143(12) of The Companies Act, 2013.

Declaration of Independent Directors

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Company’s Policy relating to Directors Appointment, Payment of Remuneration and other matters provided under Section 178(3) of the Companies Act, 2013

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and other employees of the Company. The remuneration policy and criteria for determining qualifications, positive attributes, and independence of Directors and Senior Management Personnel have been stated in Annexure ‘A’ to this report. The Remuneration policy of the Company can be accessed on the Company’s website at the link https://www.elgi. com/in/wp-content/uploads/2019/05/Remuneration-Policy.pdf.

Comments on Auditors’ Report

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. Price Waterhouse Chartered Accountants LLP, Statutory Auditors and Mr. M.D. Selvaraj, Proprietor of MDS & Associates, Secretarial Auditor, in their respective reports.

Particulars of Loans, Guarantees or Investments made under Section 186 of the Companies Act, 2013

Details of loans given, investments made, guarantees given and securities provided pursuant to the provisions of Section 186 of The Companies Act, 2013, have been given in the notes to the Financial Statements.

Particulars of contracts or arrangements with Related Parties

All transactions entered into with related parties as defined under The Companies Act, 2013 and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year 2020-21 were in the ordinary course of business and on an arm’s length pricing basis. The particulars of contract and arrangement entered into with related parties referred in Section 188(1) of the Companies Act, 2013, which are material in nature are disclosed in the prescribed Form No. AOC-2 and annexed herewith as ‘Annexure ‘B’ to this report.

The Policy on Related Party Transactions as approved by the Board of Directors of the Company has been uploaded on the Company’s website and may be accessed through the link at https://www.elgi.com/ in/wp-content/uploads/2019/05/Related-Party-Transactions-Policy.pdf.

Material Changes and commitments affecting the financial position of the Company:

There are no material changes and commitments affecting the financial position of the Company which have occurred between the end of the financial year as on 31/03/2021 and the date of this report.

Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo:

The information on foreign exchange earnings and outgo, technology absorption, conservation of energy stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure ‘C’.

Risk management plan implementation

Pursuant to the requirement of Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (the "SEBI LODR"), the Company has constituted a Risk Management Committee (RMC), consisting of Board members and senior executives of the Company. The Company has in place a Risk Management framework to identify, evaluate business risks and challenges across the Company both at corporate level as also separately for each subsidiary.

The top 10 risks for the Company have been mapped by the operating management (with additional support of external guidance) after extensive deliberations on the nature of the risk being a gross or a net risk and thereafter in a prioritized manner presented to the Board for their inputs on risk mitigation/management efforts. Based on this framework, a Risk Management policy has been adopted.

The RMC engages in the Risk Management process and has set out a review process so as to report to the Board the progress on the initiatives for the major risks of each of the businesses that the Company is into. The The RMC reviewed the top 10 risks at its meeting held on 29th June, 2020 in the year under review. The results of the mitigation measures implemented by the Company will be visible in the below table that shows the comparative position on 29th June, 2020 vis-a-vis 20th May, 2021.

Risk Category Risk Summary Position as on 29/06/2020 Risk Response /Mitigation actions Position as on 20/05/2021
1 Compliance Risks The Company’s business is subject to legal and regulatory requirements globally; non-compliance could result in severe consequences The Company has developed and implemented a process and a software tool to capture and report all applicable compliances in the Company’s geographies globally. The Company has developed and implemented a process and a software tool to capture and report all applicable compliances in the Company’s geographies globally.

The Company revisits the compliance checklist periodically and updates them to cover latest legal developments and changes in laws using external consultant’s help. Proof of compliance collected from the respective process owners.

Proof of compliance collected periodically from the respective process owners globally. Further, the Company revisits the compliance checklist periodically and updates them to cover latest legal developments and changes in laws using external consultant’s help.

2 Human Resource Risks Recruiting and retaining strong talent is key to achieving the Company’s aspirations; any gaps in these efforts could impact the achievement of revenue and profitability targets.

Competency framework has been developed and rolled out. This is expected to secure access to people with the right expertise in the geographies the Company operates in. The Company also actively monitors and implements its plans on talent development and attrition in key roles across the globe.

The talent acquisition model is driven by a strong selection process, partnering with specialized search firms, industry contacts. Global competency framework, has been developed and rolled out. Access to people with the right expertise in the geographies the Company operates in is ensured with the above.

