HPL Electric & Power Ltd Directors Report.

Dear Members

The Directors have pleasure in presenting 28th Annual Report of the Company together with the Audited Financial Statements for the financial year ended 31st March, 2020.

1. Financial Highlights

The Companys financial performance for the year ended 31st March, 2020 alongwith previous years figures is summarized below: (Rs. In Lakhs)

Particulars Standalones Consolidated
2019-20 2018-19 2019-20 2018-19
Revenue from Operations 92522.40 110,259.11 97651.44 115,847.46
Other Income 383.75 398.13 458.21 470.27
Operating Profit before Finance Costs, 11444.68 12,133.09 12948.54 13,822.34
Depreciation, Tax and Extraordinary items
Less: Finance Cost 5639.81 5,276.15 6144.79 5,814.67
Less: Depreciation and amortization 3480.79 2,986.61 3741.98 3,203.65
expenses
Profit before Exceptional Expenses and Tax 2324.08 3,870.33 3061.77 4,804.02
Profit before tax 2324.08 3,870.33 3061.77 4,804.02
Less: Tax Expenses 653.46 1,231.81 869.64 1,532.81
Profit for the year 1670.62 2,638.52 2192.13 3,271.21
Other comprehensive income for the year, 1.35 (20.88) (1.80) (20.49)
net of tax
Total comprehensive income for the year, 1671.97 2,617.64 2190.33 3,250.72
net of tax
Profit for the year attributable to
Equity holders of the parent Company 1670.62 2,638.52 2177.23 3,252.89
Non-controlling interest - - 14.90 18.32
Total comprehensive income for the year
attributable to
Equity holders of the parent Company 1671.97 2,617.64 2175.52 3,232.39
Non-controlling interest - - 14.81 18.33
Earnings per Share (in Rs ) Not
Annualised
Basis ( Rs ) 2.60 4.10 3.39 5.06
Diluted ( Rs ) 2.60 4.10 3.39 5.06

2. State of Companys Affairs

FY20 was a challenging year for the Indian consumer and industrial electrical companies. HPL reported a revenue of Rs 976.5 crores in FY20 lower by 15.7% compared to Rs 1,158.5 crores. Performance for the year was impacted by the subdued demand from the real estate & infrastructure sectors, and government projects. This was further accentuated by the disruption caused by the Covid-19 pandemic in the fourth quarter due to which the company lost revenue to the tune of Rs 120 crore.

"Metering" segment was particularly hard hit in the fourth quarter. From February 2020 onwards, the company experienced a shortage of some imported critical components as Covid-19 disrupted supply chains from China. Furthermore, inspections came to halt in March 2020, due to the Covid-19 led uncertainty in India. Both these factors led to a sharp drop in dispatches and consequently sales. However, these orders and sales have not been lost but only delayed which we should recoup going forward.

On the B2C front, our "lighting" segment witnessed healthy traction and was on track to achieve mid-to-high single digit growth had it not been for the pandemic. The "switchgear" and "wires & cables" segment performance was impacted by the slowdown in the real estate & infrastructure sectors besides the Covid-19 disruption.

Despite enduring a difficult year, we were able to keep our operating profitability largely intact through efficient raw material sourcing and rationalization of operating costs. EBITDA margins for FY20 expandedby 127 bps to 12.8% (11.5% in FY19)

Looking ahead to the next year, our performance will be adversely impacted by the lockdown and the ensuing slowdown in demand in H1 FY21. However, we remain cautiously optimistic as robust order book of Rs 367.70 crores* provides revenue visibility. Further, we have also restored our supply chains for both the metering and B2C segments. In a major positive boost, we have received smart meter orders of Rs 90 crores in May 2020. Winning of this order is a testament of the HPLs capabilities in providing efficient smart meter solutions.

The one-time liquidity injection of Rs 90,000 crores into power Discoms announced by the Government is likely to support demand for "meters" for the next fiscal andensure timely payment of dues for equipment suppliers. Our B2C segment is also expected to see a demand recovery in H2 FY21as the impact offockdown recedes, underpinned by the on-set of the festival season and higher governmentspending.

Looking beyond the near-term challenges, HPL remains committed to deliver sustainable growth over the medium term led by traction in both metering and B2C segments. Smart meters will be a major growth area for the company going forward. The central Governments thrust on replacing 250 million conventional meters with smart meters opens-up a huge potential market for prominent suppliers like HPL.Furthermore, we expectsee healthy traction in our B2C segment over the coming years, led by product development efforts, network expansion, and effective branding initiatives.

