HBL Power Systems Ltd Directors Report.
To Dear Members,
Your directors take pleasure in presenting the 31st annual report for the financial year ended on March 31, 2017. The financial performance is presented below (standalone basis as per Ind AS).
|Rs. in Lakhs|
|S No.||Particulars :||2016-17||2015-16|
|1||Revenue from operations||152,986.23||139,570.67|
|5||Earnings before interest, depreciation and tax (EBIDTA)||14725.38||14786.77|
|7||Depreciation and amortization expenses||4,817.75||5,035.40|
|8||Profit before exceptional items and tax||5,285.95||2,915.71|
|10||Profit before tax (PBT)||5,006.95||2,019.55|
|11||Provision for tax and deferred tax adjustment||1,445.52||1,237.57|
|12||Total comprehensive income for the period (PAT)||3,220.38||405.19|
|13||Earnings per share (basic and diluted EPS of C1/- each)||1.16||0.16|
|14||Proposed dividend (on share of C1 each)||25%||25%|
Adoption of Indian Accounting Standards (Ind AS)
As notified by the Ministry of Corporate Affairs, your company adopted Indian Accounting Standards (Ind AS) with effect from April 1, 2016. The financial statements of the company for the year have been prepared in accordance with the Ind AS notified under the Companies (Indian Accounting Standards) Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 (as amended). For all the periods up to and including the year ended March 31, 2016, the company prepared its financial statements in accordance with requirement of previous GAAP which includes Accounting Standards notified under section 133 of the Companies Act, 2013 read together with Companies (Accounting Standards) Rules, 2006. These financial statements for the year ended March 31, 2017 are companys first Ind AS financial statements. Accordingly,
the financial statements have been prepared based on Ind AS 101- First time adoption of Indian Accounting Standards with a date of transition to Ind AS as April 1, 2015. Previous years figures have been regrouped and presented according to Ind AS requirement.
Performance review 2016-17
FY 2016-17 has been a fruitful year for the company. Revenue from operations showed an increase of 9.6% over last year while Profit before Tax (PBT) showed an increase of 247%. Efforts were directed towards strengthening our capabilities as markets became competitively challenging. Improved operational efficiencies coupled with cost savings and reduction in cost of borrowings have resulted in considerable growth in gross margins and profit after tax (PAT). Your company is well prepared to address the challenges posed and is geared up to maintain growth momentum.
Current years performance
During the year a constitutional amendment paved the way for the long-awaited and transformational Goods and Services Tax (GST). The outlook for 2017-18 remains positive with a favourable domestic economic growth recovery forecast of the Government. Opportunities are expected in both traditional as well as new areas of business which shall enable your company to embark on a growth path. As a leading manufacturer of a variety of industrial batteries and electronics products your company has been adept at transforming itself to address the opportunities in railways and defence business segments. The management discussion and analysis (MDA) section of the annual report presents a detailed business review of the Company.
Your directors are pleased to recommend 25% dividend (i.e. C0.25 paise per equity share of C1 fully paid up share) for the financial year 2016-17 as in the previous year, subject to the approval of the members at the ensuing annual general meeting. The proposed dividend including Dividend Tax will absorb C834.07 lakhs.
The consolidated financial statements of the company and its subsidiaries prepared in accordance with the Companies Act, 2013 and applicable accounting standards, forms part of this annual report. The consolidated financial statements presented by the company include the financial results of its subsidiary companies, associates and joint ventures. (As on March 31, 2017)
|Subsidiaries||1. HBL America Inc.|
|2. HBL Germany GmbH, Germany|
|3. SCIL Infracon Private Limited|
|4. HBL Suntech LLP|
|Associate companies (within the meaning of Section 2(6) of the Companies Act, 2013)||Naval Systems and Technologies Private Limited (NSTL)|
|Kairos Engineering Limited (KEL)|
|Joint Venture Company||Gulf Batteries Co. Ltd (JV in the Kingdom of Saudi Arabia-KSA).|
There has been no material change in the nature of the business of the subsidiaries. As per provisions of section 129(3) of the Act, a table containing salient features of the financial statements of the companys subsidiaries in Form AOC-1 is attached.