From a compensation perspective, salaries and other conditions are benchmarked to the market and linked to business priorities The Company also actively monitors and implements its plans on talent development and attrition in key roles across the globe. From a retention perspective, employee compensation and benefits are benchmarked to the market periodically.
3 Economic & Market Risks Our global operations are subject to economic and market risks in the geographies we operate in. India is still a high growth market over a long term and the Company’s relatively diversified portfolio may mitigate this risk to a certain extent. India is still a high growth market over a long term and the Company’s relatively diversified geographical presence will mitigate this risk to a certain extent.
Well-diversified sales to customers in multiple countries and industries. Sales of spare parts and services are relatively stable in comparison to equipment sales Broad product portfolio serving very diverse industry segments mitigates the risks further. Sales of spare parts and services driven by growing installed base offers sustainable revenue opportunities.

 

4 Acquisitions, joint ventures and investments could be unsuccessful or consume management time and resources, which could adversely affect our operating results

The Company selects its acquisitions mostly after its own previous experience of dealing with this on a channel level; also, as a standard practice, detailed due diligence is performed with the help of external experts in the legal, financial and tax areas to fully understand and factor the risks in both making a decision on the deals as well as arriving at the acquisition price

The Company selects its acquisitions strategically and carefully basis its own previous experience and learnings. As a standard practice, detailed due diligence is performed with the help of external experts in the legal, financial and tax areas to fully understand and factor the risks in both making a decision on the deals as well as arriving at the acquisition price.
The integration of the acquired Company is achieved through a judicious mix of centralization and decentralization approach. The Company also ensures that appropriate resources are invested to make the acquisition successful. The integration of the acquired Company is achieved through a judicious mix of centralization and decentralization approach. The Company also ensures that appropriate resources are invested to make the acquisition successful.
5 Strategic Risk Business continuity could be severely affected due to natural disasters or unexpected events like COVID 19 pandemic Insurance policies taken by the Company mitigate the risks to a certain extent but these can be revisited to strengthen the scope as required. Insurance policies taken by the Company mitigates the risks to a certain extent and this is periodically reviewed to strengthen the scope as required.

The Company has responded swiftly and effectively by managing its costs and cash flows to largely overcome the sales compression caused by COVID-19. The Company has a disaster management plan in place and continues to refine it regularly to meet the changing requirements.

The Company has responded swiftly and effectively by managing its costs and cash flows to largely overcome the sales compression caused by COVID-19. The Company has a disaster management plan in place and continues to refine it regularly to meet the changing requirements.
6 Supply Chain Risks Disruptions in supplies due to concentration of manufacturing facilities in a single location and reliance on one or few suppliers present risks to business stability

The Company is exploring responsestomanufacturing concentration including strategic stocking in various parts of India and the world. Actions would be undertaken on widening the supplier base and develop a global network of suppliers to prevent supplier dependency.

The Company is exploring responses to manufacturing concentration including strategic stocking in various parts of India and the world in the short to mid-term and having assembly operations in global regions in the mid to long-term.
There is a continuous focus on widening the supplier base and develop a global network of suppliers to prevent supplier dependency. Strategic selective backward integration approach to manufacturing is ensuring that most critical parts are moved in-house.

 

7 Information Technology Risks Cyber security risks could disrupt the Company’s technology systems, infrastructure, and networks. Gaps in data protection could result in non-compliance of applicable regulations Availability has been improved by adopting Cloud technologies for some of the critical systems. Emails are scanned and quarantined if risk is detected. Multi-factor authentication is being implemented for minimizing cyber risks due to password hacks.

Reliability in continuously enhanced by adopting and moving systematically critical systems to the Cloud. Up-to-date technology is deployed to ensure Emails are scanned and quarantined if risk is detected. Multi-factor authentication is implemented for minimizing cyber risks due to password hacks.

IT security audits are performed annually to assess the vulnerabilities in the existing systems. Intelligent security monitoring tools to be evaluated. Data privacy policy is being formulated to comply with GDPR. IT security audits are performed annually to assess the vulnerabilities in the existing systems. The Company is exploring the possibility to move to half-yearly audit besides Deploying intelligent security monitoring tools. Data privacy policy to comply with GDPR is implemented.
8 Financial Risks Exchange rate fluctuations in the various currencies that Company deals in could adversely affect the Company’s financial performance To minimize fluctuation risks, the Company has a strong hedging process and policy in place. The Company also continuously monitors the exchange rates relevant for its geographies and takes suitable actions to offset negative changes by adjusting selling prices and costs.

