JTEKT India Ltd Directors Report.

TO THE MEMBERS,

Your Directors have pleasure in presenting their 36 Annual Report together with audited accounts of the Company for the year ended 31 March 2020.

1. Financial Results

STANDALONE AND CONSOLIDATED PREFORMANCE OF THE COMPANY

(Amount in INR/Lakhs)

Particulars Standalone Consolidated
Current Year Previous Year Current Year Previous Year
31.03.2020 31.03.2019 31.03.2020 31.03.2019
Total Income (net of excise duty) 154,189 178,567 151,935 176,561
Profit before interest , depreciation & tax 12,904 21,342 14,567 23,328
- Interest 989 1,552 993 1,555
- Depreciation & write offs 8,651 9,060 9,278 9,595
Profit before share of profit of Associates 3,264 10,730 4,296 12,179
Profit before tax 3,264 10,730 4,296 12,179
Less : Provision for tax 1,237 4,179 1,607 4,632
Provision for deferred tax liability/(assets) (724) (305) (823) (280)
Profit after tax 2,751 6,856 3,512 7,826
Less : Share of profit transferred to minority - - 486 552
Profit for the year 2,751 6,856 3,026 7,274
Retained Earnings
Balance at the beginning of the year 36,199 31,833 38,165 33,412
Transition impact of Ind AS 116 (168) - (168) -
Profit for the year 2,751 6,856 3,026 7,274
Payment of Dividend on equity shares (1,956) (1,861) (1,956) (1,861)
Corporate Dividend Tax paid (350) (522) (402) (554)
OCI Transfer to Retained Earnings (233) (107) (239) (106)
Balance at the end of the year 36243 36,199 38,426 38,165

The consolidated financial statement is also being presented in addition to the standalone financial statement of the Company.

2) State of Affairs of the Company

The Company achieved revenue from operations of INR 153,090 lakhs during the year; facing a decline of 13.7% compared to revenue achieved in the previous year. The decline in sales corresponds to the overall decline in Auto sector which registered a de-growth of (-) 14.7% over the year. The Company reported profitafter tax of INR 2,751 lakhs.

The decline Profitmargin Net from 3.9% to 1.7% is mainly due to a decline in sales volumes.

3) Covid-19 Pandemic

In the last month of FY 2020, the Covid-19 pandemic developed rapidly into a global crisis, forcing governments to enforce lock-downs of all economic activity.

In keeping with its employee-safety first approach the Company has taken several initiatives to tackle this unprecedented situation. In line with the government guidelines and best practices followed in the industry the company has promptly launched a series of initiatives related to Covid-19 such as

(a) conducting awareness sessions via online trainings program

(b) continuous monitoring of health of employees and visitors of the Company

(c) regular sanitisation of work areas and modification in the layout of work areas

(d) where practically possible adopted ‘work-from-home model. As a responsible member of the community that it operates in, the Company has contributed to various Covid-19 relief and monitoring programs in India.

The Indian economy was hoping for some revival at the beginning of 2020, but due to Covid-19, all prospects of an early financial rebound have diminished. In order to meet the challenges posed by Covid-19, the Government decided to impose nationwide lockdown in the last week of March 2020. Stoppage of economic activity across India adversely impacted growth and the Indian economy expanded by just 3.1% in the January-March quarter and dragged the full year FY20 GDP growth to 4.2% weakest since the financial crisis hit more than a decade back. The slowdown was witnessed in almost all sectors right from manufacturing to construction and the auto industry is no exception to it. However due to strong fundamentals, India may see a quicker recovery when this pandemic subsides.

4) Capital Expenditure on tangible assets-standalone

This year, on standalone basis, we incurred a capital expenditure of INR 3,313 lakhs. This comprises:

• Building INR 555 lakhs.

Plant and Machinery, jig & fixture etc. INR 2,096 lakhs.

Office equipment and others INR 662 lakhs.

