Esab India Ltd Directors Report.

Your Directors take pleasure in presenting the Thirtieth Annual Report together with the audited accounts of the Company for the financial year ended 31 March, 2017.

1. FINANCIAL SUMMARY / HIGHLIGHTS

(Rs in Lakhs)
Particulars 2016-17 2015-16
Income 48,657 45,895
Profit before Interest and
Depreciation 5,575 5,415
Finance Charges
Gross Profit 5,575 5,415
Provision for Depreciation (1,027) (952)
Profit before exceptional and
prior period items and tax 4,548 4,463
Exceptional items (911) (353)
Profit before Tax 3,637 4,110
Provision for Tax (1,037) (1,276)
Net Profit After Tax 2,600 2,834

2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There were no events to report that has happened subsequent to the date of 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.

4. DIVIDEND

The Board of Directors has recommended a dividend of Rs 1/- per equity share of Rs 10/- each (10%) at its meeting held on 25 May, 2017 resulting in an estimated outflow of about Rs 185.27 lakhs (Inclusive of dividend distribution tax) for approval of the shareholders at the Annual General Meeting. The proposed dividend takes into consideration current and anticipated future resource requirements of the business.

5. BOARD MEETINGS

The Board of Directors met 4 times during the financial year 2016-17. The Meetings were held on 19 May, 3 August and the 3 November of 2016 and on the 9 of February, 2017.

6. DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company has six members.

Mr Daniel A Pryor is the nominee of ESAB Holdings Limited and a non-retiring Director in terms of the provisions 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 1 November, 2013.

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 calling the Annual General Meeting.

Key Managerial Personnel

As stipulated under 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 have been designated as the Key Managerial Personnel of the Company.

Mr B Mohan, Chief Financial Officer joined the Company on 1 February, 2005 and Mr S Venkatakrishnan, Company Secretary joined the Company on 10 March, 2006.

7. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

As required under Section 149 (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.

8. 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 Daniel A Pryor are the other members of the said Committee. The said Committee met four times on 19 May, 3 August, 3 November, 2016 and on 9 February, 2017. The constitution and the terms of reference of the Committee are in line with the requirements of Section 177 of the Companies Act.

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 while Mr Sudhir Chand & Ms Sabitha Rao, Independent Directors and Mr Daniel A Pryor, Chairman of the Board are the other Members of the Committee.

The said Committee met once during the financial year 2016-17 on 19 May, 2016.

The said 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 for the above referred personnel. The remuneration policy of the Company can be viewed on the Companys website www.esabindia.com.

The above are 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 Daniel A Pryor, Chairman of the Board and Mr Rohit Gambhir, Managing Director are the other Members of the Committee.

The Committee met four times during the year on 19 May, 3 August, 3 November, 2016 and on 9 February, 2017.

The Committee and the conduct of its business 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. Mr Daniel A Pryor, Chairman of the Board and Mr Rohit Gambhir, Managing Director are the other Members of the said Committee.

The Committee met twice during the financial year on 19 May and 3 November, 2016.

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 of the Company 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.

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 Daniel A Pryor, Chairman of the Board, Mr Rohit Gambhir, Managing Director and Mr B Mohan, Vice President Finance & Chief Financial Officer of the Company.

The said Committee met twice on 3 August, 2016 and 9 February, 2017.

The said Committee lays down the Policy on Risk Management stating therein the objectives and purpose of the said policy. 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 resolving 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, in order to guide decisions on material risk related issues.

The Risk Management Policy of the Company can be viewed on the Companys website www.esabindia.com.

9. VIGIL MECHANISM

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.

The above is in compliance 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.

10. 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 statement 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 31 March, 2017 the applicable accounting standards have been followed;

2. The Directors have selected such accounting policies listed in Note 2.1 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 31 March, 2017 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 31 March, 2017 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.

11. MANAGEMENT DISCUSSION AND ANALYSIS ECONOMIC & BUSINESS ENVIRONMENT

The financial year under review witnessed a slew of initiatives from the Government with varying ranges of present and potential impact. There appeared to be legislative intent in addressing multiple issues notably on financial sector reforms, digitization and policy push on infrastructure. The short term adverse impact on some of these initiatives affected business for a part of the financial year and we expect to have some more short term volatilities in the current fiscal year. This is specifically in the context of the proposed Goods and Services Tax. The longer term impact of these initiatives on digitization, demonetization and GST are expected to be positives for players in the organized sector including your Company. However, there are expected short term disruptions, compliance risks and multiple change management issues to address on the supply chain, IT and other business elements.