Pursuant to the provisions of section 136 of the Act, the financial statements of the company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are placed on the website of the company.
Highlights of performance of subsidiaries, associates and joint venture companies and their contribution on overall performance of the company.
As per the notification issued by the Ministry of Corporate Affairs on July 27, 2016 with regard to Companies (Accounts) Amendment Rules, 2016, the report of the board shall contain highlights of performance of subsidiaries, associates and joint venture companies and their contribution on overall performance of the company. Accordingly we hereby furnish the following:
HBL America Inc. (HBLA)
HBL America continues to face challenges in its main sectors of oil and gas. South America continues to face economic and political uncertainty. New approvals in the rail and aviation sector in particular are progressing and will lead to increased future sales. New products are being introduced targeting the data center market.
HBL Germany GmbH (HBLG)
HBL Germany continues to strengthen our base for selling in Europe. The company has seen a steady revenue growth YoY after a lean year in FY 15. While there has been almost a 3 fold increase in revenue from FY 15 to FY 16, there has been a 20% revenue growth from FY 16 to FY 17. The sales team has been enhanced and HBLG is targeting a growth of 10% for FY 18 as compared to FY 17.
SCIL Infracon Private Limited (SIPL)
Shareholders are already aware that SIPL is not in operation since a few years. Some of the assets of SIPL were disposed off during 2015-16 to pay off the liabilities. The loss reported in the year was mainly due to write off of assets not in saleable condition. In a situation of no business operations, SIPL directors are examining various alternatives about the continuity of the company
HBL Suntech LLP
HBL Suntech LLP was incorporated in 2011 to take up trading and sale of monoblock batteries. However, due to continuous losses and unviable business outlook, operations of HBL Suntech LLP were discontinued with effect from April 1,2014. Only administrative works related to closure of business, follow up on certain statutory matters and realisation of old book debts were conducted in the year under review. The loss reported in the year was mainly due to write off of unrealized receivables.
Naval Systems and Technologies Limited (NSTL)
NSTL is a service provider to foreign original equipment manufacturers (OEMs) mainly operating in the field of marine equipment in Indian Navy. The services provided include installation, trials and commissioning of various equipment, annual maintenance, specialised documentation etc. NSTL has proven expertise in providing technical support, conducting feasibility studies for complex systems, market research and software support. FY 2016-17 was a good performance year for NSTL with an income of C638.71 lakhs and a PBT of C160.50 lakhs. Barring unforeseen reasons, year 2017-18 may possibly be a very good performance year for NSTL. Your directors believe that NSTL will continue to grow into different niche areas, and maintain its profitability.
Kairos Engineering Limited (KEL)
KEL was primarily engaged in software solutions for railway signaling controls. Some of the products developed earlier are yet to get due recognition from railways for commercial implementation. As result of such delays during the year KEL did not receive any new orders and there was no operational income from sales or service. In a situation of no business operations, KEL directors are examining various alternatives about the continuity of the company.
Gulf Batteries Co. Ltd (GBC) in the Kingdom of Saudi Arabia (KSA)
Your company holds 40% stake in GBC. Due to low oil prices influencing the economic and business scenario in the KSA operations were below breakeven level and resulted in a loss.
Overall contribution on the performance of the Company
Pursuant to provisions of section 129(3) of the Act, highlights of financial performance and impact of the contribution of subsidiaries, associates and joint venture companies on overall performance of your company are presented in the consolidated financial statements in Form AOC-1 in Notes to accounts.
Scheme of arrangement and amalgamation between Beaver Engineering & Holdings Private Limited and the company
The board of directors of your company at a meeting held on March 23, 2016 have approved a scheme of arrangement and Amalgamation of Beaver Engineering & Holdings Private Limited (Beaver or Transferor Company) with HBL Power Systems Limited (HBL or the Transferee Company). Beaver is a holding company of HBL. The honorable bench of National company Law Tribunal (NCLT) at Hyderabad formally approved the scheme on May 9, 2017. A certified copy of the order of NCLT dated July 7, 2017 was since received by the company on July 13, 2017 and allotment of shares as per exchange ratio approved in the scheme was made at a meeting of the board of directors on July 19, 2017. Necessary steps have been taken to list these shares in BSE and NSE. These shares shall rank pari-passu in all respects with the existing shares including dividend if any declared
Material changes and commitments
No material changes and commitments have occurred after the closure of the FY 2016-17 till the date of this report, which would affect the financial position of your company.
