Your Directors take pleasure in presenting the Thirty Fifth Annual Report together with the audited accounts of the Company for the financial year ended 31 March 2022.
1. FINANCIAL SUMMARY / HIGHLIGHTS
|(Rs. in Lakhs)|
|Profit before Interest expense and Depreciation||12,518||9,265|
|Provision for Depreciation||(1,133)||(1,171)|
|Profit before exceptional and prior period items and tax||11,356||8,053|
|Profit before Tax from continuing Operations||11,356||8,053|
|Provision for Tax||(2,925)||(2,124)|
|Net Profit After Tax||8,431||5,929|
The financials of the Company for the year under review as also the financial statements of the previous year are prepared under IND AS.
2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS
Colfax Corporation had incorporated a wholly owned subsidiary in the name of ESAB Corporation, Delaware, USA and made ESAB Corporation, Delaware as the holding company of ESAB Holdings Limited, UK and Exelvia Group India B.V., Netherlands. Further, Colfax Corporation had separated itself from ESAB Corporation, Delaware, USA by selling 90% of the equity shares held in ESAB Corporation, Delaware, USA to the general public shareholders of Colfax Corporation thereby reducing its equity stake in ESAB Corporation, Delaware, USA to 10% with effect from April 4, 2022. The same has been reflected in Note No.36 of the financial statements.
3. CHANGE IN THE NATURE OF BUSINESS, IF ANY
There has been no material change in the nature of business during the period under review.
The shareholders at the Annual General Meeting held on 12th August 2021 had approved a Final Dividend of $ 25/-per equity share of $ 10/- each (250%) for the financial year 2020-21 resulting in a cash outflow of about $ 38.48 crores and the same was paid on 27 August 2021.
During the year under review, the Board of Directors had approved two Interim Dividends viz. i) first interim dividend of $ 22/- per equity share of $ 10/- each (220%) at its meeting held on 10th November 2021 resulting in a cash outflow of about $ 33.86 crores, which was paid on 9th December 2021; and ii) second interim dividend of $ 18/- per equity share of $ 10/- each (180%) at its meeting held on 10th February 2022 resulting in a total cash outflow of about $ 27.71 crores, which was paid on 11th March 2022.
In addition to the above two interim dividends of FY 2021-22, the Board has proposed a final dividend of $ 20/- per equity share of $ 10/- each (200%) for the financial year 2021-22, which is subject to approval of the shareholders at the ensuing Annual General Meeting to be held on 11th August 2022.
5. IND AS STANDARDS
Your Company had adopted IND AS in pursuance of Section 133 of the Companies Act, 2013 and in compliance with the Companies (Indian Accounting Standard) Rules, 2015. The financials for the current financial year ended 31st March 2022 and the comparative figures for the last financial year ended 31st March 2021 have been prepared and published based on such IND AS standards.
The quarterly results are also published by the Company based on IND AS. These have been published in newspapers and also made available in the Companys website www.esabindia.com and the website of the stock exchanges where the shares of the Company are listed.
6. TRANSFERS TO THE INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the applicable provisions of the Companies Act, 2013 ("the Act") read with the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("The Rules"), all unpaid or unclaimed dividends are required to be transferred by the Company to the Investor Education and Protection Fund (IEPF) established by the Central Government, after completion of seven years from the date of transfer of unpaid / unclaimed dividend to Unpaid Dividend account. Further, according to the Rules, the shares in respect of which dividend has not been paid or claimed by the Members for seven consecutive years or more shall also be transferred to the dematerialized account created by the IEPF authority.
The Company had sent individual notices and also advertised in the newspapers seeking action from the Members who have not claimed their dividends for seven consecutive years or more. Accordingly, the Company had transferred the unpaid or unclaimed dividends and corresponding shares pertaining to Final Dividend 2013 on 14 June 2021 and 8 October 2021 respectively.
Members / claimants whose shares, unclaimed dividend, have been transferred to the IEPF Demat Account of the Fund, as the case may be, may claim the shares or apply for refund by making an application to the IEPF Authority in Form IEPF-5 (available on https: www.iepf.gov.in) along with requisite fee as prescribed by IEPF Authority from time to time. The Member / Claimant can file only one consolidated claim in a financial year as per the IEPF Rules.
Due dates for transfer of Unclaimed Dividend to IEPF are provided elsewhere in the notice calling the Annual General Meeting.
Details of shares / shareholders in respect of which dividends have not been claimed, are provided on our website at www.esabindia.com. The shareholders are encouraged to verify their records and claim their dividends of all the preceding seven years, if not claimed.