To minimize fluctuation risks, the Company has a strong hedging process and policy in place besides leveraging the natural edge that is available. The Company also continuously monitors the exchange rates relevant for its geographies and takes suitable actions to offset adverse changes by adjusting selling prices and costs.

The Company is working closely with its bankers to understand the regulatory changes in the banking system with reference to managing exchange risks and leverage them suitably.
9 Environmental Risks Global climate change and related regulations can negatively impact our business The Company expects to focus more on EPSAC and OFSAC machines for its future growth, gradually reducing the impact of DPSAC on its overall portfolio. Environmental factors and regulatory changes happening globally would be closely monitored to effect appropriate actions to align our products with these requirements.

The Company expects to focus more on EPSAC and OFSAC machines for its future growth, gradually reducing the impact of DPSAC on its overall portfolio. Environmental factors and regulatory changes happening globally are closely monitored to effect appropriate actions to align our products with these requirements.

The Company’s operation are constantly upgraded to adopt to green manufacturing.
10 Strategic Risks The Company’s large dependence on India makes it susceptible to the economic fortunes of a single geography The Company’s CK2 aspiration makes it a goal to diversify and reduce the business concentration in India. The Company believes that it now has assembled the infrastructure and resources overseas to implement this aspiration over the next few years.

The Company’s CK2 aspiration makes it a goal to diversify and reduce the business concentration in India. The Company believes that it now has assembled the infrastructure and resources overseas to implement this aspiration and the revenue mix is steadily shifting more favorably.

The Company’s strategic plan for the mid- term and the strategic initiatives are aligned to this goal to diversify the revenue mix.

It was also decided by the RMC at its meeting on 20th May, 2021 that the above top 10 risks will be revisited and refined during the course of the financial year 2021-22, as appropriate.

Details of policy developed and implemented by the Company on its Corporate Social Responsibility Initiatives

The Board had formed a Corporate Social Responsibility Committee comprising of the following Directors

1. Mr. Jairam Varadaraj 2. Dr. T Balaji Naidu 3. Mr.B.Vijayakumar and 4. Ms. Aruna Thangaraj

The CSR policy of the Company deals with allocation of funds, activities, identification of programs, approval, implementation, monitoring and reporting mechanisms under the policy.

As part of its initiatives under CSR for the year 2020-21, the Company has undertaken projects in the areas of Education, Social Development, Medical Relief, Sports, etc. These projects are in accordance with Schedule VII of the Companies Act, 2013.

The CSR spend is predominantly directed through Registered Trusts. The Trusts expend the sums contributed by the Company towards educational and related activities. The Trusts also expend the funds towards:

i) Giving education assistance to the poor & bright students to pursue college education of both Arts and Technical courses.

ii) Supporting school children whose parents are either poor or deceased to peruse studies from LKG to 12th STD.,

iii) Supporting medical assistance to the poor patients through the recognised hospitals.

iv) Supporting AMRIT school for special children, Coimbatore

v) Supporting ELGI Matriculation Higher Secondary school, Vellalore, a village situated in the suburb of Coimbatore.

vi) Supporting CanKids, a non-profit organization involved in helping cancer afflicted children.

vii. Supporting Coimbatore Cancer Foundation

The Annual Report on CSR activities undertaken by the Company during the financial year is set out in Annexure D to this report in the format prescribed under the Companies (Corporate Social Responsibility Policy) Rules, 2014.

Annual Evaluation of the Board on its own performance and of the Individual Directors

On the advice of the Board of Directors, the Nomination and Remuneration Committee of the Board of Directors of the Company formulated the criteria for evaluation of the performance of the Board of Directors & its committees, Independent Directors, Non-Independent Directors and the Managing Director of the Board. Based on that criteria, performance evaluation has been undertaken. The Independent Directors of the Company have also convened a separate meeting for this purpose.

Statement regarding opinion of the Board with regard to integrity, expertise and experience (including the proficiency) of the Independent Directors appointed during the year

The Board of Directors have evaluated the Independent Directors during the year 2020-21 and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors is satisfactory.

