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Your Directors take pleasure in presenting the Thirty Second Annual Report together with the audited accounts of the Company for the financial year ended 31 March, 2019.
1. FINANCIAL SUMMARY/HIGHLIGHTS
|(र in Lakhs)|
|Profit before Depreciation||9,552||6,461|
|Provision for Depreciation||(1,070)||(1,009)|
|Profit before exceptional and prior period items and tax||8,482||5,452|
|Profit before Tax from continuing operations||8,414||5,264|
|Income tax expense||(2,655)||(1,549)|
|Net Profit After Tax||5,759||3,715|
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
There were no reportable events subsequent to the date 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 Board of Directors had recommended an interim dividend of र90/- per equity share of र10/- each (900%) at its meeting held on the 23 of November, 2018, resulting in a cash outflow of about र167.01 Crores (Inclusive of dividend distribution tax). This was disbursed on the 17 of December, 2018. The dividend, was based on a consideration of current and anticipated future resource requirements of the business.
The Directors do not recommend any final dividend. Consequent to the declaration of the above said interim dividend, the current ratio of the Company has varied by more than 25%. The Company had declared a dividend of 900% ($ 90 per share) based on its cash position and business requirements. This was paid entirely from internal accruals with a consequential impact on the current ratio.
5. IND AS STANDARDS
Your Company had adopted IND AS with effect from 1 April, 2017 pursuant to the notification dated February 15, 2015 under Section 133 of the Companies Act, 2013 issued by the Ministry of Corporate Affairs, notifying the Companies (Indian Accounting Standard) Rules, 2015. Your Company has now prepared the IND AS Financials for the year ended 31 March, 2019 along with comparable financials for the year ended 31 March, 2018.
The quarterly results published by the Company from the financial year 2018-19 are also 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. 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 has transferred such unpaid or unclaimed dividends and corresponding shares up to the Interim Dividend 2011.
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 http:www.iepf.gov.in) along with requisite fee as decided 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 dividend has 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 2018-19. The Meetings were held on 30 May, 9 August, 30 October, 23 November of 2018, 7 February and 20 March of 2019.
8. DIRECTORS & KEY MANAGERIAL PERSONNEL
The Board of Directors of the Company has six members.
Mr Daniel A Pryor was the nominee of ESAB Holdings Limited and a non-retiring Director in terms of the provisions of the Articles of Association. In terms of Articles of Association, the promoter Esab Holdings Limited has withdrawn the nomination of Mr Daniel A Pryor as Chairman of the Board with effect from the 9 of May 2019 and has nominated Mr Scott Allen Grisham as the Chairman of the Board. Consequently, Mr Scott Allen Grisham would replace Mr Daniel A Pryor in all the Committees of the Board as well with effect from the 9 of May 2019.
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. He was subsequently re-appointed for a term of 5 years with effect from 1 November 2018 vide a postal ballot resolution of the shareholders dated 25 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 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.
9. 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.
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 Daniel A Pryor were the other members of the said Committee. The said Committee met 4 times on 30 May, 9 August, 30 October 2018 and 7 February 2019. 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 NonExecutive 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 were the other Members of the Committee.
This Committee met twice during the financial year 2018-19 on the 9 August 2018 and on the 20 March 2019.
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 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 were the other Members of the Committee.
The Committee met four times during the year on 30 May, 9 August, 30 October 2018 and on the 7 February 2019. 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 were the other Members of the said Committee. The Committee met once during the financial year on the 30 May 2018.
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 had 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 as members.
The said Committee met once during the financial year on 7 February 2019.
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.
11. 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.
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 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, 2019 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, 2019 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, 2019 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. MANAGEMENT DISCUSSION AND ANALYSIS
ECONOMIC & BUSINESS ENVIRONMENT
The financial year under review witnessed the Company achieve strong growth and profitability in a volatile and challenging economic environment. Continuing firm trends in raw materials costs, volatility in currency along with slackness in demand continued to pose challenges. The Companys continuing focus on product development along with the execution of a few relatively larger value orders during the year helped achieve the growth in Sales. Despite teething troubles in the GST infrastructure, low level of preparedness in some segments and multiple changes in the procedural aspects of the law, the overall impact did appear to be positive for the organized segment of the industry.
While the economy reportedly grew at around 7.2% during the financial year, relevant indicators for the company on manufacturing data and Index of Industrial Production (IIP) on segments relevant to fabrication technologies continued to indicate volatilities with low to moderate growth for most of the financial year. Liquidity conditions got tighter towards the end of the financial year with consequential impact on sales and working capital.
Steel costs continued to increase during the year reportedly driven by increases in input costs. Alternate sourcing options continued to be non- existent or limited. Profitability could be sustained and improved through better product mix and control on costs.
