Kirloskar Electric Company Ltd Directors Report.

Dear Shareholders,

The Directors present the 73rd Annual Report of Kirloskar Electric Company Limited (hereinafter referred as "the Company" or "KECL") along with the audited financial statement for the financial year ended March 31, 2020. The consolidated performance of the Company and its subsidiaries has been referred to wherever required.

Review of performance and state of Companys affairs:

During the year under report, your Company achieved a total turnover of Rs. 31,869/- Lakhs (previous year Rs. 35,659/- Lakhs). The operations have resulted in net loss of Rs. 8,711/- Lakhs (previous year net loss was Rs 6,732/- Lakhs).

The financial summary and highlights are as follows:

( Rs In Lakhs)

PARTICULARS Standalone Consolidated
2019-20 2018-19 2019-20 2018-19
Revenue from operations 31,441 29,442 31,441 29,461
Other income (Net) 428 6,217 8,508 6,217
Total Income 31,869 35,659 39,949 35,678
Total Expense 40,939 37,522 36,400 38,819
Profit before Exceptional items (9,070) (1,863) 3,549 (3,141)
Exceptional Items 471 - 982 346
Profit / (Loss) before tax (8,599) (1,863) 4,531 (2,795)
Tax Expense - - - -
Profit / (Loss) after tax (8,599) (1,863) 4,531 (2,795)
Total other comprehensive income (112) (4,870) (112) (4,870)
Total comprehensive income for the period (8,711) (6,733) 4,419 (7,665)

 

Note: The above figures are extracted from the audited standalone and consolidated financial statements as per Indian Accounting Standards (Ind AS)

Dividend:

In view of the losses, the Board of Directors of your Company has not recommended any Dividend for the year under review.

Transfer to Reserves:

In view of the losses, the Board of Directors of your Company has not transferred any amount to the Reserves for the year under review.

Change in the nature of business:

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

Share Capital:

As at March 31, 2020, the paid up share capital of your Company stood at Rs 664,140,710/- divided into 66,414,071 Equity Shares of Rs 10/- each.

Disclosure under section 43(a)(ii) of the companies act, 2013:

The Company has not issued any shares with differential rights and hence no information as per provisions of Section 43(a)(ii) of the Act read with Rule 4(4) of the Companies (Share Capital and Debenture) Rules, 2014 has been furnished.

Disclosure under section 54(1)(d) of the companies act, 2013:

The Company has not issued any sweat equity shares during the financial year under review and hence no information as per provisions of Section 54(1)(d) of the Act read with Rule 8(13) of the Companies (Share Capital and Debenture) Rules, 2014 has been furnished.

Disclosure under section 62(1)(b) of the companies act, 2013:

The Company has not issued any equity shares under Employees Stock Option Scheme during the financial year under review and hence no information as per provisions of Section 62(1)(b) of the Act read with Rule 12(9) of the Companies (Share Capital and Debenture) Rules, 2014 has been furnished.

Disclosure under section 67(3) of the companies act, 2013:

During the financial year under review, there were no instances of non-exercising of voting rights in respect of shares purchased directly by employees under a scheme pursuant to Section 67(3) of the Act read with Rule 16(4) of Companies (Share Capital and Debentures) Rules, 2014 and hence no information has been furnished.

Transfer to Investor Education and Protection Fund:

As required under the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 ("IEPF Rules"), during the year 2019-20, matured deposits for the financial years 2009-10 and 2010-11 amounting to Rs 1,70,000/ - (Rupees One Lakh and Seventy Thousand Only), was transferred to the Investor Education and Protection Fund ("IEPF").

Subsidiaries, associate companies & joint ventures:

The Company has four wholly owned subsidiaries and an associate Company.

During the Financial year 2019-20, two of the wholly owned subsidiaries of the Company i.e., Swaki Habitat Private Limited (CIN: U70100KA2015PTC079374) and Kesvik Developers Private Limited (CIN: U70100KA2015PTC079459) with paid up capital of Rs 100.000/- each have applied for strike off with the Registrar of Companies, Karnataka.