7. BOARD MEETINGS
The Board of Directors met 6 times during the financial year 2021-22. The Meetings were held on 21 May, 12 August, 28 October, 10 November of 2021, 10 February and 25 March of 2022.
8. DIRECTORS & KEY MANAGERIAL PERSONNEL
The Board of Directors of the Company has six members.
Mr. Kevin Joseph Johnson is the nominee of ESAB Holdings Limited and a non-retiring Director in terms of the Articles of Association.
Mr. Rohit Gambhir is the Managing Director of the Company. He was appointed for a period of five years with effect from 1st November 2013. He was subsequently re-appointed for a term of 5 years with effect from 1st November 2018 vide a postal ballot resolution of the shareholders dated 25th September 2018.
There are four Non-executive and Independent Directors on the Board of the Company.
In accordance with the provisions of Article 129 of the Companys Articles of Association, Mr. Rohit Gambhir retires by rotation at the forthcoming Annual General Meeting and being eligible, has offered himself for re-appointment. The details as required under Regulation 36 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding Mr. Rohit Gambhir are published as part of the Notice convening the Annual General Meeting.
Key Managerial Personnel
In compliance with Section 203 of the Companies Act, Mr Rohit Gambhir, Managing Director, Mr. B. Mohan, Vice-President Finance & Chief Financial Officer, and Mr. S Venkatakrishnan, Company Secretary (until 25th March 2022) and Mr. G Balaji, Company Secretary (from 26th March 2022) have been designated as the Key Managerial Personnel of the Company.
Mr. B Mohan, Chief Financial Officer joined the Company on 1st February 2005 and Mr. S. Venkatakrishnan, Company Secretary joined the Company on 10th March 2006.
Mr. S Venkatakrishnan demitted his post as Company Secretary by the closing hours of the 25th of March 2022 in view of his impending retirement at the end of May 2022. Mr. G. Balaji was appointed as Company Secretary to succeed Mr. S. Venkatakrishnan as Company Secretary and Compliance Officer effective the 26th of March 2022. His appointment was approved by the Board of Directors at its meeting held on the 25th of March 2022.
9. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS
As required under Section 149 (6) and (7) of the Companies Act, 2013 all the Independent Directors on the Board of the Company have individually issued the stipulated annual declaration confirming that they meet all the criteria of independence as stipulated under the Act. Further, the Independent Directors have completed their KYC confirmation on the MCA website and have also uploaded their profile in the Indian Institute of Company Affairs before the stipulated date. All the Directors are exempted from undergoing the mandatory online tests based on their quantum and areas of experience.
10.COMMITTEES OF THE COMPANY
A. AUDIT COMMITTEE
The Companys Audit Committee consists of three Independent Directors and one Non-executive Director. Mr. K Vaidyanathan, is the Chairman of the said Committee.
Mr. Vikram Tandon, Mr. Sudhir Chand and Mr. Kevin J Johnson are the other members of the Committee.
The said Committee met 4 times during the financial year 2021-2022, on the 21st May, 12th August, 28th October of 2021 and 10th February 2022. The constitution and the terms of reference of the Committee are in line with the requirements of Section 177 of the Companies Act and Regulation 18 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
There were no occasions during the year where the Board of Directors did not accept the recommendations of the Audit Committee.
B. NOMINATION AND REMUNERATION COMMITTEE
The Companys Nomination and Remuneration Committee consists of three Independent Directors and one Non-Executive Director. Mr. K Vaidyanathan is the Chairman of the said Committee. Mr. Sudhir Chand, Independent Director, Ms. Sabitha Rao, Independent Director and Mr. Kevin J Johnson, Chairman of the Board are the other members of the Nomination and Remuneration Committee.
This Committee met once during the financial year 2021-22 on 25th March of 2022.
This Committee lays down the policy on remuneration stating therein the attributes required for the Managing Director, Independent Directors and Key Managerial Personnel. The said policy also states the modus operandi for determining the remuneration of the KMPs and senior management. The remuneration policy of the Company can be viewed on the Companys website www.esabindia.com
The said committee is constituted in compliance with Section 178 (4) of the Companies Act, 2013 and Regulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
C. STAKEHOLDERS RELATIONSHIP COMMITTEE
The Companys Stakeholders Relationship Committee consists of two Independent Directors, one Non-executive Director and the Managing Director. Mr. Vikram Tandon is the Chairman of the Committee, Mr Sudhir Chand, Independent Director, Mr. Kevin J Johnson, Chairman of the Board and Mr Rohit Gambhir, Managing Director are the Members of the Committee.
