Today's Top Gainer
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Your Directors have pleasure in presenting 28th Annual Report together with the Audited Annual Accounts for the year ended 31st March, 2019.
I. FINANCIAL PERFORMANCE
The financial results of the Company for the financial year 2018-2019 as compared with the previous year are as follows -
|(Rupees in Lakhs)|
|Profit before tax||14,671||5,442|
|Profit for the year||9,811||3,800|
|Other comprehensive income for the year||27||(61)|
|Total comprehensive income for the period||9,838||3,739|
|Profit brought forward from previous year||27,855||27,508|
|Dividend paid on equity shares||(1,717)||(2,403)|
|Tax on above Dividend||(353)||(489)|
|Interim Dividend paid on equity shares||(1,377)||-|
|Tax on above Dividend||(283)||-|
|Profit available for appropriation||33,963||28,355|
|Transfer to General Reserves||(500)||(500)|
|Balance carried to Surplus in Statement of Profit and Loss||33,463||27,855|
Your Directors at their meeting held on 30th January, 2019 declared an interim dividend of 20 percent (Rs. 1 per equity share) amounting to Rs. 1,377 Lakhs. Your Directors have recommended a final dividend of 20 percent (i.e. Re. 1/- per equity share of Rs. 5 each) for the Financial Year ended 31st March, 2019. Dividend will be recognised as liability when approved by the Members at the forthcoming annual general meeting. Accordingly, the total dividend (inclusive of Interim Dividend declared and paid) for the F.Y 2018-2019 is 40 percent.
II. MANAGEMENT DISCUSSION AND ANALYSIS
A. Economy and Industry Overview Global Economy and outlook:
The global expansion has weakened. Global growth for 2018 is estimated at 3.7 percent, as in the October 2018 World Economic Outlook (WEO) forecast, despite weaker performance in some economies, notably Europe and Asia. The global economy is projected to grow at 3.5 percent in 2019 and 3.6 percent in 2020.
The global growth forecast for 2019 and 2020 had already been revised downward in the last WEO, partly because of the negative effects of tariff increases enacted in the United States and China earlier that year. The further downward revision since October in part reflects carry over from soffer momentum in the second half of 2018including in Germany following the introduction of new automobile fuel emission standards and in Italy where concerns about sovereign and financial risks have weighed on domestic demandbut also weakening financial market sentiment as well as a contraction in Turkey now projected to be deeper than anticipated.
The Indias GDP growth for FY 2019 is estimated to be 7 percent and for FY 2020, India is projected to grow at 7.7 percent.
Cumulative value of exports for the period April-March 2018-2019 was US $ 331.02 Billion as against US $ 303.53 Billion during the period April-March 2017-2018, registering a positive growth of 9.06 percent. Cumulative value of imports for the period April-March 2018-2019 was US $ 507.44 Billion, as against US $ 465.58 Billion during the period April-March 2017-2018, registering a positive growth of 8.99 percent.
The overall trade deficit for FY 2018-2019 was estimated at US$ 95.85 billion as compared to US $ 86.05 Billion in the corresponding period last year. Oil imports in April-March 2018-2019 were at US $ 140.47 Billion which was 29.27 per cent higher than the oil imports of US $ 108.6 Billion over the same period last year.
Rupee opened at a level of Rs. 65.1200 against US Dollar on 1st April, 2018 and closed at Rs. 69.0420 as on 29th March, 2019. Rupee experienced some volatility during the year touching high of Rs. 74.4900 intraday on 11.10.2018.
Sensex which was at 33,030.87 on 2nd April, 2018 closed at 38,672.91 on 29th March, 2019 registering a gain of 14.58 percent for FY 2018-2019. During the year, Reserve Bank of India (RBI) increased repo rate by 25 basis points twice during the year and in February 2019 reduced rate by 25 basis points.
India was the worlds second largest steel producer, as of 2018.
In FY 2018, India produced 104.98 million tonnes (MT) and 103.13 MT of finished steel and crude steel, respectively. Crude steel production between April 2018 to January 2019 reached 87.98 million tonnes.
India was also a net exporter of steel in FY 2018. Exports and imports of finished steel stood at 5.15 MT and 6.55 MT respectively, during April 2018 to January 2019.
Steel consumption is expected to grow 7.5 percent year-on-year to 95.4 MT in 2018. Indias steel production is expected to increase from 103.13 MT in FY 2018 to 128.6 MT by 2021.