Directors responsibility statement
Pursuant to section 134(5) of the Companies Act, 2013, the board of directors, to the best of their knowledge and ability, confirm that:
i. in preparation of the annual accounts, the applicable Ind AS accounting standards have been followed and there are no material departures;
ii. they have selected such accounting policies as per Ind AS and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit of the company for that period;
iii. they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;
iv. they have prepared the annual accounts on a going concern basis;
v. they have laid down internal financial controls to be followed by the company and such internal financial controls are adequate and operating effectively;
vi. they have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.
The board wishes to inform that subsequent to approval of the standalone financial statements for the financial year 201617 at the board meeting held on May 26, 2017 and submitted to the stock exchanges and published in press subsequently, it was opined by the board of directors to reclassify/regroup certain items in the final print version of standalone financial statements circulated in this annual report.
Such reclassification/regrouping of the figures constitute an overall change of approximately 0.18% of the balance sheet total between that presented at the Board meeting held on May 26, 2017 and the figures in these standalone financial statements. Therefore, as a matter of corporate governance, the board felt it necessary to inform the members and the stakeholders to make note of the same. Adequate disclosure has been made in note no. 45 to accounts in respect of the effect of such reclassification/regrouping.
Directors and key managerial personnel (KMP)
There is no change in the board of the company during the year. Mrs. Kavita Prasad has been appointed as a chief financial officer (CFO) and a KMP with effect from August 11, 2016.
During the year, the non-executive directors of the company had no pecuniary relationship or transactions with the company.
Mr. Ajay Bhaskar Limaye retires by rotation and is eligible for re-appointment. Your board recommends for his reappointment.
Number of meetings of the board
Five meetings of the board were held during the year. For details of the meetings of the board, please refer to the corporate governance report, which forms part of this report.
During the year under review as per the guidance note on board evaluation issued by Securities and Exchange Board of India, vide its circular dated 5th January 2017 pursuant to the provisions of the Companies Act and the corporate governance requirements prescribed by SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the board has carried out an annual evaluation of its own performance and that of its committees as well as performance of all the directors individually. Feedback was sought by way of a structured questionnaire covering various aspects of the boards functioning such as adequacy of the composition of the board and effectiveness of its committees, execution and performance of specific duties, governance, meaningful and constructive contribution and inputs in meetings etc. Evaluation was carried out based on responses received from the directors. A separate meeting of the independent directors also was held where in performance of nonindependent directors, performance of the board as a whole and performance of the chairman and managing director was evaluated. The directors expressed their satisfaction with the evaluation process.
Policy on directors appointment and remuneration and other details
The companys policy on directors appointment and remuneration and other matters provided in section 178(3) of the Act has been disclosed in the corporate governance report, which forms part of the directors report.
The details pertaining to composition of audit committee are included in the report on corporate governance, which forms part of this report. The board of directors has accepted all the recommendations of the audit committee placed at respective meetings.
M/s Rao & Kumar, Chartered Accountants (FRN 03089S) Visakhapatnam who are the statutory auditors of the company retire at the conclusion of the ensuing annual general meeting (AGM) and are eligible for reappointment for a further period of five years to hold office from the conclusion of the ensuing AGM till the conclusion of the 36th AGM of the company to be held in the year 2022, subject to ratification by the members at every annual general meeting. Your directors recommend for their reappointment at the AGM.
The company has deployed a comprehensive framework to identify, monitor and take all necessary steps towards mitigation of various risk elements which can impact the existence of the company on a periodic basis. All the identified risks are managed through continuous review of business parameters by the management and the board of directors is also informed of the risks and concerns.