5) Dividend

Your directors are pleased to recommend a dividend of INR 0.35 per equity share of the face value of INR 1/- each (@ 35%) out of profitfor Financial Year 2019-20 resulting into distribution of sum of INR 85,568,164 towards dividend, payable to those shareholders whose name appear in the Register of Members as on the date of book closure. During the previous Financial Year dividend was paid at the rate of 80% on the equity share capital of the Company.

No interim dividend was declared by the Board of Directors during Financial Year 2019-20.

6) Reserves

(Amount in INR/Lakhs)

Particulars 31 March 2020 31 March 2019
Balance as per last financial statements 36,199 31,833
Less: Transition impact of Ind AS 116 (168) -
Add: Profit for the year 2,751 6,856
Less: Appropriations
Dividend paid 1,956 1,861
Tax on dividend paid 350 522
Less : OCI Transfer to Retained Earnings 233 107
Net surplus in the statement of profit and loss 36,243 36,199

7) Change of nature of Business

During the year there has been no change in the nature of business of the Company.

8) Share Capital

As on 31 March 2020:

(a) the Authorized Share Capital of the Company is INR 87,10,00,000/- consisting of 87,10,00,000 nos. of Equity Shares of INR 1/- each; and (b) the Issued, Subscribed and Paid-up Share Capital of the Company is INR 24,44,80,469/- consisting of 24,44,80,469 nos. of Equity Shares of INR 1/- each During the Financial Year 2019-20 the Company has not issued, changed, reclassified, converted or reduced any Equity Shares/

Convertible Securities/Warrants/Sweat Equity Shares/ Employee Stock Options.

As on 31 March 2020, none of the Directors of the Company hold instruments convertible into equity shares of the Company. For details of dividend and shares transferred to Investor Education and Protection Fund (IEPF), please refer Corporate Governance Report.

9) Significant and material Orders passed by the Regulators or Courts

There are no significant

Regulators or Courts that would impact the going concern status of the Company and its future operations.

10) Material changes and commitments, if any, affecting the financial position of the Company

There are no material changes and commitments, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which financial statements relate and the date of the report.

11) Details in respect of adequacy of internal controls

The Company has an effective and reliable internal control system commensurate with its size and operations. The internal controls are aligned to global standards and processes while also adhering to local statutory requirements. The internal control systems are supported through, management reviews, verification internal auditors, as well as verification

Further, the Audit Committee of the Board reviews the internal audit plan, adequacy of internal control systems, significant audit observations and monitors the sustainability of remedial measures.

In addition to policies, procedures, and guidelines, the internal control systems is facilitated by an automated “Compliance Manager Tool”, which enables self-assessment by process owners on status of all applicable regulatory compliances and internal controls including, controls relating to adherence to Companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. The status of each self-assessment is approved by an immediate superior. The status of self-assessment is periodically deliberated and reviewed by the Senior Management.

Further, the accuracy of sample self-assessments is verified through periodic internal audits.

The aforesaid internal control systems provides high degree of assurance with respect to effectiveness and efficiency of operations, adequacy and adherence of internal financial controls and compliances with laws and regulations.

12) Details and Performance of Subsidiary Company

Company has one subsidiary namely JTEKT Fuji Kiko Automotive India Limited (‘JFIN) (earlier known as Sona Fuji Kiko Automotive Limited).

The Company is holding 51% of the Equity Capital (i.e. 50,99,993 numbers of equity shares) in JFIN, which was established in technical and financial collaboration with FUJI KIKO Co. Ltd., Japan with a business objective of manufacturing Columns / Column parts to be primarily used in the manufacturing of C-EPS by the Company. The Plant of JFIN is located in Bawal, Haryana. During the year ended 31 March 2020, JFIN has achieved total revenue of INR 10,075 Lakhs andearnednetprofit INR 980 Lakhs. of

13) Subsidiary Company Accounts

During the year, the Board of Directors of the Company reviewed the affairs of the subsidiary company. In accordance with Section 129(3) of the Companies Act, 2013, the consolidated financial statements of the Company forms part of the Annual Report. Further, a statement containing the salient features of the financial statement of the subsidiary company in the prescribed Form AOC-1 is attached along with financial statement. The statement also provides the details of performance, financial position of the subsidiary company. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of its subsidiary company, are available on Companys website www.jtekt.co.in. These documents will also be available for inspection during business hours at Companys registered office. The Company shall provide the copy of financial statements of its subsidiary company to the shareholders upon their request.