Note: * Order Book Size is as on 9th June, 2020

3. Performance of subsidiaries, associates and joint venture companies and their contribution to the overall performance of the company

As on 31st March, 2020, the company is having only one subsidiary namely Himachal Energy Private Limited and two Joint Ventures (JVs) namely HPL Electric & Power Pvt. Ltd. – Shriji Designs (JV) and HPL Electric & Power Pvt. Ltd. – Trimurthi Hitech Co. Pvt. Ltd. - Shriji Designs (JV). These JVs are established as Association of Person (AOP) and not registered under the Companies Act, 2013 and accordingly are not Associate Companies as per section 2(6) of the Companies Act, 2013.

Himachal Energy Private Limited is engaged in the manufacturing of energy saving meters and other related products. The Gross Revenue of the Company for the FY 2020 stood at Rs. 8532.28 lakhs (P.Y. Rs. 10,518.83 lakhs).

Profit after tax for the year stood at Rs. 522.73 lakhs (P.Y. Rs. 642.88 lakhs). The Company continues its performance momentum.

Further, pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements alongwith relevant documents and separate financial statements in respect of Subsidiary company, are available on the website of the Company i.e. www.hplindia.com.

4. Names of Companies which have become or ceased to be its Subsidiaries, Joint Ventures or Associate Companies during the year

During the Financial Year ended 31st March, 2020, no company became or ceased to be a subsidiary of the Company or Joint Venture or Associate Company.

5. Consolidated Financial Statement

The Consolidated Financial Statements of the Company are prepared in accordance with relevant Indian Accounting Standards issued by the Institute of Chartered Accountants of India and forms an integral part of this Report.

Pursuant to Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing the salient features of the financial statement of a companys subsidiary or subsidiaries, associate company or joint venture or ventures in Form AOC-1 is annexed as

Annexure I.

6. Material changes and commitments, if any, affecting the financial position of the company which have occurred between the end of the financial year of the Company to which the financial statements relate and the date of the Report

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year and date of this report.

7. Change in the nature of business, if any

There was no change in the nature of business of the Company during the financial year ended 31st March, 2020.

8. Reserves

During the period under report, the company do not propose to transfer any amount to the General Reserve.

9. Dividend

The Board of Directors in its meeting held on 9th July, 2020 recommended a final dividend of Rs. 0.15 per equity share of Rs. 10 face value (1.5%) for the financial year ended 31st March, 2020, subject to the approval of the shareholders at the ensuing Annual General Meeting of the Company.

The dividend would be payable to all those Shareholders whose names appear in the Register of Members as on 23rd September, 2020, the record date fixed for this purpose.

10. Public deposits

During the period under report, the Company has not accepted any deposit within the meaning of Sections 73 and 74 of the Companies Act, 2013 read together with the Companies (Acceptance of Deposits) Rules, 2014.

11. Details of Directors or Key Managerial Personnel including those who were appointed or have resigned during the year

Mr. Hargovind Sachdev (DIN: 08105319) was appointed as an Independent Director of the Company for a period of 2 years with effect from 13th April, 2018. The first term of office as Non-Executive Independent Director completed effective 12th April, 2020. Thereafter, on the recommendation of the Nomination and Remuneration Committee, the Board of Directors of the company has approved the re-appointment of Mr. Hargovind Sachdev (DIN:08105319) as an Independent Director of the Company for a further period of 5 (five)consecutive years w.e.f 13th April, 2020, and recommends the same for the approval by the shareholders of the company in the forthcoming Annual General Meeting. The company has received consent in writing from Mr. Hargovind Sachdev to act as director in the form DIR-2 and intimation in the Form DIR- 8 to the effect that he is not disqualified U/s 164 (2) of the Companies Act, 2013 to act as Director and confirmation that he meets the criteria of independence prescribed under the Act and the SEBI Listing Regulations.

Pursuant to the provisions of Section 152 of the Companies Act, 2013 and other applicable provisions of the Act, Mr. Rishi Seth (DIN:00203469), Managing Director of the Company, who retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence prescribed under the provisions of Section 149(6) of the Act and Regulation 16 of the SEBI Listing Regulations.

Brief details of the directors being recommended for reappointment as required under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have been furnished in the Notice dated 3rd September, 2020 convening the 28th Annual General Meeting.

12. Number of meetings of the Board

During the period under report, the Board of Directors of the Company met 4 (four) times on 20th May, 2019, 12th August, 2019, 14th November, 2019 and 14th February, 2020. Particulars of attendance of each director are mentioned in the Corporate Governance Report.