However, reports on the performance and financial position of each of the subsidiary and associate companies have been provided in Form AOC-1 appended to this report.

During the period under review, the company has entered into joint venture agreement with Electrodrive Powertrain Solutions Private Limited to float a project of setting up a separate entity for undertaking design and development and supply of electric motors required for all types of electrical vehicles. However, due to change in market dynamics and pandemic Covid-19, the said JV is kept on hold indefinitely

Fixed deposits:

Particulars Rs in Lakhs
1. Accepted / renewed during the year Nil
2. Remained unpaid or unclaimed at the end of the year. 40.60
3. Whether there has been any default in repayment of deposits or payment of interest thereon during the year and if so, number of such cases and the total amount involved:-
• At the beginning of the year N/A
• Maximum during the year
• At the end of the year
4. Details of deposits which are not in compliance with the requirements of Chapter V of the Act; Nil

Directors and Key Managerial Personnel:

In accordance with the provisions of section 152 of the Companies Act, 2013 and Articles of Association of the Company, Mrs. Meena Kirloskar (DIN: 00286774), a Non-executive Director being longest in the office, shall retire by rotation and being eligible, has offered herself for re-appointment seeking members approval has been set forth in the notice of the 73rd Annual General Meeting of the Company.

Due to personal reasons Mr. Anand Balaramacharya Hunnur (DIN: 06650798) Managing Director of the Company has resigned from the position of Managing Director with effect from the close of office hours on May 31, 2019.

Mr. Ganesh Krishnamurthy (DIN: 05160176), nominee of Life Insurance Corporation of India, has resigned from the directorship due to personal reason, with effect from the close of office hours on July 11, 2019.

Subject to the approval of members of the Company, the Executive Chairman of the Company, Mr. Vijay Ravindra Kirloskar (DIN: 00031253) whose appointment term of three years ends on Augus 11, 2020 has been reappointed as the Executive Chairman of the Company for a period of three years beginning from Augus 12, 2020 up to Augus 11, 2023.

Dr. Ashok Misra whose appointment term of 5 years as Independent Director on the Board of Directors of the Company with effect from November 05, 2015 comes to an end on November 04, 2020 has made himself available for reappointment of second term of 5 years for the period beginning from November 05, 2020 upto November 04, 2025.

Subject to approval of members of the Company, Mr. Sanjeev Kumar Shivappa (DIN: 08673340) has been appointed as Director (Finance) & Chief Financial Officer of the Company for a term of three years effective from February 14, 2020 upto February 13, 2023

Subject to approval of members of the Company, Mr. Ravi Ghai (DIN: 08715119) has been appointed as Nominee Director nominated by Asset Reconstruction Company Limited (ARCIL) as their representative with effect from June 27, 2020.

In terms of the provisions of Section 149(7) of the Companies Act, 2013, the company has received declarations from all the independent directors stating that they continue to meet the criteria of independence as provided under the provisions of Section 149 (6) of the Companies Act, 2013.

All independent directors have registered their names in the Independent Directors Databank. In the opinion of the Board, the independent directors so appointed / re-appointed possess the requisite expertise, experience and proficiency and are of integrity.

Evaluation of Directors, Committees and the Board:

The evaluation process has been explained in the Corporate Governance Report which forms part of the annual report.

Number of meetings of the Board of Directors and its committees:

Eight meetings of the Board of Directors were held during the financial year 2019-20. The composition of Committee and others details are contained in the Corporate Governance Report which forms part of the annual report. The Nomination and remuneration policy and risk management policy has been appended to this report as Annexure-I and Annexure-II respectively.

Managerial remuneration:

The information required under Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is disclosed in the Annexure – A & is also available in Form MGT – 9.

Particulars of employees:

In terms of the provisions of Section 197 (12) of the Companies Act, 2013 read with rules 5(2) & 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, a statement showing disclosures pertaining to remuneration and also the names and other particulars of the employees drawing remuneration in excess of limits set out in the said rules are provided in the Annexure-A to the Boards Report which forms part of the annual report.