Directors and Key Managerial Personnel

Dr. T Balaji Naidu, Director of the Company, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. Your Directors recommend his re-appointment.

During the year under review, Mr. Anvar Jay Varadaraj was appointed as an Additional Director (Non-Executive) of the Company with effect from 1st April, 2020 and was subsequently appointed as a Non-Executive Director of the Company by the members at the 60th Annual General Meeting held on 14th August, 2020. During the year under review, pursuant to the approval granted by the Board of Directors & the members of the Company, Mr. Jairam Varadaraj was re-appointed as the Managing Director of the Company for a period of 5 years with effect from 1st April, 2021. The Board of Directors of the Company, on the recommendation of the Nomination and Remuneration Committee, have proposed to appoint Mr.Anvar Jay Varadaraj (DIN: 07273942) as an Executive Director of the Company for a period of 5 years with effect from 2nd August, 2021 on the terms and conditions as set out in the notice convening the 61st Annual General Meeting. Necessary resolution in this regard has been included in the Agenda of the Notice convening the Annual General Meeting for the approval of the members. The Board recommends his appointment. Mr.Ragunathan Gunabooshanam resigned as the Chief Financial Officer of the Company with effect from 22nd October, 2020 and Mr.Jayakanthan R was appointed as the Chief Financial Officer of the Company with effect from 23rd October, 2020.

The Company has appointed Mr.Ragunathan K (ACS No.62397) as a Company Secretary and Compliance Officer of the Company with effect from 29th June, 2020. Key Managerial Personnel of the Company as required pursuant to Section 2(51) and 203 of the Companies Act, 2013 are Mr.Jairam Varadaraj, Managing Director and Mr. Jayakanthan R, Chief Financial Officer and Mr.Ragunathan K, Company Secretary.

Subsidiaries, Joint Ventures and Associate Companies

The highlights of performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company during the period review have been disclosed in the Management Discussion and Analysis Report The Company has 24 subsidiaries and 7 joint venture / associate entities. The statement pursuant to Section 129(3) of The Companies Act, 2013, containing the salient features of the financial statements of subsidiary Companies, forms part of this Annual report. The following Companies have become subsidiaries/joint ventures during the year under review and as on date of this report:

a. Compressed Air Solutions of Texas LLC (Joint Venture)

b. PLA Holding Company LLC (Joint Venture)

c. Pattons of California LLC (Joint Venture)

d. Elgi Compressors Nordics (Subsidiary)

e. Elgi Compressors Eastern Europe sp. z.o.o. (Subsidiary)

f. Elgi Compressors France SAS (Subsidiary)

g. Elgi Compressors UK and Ireland Limited (Subsidiary)

h. G3 Industrial Solutions, LLC (Joint Venture)

i. ELGI COMPRESSORS (M) SDN. BHD (Subsidiary)*

*During the year 2020-21, Elgi Compressors (M) SDN.BHD was incorporated, but no capital infusion was made During the year, the shareholding of Rotair SPA (1%) and Elgi Compressors Italy SRL (99%) in the step down subsidiary Elgi Compressors Europe SRL were transferred to the Company in an attempt to restructure the European Subsidiaries, so that Elgi Compressors Europe SRL is seen as the centre point of all European operations.

The Company has also initiated the procedure for winding up of the subsidiary viz. Elgi Equipments (Zhejiang) Limited commencing from 27th May, 2020. As of 31/03/2021, the Company has three material subsidiaries, ATS Elgi Limited, Rotair SPA and Pattons Inc, whose net worth exceeds 10% of the consolidated net worth of the holding Company in the immediately preceding financial year or has generated 10% of the consolidated income of the Company during the previous financial year. The Board has approved a policy for determining material subsidiaries, which has been uploaded on the Company’s website viz. www.elgi.com. The consolidated financial statements of the Company and its subsidiaries prepared in accordance with the applicable accounting standards have been annexed to the Annual Report. The annual accounts of the subsidiary Companies are posted on the website of the Company viz. www.elgi.com and will also be kept open for inspection by the shareholders at the registered office of the Company. The Company will also provide a copy of the annual accounts of subsidiary Companies to the shareholders upon their request.