The Committee met four times during the year on 21st May, 12th August, 28th October of 2021 and on 10th February 2022.
The composition of the said Committee and the matters being placed before the Committee are in compliance with Section 178(5) of the Companies Act, 2013 and Regulation 20 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
D. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE
The Companys Corporate Social Responsibility Committee consists of one Independent Director, one Non-executive Director and the Managing Director. Ms. Sabitha Rao is the Chairperson of the said Committee and Mr. Kevin J Johnson, Chairman of the Board, Mr. Rohit Gambhir, Managing Director are the other members of the said Committee.
The Committee met once during the financial year 2021-22 on 21st May 2021.
The Committee lays down the Policy on Corporate Social Responsibility stating therein the strategy, objectives, funding & allocation for the CSR projects, implementation, strategy and steps involved in achieving the CSR objectives. The Policy on Corporate Social Responsibility was revised by the Board of Directors at their meeting held on 27th May 2022. The budget allocation for CSR Projects for the year 2022-23 can be viewed on the Companys website www.esabindia.com
The formation of the Committee and its terms of reference are in line with the requirements of Section 135 (1) of the Companies Act, 2013. The CSR Report which is attached as annexure to this report is in compliance with the Companies (Corporate Social Responsibility Policy) Amendment Rules, 2021.
E. RISK MANAGEMENT COMMITTEE
The Company has a Risk Management Committee as stipulated by the Companies Act, 2013 and Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Companys Risk Management Committee consists of Mr. Kevin J Johnson, Chairman of the Board, Mr. Rohit Gambhir, Managing Director, Mr. Sudhir Chand, Independent Director and Mr. B Mohan, Vice President Finance & Chief Financial Officer of the Company. A Risk Management Committee is mandatory for the Company since it is part of the Top 1,000 Companies in terms of market capitalization.
The said Committee met twice during the financial year on 12th August 2021 and 10th February 2022. As per Regulation 21 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the meetings of the risk management committee shall be conducted in such a manner that on a continuous basis not more than one hundred and eighty days shall elapse between any two consecutive meetings. The first meeting of the Risk Management Committee of the Company was held on 12th August 2021 and the second was on 10th February 2022. By oversight, the Company had exceeded the prescribed timegap between the two meetings by two days.
The said Committee lays down the Policy on Risk Management. The main objective of this policy is to ensure sustainable business growth with stability and to promote a pro-active approach in reporting, evaluating and mitigating those risks which are material in nature and are associated with the business. In order to achieve the key objective, the policy establishes a structured and disciplined approach to Risk Management.
The Risk Management Policy of the Company can be viewed on the Companys website www.esabindia.com
The Company has set up a whistleblower policy which can be viewed on the Companys website www.esabindia.com. In terms of the said policy the Directors and employees are given direct access to the Chairman of the Audit Committee to report on alleged wrongdoings. The said policy has been made available at the Offices / Plants of the Company at conspicuous places to enable the employees to report concerns, if any, directly to the Chairman of the Board and to the Chairman of the Audit Committee. Employees who join the Company newly are apprised of the availability of the said policy as a part of their induction schedule.
Based on an internal review, the Company had updated the whistle blower policy and this was approved by the Board of Directors at its meeting held on 10th February 2022. The same can be viewed from the website of the company viz. www.esabindia.com.
The above complies with the requirements of Section 177 (9) & (10) of the Companies Act, 2013 and in terms of Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Company did not receive any complaints under the whistle blower policy during the year under review.
12. DIRECTORS RESPONSIBILITY STATEMENT
To the best of their knowledge and belief, and according to the information and explanations obtained by them, your Directors make the following statements as per the requirements of Section 134 (5) of the Companies Act, 2013.
1. In the preparation of the annual accounts for the financial year ended 31st March 2022 the applicable accounting standards have been followed;
2. The Directors have selected such accounting policies listed in Note 2.2 to the Notes to the Financial Statements and applied consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of the affairs of the Company at the end of the financial year on 31st March 2022 and of the Profit of the Company for that year;
3. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
4. The Directors have prepared the annual accounts for the year ended 31st March 2022 on a going concern basis;
5. 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
6. The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
13. There were no instances of fraud reported by the auditors of the Company under sub-section 12 of Section 143 of the Companies Act, 2013.