Annual Return:

According to the provisions of Section 134(3)(a), copy of Annual Return i.e., Form MGT-7 for the year ended March 31, 2019 has been placed on the Companys website: https://kirloskarelectric.com/investors/investors-information/financial.html and in accordance with the provisions of Section 92(3) of the Companies Act, 2013, the extract of the Annual Return in Form MGT-9 has been annexed to this report as Form MGT-9.

Directors Responsibility Statement:

We, the Directors of your Company, confirm, to the best of our knowledge and ability that:-

(a) in the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material discrepancy or material departures;

(b) we 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 and of the profit / loss of the Company for that period;

(c) we 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) we have prepared the annual accounts on a going concern basis;

(e) we have laid down internal financial controls to be followed by the Company and such internal financial controls are adequate and operating effectively.

(f) we have devised proper systems to ensure compliance with the provisions of all applicable laws to the Company and that such systems were adequate and operating effectively.

Particulars of loans, guarantee, investments and securities:

There were no loans and advance, guarantee or investment made by the Company during the year under report.

Particulars of loans, advances, investments as required under the listing regulations:

The details of related party disclosures with respect to loans, advances, investment at the year end and maximum outstanding amount thereof during the year as required (under part A of Schedule V of the Listing Regulations) have been provided in the notes to the financial statement of Company.

Your directors draw attention of the members to note no. 17 & 37(12) of the standalone financial statements which sets out the details of loan and advance, guarantee or investment.

Particulars of contracts or arrangements with related parties:

The particulars of every contract or arrangements entered into by the Company with related parties referred to in subsection (1) of section 188 of the Companies Act, 2013 including certain arms length transactions under third proviso thereto are disclosed in Form No. AOC -2 appended hereto.

All related party transactions that were entered into during the financial year were on an arms length basis and in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 (‘the Act) and SEBI (Listing Obligations and Disclosures Requirements) Regulations 2015 as amended from time to time and the provisions of Section 188 of the Companies Act, 2013 are not attracted.

There were no materially significant Related Party Transactions made by the Company during the year that would have required Shareholder approval as per provision of Companies AcRs. 2013 read with applicable rules and Regulation 23 of SEBI (Listing Obligations and Disclosures Requirements) Regulations, 2015.

All related party transactions are placed before the Audit Committee for approval. Prior Omnibus approval of the Audit Committee is obtained for the transactions which are of foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted along with a statement giving details of all related party transactions is placed before the Audit Committee from time to time.

The Policy on Related Party Transaction is available on the Companys website:-

(URL: https://www.kirloskarelectric.com/images/pdf/investor/policies/Policy-on-related-party-transactions.pdf

Your directors draw attention of the members to note no. 37(12) to the standalone financials statement which sets out the related party disclosures

Corporate Social Responsibility:

In terms of section 135 of the Companies Act, 2013, the Company has constituted CSR Committee and the CSR Policy of the Company wherein the Company is required to spend two percent of the average net profits of the Company for the three immediately preceding financial years. The Company has incurred heavy losses in preceding three financial years and the average net profits for three financial years is in negative, thus the Company was not required to spend any money for the CSR activities during the financial year ending March 31, 2020.

The policy can be accessed at the following URL: https://www.kirloskarelectric.com/investors/investors-information/policies.html

During the preceding three years the Company has not made any profit and hence not required to spend any amount on the CSR. During the year the Company has contributed RS. 10,00,000 to Chief Minister for flood affected in Karnataka.

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The relevant data pertaining to conservation of energy, technology absorption and other details are given in the Annexure - III, which forms part of this report.