In accordance with the Accounting Standard ‘AS-110 on Consolidated Financial Statements read with Accounting Standard ‘AS-28 on Investment in Associates and Joint Ventures, the Audited Consolidated Financial Statements are provided in the Annual Report.

14) Extract of Annual Return

The extract of Annual Return as provided under sub-section (3) of Section 92 of the Companies Act, 2013 is enclosed as Annexure – I in the prescribed form MGT-9 and forms part of this Report. Copy of the annual return shall be available on Companys website www.jtekt.co.in.

15) Corporate Social Responsibility

Your company considers CSR activities as an opportunity to make a long term positive impact on the society and forms this as an integral part of the philosophy and business activities of the Company. The Company undertakes CSR activities with a main focus on healthcare and rural development programs. During the FY 2019-20, the Company has endeavors to utilize allocable CSR budget for the benefitof society and has significantly increased its financial commitment for healthcare and rural development programs. The Company directly implement these projects in local areas after detailed assessment of the requirements of the community with the objective to derive maximum benefit from these activities. As some of the projects have taken more time than expected, the Companys spend on the CSR activities has been less than the limit prescribed under Companies Act, 2013. The CSR activities undertaken by the Company are scalable in future. In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure – II.

16) Number of meetings of the Board of Directors

The Board of Directors met 4 (four) times in the year ended 31 March 2020. The details of the Board Meetings and the attendance of the Directors are provided in the Corporate Governance Report.

17) Nomination & Remuneration Committee and its policy

The Board of Directors had constituted a Nomination & Remuneration Committee to review formulation of the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy, relating to the remuneration of the directors, key managerial personnel and other employees and such other ancillary functions as may be required.

The Company follows a policy on remuneration of Directors and Senior Management Employees. The policy is approved by the Nomination & Remuneration Committee and the Board and is available on Companys website www.jtekt.co.in. For details of remuneration paid to Directors, please refer Corporate Governance Report.

Neither Managing Director nor any of Whole Time / Executive Director(s) of the Company received remuneration or commission from holding or subsidiary company.

18) Particulars of contracts or arrangements with related parties

The Company has entered into contracts / arrangements with the related parties in the ordinary course of business and on arms length basis. Thus, provisions of Section 188(1) of the Act are not applicable.

However, in terms of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all transactions with related parties, which are of material in nature, are subject to the approval of the Members of the Company. The requisite resolution in order to comply with the aforesaid requirements of Listing Regulations, was passed by the members of the Company in Thirty Fifth Annual General Meeting of the Company held on 09 August 2019

19) Auditors

(A) Statutory Auditors

Under Section 139 of the Companies Act, 2013 and the Rules made thereunder, BSR & Co. LLP, Chartered Accountants (Firm registration number 101248W/W-100022) was appointed as the Statutory Auditors of the Company to hold office for a period of five consecutive years from the conclusion of the 33 Annual General Meeting of the Company held on 22 August, 2017 till the conclusion of the 38 Annual General Meeting, subject to ratification or as may be required by the Act from time to time.

(B) Audit Reports

i. The Auditors Report for financial year 2019-20 does not contain any qualification, reservation or adverse remark. The Auditors Report is enclosed with the financial statements in this Annual Report.

ii. The Secretarial Auditors Report for financial year 2019-20 does not contain any qualification, reservation or adverse remark.

iii. As required by the Listing Regulations, the Auditors

Certificate on corporate governance is enclosed to the Boards Report. The Auditors Certificate for financial year 2019-20 does not contain any qualification, reservation or adverse remark.