Pursuant to the provisions of Schedule IV to the Companies Act, 2013 and the SEBI Listing Regulations, 2015, a separate Meeting of the Independent Directors of the Company was held on 14th February, 2020, without the presence of Non-Independent Directors and members of the management, to review the performance of Non-Independent Directors and the Board as a whole, the performance of the Chairperson of the company, taking into account the views of Executive Directors, Non-Executive Non-Independent Directors and also to assess the quality, quantity and timeliness of flow of information between the Company management and the Board.

13. Formal Annual Evaluation

Pursuant to the provisions of Section 178 of the Companies Act, 2013 read with Companies (Amendment) Act, 2017 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Nomination and remuneration committee has laid down the manner for effective evaluation of_ performance of Board, its committees and individual directors and accordingly the Board of directors has carried out an annual evaluation of its own performance, board committees and individual directors.

While evaluating the performance of Board, the Board had considered the composition and structure of the Board in terms of size, experience, diversity, effectiveness of the board process, dissemination of information etc.

The performance of the committees was evaluated by the board taking into consideration the factors such as composition of the committee; effectiveness of committee meetings; independence of the committee from the Board and contribution in decision making by the Board etc.

The performance evaluation of all the individual directors was carried out after taking into account their individual contribution to the board and committee meetings such as preparedness on the issues to be discussed, effective contribution in the discussion on the various agenda items, whether the independent directors fulfill the independence criteria as specified in the Companies Act, 2013 and SEBI Listing Regulations and their independence from the management. Therefore the outcome of the performance evaluation for the period under report, was satisfactory and reflect how well the directors, board and committees are carrying their respective activities.

The independent directors in its separate meeting without the attendance of non-independent directors and members of management, reviewed -

(a) the performance of non-independent directors and the Board as a whole;

(b) the performance of the Chairperson of the company, taking into account the views of executive directors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow of information between the company management and the Board that is necessary for the Board to effectively and reasonably perform their duties.

14. Nomination and Remuneration Policy of Directors, Key Managerial Personnel and other employees

As per the provisions of Section 178 of the Companies Act, 2013, the Board of Directors has approved a policy which lays down a framework in relation to appointment and remuneration of Directors, Key Managerial Personnel and other employees of the Company.

The Policy broadly lays down the guiding principles, philosophy and the basis for payment of remuneration to Directors, Key Managerial Personnel and other employees. The policy also provides the criteria for determining qualifications, positive attributes and Independence of Director and criteria for appointment of Key Managerial Personnel / Senior Management while making selection of the candidates. The above policy is available on the website of the Company at www.hplindia.com.

15. Extract of Annual Return

As per the requirements of Section 92(3) of the Act and rules made thereunder, the extract of the Annual Return for the year ended 31st March, 2020 is annexed as Annexure II in the prescribed Form No. MGT-9, which is a part of this report. The same is available on the website of the Company at www.hplindia.com.

16. Listing

The equity shares of the Company are listed on the National Stock Exchange of India Ltd. and BSE Limited. The listing fee for the financial year 2020-2021 has been paid to both the Stock Exchanges.

17. Audit Committee

The details pertaining to the composition of the Audit Committee are included in the Corporate Governance Report which is a part of this Annual Report.

18. Vigil mechanism/ Whistle Blower Policy

Pursuant to the provisions of Companies Act, 2013 and SEBI Listing Regulations 2015, the Company has established a robust vigil Mechanism for directors and employees to report to the management instances of unethical behavior, actual or suspected, fraud or violation of the Companys code of conduct. The Vigil Mechanism

Policy provides that the company investigates in such incidents, when reported, in an impartial manner and shall take appropriate action as and when required to do so. The policy also provides the mechanism for adequate safeguard against the victimization of Director(s)/ employees who avail the mechanism and also provide for the direct access to the Chairman of the Audit Committee in exceptional cases. A vigil Mechanism policy is available on the website of the company at www.hplindia.com.

19. Risk Management

The Company has in place a robust risk management policy to anticipate, identify, measure, manage, mitigate, monitor and report the risk and uncertainties that may have an impact to achieve the business objective of the company. The Company recognizes these risks which need to be managed and mitigated to protect the interest of the stakeholders, to achieve business objectives and enable sustainable growth. The risk management framework is aimed at effectively mitigating the Companys various business and operational risks, through strategic actions. The Company believes that managing risks helps in maximizing returns.

An extensive program of internal audits and regular reviews by the Audit Committee is carried out to ensure compliance with the best practices.

20. Policy on Material Subsidiary

The Company has framed a Policy on Material Subsidiary under Regulations 16(c) of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015 which is available on the website of the company i.e. www.hplindia. com.

