Kar Mobiles Ltd Directors Report

Your directors have pleasure in presenting their Seventy Seventh Annual Report together with the accounts for the year ended March 31, 2014. In terms of the clarification issued by the Ministry of Corporate Affairs (MCA) vide General Circular 08/ 2014 dated 04.04.2014 the financial statements and the directors report have been prepared in accordance with the disclosure requirements under the Companies Act, 1956 and the rules made thereunder.

1. Financial Performance

The financial highlights for the year under review are as follows:

		(Rs. in Crores)
Particulars	2013-14	2012-13
Sales & Operating Revenue	120.17	123.78
Profit before Tax	2.07	3.14
Provision for Tax	0.69	0.35
Profit after Tax	1.38	2.79
Surplus brought forward	1.49	1.87
Profit available for appropriation	2.87	4.66

During the year, the Company’s sales and operating revenues declined by 3% from the previous year. The profitability was lower by 34% compared to previous year mainly due to adverse market conditions, higher inflationary situation. This resulted in lower earnings per share at Rs.6.15 as against Rs.12.47 in the previous year.

2. Appropriation

Out of the profit available for appropriation of Rs.2,87,17,825 the board of directors has recommended a dividend of 25% for the year. The total dividend amount inclusive of distribution tax and surcharge thereon would be Rs.65,51,720. After transfer of Rs. 1,25,00,000/- to the general reserve, Rs.96,66,105 has been retained as surplus in the profit and loss account.

3. Management Discussion and Analysis

Your Company is engaged in the manufacturing and marketing of medium and large engine valves for applications in internal combustion engines. A detailed analysis of the automotive industry, your Company’s performance etc. are discussed in the report on ‘Management Discussion and Analysis’ which forms part of this report and annexed as Annexure A.

4. Board of Directors

Mr. V Ramachandran retire by rotation at this Annual General Meeting (AGM) and being eligible, offers himself for re-election. The notice convening the ensuing AGM includes the proposal for his re-appointment as director.

Mr. C N Srivatsan, Mr. K P Balasubramaniam and Mr. S Krishna Kumar, Independent Directors on the Board, hold the office of director liable to retire by rotation, as per the resolution passed by the shareholders under the provisions of Companies Act, 1956.

In terms of Section 149 of the Companies Act, 2013, the Independent Directors are not liable to retire by rotation and can hold office for a tenure of five years. In order to comply with these provisions of the Companies Act, 2013, we propose all of the Independent Directors retire at the ensuing AGM in terms of their earlier appointment and re-appoint them as Independent Directors for a period of three years, as required under the Companies Act, 2013. All the Independent Directors have affirmed that they satisfy the criteria laid down under section 149 of the Companies Act, 2013 and clause 49 of the listing agreement.

5. Amalgamation of the Company with Rane Engine Valve Limited

Rane Engine Valve Ltd (REVL) is engaged in the manufacture of engine valves, guides and tappets for passenger cars, commercial vehicles, farm tractors and two/three wheelers. REVL has five manufacturing locations in Tamil Nadu and Andhra Pradesh. REVL is subsidiary company of Rane Holdings Limited.

The board of directors of your company, at its meeting held on May 20, 2014 has considered amalgamation of the company with REVL with a view to develop the potential for further growth and expansion of businesses and to have better synergies, optimization of resources and fund raising capabilities. The significant benefits expected as a result of the amalgamation are as follows:

• Business Synergy: Consolidation of business operations and significant impetus to growth since KML is also engaged in the similar areas of business.

• Optimal utilization of resources: Enhancement of the scale of operations and reduction in overheads, administrative, managerial and other expenditure, operational rationalization, sharing of technology, organizational efficiency, and optimal utilization of various resources.

• Enhancement in shareholder value : Improvement in shareholder value for both the companies by way of improved financial structure and cash flows, increased asset base and stronger consolidated revenue and profitability.

• Expansion: Enhancing the leveraging capability of the combined entity for larger expansion strategies and tapping bigger opportunities in the automotive industry.

• Consolidation of expertise: Consolidation of managerial expertise of the Companies will facilitate greater focus and utilization of resources.

Based on the valuation carried out by the independent chartered accountants, the board has approved the exchange ratio of 7 equity shares in REVL for every 10 equity shares of the Company, as consideration for the amalgamation.

The appointed date for the amalgamation is April 1, 2014 and is subject to regulatory, legal and other statutory approvals as may be required.

6. Fixed Deposits

The Company does not accept fixed deposit falling under the provisions of Section 58A of the Companies Act, 1956 and the rules framed thereunder.

7. Conservation of Energy

During the year, various initiatives have been taken to reduce consumption of energy like replacement of conventional hydraulic systems with energy efficient hydraulic systems, "Auto off" timers to all the machines, arresting the leakage in all the compressors. This has resulted reduction of energy by 385 units per day.