(C) Secretarial Audit Report

Pursuant to Section 204 of the Companies Act, 2013, the Company had appointed Mr. Krishna Kumar Singh, proprietor of KKS and Associates, Company Secretaries in practice, as its Secretarial Auditors to conduct the secretarial audit of the Company for the FY 2019-20. The Company provided all assistance and facilities to the Secretarial Auditors for conducting their audit. The Report of Secretarial Auditors for the FY 2019-20 is annexed to this report as Annexure – III. The report does not contain any qualification.

20) Reporting of frauds by auditors

During the year under review, none of the auditors has reported to the Audit Committee, under Section 143 (12) of the Companies Act, 2013, any instances of fraud committed against the

Company by its officers e (5) Independent Directors (including two or employees.

21) Risk Management

The Board of Directors of the Company had constituted a Risk Management Committee to oversee the risk management process in the Company.

The Company has laid down a well-defined risk management mechanism covering the risk mapping and trend analysis, risk exposure, potential impact and risk mitigation process. A detailed exercise is being carried out to identify, evaluate, manage and mitigate both business and non-business risks. The Risk Management Committee periodically reviews the risks and suggests the steps to be taken to identify and mitigate the same through a properly defined framework.

For details pertaining to Risk Management Committee, please refer to the Corporate Governance Report.

22) Corporate Governance

The Company has complied with the corporate governance requirements under the Companies Act, 2013, and as stipulated under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (hereinafter referred to as ‘Listing Regulations). A separate section on corporate governance under the Listing Regulations, along with a certificate from the Practicing Company Secretary confirming the compliance, is annexed and forms part of this Annual Report.

23) Business Responsibility Report

Pursuant to the Regulation 34(2)(f) of the Listing Regulations, the Business Responsibility Report describing the initiatives taken by the Company from an environmental, social and governance perspective, forms part of this Annual Report. The Company has also framed and adopted the Business Responsibility Policy and the same is available at the Companys website (web link: http:// www.jtekt.co.in/policies.html).

24) Vigil/ Whistle Blower Mechanism

The Company has established a vigil/ whistle blower mechanism for Directors and employees to report their genuine concerns. For details, please refer to the Corporate Governance Report attached to this Annual Report.

25) Listing

The Securities of your Company are listed at National Stock Exchange of India Limited and BSE Limited and the Company has paid the Listing Fee due to them.

26) Deposits

During the year the Company has no deposits covered under Chapter V of the Companies Act, 2013.

27) Loans, Guarantees and Investments

During the year under review, no loans, guarantees and investments were made by the Company under Section 186 of the Companies Act, 2013, hence the said provision is not applicable. For details pertaining to other loan given, guarantees provided, security provided and investment made please refer to the Financial Statement for financial year 2019-20.

28) Directors & Key Managerial Personnel

As on 31 March 2020, your Company has ten (10) Directors consisting of Woman Directors), three (3) Executive Directors and two (2) Non-Executive Directors.

During the Financial Year under review:

1. Mr. Hiroshi Ii was appointed as Director and Executive Chairman with effect from 15 April 2019 by Board of Directors in their meeting held on 16 March 2019 and his appointment was confirmed by shareholders in Annual General Meeting held on 9 August 2019.

2. Mr. Sudhir Chopra was elevated from the office of Director (Corporate Affairs) to Executive Vice Chairman with effect from 1 June 2019 and his appointment was confirmed by shareholders in Annual General Meeting held on 9 August 2019.

3. Lt. Gen. Praveen Bakshi (Retd.) was appointed as an Additional Director in the position of Independent Director with effect from 18 May 2019, his appointment was confirmed by the Members of the Company in the Annual General Meeting held on 9 August 2019.

4. Mr. Inder Mohan Singh was appointed as an Additional Director in the position of Independent Director with effect from 18 May 2019, his appointment was confirmed by the Members of the Company in the Annual General Meeting held on 9 August 2019.

5. Mr. Ravi Bhoothalingam, Independent Director resigned from the office with effect from 9 August 2019, upon completion of his tenure as Independent Director of the Company.