14. MANAGEMENT DISCUSSION AND ANALYSIS
A. ECONOMIC & BUSINESS ENVIRONMENT
The financial year commenced with strong expectations of economic growth after the massive disruptions witnessed in the previous year due to impact of Covid. The impact of Covid continued to be felt during the initial part of the financial year. Global developments led to supply chain interruptions through the year with longer lead times and higher costs on imports. Strong inflationary trends were witnessed even in locally sourced raw materials driven by a surge in Steel prices throughout the year. The Company continued to focus on product mix and cost reductions to sustain growth and profitability. Capital goods segment witnessed some revival in activity over the previous years. New product launches continued to show encouraging results. The Company witnessed reasonably stable market conditions despite the volatilities to achieve growth in sales and profits.
B. OUTLOOK, OPPORTUNITIES AND THREATS
The calendar year 2022 started on an encouraging note only to run into more turbulence with the developments arising from the conflict in Europe. Supply chain disruptions have since become a key operational challenge apart from further doses of inflation in commodity prices. A weaker rupee, higher interest rates and extreme challenges on inflation globally are key concerns for the ongoing financial year. Despite inherent resilience, the impact of global developments are bound to affect demand and profitability during the rest of the year. Opportunities exist in product categories where our new product launches can help gain market share and in terms of improvements in productivity and costs. A sustained period of global turbulence and squeeze on liquidity are immediate threats.
15. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Management evaluates the Companys internal controls from time to time and also works with independent internal auditors to test these and identify areas for improvement. Additionally, the Company is subjected to reviews applicable for Subsidiaries of US headquartered entities. The Company continues to list and evaluate key controls and process to an extent leveraging on the work done as part of its global reporting requirements. Key findings and actions taken to implement or remediate the same are reviewed by the Audit Committee periodically at its meetings. The scope and coverage of internal audits are aligned to have coverage in terms of key controls and locations. The endeavor is to align to the requirements of Internal Control on Financial Reporting (ICFR) framework while leveraging on work done as part of global reporting requirements. Management testing through independent audit teams followed by external testing were done during the year.
The scope of work of Internal Auditors includes review of controls on accounting, financial reporting, statutory and other compliances and operational areas in addition to reviews relating to efficiency and economy in operations. In the context of higher levels of work from home during the year, controls in Information Technology were a priority area as well during the Financial Year.
Our efforts on the above lines are expected to ensure compliance with the requirements of Internal Controls on Financial Reporting.
16.FINANCIAL PERFORMANCE OF THE COMPANY
A. INCOME AND EXPENDITURE
The Companys revenue from contract with customers grew by 31.1%. The growth was seen across all key product categories.
New product offerings and enhancements were areas of continuing focus as the Company pursued growth and market share. The Company saw good growth in income from services to related party entities which grew by 71% over the previous year.
Other income fell by about 26.8% driven by lower income from mutual funds mirroring the overall reduction in interest rates.
Finance income was lower due to higher dividend payouts resulting in lower disposable cash through the year.
Materials costs as a percentage to sales was comparable to previous year despite price increases.
Overheads including employee costs were higher by 31.6% over the previous year. The increase was driven by the growth in revenues and also the base effect of 2020-21 which witnessed multiple lockdowns. The increase was also due to impact of wage inflation and general inflation in overheads lines.
The Company has continued to provide for Depreciation at useful lives based on a technical evaluation of useful life of assets.
Profit before tax was higher by 41% over the previous year with the impact of higher contributions from revenue growth.
B. BALANCE SHEET
Shareholders funds were at $ 244.22 Crores at the end of the year as against $ 259.22 Crores at the end of the previous year. The Company had paid dividends of $ 100.05 Crores during the financial year.
Working capital and cash were key focus areas for Industry in general and this continued to be monitored closely to manage customer service levels without compromising on quality and turns on receivables and inventory. This resulted in the Company being able to manage working capital and cash flows at a consistently good level in relation to industry standards despite instability in supply chain
Capital Expenditure net of movements in capital work in progress was at $ 11.14 Crores as against $ 11.24 Crores in the preceding year. Capital expenditure was primarily on refurbishments on existing lines, productivity improvements, marginal capacity enhancements and upgrading IT systems.
Cash and equivalents were at $ 21.20 Crores at the end of the year as against $ 18.57 Crores at the end of the previous year. Investments in short term and debt funds were at
$ 31.01 Crores as against $ 41.09 Crores at the end of the previous year. The Company is well positioned to ride through short term volatilities in working capital by virtue of its debt free position and cash flows.
17. SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY
The Company does not have any subsidiary, joint venture, or associate company.
As on 31st March 2022, Colfax Corporation, was the ultimate parent company of ESAB India Limited and subsequently, Colfax Corporation had offloaded its indirect equity control in ESAB India Limited in favour of ESAB Corporation, Delaware, USA. With effect from 4th April 2022 ESAB Corporation, Delaware, USA, is the ultimate parent company of ESAB India Limited.
19. ANNUAL RETURN
Pursuant to subsection (3) of section 92 of the Companies Act 2013, your Company has placed a copy of the annual return for the financial year 2021-22 on its website and it can be viewed from the companys website viz. www.esabindia.com.
20. STATUTORY AUDITORS
M/s. S R Batliboi & Associates, LLP, Chennai (Firm Regn No.101049W / E300004) was re-appointed for a period of four years by the shareholders at the Annual General Meeting held on 28th August 2020 as the Statutory Auditors of the Company in compliance with Section 139 (1). The details of remuneration of the statutory auditors with breakup of fee paid to S R Batliboi & Associates and its network firms as required by the provisions of amended SEBI (LODR) Regulations for the financial year 2021-22 is given as part of the Corporate Governance Report.
Their remuneration is fixed in line with the recommendations of the audit committee and as duly approved by the Board of Directors.
The Statutory Auditors have issued a clean report on the financials of the Company and have not issued any qualifications for the financial year ended 31 March 2022. Members may please take note of the changes in the requirements with respect to the report of the Auditors including specific references to key audit matters.
21. SECRETARIAL AUDIT
In terms of Section 204 (1) of the Companies Act, 2013, the Company has appointed M/s. V Mahesh & Associates, Chennai to do the secretarial audit of the Company for the financial year 1st April 2021 to 31st March 2022. Their appointment was informed to the Registrar of Companies, Chennai vide SRN T19974682 form MGT-14 dated 25th May 2021.
M/s. V Mahesh & Associates have now completed their secretarial audit and have issued their certificate dated 19th May 2022 as per the prescribed format in MR-3 to the shareholders of the Company, which is annexed to this Report as Annexure-2.
They have no adverse observations in their report except for the time gap exceeded by two days between two consecutive meetings of Risk Management Committee. They have confirmed that the Company has proper board processes and a compliance mechanism in place. They have also affirmed that the Company has complied with the relevant statutes, rules and regulations and secretarial standards, as applicable.
In response to the observation made by the Secretarial Auditor, the Board explained that by oversight, the time gap between two consecutive meetings of the risk management committee held during the financial year 2021-22 was exceeded by two days than the permitted limit prescribed by SEBI (LODR) Regulations.
22. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO
The information required under Section 134 (3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is given in the Annexure-1 and forms part of this Report.
23. DETAILS RELATING TO DEPOSITS
The Company has not accepted any deposits during the period under review as envisaged under Section 73, 74 & 76 of the Companies Act, 2013. There have been additional filing requirements introduced with respect to liabilities not in the nature of deposits. The necessary form DPT 3 has been filed for the financial year 2020-21 on 28.04.2021 vide SRN No. T16543431.
24. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS
During the year under review, there have been no significant and material orders passed by any regulators / courts / tribunals that could impact the going concern status and the companys operations in future.
25. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The Company had made a loan of $ 30 Crores to M/s. EWAC Alloys Limited, related party and a fellow subsidiary on an arms length basis at a rate not exceeding 9% per annum (Floater rate) as per Section 186 and 188 of the Companies Act, 2013. The repayment schedule was extended from 30 September 2021 to 31 March 2022. M/s. EWAC Alloys Limited has completely repaid the Inter Company Loan as on 31 March 2022.
The Board of Directors from time to time has authorized the Company to invest the surplus funds of the Company in deposits with Bank and investments in debt funds, liquid funds and fixed maturity plans with mutual funds for a tenor not exceeding 100 days. The investments are made in debt funds and liquid funds. The Company has earned an income of around $ 77 Lakhs from investment in mutual funds for the period 1 April 2021 to 31 March 2022. The Company has not given any guarantees other than bank guarantees in the normal course of business to meet its contractual obligations.
26. RISK MANAGEMENT POLICY
In compliance with the requirements of Section 134 (3) (n) of the Companies Act, 2013 and as required under Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company has constituted a Risk Management Committee consisting of Mr. Kevin J Johnson, as the Chairman, Mr. Rohit Gambhir, Managing Director, Mr. Sudhir Chand, Independent Director and Mr. B Mohan, Chief Financial Officer as the Members of the Committee. The said Committee lays down the procedures to identify risks and the mitigation procedures and adopted a policy in this regard. The Board of Directors defines the roles and responsibilities of the Committee.