Vigil mechanism for Directors and Employees:

The Company has adopted a Whistle Blower Policy establishing vigil mechanism, to provide a formal procedural course to the directors and employees to report their concerns about any poor or unacceptable practices or any event of misconduct or violation of Companys code of conduct. The purpose of this policy is to provide a framework to secure whistle blowing incidents and to protect the employees who are willing to raise concerns about serious irregularities within the Company. The policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. The policy of Vigil Mechanism is available on the Companys website :-(URL: https://www.kirloskarelectric.com/images/pdf/investor/policies/Whistle-Blower-Policy.pdf

Material Changes affecting the Company:

There have been no material changes and commitments affecting the financial positions of the Company between the end of the financial year and date of this report. There has been no change in the nature of business of the Company. COVID-19

In the last month of FY 2019-20, the Coronavirus (COVID-19) pandemic developed rapidly into a global crisis, forcing governments to enforce lockdowns of all economic activities. In many countries, businesses are being forced to cease or limit their operations for long or indefinite periods of time. Measures taken to contain the spread of the virus, has resulted in an economic slowdown. COVID-19 is significantly impacting business operations of the companies, by way of interruption in production, supply chain disruption, unavailability of personnel, closure / lockdown of production facilities etc.

The Ministry of Home Affairs, Government of India on March 24, 2020 notified the first ever nationwide lockdown in India to contain the outbreak of Covid-19. Towards the end of the quarter ended March 2020, the operations were disrupted at certain manufacturing facilities of the Company.

In view of the outbreak of the pandemic, the Company undertook timely and essential measures to ensure the safety and well-being of all its employees and workers at all its plant locations, various branch offices and the corporate office. The Company observed all the government advisories and guidelines thoroughly and in good faith. As of March 31, 2020, ‘work from home was enabled to enable employees to work remotely and securely. This response has reinforced customer confidence in the Company and many of them have expressed their appreciation and gratitude for keeping their businesses running under most challenging conditions.

No fraud has been reported by auditors to the Audit Committee of the Board.

Neither the Executive Chairman and nor whole time Directors of the Company receive any remuneration or commission form any of its subsidiaries.

Significant and Material orders passed by the Regulators or Courts:

There were no significant and material orders passed against the Company by the regulators or courts or tribunals during financial year 2019-20 impacting the going concern status and Companys operations in future.

Statutory audit:

M/s. K N Prabhashankar & Co., (Formerly known as Ashok Kumar, Prabhashankar & Co.,) chartered accountants, (Firm Registration no. AAD-7041) were re-appointed as auditors of the Company to hold office from the conclusion of the 72nd Annual General Meeting until the conclusion of the 77th Annual General Meeting

Branch audit:

M/s. Sundar and Associates (AF no. 1172), Chartered Accountants, Malaysia, were reappointed as the auditors for conducting audit of sales office at Kuala Lumpur and to hold the office from the conclusion of 72nd Annual General Meeting until the conclusion of 73rd Annual General Meeting of the Company. Based on the recommendation of the Audit Committee, the Board of Directors of the Company has propose to appoint, M/s. Sundar and Associates (AF no. 1172), Chartered Accountants, Malaysia, as auditors for conducting audit of sales office at Kuala Lumpur and to hold the office from the conclusion of 73rd Annual General Meeting until the conclusion of 74th Annual General Meeting of the Company subject to the approval of the members of the Company.

Internal audit:

The Company has appointed M/s. Avanza Management Consulting LLP, Chartered Accountants (LLP Registration no. AAE-9087), Bengaluru as its internal auditors for 2019-20.

Cost audit:

M/s. Rao, Murthy and Associates, Cost Accountants (Firm Registration no. 000065), were appointed as cost auditors of the Company for the financial year ended March 31, 2020. The Board of Directors of your Company has fixed RS. 450,000/- (Rupees Four Lakhs Fifty Thousand only) as audit fees, which requires ratification by the members of the Company in terms of the applicable provisions of the Companies Act, 2013. Accordingly, a resolution seeking members approval has been set forth in the notice of the 72nd Annual General Meeting of the Company.

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

During the period under review, the Company has conducted the audit of cost records and maintained the cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013.

Secretarial Audit:

M/s. JKS & Co., Company Secretaries, Bengaluru were appointed as secretarial auditors of the Company for the financial year 2019-20 to conduct secretarial audit in terms of the provisions of Section 204 of the Companies Act, 2013. The audit report is enclosed as Form MR - 3.