Despite the favorable impact of some large value orders, the investment cycle in the economy was weak for most part of the year with no significant capacity additions in key customer segments the Company deals with.
The Company continues to maintain its established market position as one of the leading players in the domestic welding industry pan-India presence, strong financial risk profile characterized by relatively stable cash accruals, zero debt & comfortable liquidity position apart from synergy benefits derived from being part of a group which has wide presence across the globe.
OUTLOOK, OPPORTUNITIES AND THREATS
The financial year witnessed a few positives with growth in volumes in some segments. There are some references to sporadic and recent uptick in the capital goods segment. A relatively stronger rupee and stable fuel costs would be positives if they continue to hold. Steel price trends and also emerging challenges in product mix could have a strong impact on the prospects as it has been on a rising curve for a prolonged period of time.
We continue to see threats arising from excess capacities in the market and competition from Tier II players in the Industry apart from volatilities in customer segments and any economy linked headwinds.
14. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The Companys internal controls are 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.
15. FINANCIAL PERFORMANCE OF THE COMPANY
A. INCOME AND EXPENDITURE
The Companys revenue from Contract with Customers grew by about 23.8% despite the difficult backdrop. The growth was driven by higher growth in manufactured items including some large value orders as also growth in service income on support services on R&D and shared services.
The Company continued to increase its range of product offerings with the introduction of new products. The Company also had steady volumes in terms of exports to related party entities.
Service income grew by about 30% though on a small base, with increases in activity on R&D support, shared services and related activities undertaken for related party entities based outside of India. We continue to see some potential on this with the resultant foreign exchange earnings helping in partly offsetting exchange risks on imports.
Other income and finance income increased by about 29.6% driven by growth in management fee recharge and also due to reversals in provision for doubtful debts during the year. Income from bank deposits and investments in mutual funds were lower due to lower funds deployed.
Materials costs as a percentage to sales were comparable with the previous year after adjustment for Excise duty on Sales.
Overheads including employee costs were lower at 24.1% of Revenue from Contract with Customers as against 26.2% in the previous accounting period due to the impact of revenue growth outpacing increase in expenditure. The key variances were primarily on account of the following;
- Employee benefit expenses were higher by 18% on a comparable basis driven by recruitments primarily on global support functions, wage inflation and higher retirement benefits costs due to reduction in interest rates in the last quarter of the year.
- Higher costs on transportation outwards in line with changes in terms of trade and customer mix.
- Reduction in Excise duty on Sales with the introduction of GST effective July 1,2017.
Profit from continuing businesses before exceptional items was higher by 55.6% over the previous year with the impact of sales growth and control on costs.
B. BALANCE SHEET
The year under review continued to witness issues in the banking and financing sector with no significant change in fortunes from the preceding year. Liquidity continued to be tight with apprehensions on defaults forcing lenders to exercise extreme caution on lending. Key industrial indicators including sectors relevant to fabrication technology continued to throw up anemic growth data. Investment cycle and infrastructure driven projects continued to be sluggish.
The Company continued to focus on key metrics on working capital, cash flows and to push on operational efficiencies. Despite a significant dividend payout, the Company ended the year with a strong Balance sheet and on a debt free note.
Additions to tangible and intangible assets was about $ 1,577 lakhs as against $ 1,654 lakhs in the preceding year. The capital expenditure was primarily on productivity improvements, capacity enhancements and upgrading IT systems.
Inventories were lower in value terms despite sales growth with concerted actions on disposal of old inventory apart from improvements in the supply chain. Debtors were lower in terms of days sales outstanding with tight control on credit and collections. Balances in cash and investments in liquid and debt funds were at $ 7,333 lakhs even after the dividend payout in 2018.
16. SUBSIDIARY/JOINT VENTURE/ASSOCIATE COMPANY
The Company does not have any subsidiary, joint venture or an associate company.
17. HOLDING COMPANY
Colfax Corporation is a Delaware, USA based industrial group with existing global business interests in industrial fans, fabrication technology products and medical 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.
18. 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, 2019 is attached by way of Annexure 1. This is also made available in the website of the Company viz. www.esabindia.com. Those interested may visit our website and see the details of MGT-9.
19. 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.
This is the fifth consecutive year out of the five years that they have been appointed. Their remuneration is fixed in line with the recommendations of the audit committee and as duly approved by the Board of Directors.
M/s. S R Batliboi& Associates, LLP, Chartered Accountants, have vide their letter dated May 8, 2019 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 Section 139(1) 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, 2019. Members may please take note of the changes the requirements with respect to the report of the Auditors including specific references to key audit matters.