The said committee updates the Board of Directors on a periodical basis on the material risks faced by the Company and the measures taken by the Company to mitigate the said risks. The Committee analyzed various risks including those arising from COVID-19, cyber security aspects and remote access control and other different controls necessary to be established with executives working from home. They suggested the actions to be taken to mitigate these risks which went a long way in the Company successfully managing all the risks. The Ministry of Home Affairs (MHA) had also during the pandemic had issued various guidelines for the plants to follow and the Company had complied with all these MHA guidelines to ensure that all the risks associated with the COVID-19 pandemic were adequately being addressed.
27. CORPORATE SOCIAL RESPONSIBILITY
As required under Section 134 (3) (o) read with Section 135 (1) of the Companies Act, 2013, the Company has constituted a Corporate Social Responsibility Committee. The Committee has Ms. Sabitha Rao, as the Chairperson, Mr. Kevin J Johnson, Chairman of the Board and Mr. Rohit Gambhir, Managing Director are the members of the said Committee.
The Committee formulated a policy on CSR and the Board of Directors approved the same. The policy as required under Section 135 (4) (a) of the Companies Act, 2013 has been uploaded on the Companys website www.esabindia.com.
As part of CSR initiatives, the Company has been involved in promoting and educating safe welding practices including usage of all personal protective equipment during the process of welding to ensure total safety of the welders, especially at smaller towns through deployment of duly trained resources. The Company had also tied up with certain vocational institutions for educating the welders in Tier II and Tier III cities on welding through deployment of personnel.
During the year under review, the Company had the eligible 2% spend of Rs.172.90 lakhs in addition to the carried forward unspent amount of $ 21.65 lakhs aggregating to $ 194.55 lakhs. Out of CSR eligible spend of $ 194.55 lakhs, the company had pursued its CSR Ongoing Project 2020-21 with a budget amount of $ 154.55 lakhs and Other than Ongoing Project with a budget amount of $ 40 lakhs. This was approved by the CSR Committee and the Board of Directors in their meetings held on 21st May 2021.
In relation to Ongoing Project 2020-21, the Company could spend $ 86.33 lakhs leaving an unspent amount of $ 68.22 lakhs which was transferred to a separate bank account titled CSR Unspent A/c. 2021-22.
In relation to Other than Ongoing Project of 2021-22, the Company was not able to spend the earmarked amount of $ 40 lakhs and this unspent amount of $ 40 lakhs was also transferred to the CSR Unspent A/c. 2021-22.
The Companys policy on CSR envisages expenditure in areas falling within the purview of Schedule VII of the Companies Act, 2013. The annual report on CSR activities is enclosed by way of Annexure - 3 to this report.
28. RELATED PARTY TRANSACTIONS
As required under Section 188 of the Companies Act, 2013 and Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company places before the audit committee the list of related parties from whom they buy raw materials or finished goods, to whom the Company extends services or exports goods. The details of the basis of pricing and the margins on such transactions are also tabled. The Audit Committee accords its omnibus approval for such related party transactions on an annual basis. The updates on the transactions with the related parties are placed before the audit committee on a quarterly basis. The details are also placed before the Board of Directors for its information.
As required under Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the Company has formulated a policy on related party transactions and the same was approved by the Audit Committee and the Board of Directors. The said policy has been uploaded on the companys website www.esabindia.com
All the transactions with the related parties entered into during the period under review have been in the ordinary course of business and at arms length basis. There have been no material related party transactions entered into during this period.
The details of related party transactions pursuant to Clause (h) of sub-section (3) of Section 134 of the Act, is enclosed in form no. AOC-2 as Annexure - 4.
29. FORMAL ANNUAL EVALUATION
As required under Section 134 (3) (p) of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board of Directors had already approved the evaluation criteria for evaluating the performance of the Board of Directors, its committees and the performance of Independent Directors.
Accordingly, as required under Schedule IV of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the
Independent Directors at their separate meetings held on 10th February 2022 and 25th March 2022 evaluated the performance of the non-independent Directors and the Board as a whole. They also reviewed the performance of the Chairman of the Company and also assessed the quality, quantity and timeliness of flow of information between the Company Management and the Board that was necessary for the Board to effectively and reasonably perform their duties.