Internal financial controls
Pursuant to section 134 of the Companies Act 2013, the directors state that the board, through the operating management has laid down internal financial controls to be followed by the company. Such financial controls are adequate with reference to the size and operations of the company. The internal controls have been assessed during the year under review taking into consideration the essential components of internal controls stated in the guidance note on audit of internal financial controls over financial reporting issued by the Institute of Chartered Accountants of India. Based on the results of such assessments carried out by management, no reportable material weakness or significant deficiencies in the design or operation of internal financial controls was observed. However, the existing controls have further scope for improvement for which necessary steps are being taken to strengthen the scope of internal audit and reviewing SoPs from time to time.
Particulars of loans, guarantees and investments
The particulars of loans, guarantees and investments have been disclosed in the financial statements.
Transactions with related parties
None of the transactions with related parties falls under the scope of section 188(1) of the Act. Information on transactions with related parties pursuant to section 134(3) (h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are given in Annexure I in Form AOC-2 and the same forms part of this report. Related party transactions are in the ordinary course of business and on arms length basis.
Corporate social responsibility
The company has a board level committee that supervises its corporate social responsibility (CSR) activities. The brief outline of the CSR Policy of the company and the initiatives undertaken by the company on CSR activities during the year are set out in Annexure II of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014.
Extract of annual return
Pursuant to section 92(3) of the act, the extract of annual return is given in Annexure III in the prescribed Form MGT-9, which forms part of this report.
Particulars of employees
The information required under section 197 of the act read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given below:
|Employee Name||Mr. Suresh Kalyan|
|Total remuneration CTC (C lakhs)||C122.38 lakhs|
|Designation and Nature of Duties||Chief Operating Officer (COO)|
|Qualification/Exp.(Yrs)||B.Sc., Chartered Accountant/26 yrs|
|Date of commencement of employment||17.11.2014|
|Last employment held before Joining the Company||Amara Raja Batteries Limited, Hyderabad, as President-Finance|
a. The ratio of the remuneration of each non-executive director to the median remuneration of the employees of the company for the financial year: Not Applicable as none of the non-executive directors was paid any remuneration.
b. The percentage increase in remuneration of each director, chief executive officer, chief financial officer, company secretary in the financial year:
|Directors, chief executive officer, chief financial officer and company secretary||% increase in remuneration in the financial year|
|Dr. A J Prasad, Chairman and Managing Director||42.86|
|Mr. MSS Srinath, Whole-time Director||38.27|
|Mrs. Kavita Prasad, Chief Financial Officer||Nil|
|Mr. MVSS Kumar, Company Secretary||4.30|
c. The percentage increase in the median remuneration of employees in the financial year: 8.91%
d. The number of permanent employees on the rolls of company: 2118 (as at March 31, 2017)
e. The explanation on the relationship between average increase in remuneration and company performance:
On an average, employees received an annual increase of 8.91%. The individual increments varied from 8% to 30%, based on individual performance. As per the remuneration policy of the company, employees are compensated broadly in comparison with the median of the comparator basket, on the basis of performance, potential and criticality for achieving competitive advantage in the business. Salary increases during the year were in line with your companys performance as well as inflation and motivational factors.
f. Comparison of the remuneration of the key managerial personnel against the performance of the company:
|Aggregate remuneration of key managerial personnel (KMP) in 2016-17 (C lakhs) including commission on profits to CMD||378.71|
|Revenue (C lakhs)||1,52,986.23|
|Profit before tax (PBT) (C lakhs)||5,006.95|
|Remuneration of KMPs (as % of revenue)||0.25|
|Remuneration of KMP (as % of PBT)||7.56|
g. Variations in the market capitalisation of the company, price earnings ratio as at the closing date of the current financial year and previous financial year:
|Particulars||March 31, 2017||March 31, 2016||% Change|
|Market capitalisation (C crores)||1077.27||919.65||17.88|
|Price earnings ratio||36.94||47.20||(21.74)|
h. Comparison of each remuneration of the key managerial personnel against the performance of the company:
Rs. in Lakhs
|Particulars||Dr. AJ Prasad||Mr. MSS Srinath||Mrs. Kavita Prasad||Mr. MVSS Kumar||Mr.K Mahidhar|
|Designation||CMD||Executive director||CFO (wef August 11,2016)||Company secretary||Vice president, finance|
|Remuneration in 2016-17||96.00||50.40||16.92||23.99||34.87|
|Commission on profit||156.53||-||-||-||-|
|Profit before tax (PBT)||5006.95||5006.95||5006.95||5006.95||5006.95|
|Remuneration as % of revenue||0.17||0.03||0.01||0.02||0.02|
|(as % of PBT)||5.04||1.01||0.34||0.48||0.70|
i. The key parameters for any variable component of remuneration availed by the directors:
Only commission on net profits was paid to chairman and managing director in addition to the monthly remuneration.