Fixed Deposits

Since the Company has not accepted any fixed deposit covered under Chapter V of the Companies Act, 2013, there are no deposits remaining unclaimed or unpaid as on 31st March, 2021 and accordingly, the question of default in repayment of deposits or payment of interest thereon during the year does not arise.

Details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company’s operations in future

There are no significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and Company’s operations in future.

Adequacy of Internal Financial Controls with reference to the Financial Statements

The Company has adequate internal control systems to monitor business processes, financial reporting and compliance with applicable regulations. The systems are periodically reviewed for identification of control deficiencies and formulation of time bound action plans to improve efficiency at all the levels. The Audit Committee of the Board constantly reviews internal control systems and their adequacy, significant risk areas, observations made by the internal auditors on control mechanism and the operations of the Company and recommendations made for corrective action through the internal audit reports. The committee reviews the statutory auditors’ report, key issues, significant processes and accounting policies. The Directors confirm that the Internal Financial Controls (IFC) are adequate with respect to the operations of the Company. A report of Auditors pursuant to Section 143(3) (i) of the Companies Act, 2013 certifying the adequacy of Internal Financial Controls is annexed with the Auditors Report.

Auditors:

Statutory Auditors

M/s. Price Waterhouse Chartered Accountants, LLP (FRN 012754N/N500016) Chartered Accountants, Chennai were appointed as the Statutory Auditors of the Company for a period of 5 years at the 57th Annual General Meeting of the Company held on 28 July, 2017. The Company has received a certificate from M/s. Price Waterhouse Chartered Accountants LLP, confirming that they are not disqualified from continuing as statutory auditors of the Company.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. MDS & Associates, Company Secretaries in Practice, to undertake the secretarial audit of the Company. The report of the secretarial auditor is annexed herewith as Annexure ‘E’. In accordance with Regulation 24 A of the SEBI (Listing Obligations & Disclosure Requirements), 2015, the Company carried out Secretarial Audit of its material unlisted subsidiary M/s.ATS Elgi Limited also through M/s. MDS & Associates, Company Secretaries in Practice. The report of the secretarial auditor is annexed herewith as Annexure ‘E-1’.

Cost Auditors

The Board of Directors on the recommendation of the Audit Committee, has appointed M/s. STR & Associates, Cost Accountants as the Cost Auditors of the Company for the financial year 2021-22. The scope of audit was as follows: Verification of cost records maintained by the Company.

Reconciliation of cost records with that of financial records.

Verification of material consumption, overhead recovery rates, allocation of production, administration, selling and distribution overheads between various divisions and the basis for cost allocation.

Verification of Quantity reconciliation and Costing Profit &Loss statement.

The total turnover that was subject of audit was INR 10,811 Million.

Pursuant to Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Accounts) Rules, 2014, the remuneration payable for the year 2021-22 to the Cost Auditors of the Company is subject to ratification by the shareholders at the ensuing Annual General Meeting. The remuneration of 3,00,000/- (Rupees Three Lakhs Only) to the Cost Auditors is commensurate with the size of the Company, work involved and scope of audit. The Board recommends their remuneration for members’ ratification.

Maintenance of cost records under sub-section (1) of Section 148 of the Companies Act, 2013

Pursuant to the provisions of Section 148(1) of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014, the Company was required to maintain cost records. Accordingly, the Company has duly made and maintained the cost records as mandated by the Central Government.

Details of application made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 during the year

No applications have been made and no proceedings are pending against the Company under the Insolvency and Bankruptcy Code, 2016.

Details of difference between amount of the valuation done at the time of one time settlement and the valuation done while taking loan from the Banks or Financial Institutions along with the reasons thereof.

The disclosure under this clause is not applicable as the Company has not undertaken any one-time settlement with the banks or financial institutions.

Human Resources and Industrial Relations

The Company continues to enjoy cordial relationship with its employees at all levels. The total strength of employees as on 31st March, 2021 was 2142. (Including subsidiaries).

Particulars of Employees

Details pursuant to Section 197(12) of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 form part of this Report as Annexure ‘F’.