In the specific context of segments addressed by your Company, the indicators continued to reflect a continuing phase of low to often negative core manufacturing growth. The Investment cycle is reportedly yet to revive and steel consumption growth for relevant segments addressed by the Company continued to languish at low levels.

Key end customer segments for Welding products were affected to various degrees by the above elements.

Input costs on Steel hardened in the face of reported cost increases on ore and coking coal. Pass through in terms of pricing changes was limited given the market conditions and the consequent squeeze on margins had to be addressed through productivity gains and cost reductions.

The Company enhanced its range of product offerings with the introduction of new products. The Company made a small beginning in terms of exports to South East Asian countries on a range of consumables that were hitherto sourced from another ESAB location outside India.

The Company discontinued manufacturing operations at its Khardah Plant and successfully completed the transfer of manufacture of products mainly to its Ambattur Plant. Some of the products relating to Wires are now being supplied out of the Companys Plant at Kalmeshwar, Nagpur.

The Company undertook a restructuring exercise at Taratala involving right sizing of headcount through a voluntary separation scheme for workmen and one time settlement of some of the contractors. This is expected to help us stay cost competitive in a difficult market.

The Company continued to make good progress on its support service activities out of India in the areas of R&D, shared services and operational support for other subsidiaries of Colfax around the world. We have had encouraging response from the concerned end customers in the Colfax group. We continue to focus on this to grow employment opportunities in India and to optimize on costs apart from bringing in foreign exchange earnings.

We continue to explore avenues to drive down costs and improve productivity through internal and global benchmarking of performance metrics.

OUTLOOK, OPPORTUNITIES AND THREATS

Despite mixed signals within various segments, the overall outlook appears to be moderately better for the current fiscal year. We expect to see the benefits of some of the reforms which tend to benefit the organized sector of the economy. We also expect to see some change management issues in the economy in the transition phase of GST when it is implemented. We also expect to see some benefits from the restructuring projects undertaken over the last 2 years to accrue in terms of costs and productivity.

RISKS AND CONCERNS

Acute price pressures on some of our key product segments, continuing volatility in Steel prices, Exchange rate volatilities with an upside bias on the Rupee and the eventual levels of Monsoon are some of the external elements to deal with. We also continue to see threats arising from excess capacities in the market and competition from the unorganized segment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Companys internal controls are continuously evaluated by Management and tested by our Auditors. 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. The Audit Committee reviews key findings and follow up actions 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.

Our efforts on the above lines are expected to ensure compliance with the requirements of Internal Controls on Financial Reporting.

FINANCIAL PERFORMANCE OF THE COMPANY INCOME AND EXPENDITURE

Revenue from operations grew by about 5% over the previous year. Consumables business grew by 3.9% while Equipment grew by 6.3%. The growth was driven by volume growth in Electrodes, Cored Wires, Gas Equipment and Automation businesses. Overall Equipment business continued to be affected by a continuing slowdown in the capital expenditure cycle.

Other income grew by 60.6% driven by higher investment income, exchange gains and profits on disposal of fixed assets primarily relating to Assets following the closure of the Khardah Plant. Cash surpluses were deployed in debt and liquid funds through the year.

Materials costs as a percentage to sales were higher at 65% as against 64% in the previous year. This was due to higher Steel costs and growth in traded items sales with relatively lesser margins.

Overheads including employee costs were higher at 28.3% of Net Sales and Service Income as against 27.7% in the previous accounting period. The increases were primarily on account of;

- Employee benefit expenses were higher by 12.4% on a comparable basis driven by recruitments primarily on global support functions, wage inflation and higher retirement benefits costs on funding due to reduction in interest rates.

- Higher costs on transportation outwards in line with changes in terms of trade and customer mix.

- Increases in sales promotion expenses for furthering sales and channel growth.

Depreciation was higher by 7.9% as compared to 2015-16 due impact of additions during the year. The Company has continued to provide for Depreciation at rates aligned to the erstwhile Schedule XIV of the Companies Act, 1956 based on a technical evaluation of useful life of assets.

BALANCE SHEET

Market conditions on liquidity continued to be tight throughout the year with a pronounced short term impact arising from demonetization during the year. Additionally, there were transition issues arising from product transfers and plant closure related activities.