6. Mr. SudhirChopraresignedfromtheofficeof Company Secretary and Compliance Officer of the Company with effect from close of business hours of 17 May 2019 and Mr. Nitin Sharma was appointed as Company Secretary and Compliance officer of the Company with effect from 18 May 2019.

In terms of the definition of ‘Independence of Directors as prescribed under the Listing Regulations and Section 149(6) of the Companies Act, 2013 the Company has received declarations from the following Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and Listing Regulations:

1) Mrs. Geeta Mathur

2) Mr. Inder Mohan Singh

3) Lt. Gen. Praveen Bakshi (Retd.)

4) Mr. Hidehito Araki

5) Mrs. Hiroko Nose

Your Directors take this opportunity to place on record the appreciation of services rendered by Mr. Ravi Bhoothalingam, during his association as Independent Director with the Company. Pursuant to the provisions of Section 152(6) read with the Articles of Association of the Company, Mr. Akihiko Kawano (DIN: 08160588) will retire by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. For further details, pertaining to Board Meetings, please refer to the Corporate Governance Report.

29) Board Evaluation

The Company has devised a Policy for performance evaluation of Independent Directors, the Board, its Committees and other individual Directors which include criteria for performance evaluation of the non-executive directors and executive directors. The performance evaluation of the Board, its Committees and individual directors was conducted and the same was based on questionnaire and feedback from all the Directors on the Board as a whole, Committees and self-evaluation.

Based on the questionnaire and feedback, the performance of every director was evaluated in the meeting of the Nomination and Remuneration Committee. Further, in accordance to the Board Performance Evaluation Policy, the Board carried out annual performance evaluation of Independent Directors. The Independent Directors carried out annual performance evaluation of Non Independent Directors and Board as a whole.

30) Committee of Directors

For composition and other details pertaining to the Committee of Directors, please refer to the Corporate Governance Report.

31) Directors Responsibility Statement

Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, the directors confirm that:

a) in the preparation of the annual accounts for the financial year 2019-20, the applicable accounting standards have been followed along with proper explanation relating to material departures;

b) the directors have 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 2019-20 and of the profit loss of the Company for that period;

c) the directors 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;

d) the directors have prepared the annual accounts on a going concern basis;

e) 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

f) 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.

32) Secretarial standards

The Company complies with all applicable secretarial standards.

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

A statement containing the necessary information on conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be given pursuant to provisions of Section 134 of the Companies Act, 2013, read with the rules made there under is annexed as Annexure – IV and forms part of this report.

34) Managements discussion and analysis

In terms of the provisions of Regulation 34 of the Listing Regulations, the Managements discussion and analysis is set out in this Annual Report.

35) Employees

Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, are provided in Annexure - V(a) to this Report.

A statement showing the details of employees of the Company who are drawing salary as per the limits prescribed under rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 during the Financial Year 2019-20 or part thereof, is attached herewith as Annexure - V(b) to this Report.

36) Disclosures pertaining to the Sexual Harassment of women at the work place (prevention, prohibition and redressal) Act, 2013

For details pertaining to the Sexual Harassment of women at the work place (prevention, prohibition and redressal) Act, 2013, please refer Corporate Governance Report.

37) Acknowledgements

Your Directors acknowledge with gratitude the co-operation and support extended by the Companys customers namely Maruti Suzuki, Mahindra & Mahindra, Tata Motors, Honda, Fiat India, Toyota Kirloskar, General Motors, John Deere, Club Car, E-z-go, Renault-Nissan and Isuzu, the Financial Institutions, Banks, various agencies of the Government.

Your Directors also wish to place on record their sincere appreciation of the services rendered by all the employees of the Company and are thankful to the Shareholders for their continued patronage.

For and on behalf of the Board
Akihiko Kawano Sudhir Chopra
Place : Gurugram Managing Director Executive Vice Chairman
Dated : 22 June 2020 [DIN 08160588] [DIN : 00058148]