20. SECRETARIAL AUDIT
In terms of Section 204 (1) of the Companies Act, 2013, the Company had appointed M/s. V Mahesh & Associates, Chennai to do the secretarial audit of the Company for the financial year 1 April, 2018 to 31 March, 2019. Their appointment was informed to the Registrar of Companies, Chennai vide SRN G89457873 form MGT-14 dated 14 June, 2018.
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.
21. 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.
22. 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 recently with respect to liabilities not in the nature of deposits. The format for the details to be uploaded is yet to be notified.
23. 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.
24. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS
The Company had lent a sum of $ 47.5 Crores to a related party entity viz. Howden Solyvent India Private Limited on terms which were benchmarked with market rates and on an arms length basis under Section 186 of the Companies Act, 2013 during the year under review. There has been a repayment of $ 9 Crores and there is an amount of $ 38.5 Crores outstanding as of 31 March 2019.
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 $ 542 Lakhs for the period 1 April 2018 to 31 March, 2019 in the form of dividends and fair value gains of investments. The Company has not given any guarantees other than bank guarantees in the normal course of business to meet contractual obligations.
25. RISK MANAGEMENT POLICY
In compliance 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 had 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.
26. 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 had 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 has also made a beginning in term of working with certain vocational training 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 Company has also undertaken some activities with respect to environment through spends on gardening outside of company premises.
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.
The Company, has expended about $ 15.64 Lakhs as against $ 4.30 lakhs during the previous financial year towards its CSR initiatives.
27. 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 - 5.
28. 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 7 February, 2019 evaluated the performance of the nonindependent 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.
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 and corporate social responsibility were also assessed on the above parameters and also in the context of the committees effectiveness visa-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.
29. COST AUDITOR
As required under Section 148 of the Companies Act, 2013 the Board of Directors at its meeting held on 9 May, 2019 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 2019-2020. 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 April 15, 2019 from the Cost Auditor stating that the appointment, if made, will be within the limit prescribed under the Act.
The relevant Form CRA2 for appointment of Cost auditor for the financial year 2018-19 was filed with the Registrar of Companies on 18 June, 2018 vide SRN G89730162.
The cost audit report issued by the Cost Auditor for the financial year ended 31 March, 2018 was filed with the Registrar of Companies vide form CRA-4 dated 15 October, 2018 vide SRN H21460811.
30. 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 24 :1 (24: 1 for the year ended 31.3.2018).
Non-executive Independent Director
Ratio of remuneration paid to Mr Vikram Tandon, Nonexecutive Independent Director vs the median employee is: 0.85: 1 (0.88: 1 for the year ended 31.3.2018)
Ratio of remuneration paid to Mr Sudhir Chand, Nonexecutive Independent Director vs the median employee is : 0.94:1 (0.93:1 for the year ended 31.3.2018)
Ratio of remuneration paid to Mr K Vaidyanathan, Nonexecutive Independent Director vs the median employee is: 0.99:1 (0.99 : 1 for the year ended 31.3.2018)
Ratio of remuneration paid to Ms. Sabitha Rao, Nonexecutive Independent Director vs the median employee is: 0.86:1 (0.85 : 1 for the year ended 31.3.2018)
B. The percentage increase in the median remuneration of employees in the financial year was 7.4%.
C. The number of non-unionised employees in the rolls of the Company as at 31 March, 2019 is 482 (426 as on 31 March, 2018).
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 8.1% while that of KMPs is 7.7%. 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 challenges in the operating environment, we exceeded the budget in all the three metrics. Taking into account the rate of inflation, it was decided to consider an average increase of 7.7%. This increase also includes a higher percentage of increase that has been considered for junior/middle level employees who have been considered for promotion.
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 - 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.
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 - 6. However in terms of first proviso to 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.
As at the end of 31 March, 2019 the Company had 753 employees as against 734 at the end of 31 March, 2018. 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 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.
32. 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.
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.
33. 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 2018-2019. 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 10,456 shareholders as at the end of the year 31 March, 2019. 98.79% 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 2018-2019 and the shares outstanding in the suspense account as on 31.3.2019 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 1.4.2018||65||4,710|
|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.||No. of shares transferred to Investor Education and Protection Fund||3||250|
|5.||Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2019||61||4,410|
61 Shareholders holding 4,410 equity shares constituting about 0.03% 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.
34. 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.
35. 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 committeewith effect from 30 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.
The Committee received one complaint during the year from a female employee. The Committee met on 22nd February 2019 and conducted a thorough enquiry on the allegations. The Company initiated suitable action against the errant employee after the investigation.
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.
36. SECRETARIAL STANDARDS
As on 31 March, 2019 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 25 April, 2019 is enclosed as Annexure - 2 and forms part of this Report.
37. 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.
|For and on behalf of the Board of Directors|
|Scott A Grisham|
|9 May, 2019||Chairman|