21. Corporate Social Responsibility (CSR)

It is the responsibility of the corporations operating within society to contribute towards social and environmental development that will help in creating a positive impact on society at large.

The Corporate Social Responsibility committee comprises of Mrs. Madhu Bala Nath as Chairperson, Mr. Lalit Seth, Mr. Rishi Seth and Mr. Jainul Haque as members of the committee.

The company discharges its CSR obligations directly and by making contribution through Seth Inder Narain Foundation, Trust and SUTRA, an implementing agency appointed by the Company towards supporting projects in Eradicating hunger, poverty and malnutrition promoting health care; promoting education, including special education and employment enhancing vocation skills especially among children, women, elderly and the differently abled and livelihood enhancement projects. The company also extends its objective towards CSR in supporting the rural development projects.

The Board of Directors have approved the CSR Policy of the Company as formulated and recommended by the CSR Committee which is available on the website of the Company at www.hplindia.com. A report on Corporate Social Responsibility is annexed as Annexure III.

22. Particulars of Contracts or Arrangements with related Parties

All the transactions entered into with related parties as defined under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 during the financial year ended 31st March, 2020 were in the ordinary course of business and on arms length basis. As per the provisions of Section 188 of the Companies Act, 2013, and Rules made thereunder read with Regulation 23 of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company had obtained the necessary prior approval of the Audit Committee for all the related party transactions. Further, there were no material related party transactions with promoters, directors or Key Management Personnel during the year under report.

None of the transactions with any of the related parties were in conflict with the interest of the Company rather, they synchronize and synergies with the Companys operations.

The Company has framed a Policy on Related Party Transactions in accordance with Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 and as per the provisions of the Companies Act, 2013, as amended. The Policy intends to ensure that proper reporting; approval and disclosure processes are in place for all transactions between the Company and related parties. The policy is available on the website of the company at www.hplindia.com and the Details of Related Party Transactions are annexed as per Form AOC-2 in Annexure IV.

23. Auditors

A) Statutory Auditors

As per the provisions of Section 139(1) of the Act, the Company had appointed M/s. Kharabanda Associates, Chartered Accountants (Regn. No. 003456N) as Statutory Auditors for a period of 5 (Five) years in the Annual General Meeting of the company held on 28th September 2017. Pursuant to the amendments made to Section 139 of the Companies Act, 2013 by the Companies (Amendment) Act, 2017 effective from May 7, 2018, the requirement of seeking rati_cation of the Members for the appointment of the Statutory Auditors has been withdrawn from the Statute. Hence the resolution seeking ratification of the Members for continuance of their appointment at this AGM is not being sought.

Statutory Auditors Report

There are no observations (including any qualification, reservation, adverse remark or disclaimer) of the Auditors in their Audit Report that may call for any explanation from the Directors. Further, the notes to accounts referred to in the Auditors Report are self-explanatory.

There was no instance of fraud during the year under report, which required the Statutory Auditors to report to the Audit Committee and / or Board under Section 143(12) of Act and Rules framed thereunder.

B) Cost Auditors

As per Section 148 of the Companies Act, 2013, the company is required to have the audit of its cost records conducted by a Cost Accountant in practice.

Pursuant to the provisions of Section 141, 148 of the Companies Act, 2013 read with Companies (Cost Records and Audit) Rules, 2014 and other applicable provisions of the Act, as amended from time to time, M/s Bikram Jain & Associates, Cost Accountants, (Firm Registration No. 101610) were appointed as the Cost Auditor of the Company for the financial year ended 31st March, 2020.

The company has received the Cost Audit Report of the company for the financial year ended 31st March, 2019 in its meeting held on 12th August, 2019 and the same was filed in XBRL mode within due date.

The company has made and maintained the Cost records under Section 148 of the Companies Act, 2013 for the financial year ended 31st March, 2020.

C) Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with corresponding rules made there under M/s. AVA Associates, Company Secretaries were re-appointed as Secretarial Auditors of the Company to conduct Secretarial Audit of the Company for the financial year ended 31st March, 2020.

Secretarial Audit Report

The Secretarial Audit Report for the FY 2019-20 as submitted by Secretarial Auditor in Form MR-3 is annexed to this Report as Annexure V.

Therearenoobservations(includinganyqualification, reservation, adverse remark or disclaimer) of the Secretarial Auditors in their Secretarial Audit Report that may call for any explanation from the Directors.

Annual Secretarial Compliance Report

A Secretarial Compliance Report for the financial year ended 31st March, 2020 on compliance of all applicable SEBI Listing Regulations and circulars/ guidelines issued thereunder, was obtained from M/s AVA Associates, Secretarial Auditors, and submitted to both the stock exchanges.