Also as required under Regulation 17 (10) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board assessed the performance of the Independent Directors as per the criteria laid down and has recommended their continuation on the Board of the Company at its meeting held on 27th May 2022.
As required under the said regulations, the Board of Directors assessed the performance of the individual directors on the Board based on parameters such as, relevant experience and skills, ability and willingness to speak up, focus on shareholder value creation, high governance standards, knowledge of business, processes and procedures followed, openness of discussion / integrity, relationship with management, impact on key management decisions etc. The Members of the Committees of Audit, Nomination & remuneration, Stakeholders relationship, Corporate social responsibility and Risk management committee, were also assessed on the above parameters and also in the context of the committees effectiveness vis-a-vis the Act and the listing regulations.
The Independent Directors fulfilled the independence criteria as specified under the above regulations and the Companies Act, 2013. The Board was satisfied with the evaluation results which reflected the overall engagement and the effectiveness of the Board and its committees. The Independent Directors also updated their current profiles by paying up the relevant fees in the website of the Indian Institute of Corporate Affairs on Independent Directors for a period of five years from 2020-21. Since all the four Independent Directors possess the necessary experience and the expertise, they are exempted from taking up the online assessment test of the Ministry.
30. COST AUDITOR
As required under Section 148 of the Companies Act, 2013 the Board of Directors at its meeting held on 27th May 2022 has appointed M/s. Geeyes & Co., Cost Accountants within the meaning of Cost & Works Accountants Act and holding a valid certificate of practice No.000044 as the Cost Auditor for conducting the Cost Audit for the financial year 2022-23. The Audit Committee recommended the appointment subject to the compliance of the requirements stipulated in the relevant notifications issued by Ministry of Corporate Affairs.
The Company has received a letter dated 12th May 2022 from the Cost Auditor stating that the appointment, if made, will be within the limit prescribed under the Act.
The relevant Form CRA 2 for appointment of Cost auditor for the financial year 2021-22 was filed with the Registrar of Companies on 25th May 2021 vide SRN T19980705.
The cost audit report issued by the Cost Auditor for the financial year ended 31 March 2021 was filed with the Registrar of Companies vide form CRA - 4 dated 9 September 2021 vide SRN T41667874.
31. RATIO OF REMUNERATION TO EACH DIRECTOR
As required under Section 197 (12) and Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the details of ratio of remuneration to each Director to the median employee remuneration are as given below:
A. Executive Director
Ratio of remuneration paid to Mr. Rohit Gambhir, Managing Director vs the median employee is 26:1 (25.8:1 for the year ended 31 March 2021).
B. The percentage increase in remuneration of CFO and CS in the financial year 2021-22 was 7.7% and 8.00% respectively.
C. The percentage increase in the median remuneration of employees in the financial year 2021-22 was (0.74%)
D. The number of eligible permanent employees in the rolls of the Company as on 31 March 2022 is 557 (545 as on 31 March 2021).
E. Average percentile increase made in salaries of employees other than KMP in comparison to the percentile increase in the remuneration of KMP and the justification thereof.
The average percentile increases in salaries of employees other than KMP proposed was 0.35 % while that of KMPs was Nil %.
The reduced percentage is due to the shift in the Increment cycle from January to December has shifted to April to March. Hence, in effect there were no increments in the financial year 2021-2022. The negligible increase in percentages other than the KMP is due to the CTC of the new hires till 30th September 2021.
As at the end of March 2022 the Company had 822 employees as against 808 at the end of 31 March 2021. The Company believes in providing a working environment that is focused on the customers, teamwork, continuous improvement, innovation and a competitive environment where employees strive to improve value for shareholders.
The Board of Directors would like to affirm that the remuneration paid to the Executive and Non-executive Directors and the Key Managerial Personnel is in line with the Remuneration Policy of the Company.
As required under the provisions of Section 197 (12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 as amended, the name and other particulars of the employee is set out in the Annexure- 5 to this Report. Further, as required under Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 rule 5 sub-rule (2), the names of Top 10 employees in terms of the remuneration drawn is given in Annexure - 5.
Details of employees receiving the remuneration in excess of the limits prescribed under Section 197 of the Act, 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as a statement and given in Annexure - 5.
In terms of Section 136(1) of the Act, 2013 the Annual report, excluding the aforesaid annexure is now being sent. The annexure is available for inspection at the Registered Office of the Company and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company.
The Companys relationships with its Bankers viz. AXIS Bank Ltd. and HDFC Bank Ltd. continued to be cordial during the year. The Company would like to thank its Bankers for their support.