Elgi Equipments Limited Employee Stock Option Plan, 2019

The Company has implemented the Elgi Equipments Limited Employee Stock Option Plan 2019 (Elgi ESOP 2019) to enable the Company and its subsidiaries to attract, retain and reward appropriate human talent in its employment and to create a sense of ownership and participation amongst the employees. The Compensation Committee administers and monitors the Employees’ Stock Option Plan of the Company through the Elgi Equipments Limited Employee Stock Option Trust. The compensation committee has during the year under review issued 1,53,800 options (against the 1,60,600 options already granted during 2019-20 to eligible employees) at a grant price of Rs.100.035 per share after considering the Bonus Issue @ 1:1 issued during the year, in accordance with the ESOP Scheme of the Company. Since Mr Ragunathan Gunabooshanam, the erstwhile Chief Financial Officer resigned with effect from 22nd October, 2020, the 6,800 options granted to him were forfeited. Total number of options issued under ESOP after reckoning for bonus issue now stands at 3,07,600. No options were granted to the Directors.

The disclosure pursuant to the provisions of Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 is given as Annexure ‘G’ to this report.

The Company has received a Certificate from the Statutory Auditors of the Company that the above referred Scheme had been implemented in accordance with the SEBI (Share Based Employee Benefits) Regulations, 2014 and the resolutions passed by the members in this regard.

Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013.

The Company has in place a policy for prevention of Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Company has complied with the statutory provisions relating to the constitution of the Internal Complaints Committee. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

a. Number of complaints filed during the financial year : NIL

b. Number of complaints disposed of during the financial year : NIL

c. Number of complaints pending as on end of the financial year : NIL

Business Responsibility Reporting

Pursuant to Regulation 34 of SEBI (Listing Obligations and Disclosure Requirement) Regulations, 2015 read with SEBI Circular No. CIR/CFD/CMD/10/2015 dated 4th November, 2015, the business responsibility report is annexed as Annexure ‘H’ to this report.

Corporate Governance

A report on corporate governance is annexed to and forms part of this report. The Company has complied with the conditions relating to corporate governance as stipulated in SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015.

Audit Committee

The Company has constituted an Audit Committee in accordance with the provisions of Section 177 of the Companies Act, 2013 and Regulation 18 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Kindly refer to the Section on Corporate Governance, under the head, ‘Audit Committee’ for matters relating to the composition, meetings, and functions of the Committee. The Board has accepted the Audit Committee’s recommendations during the year wherever required and hence no disclosure is required under Section 177(8) of The Companies Act, 2013 with respect to rejection of any recommendations of Audit Committee by Board.

Whistle Blower Policy

The Company has a Whistle Blower policy to deal with unethical or improper practice or violation of Company’s Code of Business Conduct or any complaints regarding accounting, auditing, internal controls or disclosure practices of the Company. The Policy gives a platform to the Whistle Blower to report the complaints on the above-mentioned practices to the Managing Director or Director (HR). Although the complainant is not expected to prove the truth of an allegation, the complainant aims to demonstrate that there are sufficient grounds for concern and that it is not done as a malicious act against an individual. The Audit Committee of the Board reviews the Complaints received, redressed, objected, withdrawn and dismissed for, every quarter in their meeting. During the year, there were no complaints under this policy. The Whistle Blower policy is available on the website of the Company at the following address https://www.elgi.com/in/wp-content/uploads/2019/10/ Whistle-Blower-Policy.pdf.

Shareholder Initiatives

Your Company adheres strictly to all the statutory and other legal compliances.

Your Company has in place the regulations for preventing and regulating Insider Trading. The designated persons are required to adhere to the Company’s Code of Conduct and Business Ethics Your Company regularly intimates the shareholders (through quarterly communique) on the performance of the Company, even though it is not mandatory.

Your Company has consistently paid Dividend through the years.

Your Company has been prompt and regular in its replies to your queries received by it.

Your Company also replies within the stipulated time to all legal and statutory authorities.

The custodial charges and listing fees are promptly paid by the Company to the depositories and the stock exchanges.

During this year, your Company de-matted 3,09,285 shares; with this, the total number of shares de- matted as on 31st March, 2021 are 31,45,83,101 shares, which represents 99.26% shares of the Company.

Acknowledgement

Your Directors thank the shareholders, customers, suppliers, bankers and all other stakeholders for their continued support during the year. Your Directors also place on record their appreciation of the contributions made by employees at all levels towards the growth of the Company.

For and on behalf of the Board

Jairam Varadaraj N. Mohan Nambiar
Managing Director Director
DIN: 00003361 DIN: 00003660
Place: Charlotte, North Carolina, USA Place: Coimbatore

Date: 21/05/2021