Explanations or comments on auditors qualifications / adverse remarks / emphasis on matters:

The comments / observations of the statutory auditor are self-explanatory and Companys explanation thereto has been given in the relevant notes to accounts.

Comments to the observations of the Secretarial Auditors:

The Secretarial Auditor in their Report have mentioned that, "The Board of Directors of the Company is duly constituted with proper balance of Executive Directors, Non-Executive Directors and Independent Directors, with one exception that retirement of director at the annual general meeting was not in terms of Section 152 of the Companies Act, 2013".

We wish to clarify that, your Companys Board is consisting of eight Directors and six among them are Independent Directors. Pursuant to the provisions of section 149 of the Companies Act, 2013, Independent Directors are not liable to retire by rotation. Out of other two directors, 2/3rd shall be liable to retire by rotation i.e., one director and 1/3rd of one i.e., again one director, shall retire at the AGM every year and if eligible, offer himself / herself for re-appointment. Accordingly, Mrs. Meena Kirloskar was reappointed at the AGM held during the year 2019 for the purpose of compliance of Section 152 of the Companies Act, 2013. Hence, Board of Directors of your Company is confident that there is sufficient compliance under Section 152 of the Companies Act, 2013.

Secretarial Standards:

The Company complies with applicable mandatory Secretarial standards issued by the Institute of Company Secretaries of India.

Management Discussion and Analysis:

Management discussion and analysis, is appended hereto as Annexure – IV and forms part of this report.

Details in respect of adequacy of internal financial controls with reference to the financial statement:

Internal Financial Controls:

Your Company has Systems and internal Audits in place to have controls on all processes. System driven controls also ensure ease of monitoring and consistency of operations and Compliances. Your Company is under SAP ERP which ensures that there is reasonable assurance about the financial and accounting records and controls. To safeguard assets of the Company against damage/loss and accounting records are reliable for preparing financial statement the records are verified by Internal Auditors. Internal controls are evaluated by the internal auditors and supported by management reviews. All audit observations and follow up actions thereon are initiated for resolution by the respective functions.

Corporate Governance:

Your Companys corporate governance report for the financial year 2019-20 is appended to this annual report. A certificate on the status of compliance on corporate governance is also appended and forms part of this annual report.

Prevention of Sexual Harassment at Workplace:

Your Company has zero tolerance policy in case of sexual harassment at workplace and committed to provide a healthy environment to each and every employee of the Company. The Company has in place ‘Policy on sexual harassment Redressal.

In terms of section 22 of the Sexual Harassment of Women at workplace (Prevention Prohibition and Redressal) Act, 2013 read with Sexual Harassment of Women at Work Place (Prevention, Prohibition and Redressal) Rules, 2013, we report as follows for the year ended on March 31, 2020:

Particulars Status
1 No of complaints received in the year Nil
2 No of complaints disposed off in the year Nil
3 Cases pending for more than 90 days Nil
4 No of workshops and awareness programmes conducted in the year 4
5 Nature of action by employer or District office, if any Nil

Participation and voting aRs. 73rd AGM

Pursuant to Circular nos. 14/2020, 17/2020 & 20/2020 dated April 08, 2020, April 13, 2020 & May 05, 2020 respectively issued by Ministry of Corporate Affairs and Circular SEBI/HO/CFD/CMDI/CIR/P/2020/79 dated May 12, 2020 issued by SEBI, the 73rd AGM of the Company will be held VC/OAVM. Electronic copy of the Annual Report for the year ended March 31, 2020 and Notice of the AGM are being sent to all the members whose email IDs are registered with the Company / Depository Participants(s) for communication purposes. A copy of the notice of the AGM and annual report are also available for download from the website of the Company at www.kirloskarelectric.com. Any member may request hard copy of the Annual Report by writting to the Company.

Acknowledgements:

The Board of Directors takes the opportunity to express its sincere appreciation for the continued support and confidence received from the Companys bankers, customers, suppliers, depositors and the shareholders.

The Company considers its employees as its most valuable resources. Employees at all levels have put in their best to the services of the Company and the Board puts on record the sincere appreciation of their dedication and loyalty.