The Company continued to monitor closely all key elements of working capital and capital expenditure. This resulted in a healthy cash conversion with a healthy growth of 19.8% in cash and current investments from the end of the previous financial year.

Capital Expenditure was about $. 1,491 lakhs as against $.1,053 lakhs in the previous year. The capital expenditure was primarily on productivity improvements, capacity enhancements and upgrading IT systems.

Inventories were higher by about 7.5% in value terms due to seasonal elements including product transfers and restructuring as also due to increases in forecast based inventory levels at the end of March, 2017. Measured in days to sales, it went up marginally from 48.6 days at the end of 2015-16 to 50.1 days.

Trade receivables were relatively stable at 38.2 days to sales as compared to 37.7 days at the end of the previous financial year.

Current liabilities were higher by 25.8% after negotiated improvements in payment terms with vendors.

SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY

The Company does not have any subsidiary, joint venture or an associate company.

HOLDING COMPANY

Colfax Corporation is a Delaware, USA based industrial group with existing global business interests in gas and fluid handling and fabrication technology products and services. Colfax Corporation holds 73.72% of equity shares of your Company through ESAB Holdings Limited, UK and Exelvia Group India BV, Netherlands which are its indirect wholly-owned subsidiaries.

12. EXTRACT OF THE ANNUAL RETURN

The Extract of the Annual Return in form MGT-9 of the Company made up as on the Financial Year ended 31 March, 2017 is attached by way of Annexure - 1 to this report.

13. STATUTORY AUDITORS

M/s. S R Batliboi & Associates, LLP, Chennai (Firm Regn No.101049W / E300004) were appointed by the shareholders at the Annual General Meeting held on 7 August, 2015 as the Statutory Auditors of the Company for a period of five years in compliance with Section 139 (1). Their appointment as statutory auditor was informed to the Registrar of Companies through Form ADT-1 dated 14 August, 2015 vide SRN S39001086.

Further as envisaged in Section 139 and 142 of the Companies Act, 2013, their appointment is subject to ratification by the shareholders of the Company at the

Annual General Meeting. This being the third consecutive year out of the five years that they have been appointed the subject is being placed before the shareholders at the Annual General Meeting on 3 August, 2017.

M/s. S R Batliboi & Associates, LLP, Chartered Accountants, have vide their letter dated April 10, 2017 given their written consent to continue as the Statutory Auditors of the Company and have also issued a certificate that the appointment if made shall be in accordance with the conditions and that they satisfy the criteria provided under the relevant section and Chapter X of the Companies Act read with Companies (Audit and Auditors) Rules, 2014.

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, 2017.

14. 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 1 April, 2016 to 31 March, 2017. The said firm had vide their letter dated 24 March, 2016 issued their consent to do the secretarial audit for the Company for the said period. Their appointment was informed to the Registrar of Companies, Chennai vide form MGT-14 dated 30 May, 2016 vide SRN G04321774.

M/s. V Mahesh & Associates, have now completed their secretarial audit and have issued their certificate 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 observations in their report and 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.

15. 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 - 3 and forms part of this Report.

16. 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.

17. 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.

18. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS

The Company has not made any loans to any third party as envisaged under Section 186 of the Companies Act, 2013 during the year under review.

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 liquid and debt funds .The Company has earned an income of around $.935 Lakhs for the period 1 April 2016 to 31 March, 2017 in the form of dividends and profit on redemption of investments. The Company has not given any guarantees other than bank guarantees in the normal course of business to meet contractual obligations.

19. RISK MANAGEMENT POLICY

In order to comply with the requirements of Section 134 (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 Daniel A Pryor, as the Chairman and Mr Rohit Gambhir, Managing 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 policy on Risk Management has been hosted in the Companys website www.esabindia.com. 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.

20. CORPORATE SOCIAL RESPONSIBILITY

As required under Section 134 (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 Daniel A Pryor and Mr Rohit Gambhir as 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.

The Company promotes education on safe welding practices especially in smaller towns through deployment of consultants to work with welders. The Company is also in the process of identifying vocational institutions where it could contribute by way of education on welding through deployment of personnel and also through contributions in the form of Equipment and / or welding consumables.

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 - 4 to this report.

In addition to ongoing initiatives for promoting safe welding practices, the Company is concentrating on providing employment enhancing vocation / skill development training and promoting livelihood enhancement projects as an identified area. Towards this end, the Company is currently working on identifying vocational centers / beneficiaries of these projects, understanding their needs, shortlisting the partnering agencies and the implementing NGOs having the necessary expertise in this field. The Company is evaluating plans to scale up the identified CSR activities in a structured and controlled manner to ensure maximum advantage to the relevant communities.