33. ENVIRONMENT, HEALTH AND SAFETY
The Company continued its commitment to industrial safety and environment protection and all its factories have obtained its ISO 14001 and OHSAS 18001 certification. Periodical audits are done by external and internal agencies to assess the continued levels of EHS efficiency of each of these plants and the OHSAS certification given is renewed after every such audit. The Company is also networked with the Group on EHS initiatives and works closely with them on initiatives and actions concerning EHS. During the year under review, the Companys Plants at Ambattur and Nagpur won global recognition for EHS initiatives.
Certain statements in this Directors Report may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied in this Report.
34. LISTING WITH STOCK EXCHANGES
The Companys equity shares are listed with a) BSE Limited and b) National Stock Exchange of India Limited. The annual fees for both the exchanges have been paid promptly for the year 2021-22. Pursuant to the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company had executed fresh listing agreements with BSE Limited and National Stock Exchange of India Limited on 9th November 2015.
The Company had 14,844 shareholders as at the end of the year 31st March 2022. 99.07% of the shares are held in dematerialized form.
The Company is part of the Top 500 Companies by way of Market capitalization. The Company has adopted a dividend policy, formed a risk management committee and have also prepared a Business Responsibility Report for the year under review.
As required under Regulation 39 (4) Read with Schedule VI of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the details of the shares issued by the Company consequent to amalgamation of erstwhile Maharashtra Weldaids Limited with the Company in 1994, the details of the physical shares which remains unclaimed and transferred to the Unclaimed Suspense Account and the reconciliation of the shares claimed by shareholders during the year 2021-22 and the shares outstanding in the suspense account as on 31st March, 2022 is given below:
|Sl. No. Details||No. of shareholders||No. of equity shares|
|1. Aggregate number of shareholders and the outstanding shares lying in the unclaimed suspense account at the beginning of the year i.e. as on 1.4.2021||44||3,060|
|2. Number of Shareholders who approached the Company during the year||NIL||NIL|
|3. Number of shareholders to whom shares were transferred from the unclaimed suspense account during the year||NIL||NIL|
|4. No. of shares transferred to Investor Education and Protection Fund||1||50|
|5. Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2022||43||3,010|
43 shareholders holding 3,010 equity shares constituting about 0.02% of shares have not made their claim from the Company on the shares outstanding in the Unclaimed Suspense Account of ESAB India Limited. The voting rights for these shares shall remain frozen until these are claimed by the rightful owners.
35. CORPORATE GOVERNANCE
In terms of Chapter IV Regulation 15 Read with Schedule II of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 a Corporate Governance Report is made part of this Annual report.
A certificate from the Statutory Auditors of the Company regarding compliance of the conditions stipulated for Corporate Governance as required under Clause E of Schedule V read with Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to this report.
The declaration by the Managing Director addressed to the Members of the Company pursuant to Clause D of Schedule V Read with Regulation 34 (3) Chapter IV of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 regarding adherence to the Code of Conduct by the Members of the Board and by the Members of the Senior Management Personnel of the Company is also attached to this Report.
36. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORKPLACE ACT
The Company has also adopted the mandatory policy on Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Employees have been sensitized on the provisions of this enactment and the Company has also constituted an internal complaints committee with effect from 30th October 2013 to deal with complaints, if any, under the said Act. The Committee also has an independent external NGO representative as one of its members. The Committee meets as and when requirement arises. The Company believes in providing safe working place for the Women in the Company and adequate protection are given for them to carry out their duties without fear or favour. All the employees of the Company as a part of induction are sensitized about the provisions of the said Act.
As required under Section 21 of Chapter VIII of the said Act, the Committee has submitted its annual report in the prescribed format to the designated authority within the stipulated period.
37. SECRETARIAL STANDARDS
As on 31st March 2022 all the applicable Secretarial Standards which have been notified have been complied with by the Company.
A certificate of compliances issued by the Secretarial Auditor M/s. V Mahesh & Associates dated 19th May 2022 is enclosed as Annexure - 2 and forms part of this Report.
38. ISSUE OF SHARES
The Company during the year under review has not issued any SWEAT equity shares or shares with differential rights or under Employee stock option scheme nor did it buy back any of its shares.
Your Directors place on record their appreciation for the confidence reposed and continued support extended by its customers, suppliers and shareholders.
Your Board would like to place on record, its sincere appreciation to the employees for having played a very significant part in the Companys operations till date and more so in a difficult year that we went through.