The Government has taken various steps to boost the sector including the introduction of National Steel Policy 2017 and allowing 100 per cent Foreign Direct Investment (FDI) in the steel sector under the automatic route.
Iron ore Mines:
The Supreme Court, in April 2013, had directed the Karnataka Government to cancel 51 C-category mining leases for illegal mining.
Out of 51 C category mines, so far 19 mines were put up for auction. Out of 19 mines, 14 mines were auctioned successfully and in respect of 5 mines, there were no bidders hence auction was annulled. Balance of 32 mines has not been put up for auction till end of March 2019.
Presently, the A and B category mines which are completing Mining Lease terms by 2020, the Government has put up 4 mines for e-auction. The C category mines had the restriction for participation for captive usage. However, A and B category mines will not have restrictions of captive use, hence may witness more participation by the bidders.
The prices of the iron ore lumps and fines remained range bound throughout the year. Considering the demand for iron ore, Supreme Court increased the mining capacity in Bellary and Chitradurga sector from 30 million ton to 35 million ton per annum.
Indias iron ore imports increased during the second half of the current fiscal owing to the suspension of operations from November 2018 by public sector mining giant NMDC at its Donimalai mines in Ballari district. NMDC suspended mining at Donimalai after the Karnataka Government imposed an 80 percent premium on sales. With this, an estimated seven million tonnes of iron ore production will come down. This has affected the price of iron ore.
Coal and Coke:
The Coke prices at the beginning of the year was around USD360 per MT and peaked to USD 400 per MT by 3rd quarter and subsequently prices dropped and closed at USD 330 per MT by end of the year. The Prime Hard Coking Coal prices at the beginning of the year was around USD 210 per MT and peaked to USD 240 per MT by 3rd quarter and subsequently prices dropped and closed at USD 215 per MT by end of the year. During year the supply of coke and coal was normal except in the 3rd quarter where the coal supplies from Australia got affected due to natural calamities and transportation issues and the supplies got normalized in the 4th quarter.
The automobile sector accounts for 7 percent of Indias GDP and 45 percent of manufacturing GDP.
The industry produced a total 30,915,420 vehicles including passenger vehicles, commercial vehicles, three wheelers, two wheelers and quadricycle in April-February 2019 as against 29,094,447 in April-February 2018, registering a growth of 6.26 percent over the same period last year.
The overall Commercial Vehicles (CV) segment registered a growth of 17.55 percent in April- February 2019 as compared to the same period last year. Medium & Heavy Commercial Vehicles (M&HCVs) increased by 14.66 percent and Light Commercial Vehicles grew by 19.46 percent in April-February 2019 over the same period last year.
TheCVsectorregisteredahealthygrowthtillOctober2018,duetopickupinconstructionandmining activities and increased inter-state movement of goods, with the streamlining of e-commerce and FMCG post GST implementation. A_er registering growth, the domestic CV sector has sharp contraction in sales of M&HCV (Truck) as well as slowdown in growth momentum in case of LCV (Trucks). The adverse impact of tightening financing environment arising from liquidity crisis at Non-Banking Financial Corporations (NBFCs), viability pressure because of higher fuel cost and weak freight rates and revision in axle load norms, and high insurance cost have collectively impacted CV demand.
Auto Industry outlook:
Ratings agency has maintained a stable outlook on the auto sector, anticipating improving sales in the sector during the next fiscal over expectations of better liquidity in non-bank financial companies. The stable outlook comes despite subdued sales numbers in the last couple of months.
Commercial vehicle companies are likely to post strong volume growth owing to pre-buying happening due to a change in emission norms from BSIV to BSVI from April 2020. The implementation of the scrappage policy is also on the cards, which can spur additional demand for approximately 250,000 vehicles to the market. Additionally, an expected drop in fuel price should improve profitability of fleet operators, spurring demand for construction vehicles for road infrastructure activities. Considering these factors, it is expected that the CV industry to register a new peak of 11 percent over FY18-20.
Future of Indian Automotive Industry will remain in the robust growth horizon over the next decade with the volume growth in the region of around 15 percent a year, recording a CAGR of over 12 percent.
Tractor industry :
The growth for tractor industry for FY 2019 is expected to be 10-12 percent approximately 8 Lakhs unit compared to 7.11 lakh units in FY 2017-2018 continuing the growth momentum over the past two financial years.
