HBL Power Systems Ltd Directors Report.

Dear Members

Your Directors take pleasure in presenting the 33rd Annual Report for the financial year ended on March 31,2019. The standalone financial performance is presented below 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.

Sl. Particulars 2018-19 2017-18
1 Revenue from Operations 1,25,720.03 1,62,411.26
2 Other Income 1,694.48 2,271.99
3 Total Income 1,27,414.51 1,64,683.25
4 Total Expenditure 1,16,578.84 1,49,825.95
5 (Earnings before interest, depreciation and tax (EBIDTA 10,835.67 14,857.30
6 Finance Costs 3,059.66 4,054.57
7 Depreciation & Amortization expenses 4,435.21 4,603.19
8 Profit before Exceptional items and Tax 3,340.80 6,199.54
9 (Exceptional Items - Income / (Expenses 664.45 (975.77)
10 (Profit before tax (PBT 4,005.25 5,223.77
11 Provision for tax & Deferred tax adjustment 1,494.35 2,258.08
12 (Other comprehensive income (net 24.65 10.10
13 (Total Comprehensive Income for the Period (PAT 2,486.25 2,955.59
14 (Earnings Per Share (Diluted EPS of Rupees 0.90 1.07
15 (Proposed Dividend (on share of Rs. 1 each 30% 25%

Performance review 2018-19

Year 2018-19 was a challenging year for the Company amidst disruptive headwinds in the Telecom segment with a negative growth. Both revenue from operations and Profit before Tax have shown a consequent decline over the previous year. Your Company continued to focus on managing cash efficiently and ensured that it had adequate liquidity and minimized borrowing costs. Continuing initiatives on cost saving, product optimization and developments have provided positive results. Notwithstanding this, there was an intense competition in Telecom industry business, which is our main business segment, forcing reduction in demand and our margins. And this affected our revenues and profitability as you would have noticed. In this situation, your Company managed an overall creditable performance with a stronger Balance Sheet.

Current years performance 2019-20

Going forward, economic activity is likely to be supported by the continuing political leadership which we believe possesses the vision and resolve to usher in an era of inclusive growth. We are making steady progress towards our vision to gain from potential opportunities in Railways and Defence business. While we do not anticipate any major momentum in Telecom sector demand in the immediate future, to offset this to an extent, your Company is examining alternative product initiatives. Your Company will continue to pursue its initiatives on cost reduction, product development to stay healthy in a turbulent market. The Management Discussion and Analysis section in the Annual Report provides more information and the shareholders may refer to the same for further insights.

Dividend

Your Directors are pleased to recommend a dividend of 30% (ie 0.30 paise per equity share of C.1 each fully paid up) for the Financial Year 2018-19 subject to the approval of the members at the ensuing Annual General Meeting. The proposed dividend including dividend distribution tax will absorb 1002.51 Lakhs.

Subsidiaries, Associate and Joint Venture Companies (as on March 31,2019)

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:

Subsidiary companies HBL America Inc. HBL Germany GmBH, Germany SCIL Infracon Pvt Ltd
Associate companies within the meaning of Section 2(6) of the Companies Act, 2013 ("Act"). Naval Systems & Technologies Pvt Ltd (NSTL)
Joint Venture Company Gulf Batteries Company Ltd in the Kingdom of Saudi Arabia (KSA).

The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary and associate except JV company i.e. Gulf Batteries Company Ltd, prepared in accordance with the Companies Act, 2013 (Act) and applicable Ind AS notified under the Companies (Indian Accounting Standards) Rules 2015 and Companies (Indian Accounting Standards) Amendment Rules, 2016 as amended.

Pursuant to provisions of section 129(3) of the Act, a statement containing salient features of the financial statements of the Companys subsidiaries in Form AOC-1 is attached to the financial statements of the Company and as per the provisions of section 136 of the Act, the standalone financial statements of the Company, consolidated financial statements along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company. There has been no material change in the nature of the businesses of the subsidiaries except as disclosed hereunder.

Highlights of performance of subsidiaries, associates and joint venture companies and their contribution on overall performance of the Company:

Operational and financial performance of the subsidiaries, associates and joint venture shall be provided as and when the same is made available.

Subsidiary Companies

SCIL Infracon Private Limited (SIPL)

Shareholders are already aware that SIPL is not in operation since over five years. Hence, the Board of Directors of SIPL in its on 15th March 2019 claimed the status of the Company as dormant and filed necessary forms with the Ministry of Corporate Affairs.

Joint Venture Company

Gulf Batteries Co. Ltd (GBC) in the Kingdom of Saudi Arabia (KSA)

Your Company holds 40% stake in GBC. Your Company therefore filed a petition for liquidation (winding up) of GBC before a Commercial Court in Saudi Arabia. The case was not decided in favour of the Company. The Company is in consultation with the legal counsel for filing a fresh appeal for liquidation (winding up) of GBC as the accumulated loss of nearly 75% of its capital, as per Saudi Arabian laws, in a situation like this, such Company is terminated by force of law. GBC financials statements have not been available for consolidated financial statements of the Company.