The Company, has expended about $.8.22 lakhs during the financial year towards its CSR initiatives.

21. 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 which required the approval of the shareholders by way of special resolution. 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 - 5.

22. FORMAL ANNUAL EVALUATION

As required under Section 134 (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 meeting held on 9 February, 2017 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) 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.

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 Committee of Audit, Nomination & remuneration, Stakeholders relationship and Corporate social responsibility 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.

23. COST AUDITOR

As required under Section 148 of the Companies Act, 2013 the Board of Directors at its meeting held on 25 May, 2017 have 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 2017-2018. 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 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 2015-16 was filed with the Registrar of Companies on 6 June, 2016 vide SRN G04764023.

The cost audit report issued by the Cost Auditor for the financial year ended 31 March, 2016 was filed with the Registrar of Companies vide form CRA-4 dated 2 September, 2016 vide SRN G10496263.

24. 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 23 : 1 (22 : 1 for the year ended 31.3.2016).

Non-executive Independent Director

Ratio of remuneration paid to Mr Vikram Tandon, Non-executive Independent Director vs the median employee is 0.77 : 1 (0.58 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Mr Sudhir Chand, Non-executive Independent Director vs the median employee is 0.83 : 1 (0.66 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Mr K Vaidyanathan, Non-executive Independent Director vs the median employee is 0.88 : 1 (0.70 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Ms Sabitha Rao, Non-executive Independent Director vs the median employee is 0.78 : 1 (0.62 : 1 for the year ended 31.3.2016).

B. The percentage increase in the median remuneration of employees in the financial year was 7%.

C. The number of non-unionized employees in the rolls of the Company as at 31 March, 2017 is 371 (344 as on 31 March, 2016).

D. 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 increase in salaries of employees other than KMP is 8.5% while that of KMPs is 8.6%.

Justification thereof: Compensation revisions take into account performance metrics on sales, operating profits and working capital apart from specific elements attributable to various functions within the organization. Despite difficulties in the operating environment, the Companys performance against the above metrics were close to or marginally above budgeted levels. The revisions also need to be reviewed in the light of short and medium term forecasts and budgets on profitability and working capital elements apart from qualitative objectives including safety, quality and leadership parameters. Taking into account all the above elements, we chose to consider an overall average increase of 6.6% to sustain the morale and motivation levels.

E. The key parameters for any variable component of remuneration availed by the Directors.

Variable Component to Mr Rohit Gambhir - This is linked to various parameters, financial and non-financial. Key elements include sales, operating profit, working capital, implementation of business systems.

Variable Component to Independent Directors - This is based on the roles and responsibilities and their contribution to the Company in their respective capacities. The Commission is individually determined based on their varying commitments of time and effort to the Board and to its Committees.

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 - 6 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 - 6.

As at the end of March, 2017 the Company had 660 employees as against 622 at the end of 31 March, 2016. 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.

25. FINANCE

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.

26. ENVIRONMENT, HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protection and all its factories have obtained its 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.

Cautionary Statement

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.

27. LISTING WITH STOCK EXCHANGES

The Companys equity shares are listed with a) BSE Limited and b) National Stock Exchange of India Limited. The annual fee for both the exchanges have been paid promptly for the year 2016-2017. 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 9 November, 2015.

The Company had 9,472 shareholders as at the end of the year 31 March, 2017. 98.28% of the shares are held in dematerialized form.

As required under Regulation 39 (4) read with Schedule VI 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 2016-2017 and the shares outstanding in the suspense account as on 31.3.2017 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 1.4.2016 127 9,515
2. Number of Shareholders who approached the Company during the year 1 50
3. Number of shareholders to whom shares were transferred from the unclaimed suspense account during the year 1 50
4. Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2017 126 9,465

126 Shareholders holding 9,465 equity shares constituting about 0.06% 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.

28. 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.

29. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE 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 30 October, 2013 to deal with complaints, if any, under the said Act. 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. There were no complaints received during the year to report under the said statute. 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.

30. SECRETARIAL STANDARDS

As on 31 March, 2017 the Secretarial Standard 1 & 2 on Board Meetings and General Meetings have been notified and the Company has complied with the requirements of the said Secretarial Standards.