Steps taken by the Government to enhance farmers income as the primary growth drivers. The Union Governments initiatives towards enhancing farmers incomes, in addition to schemes aimed at improving irrigation and insurance coverage and the MSP (Minimum Support Price) hikes have been better than previous years. Loan waiver announced in three states is likely to boost sales.
Tractor industry Outlook:
Supplementation of tractor usage with non-agri operations like haulage for construction activities as infrastructure development picks up steam pan-India, coupled with easy financing options, and various Government support programmes will give a boost to the domestic tractor market. The long term tractor industry CAGR from fiscal 2018 to fiscal 2023 is expected to be 7 to 9 percent. The forecast also takes into account possibility of 1-2 deficient rainfall years during this period. Governments renewed thrust towards improving the rural economy, via measures such as doubling farm income by 2022, increasing spend towards irrigation, and improving crop productivity by distributing soil health cards is expected to drive growth in the long term. This will also be supported by other measures like the e-NAM (National Agriculture Market), expanding crop insurance, and gradual spread of Custom Hiring centres. With growth in rural wages also decelerating, and increasing mechanization on farm fields, this bodes well for structural tractor demand growth.
Cost of tractors in India is the cheapest in world. The cost of a finished tractor in India is as much as the cost of gear box in developed countries. Hence there exists tremendous scope for exports.
Crude oil prices:
Oil prices have been volatile due to swings in supply. On 10th May, 2018, prices rose to a record of $80 per barrel.
Crude oil prices have been volatile since August, reflecting supply influences, including US policy on Iranian oil exports and, more recently, fears of softening global demand. As of early January, crude oil prices stood at around $55 a barrel, and markets expected prices to remain broadly at that level over the next 45 years.
B. Company Performance
Your Company achieved net sales of Rs. 215,915 Lakhs (previous year Rs. 176,519 Lakhs).
The profit before tax for the year under review stood at Rs. 14,671 Lakhs as compared to Rs. 5,442 Lakhs of the previous year after providing for depreciation and amortisation.
C. Operational Performance
Your Company sold 358,557 MT of pig iron valued at Rs. 117,572 Lakhs during FY 2018-2019 as compared to 306,303 MT of pig iron valued at Rs. 91,602 Lakhs in the previous year.
Pig iron business showed recovery in respect of margins with the improvement of pig iron selling price and a small reduction in raw material cost. Your Company sold 97,268 MT castings aggregating to Rs. 92,311 Lakhs during FY 2018-2019 as compared to 82,922 MT castings aggregating to Rs. 72,126 Lakhs in the previous year.
There was a good demand for castings for both from tractor and automobile industry throughout the year except for the last quarter of the year, which witnessed marginal reduction for the demand for the casting. During the year under review, the casting gross sales crossed one lakh ton casting. The increase in demand for castings has come from new customers as well as from existing customers.
There was reduction in power consumption / cost during the year:
1) in Koppal plant arising out of generation of power using blast furnace gas and with the revamping of turbo generators.
2) owing to the commissioning of 10 MW AC (11 MW DC) Solar power plant at Solapur. During the year under review, rupee has been generally operating in the range as high as Rs. 74.49 and low as Rs. 64.85 to a dollar, giving mixed results for the price paid on the import of coke and coal.
The Company has been able to strategically reduce financing cost of working capital by availing facility at very competitive rates during the year under review.
Your Company has completed the following projects during the year under review:
1) Railway siding at its plant at Koppal. However, clearance from Railway for commerical operations is awaited. This project will facilitate inward movement of raw materials and outward movement of pig iron resulting in reduction in cost of transportation and handling losses.
2) Installed and commissioned 10 MW AC (11 MW DC) solar power plant at Solapur in October 2018. This has resulted in reduction of power cost of the foundry at Solapur.
3) Acquired following two mines by participating in the mines auction in Karnataka
1. M/s. Bharath Mines & Minerals
2. Sri. M Channakesava Reddy (M/s. Sri Lakshmi Narasimha Mining Co)
This will facilitate in the reduction of Iron ore cost and having its own source of raw material.
4) 3D printing facility installed at Koppal Plant has resulted in the reduction of cycle time of development of castings. This will help to increase more orders for castings business.
5) Improvement in Turbo Generator capacity utilisation with Mini blast furnace upgradation.