8. Research & Development Activities

During the year, the Company has not carried out any research & development activity. However, upgrade of products / processes are carried out on regular basis. The statement giving information as required under Companies (Disclosure of Particulars in the Report of the Board of Directors) Rules, 1988 is enclosed to this report as Annexure B.

9. Foreign exchange earnings and outgo

Strategic initiatives are undertaken to increase export business in terms of customers, product and geographical location by identifying new business opportunities.

Foreign exchange earned (FOB) during 2013-14 was Rs.51.24 crores and foreign exchange outgo was Rs. 20.89 crores.

10. Employees

As there are no employees who are drawing the specified remuneration, particulars of employees under section 217 (2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules, 1975 are not given.

11. Auditors

Statutory Auditors

M/s Varma & Varma, Chartered Accountants, Bangalore, the auditors of the Company retire at the ensuing AGM.

In terms of the transition provisions of section 139 of the Companies Act, 2013, it is proposed to appoint M/s Varma & Varma as Statutory Auditors of the Company for a period of three years from the conclusion of the ensuing seventy seventh AGM until the conclusion of the eightieth AGM.

The Company has received letter from M/s Varma & Varma to the effect that their appointment, if made, would be within the limits prescribed in Companies Act, 2013 and the rules made thereunder. M/s Varma & Varma has submitted the Peer Review Certificate issued to them by The Institute of Chartered Accountants of India.

The notice of the ensuing AGM contains necessary resolution in this regard. Members may consider appointing M/s Varma & Varma as statutory auditors of the Company as per the provisions of the Companies Act, 2013 till the conclusion of the eightieth AGM. Continuation of their appointment as statutory auditors is subject to ratification by the members at every AGM of the Company.

Cost Auditors

Pursuant to the Cost Audit Orders issued by the MCA under section 233B of the Companies Act, 1956, the Cost Audit Report for the financial year 2012-13 was filed with the Ministry of Corporate Affairs (MCA) on September 24, 2013 which is well within the due date of September 30, 2013.

The board has appointed M/s. STR & Associates, Cost Accountants, Chennai to carry out the cost audit of the Company for the financial year 2013-14. The Company would be filing the Cost Audit Report for the financial year ended March 31, 2014 before the due date viz. September 30, 2014 or such other date extended by the MCA.

In terms of section 148 of the Companies Act, 2013, the Board has re-appointed M/s. STR & Associates, as cost auditors for the financial year 2014-15 based on the recommendation of the Audit Committee.

12. Directors’ Responsibility Statement

Pursuant to Section 217(2AA) of the Companies Act, 1956 and based on representations received from the operating management, the directors hereby confirm that they have:

i. Followed the applicable accounting standards in the preparation of the annual accounts for the financial year 2013-14 and there are no material departures;

ii. Selected such accounting policies and applied them consistently and made judgments and estimates that were 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 profits of the Company for the year under review;

iii. Taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956, for safeguarding the assets of the Company for preventing and detecting fraud and other irregularities;

iv. Devised systems to ensure compliance with the provisions of all applicable laws and that such system were adequate and operating effectively.

13. Corporate Social Responsibility (CSR)

The vision on Corporate Social Responsibility (CSR) is, "To be a socially and environmentally responsible organization committed to improve quality of life within and outside". CSR activities of Rane Group are channelized through Rane Foundation, a public charitable and educational trust, in the social and environmental spectrum. The focus of Rane’s social development initiatives has been in the three specific areas of (a) education (b) healthcare and (c) community development. The following social development initiatives were undertaken by your Company in this year:-

• Contribution of funds towards establishment of Polytechnic College at Trichy by Rane Foundation by way of donation.

• Provided uniform cloths to the Government Primary School children.

• Provided desks and benches to the Government Primary School.

• Provided water filter system to the Government Primary School.

• Conducted health and blood donations camps.

Pursuant to the provisions of Section 135 of the Companies Act, 2013 read with Schedule VII to the Companies Act, 2013 and the rules notified thereunder, the Board at its meeting held on March 24, 2014 constituted CSR committee comprising of Mr. L Lakshman, director, Mr. L Ganesh, chairman and Mr. S Krishna Kumar, an independent director.

The Board at its meeting held on May 20, 2014 reviewed the CSR policy recommended by the CSR Committee and adopted the same in line with the provisions of section 135 and the rules made thereunder. The CSR policy of the Company has been posted on the Company’s website.

14. Corporate Governance Report

Your Company has complied with the Corporate Governance requirements as stipulated under clause 49 of the Listing Agreement. Detailed report on the compliance and a certificate by the statutory auditors forms part of this report as Annexure C.

15. Compliance Certificate

As required under section 383A of the Companies Act, 1956 ("the Act") read with Companies (Appointment & Qualifications of Secretary) Rules, 1988, the Company has obtained certificate from a secretary in whole-time practice confirming the compliance with all the applicable provisions of the Act and a copy of the certificate is annexed to this report as Annexure D.

	For and on behalf of the Board
Place : Chennai	L Ganesh	L Lakshman
Date : May 20, 2014	Chairman	Director