A certificate of compliances issued by the Secretarial Auditor M/s. V Mahesh & Associates dated 15 May, 2017 is enclosed as Annexure - 2 and forms part of this Report.

31. 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.

32. ACKNOWLEDGEMENTS

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.

For and on behalf of the Board of Directors
Daniel A Pryor
Chairman
25 May, 2017

Annexure - A

To,

The Members,

M/s. ESAB INDIA LIMITED, CIN:L29299TN1987PLC058738 Plot No. 13, 3rd Main Road, Industrial Estate, Ambattur, Chennai - 600 058.

Our Secretarial Audit report dated, 15 May, 2017 is to be read along with this letter.

1. Maintenance of secretarial record is the responsibility of the management of the Company. Our responsibility is to express an opinion on these Secretarial records based on our audit.

2. We have followed the audit practices and processes as were appropriate to obtain reasonable assurance about the correctness of the contents of the Secretarial records. The verification was done on test basis to ensure that correct facts are reflected in secretarial records. We believe that the processes and practices, we followed provide a reasonable basis for our opinion.

3. We have not verified the correctness and appropriateness of financial records and books of accounts of the Company.

4. Wherever required, we have obtained the management representation about the compliance of laws, rules and regulations and happening of events etc.

5. The compliance of the provisions of Corporate and other applicable laws, rules, regulations, standards is the responsibility of management. Our examination was limited to the verification of procedures on test basis.

6. The Secretarial Audit Report is neither an assurance as to the future viability of the Company nor of the efficacy or effectiveness with which the Management has conducted the affairs of the Company.

For V Mahesh & Associates
V Mahesh
Practising Company Secretary
Place: Chennai M.No. F4162
Date : 15 May, 2017 C.P. No. : 2473

ANNEXURE - 3

ANNEXURE TO THE DIRECTORS REPORT

Statement under Section 134(3)(m) of the Companies Act, 2013 read with Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors Report for the year ended 31 March, 2017.

A. CONSERVATION OF ENERGY

1. Replacement of 250 watt Metal halide street light by 75 Watt LED Fittings-20 nos.

2. Replacement of 150 Watt High Bay Induction Lamp and Mercury Vapour Lamp by 80 Watt LED high bay Fittings in Shop floor-15 Nos.

3. Eliminated air leaks across factories & optimized compressor utilization to save energy.

4. Installation of One 40 HP compressor instead of running two nos 25 HP (Total 50 HP) Compressor.

5. Installation of Electrically Actuated Auto Stop Valve in Water line in all Coppering Lines resulting in water (Natural Resource) saving by 50%.

6. Design of Tubular Air Heaters used for Ovens changed by adding cold zone in mounting area to eliminate failures of heaters. 5% electrical energy saving achieved on heating loads.

7. Polycarbonate roofing sheets provided in shop floor to maximise natural skylight thereby increasing resource efficiency and reduce environmental impact. 10% saving achieved on lighting loads.

8. LED lighting provided for all office areas. 23% saving achieved on lighting loads.

9. Compressor utilization was optimized by replacing lower capacity compressor and eliminating air leaks in the pipe lines, saving of 4% achieved.

B. TECHNOLOGY ABSORPTION

1. Installation of alarm system for uniform dosing of Copper in Coppering Lines.

2. Installation of Wear Plate Machineries for Job Work.

C. FOREIGN EXCHANGE

The Company exports its products to Bangladesh, South Africa, Singapore, Middle East, Indonesia, Australia and USA.

During the year, the total outflows in foreign exchange amounted to $.6,325 lakhs (which includes $.5,396 lakhs for the import of raw materials, components and capital goods and $.929 lakhs towards expenditure in foreign currency).

During the year, the Foreign exchange earnings were

$.3,094 lakhs resulting in net foreign exchange outflow of $.3,231 lakhs for the year.