Material Changes and Commitments

No material changes and commitments have occurred after the closure of the FY 2018-19 on March 31, 2019, 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.

Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, cost, statutory and secretarial auditors and external consultants and the reviews performed by management and the relevant board committees, including the audit committee, the board is of the opinion that the Companys internal financial controls were adequate and effective during the financial year 2018-19.

Directors and Key Managerial Personnel (KMP)

Name of the appointee Date of appointment

i Kavita Prasad as CFO Upto 12.11.2018
i K Sridharan as CFO w.e.f. 12.11.2018

Mr. Ajay Bhaskar Limaye (DIN 02762738) retires by rotation and is eligible for re-appointment. Your Board recommends his reappointment.

Independent Directors:

As per sub-section (10) and (11) to Section 149 of the Companies Act, 2013 (Act), an independent Director shall hold office not more than two terms of five consecutive years in each term. Explanation to sub-section (11) clarifies that any tenure of an independent director on the date of commencement of the Act shall not be counted as a term under those sub-sections. Accordingly, P Ganapathi Rao and Preeti Khandelwal, Non-Executive Independent Directors whose first five years term of office ends on November 13, 2019 are eligible and recommended for appointment for a further period of five years in terms of sub-section (10) and (11) to Section 149 of the Act at the forthcoming Annual General Meeting (AGM) of the Company.

During the year, the non-executive directors of the Company had no pecuniary relationship or transactions with the Company except for the sitting fee paid for attending the Board meetings.

Number of meetings of the board

Four 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.

Board evaluation

Pursuant to the provisions of the Companies Act, 2013 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 during the year. 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 non-Independent 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.

Audit committee

The details pertaining to composition of Audit Committee are included in the Report on Corporate Governance, which forms part of this report. Powers and role of the Audit Committee are included in Corporate Governance Report. The Board of Directors has accepted all the recommendations of the Audit Committee placed at respective meetings.

Risk Management

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 and such policies and procedures were adopted by the Company for ensuring the orderly and efficient conduct of its business, including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records, and the timely preparation of reliable financial information. The Audit Committee evaluates the internal financial control system periodically. To the best of their knowledge and ability and inputs provided by various assurance providers confirm that such financial controls are adequate with reference to the size and operations of the Company and no reportable material weakness or deficiency in the design or operation of internal financial controls was observed.

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.

Information regarding employees and related disclosures

Your Company consistently believes in concerted efforts in talent management and succession planning practices, strong performance management and learning and training initiatives. Rewards and recognition are commensurate with performance and that employees have the opportunity to develop and grow. During the year, there were no complaints relating to child labour, forced labor, involuntary labor, sexual harassment in the last financial year and pending as on the end of the financial year.

Category No.of complaints filed No.of complaints pending
1 Child labor / forced labor/ involuntary labor 0 0
2 Sexual harassment 0 0
3 Discriminatory employment 0 0

Disclosure as required under Section 22 of Sexual Harassment of women at workplace (Prevention, Prohibition and Redressal) Act, 2013

Your Company believes in providing a healthy environment to all HBL Employees and does not tolerate any discrimination or harassment in any form. The Company has in place a gender neutral, Prevention of Sexual Harassment (POSH) policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. This policy is frequently communicated in assimilation programs and at regular intervals to all HBL employees. Following are some of the awareness programs imparted to train HBL Employees and Internal complaints committee (ICC).

1. It is mandatory for every new joiner to undergo a program on Prevention of Sexual Harassment during induction program.

2. The Internal Complaints Committee is trained by external agency when the committee members are on-boarded to the committee.

3. Policy of Prevention of Sexual Harassment at workplace is available on internet for HBL employees to access as and when required.

4. The Prevention of Sexual Harassment policy is placed in conspicuous places for better visibility and communication of the policy. The posters are also displayed in regional languages at all HBL offices.

HBL has setup an Internal Complaints Committee(ICC) both at the Head office / Corporate office and at every major location where it operates in India. ICC has equal representation of men and women. ICC is chaired by a senior woman employee and has an external women representation.

ICC investigates the case(s) and provides its recommendations to the apex authority . The apex authority upon receiving the recommendations from ICC arrives at the conclusion and acts upon such recommendations.

Penal Consequences of Sexual Harassment ("SH") and the constitution of the ICC is displayed at conspicuous places.