j. The ratio of the remuneration of the highest paid director to that of the employees who are not directors but receive remuneration in excess of the highest paid director during the year: Not applicable.
The applicable disclosures under chapter IV of the SEBI (LODR) Regulations, 2015, with regard to corporate governance report with auditors certificate thereon and management discussion and analysis are attached, which form part of this report.
Vigil mechanism/whistle blower policy
The company has formulated a vigil mechanism /whistle blower policy to provide a vigil mechanism for employees including directors of the company to report genuine concerns. The provisions of this policy are in line with the provisions of the section 177(9) of the act and the regulation 22 of the SEBI (LODR) Regulations, 2015.
Deposits from public
The company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet.
Conservation of energy, technology absorption and foreign exchange earnings and outgo
Information relating to conservation of energy, technology absorption and foreign exchange earnings and outgo, as required under section 134(3)(m) read with rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the Annexure hereto.
Pursuant to Schedule V of the SEBI (Listing Obligations and Disclosure Requirements), Regulations 2015, a separate section titled "Report on Corporate Governance" is attached to the annual report.
Your board has appointed M/s K. Narashima Murthy & Co., Hyderabad, cost accountants as cost auditors of the company for conducting the audit of cost records of the company for the financial year 2016-17. Your board proposes to re-appoint them as cost Auditors for 2017-18 subject to the approval from Central Government.
Your board has appointed Mr. CN Kranthi Kumar (CP No: 13889), practicing company secretary as a secretarial auditor for the financial year 2016-17 and his secretarial audit report is attached to this report. There are no qualifications, adverse comments and observations in the secretarial audit report for the year 2016-17.
Your directors place on record its sincere appreciation towards the companys valued customers, vendors and esteemed shareholders for the support and confidence reposed by them in the management of the company and look forward to the continuance of this mutually supportive relationship in future.
Your directors take this opportunity to thank all the companys bankers and financial Institutions, the concerned Central and State Government Departments and Agencies for their support and co-operation to the company. The board has special appreciation for the employees for their dedicated services and their ability to deliver good results in the future.
|For on and behalf of the board|
|Place : Hyderabad||Dr A J Prasad|
|Date : August 11,2017||Chairman & Managing Director|
Conservation of energy, technology absorption, foreign exchange earnings and outgo
(Pursuant to Section t34(3)(m) read with Rule 8(3) of the Companies (Accounts) Rules, 2014)
A. Conservation of energy:
Energy saving devices such as re-cycling of heat and use of alternate sources of energy like solar energy/fuel oil are being implemented wherever possible.
B. Technology absorption:
We have in-house R&D facilities. We may avail the consultancy services from overseas experts for strengthening our technology, as and when needed. We are in the process of absorbing the technology so developed and improved further.
C. Foreign exchange earnings and outgo:
(Rs. in Lakhs)
|1 Value of imports (on CIF basis)|
|Raw materials, components & spares||23026.33||17825.07|
|Capital items/ equipment||11.83||-|
|2 Expenditure in foreign currency|
|3 Investment in subsidiary||-||99.03|
|4 Foreign exchange earnings|
|Export sales (on FOB basis)||17393.97||17323.37|
|For on and behalf of the board|
|Place : Hyderabad||Dr A J Prasad|
|Date : August 11,2017||Chairman & Managing Director|