For and on behalf of the Board of Directors
Daniel A Pryor
Chairman
25 May, 2017

ANNEXURE - 5

FORM No. AOC-2

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014

Form for disclosure of particulars of contracts / arrangements entered into by the Company with related parties referred to in sub-section (1) of Section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto

A. Details of contracts or arrangements or transactions not at arms length basis:

(a) Name(s) of the related party and nature of relationship
(b) Nature of contracts / arrangements / transactions
(c) Duration of the contracts / arrangements / transactions
(d) Salient terms of the contracts or arrangements or transactions including the value, if any Nil
(e) Justification for entering into such contracts or arrangements or transactions
(f) Date(s) of approval by the Board
(g) Amount paid as advances, if any
(h) Date on which the special resolution was passed in general meeting as required under first proviso to Section 188
B. Details of Material contracts or arrangements or transactions at arms length basis:
(a) Name(s) of the related party and nature of relationship
(b) Nature of contracts / arrangements / transactions
(c) Duration of the contracts / arrangements / transactions
(d) Salient terms of the contracts or arrangements or transactions including the value, if any
Nil
(e) Justification for entering into such contracts or arrangements or transactions
(f) Date(s) of approval by the Board
(g) Amount paid as advances, if any

 

Sd/-
Daniel A Pryor
25 May, 2017 Chairman

ANNEXURE - 6

Statement pursuant to Section 197(12) read with Chapter XIII Rule 5 (2) and (3) of the Companies Act, 2013

Particulars of Employees Employed throughout the financial year and was in receipt of remuneration for the year in the aggregate in excess of the limits specified under rule 5 (2)

Sl. No. Name Design- ation Remuner- ation Received ($) Nature of Employ- ment Qualific- ation & Experi- ence Date of Commenc- ment of Employ- ment Age Previous Employment Percent- age of Shares held by the Emp- loyee Relative of a Director / Manager or not
1 Jagannathan Palle Venkata Vice President Operations 10,224,608 Full time B.E. Mech & MS in Manage- ment Systems 28 years 25.08.2014 52 Weirs Minerals (India) Limited Nil No
2 Manish Prasad Vice President APAC and Operations 11,154,019 Full time B.E. Mech 29 years 19.05.2014 52 Royal Bank of Scotland, India Nil No

Statement pursuant to Section 197(12) read with Chapter XIII Rule 5 (2) and (3) of the Companies Act, 2013

Particulars of top ten employees employed in terms of remuneration drawn

Sl. No. Name Design- ation Remuner- ation Received ($) Nature of Employ- ment Qualific- ation & Experi- ence Date of Commenc- ment of Employ- ment Age Previous Employment Percent- age of Shares held by the Emp- loyee Relative of a Director / Manager or not
1 Manish Prasad Vice President - APAC and Operations 11,154,019 Full time B.E. Mech 29 Years 19.05.2014 52 Managing Director and Head Royal Bank of Scotland, India Nil No
2 Jagannathan P V Vice President - Operations 10,224,608 Full time B.E. Mech & MS in Manange- ment Systems 29 Years 25.08.2014 52 Chief Operating Officer Manufacturing & Supply Chain Management, Weirs Minerals (India) Ltd Nil No
3 B Mohan Vice President - Finance 7,275,596 Full time B.Com, ACA, ACS 30 Years 01.02.2005 51 GM Finance and Company Secretary, Amagamation Valeo Clutch (P) Ltd Nil No
4 Vilas Tank Deputy General Manager - ESD 6,663,693 Full time B.E. Mech, MS in Industrial Engineering, MBA 13 Years 02.05.2014 38 Director - Sales & Marketing, Tank Auto Tools (P) Ltd Nil No
5 M Myilvaganan Vice President - Human Resource 5,437,455 Full time LLB, Masters in Social Work 34 Years 10.07.2005 58 General Manager - HR & Admin, Futura Polyesters Ltd Nil No
6 Amit Kumar De Vice President - R&M Business 4,848,795 Full time B.Sc. (Hons.) 39 Years 15.10.1979 60 Sales Representative, Indian Oxygen Ltd Nil No
7 S Venkata krishnan Company Secretary 4,399,397 Full time ACS, MA (Public Admin.), BGL, 31 Years 10.03.2006 53 Company Secretary TVS Group of Companies Nil No
8 Narula Anil Kumar Deputy General Manager - Sales (Welding Consum- ables) 4,127,859 Full time A.M.I.E, PGDBM, DEEE 31 Years 01.12.1986 53 Nil No
9 Biswadeep Banerjee Deputy General Manager - Equipment Sales & After Market) 3,815,420 Full time B.E. Mech, I.C.W.A 31 Years 07.08.2000 52 Deputy General Manager - Planning and Product Development, ICLC Ltd Nil No
10 V Parthasarathy Head - Sourcing 3,771,740 Full time B.E. Mech 23 Years 27.06.2014 44 Senior Manager - Global Sourcing, Vestas Wind Technology Nil No

 

Sd/-
Daniel A Pryor
25 May, 2017 Chairman