24. Particulars of Loans, Guarantees or investments

The investment made by the company in the subsidiary company in the form of equity share capital is disclosed in the notes to the Audited Financial Statements forming part of this Annual Report. The company has not given any loans, guarantees or provided any security in connection with a loan to any body corporate or person as per section 186 of the Companies Act, 2013 during the period under report.

25. Particulars of remuneration of Directors/ KMP/Employees

The information required to be disclosed in the Directors Report pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is set out in Annexure VI to this report.

26. Research and Development

HPL is passionate about innovation and has undertaken a lot of initiatives to accelerate the business growth curve in the upward direction. Company has been regularly investing in infrastructure and its R&D centers to make world-class products, meeting stringent Quality standards. All the R&D labs in various units have been focusing on design and development of innovative products in the field of Switchgear, Lighting and Metering etc. to meet the growing technological challenges of the times.

The R&D team has been continuously working on improving the reliability and life cycle of HPL products. All our plants are ISO 9001:2015 certified. Most of the products are "CE" marked. Moreover all the plants are RoHS complaint to meet the demands of the new era of business, globally.

Timely delivery of new products under development is of primary focus of R&D department. It works on a cohesive approach to narrow the gap between design and manufacturing by investing money in 3D modeling, making prototypes before commencing tool manufacturing to save money, time & energy, thereby increasing the efficiency of the company.

Company is continuously working on many more smart engineering electrical products to meet the future demand. LED being called the fourth generation light source, HPL is keeping itself abreast with innovative lighting products, continuously being developed, to meeting the market demand.

27. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo as stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is attached as Annexure VII to this report.

28. Corporate Governance Report

The Company is committed to maintain the highest standards of Corporate Governance and adhere to the Corporate Governance requirements set out by Securities and Exchange Board of India. The report on Corporate Governance as stipulated under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms an integral part of this Report. The requisite certificate from M/s. Kharabanda Associates, Statutory Auditors of the Company confirming compliance of conditions of corporate governance is also annexed to the Corporate Governance Report.

29. Directors Responsibility Statement

Pursuant to Section 134(3) (c) and 134(5) of the Companies Act, 2013, the Directors confirm that:

a. in the preparation of the annual accounts, the applicable accounting standards had been followed alongwith proper explanation relating to material departures;

b. the directors had selected such accounting policies 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;

c. the Directors had 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;

d. the Directors had prepared the annual accounts on a going concern basis;

e. the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and f. the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

30. Disclosure under the sexual harassment of women at workplace (Prevention, Prohibition And Redressal) Act, 2013

The Company has always believed in providing a safe and harassment free workplace for every individual working in the Company premises through various interventions and practices. The Company always endeavors to create and provide an environment that is free from discrimination and harassment including sexual harassment.

The Company has in place robust policy on prevention, prohibition and redressal of complaints relating to sexual harassment at workplace which is applicable to the company as per the provisions of Sexual Harassment of Women at Workplace (Prevention, prohibition and Redressal) Act, 2013. The company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace (Prevention, prohibition and Redressal) Act, 2013.

During the year under report, the company has not received any complaints pertaining to sexual harassment.

31. Significant/material orders passed by the regulators

There are no significant/material orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Company and its operations in future.

32. Internal Financial Control Systems and their adequacy

The Company has adopted policies and procedures for effective internal controls system. This ensures that all transactions are authorized, recorded & timely preparation of reliable financial information, the safeguarding of its assets, the prevention and detection of frauds and errors. The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations.

33. Management Discussion and Analysis Report

Management Discussion and Analysis Report for the year under report, as stipulated under the Companies Act, 2013 and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is also presented in a separate section forming part of this Annual Report.

34. CEO and CFO Certificate

CEO and CFO Certificate as prescribed under Schedule II part B of Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed to the Corporate Governance Report forming part of this Annual Report.

35. Disclosure of commission paid to Managing Director or Whole time directors

There is no commission paid or payable by the company to the managing director or the whole time directors.

36. Acknowledgement

The Board of Directors acknowledges the continued co-operation assistance and support the Company has received from various Government Departments, Banks/ financial Institutions and shareholders. The Board also places on record its appreciation for the sincere services rendered by employees of the company at all levels and the support and co-operation extended by the valued business associates and the continuous patronage of the customers of the Company.

For and on Behalf of the Board
For HPL Electric & Power Limited
Lalit Seth
Date : 3rd September, 2020 Chairman
Place : Noida DIN: 00312007