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 Dr. AJ Prasad Mr. Suresh Kalyan Mr. MVV Vidyasagar
Total remuneration CTC (C Lakhs) C 96.15 Lakhs and commission 101.59 Lakhs 122.24 Lakhs 63.16 Lakhs
Designation and Nature of Duties Chairman and Managing Director Chief Operating Officer (COO) President - Electronics Group
Qualification / Experience (years) B. Tech from IIT, Khargpur, MS in Management from Massachusetts Institute of Technology USA, Doctorate in International Business from Columbia University, USA. BSc. Chartered Accountant 30 BE (Electrical & Electronics) 34
Date of commencement of employment Promoter of the Company 17.11.2014 01.04.2011
Age (years) 74 55 55
Last employment held before joining the Company Administrative Staff College of India Amara Raja Batteries Limited, Hyderabad, as President - Finance Director(Operations) at Axiom Consulting Ltd.

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 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 No change
MSS Srinath, Executive Director No change
A Kavita Prasad, Executive Director No change
MVSS Kumar, Company Secretary NIL
K Sridharan (appointed as CFO w.e.f. 12.11.2018 in place of Kavita Prasad) NIL

c. The percentage increase in the median remuneration of employees in the financial year: 10-15 %

d. The number of permanent employees on the rolls of Company: 1816 (as at 31 March 2019)

e. Comparison of the remuneration of the key managerial personnel against the performance of the Company:

Aggregate remuneration of key managerial personnel (KMP) in 2018-19 218.80
Commission on profits to CMD 101.59
Total 320.39
Revenue 1,25,720.03
Remuneration of KMPs as % of revenue 0.25
Remuneration of KMP as % of PBT 7.99

f. Comparison of remuneration of each the key managerial personnel(KMP) against the performance of the Company:

Name Designation Remuneration Commission on profit Total
Dr. AJ Prasad Chairman and Managing Director 96.15 101.59 197.74
MSS Srinath Executive Director 50.55 - 50.55
Kavita Prasad Executive Director 30.83 - 30.83
MVSS Kumar Company Secretary 22.61 - 22.61
K Sridharan Chief Financial Officer (w.e.f. 12.11.2018) 18.66 - 18.66
Total 218.80 101.59 320.39

g. 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.

h. 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.

Disclosure requirements

As per listing Regulations, 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 & 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.

Corporate Governance

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.

Statutory Auditors

M/s Rao & Kumar, Chartered Accountants (FRN 03089S) Visakhapatnam who are the Statutory Auditors of the Company have been appointed by the members at the 31st Annual General Meeting (AGM) of the Company held on 26th September 2017 for a period of five years to hold office till the conclusion of AGM in 2022 subject to ratification of members at every year AGM. Accordingly, they retire at the conclusion of the ensuing AGM and are eligible for reappointment. Your Directors recommend for their reappointment at the AGM.

The Report given by M/s. s Rao & Kumar, Chartered Accountants on the financial statements of the Company for the year 2018-19 is part of the Annual Report. There has been no qualification, reservation or adverse remark or disclaimer in their Report. During the year under review, the Auditors had not reported any matter under Section 143 (12) of the Act. Therefore no detail is required to be disclosed under Section 134 (3)(ca) of the Companies Act, 2013.

Cost Auditors

Your Board has appointed M/s K. Narashima Murthy & Co., Hyderabad, Cost Accountants (FRN 000042) as Cost Auditors of the Company for conducting the audit of cost records of the Company. Your Board, on recommendation of the Audit Committee, proposes to re-appoint them as Cost Auditors for 2019-20, subject to the approval from Central Government.

Disclosure under Section 148(1) of the Companies Act, 2013

The Company has been maintaining required cost records as specified under Section 148(1) of the Companies Act, 2013 read with Companies (Accounts) Rules, 2014 as mended from time to time.

Secretarial Auditors

CS Kamal Saboo has been proposed to be reappointed (CP No: 20802), Practicing Company Secretary as a Secretarial Auditor for the financial year 2018-19 and his secretarial audit report is attached to this Report in Annexure IV. There are no qualifications, adverse comments and observations in the secretarial audit report for the year 2018-19.

Cautionary Statement

Statements in this Annual Report, particularly those that relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations, may constitute forward-looking statements within the meaning of applicable laws and regulations to enable shareholders and investors to comprehend our prospects. Although the expectations are based on reasonable assumptions, the actual results might differ materially from those expressed in the statement. Important factors that could influence the Companys operations include global and domestic demand and supply conditions affecting selling prices of finished goods, input availability and prices, changes

in government regulations, tax laws, economic developments within the country and other factors such as plant breakdowns, industrial relations etc.

Acknowledgements

Your Directors place on record its sincere appreciation towards the Companys valued customers 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 and remains committed to delivering and enhancing shareholder value.

Your Directors take this opportunity to thank all the Companys Bankers, concerned Central and State Government Departments, 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 and on behalf of the Board
Dr. A J Prasad
Chairman and Managing Director
Place: Hyderabad
August 13, 2019