Your Company has undertaken the following projects during the year under review:
1) Company is working on more value added products to secure increased orders for machined castings from its customers by setting proper machining facilities with appropriate machines.
2) Installed mechanised fettling facilities for superior casting finish both at Koppal and Solapur Plant.
3) Commenced the project activity for 2 lakh ton Coke Oven plant and 20 MW Power Plant and the progress so far is satisfactory and project work is progressing as per time line and expected to be commissioned in the quarter IV of FY 2019-2020.
Details of significant changes, (i.e., change of 25 percent or more, as compared to the immediately previous Financial Year) in key financial ratio, along with detailed explanation therefor:
|Sr. No.||Particulars||Ratio as on 31st March, 2019||Ratio as on 31st March, 2018||% Change||Explanations, if any|
|i.||Debtors Turnover||6.42||7.03||(9%)||Not Applicable|
|ii.||Inventory Turnover||5.83||6.78||(14%)||Not Applicable|
|iii.||Interest Coverage Ratio||10.19||6.06||68%||Refer Note 1|
|iv.||Current Ratio||1.11||1.05||6%||Not Applicable|
|v.||Debt Equity Ratio||0.17||0.12||43%||Refer Note 2|
|vi.||Operating Profit Margin (%)||12.23||8.71||40%||Refer Note 1|
|vii.||Net Profit Margin (%)||4.53||2.15||111%||Refer Note 1|
Details of change in Return on Net Worth as compared to the immediately previous Financial Year as follows:
|Sr. No.||Particulars||Ratio as on 31st March, 2019||Ratio as on 31st March, 2018||% Change||Explanations|
|1||Net worth||14.95||6.31||137%||Refer Note 1|
1. Pig Iron sales have increased by 28 percent and Castings sales by 28 percent as compared to previous year. The material consumption, including stores spares consumption has decreased to 72.3 percent in current year compared to 74.5 percent in previous year.
2. Debt Equity ratio has increased on account of Term Loan Borrowings for Solar and Coke oven plant obtained during the year.
D. Cost Control
Your Company adopted the following measures to reduce cost:
Strategically sourced raw material and consumables.
Improvement projects through Kaizens, involvement of cross functional teams to bring cost reductions.
Improved operational efficiencies and cost control measures at both Koppal and Solapur Plant.
Improved the quality of the castings to bring down the rejections in castings.
E. Concerns and Threats
Demand for the auto and tractors have a direct impact on the performance of your Company and any adverse market condition for these sectors will result into reduced capacity utilisation and profitability.
Fluctuation in the price of raw material such as coke and coal and shortage of quality iron ore supply in domestic market will have impact on production and consequently on profit.
Further, depreciation of Rupee vis--vis US dollar can lead to an increase in price of coke and in the price of crude oil, resulting in increased input costs, thereby putting pressure on profitability. Switch to Electronic Vehicles from Internal Combustion engines in long run.
F. Prospects for the Current Year
1. Company proposes to participate again in e-auction of further iron ore mines in Karnataka as and when the State Government invites the tender for participation in the same to further increase the availability of iron ore from its own source.
2. Supply more machined castings to increase value of sales. Machine shops will be commissioned progressively in a phased manner based on order positions.
3. Setting up pulvarised coal injection to one mini blast furnace to affect cost reduction in input cost of raw materials namely coke.
4. Installation and commissioning of 2 lakh ton capacity coke oven plant and 20 MW power plant. This will further help in reducing the cost of raw material as well as reducing the power cost.
5. More usage of concentrated iron ore in sinter plant to reduce input cost of materials.
6. To install two core centers at Koppal plant and Solapur plant to increase the production of water jacket blocks in cold box for higher productivity and cleaner castings.
7. Expansion of fettling shop both in Koppal and Solapur foundry for higher productivity and better quality, reliability using snag grinding machines and robotic grinding / fettling shop.
8. Exploring the possibility of installing additional 5 MW solar power plant at Solapur to further reduce the power cost of the foundry at Solapur and this will facilitate in meeting almost entire power requirement of the foundry.
Statements in this report, particularly those which relate to Management Discussion and Analysis, describing the Companys objectives, projections, estimates and expectations may constitute "forward looking statements" within the meaning of applicable laws and regulations. Actual results may differ materially from those either expressed or implied.
G. Internal Control Systems and their adequacy
The Company has a proper and adequate system of controls in order to ensure that all assets are safeguarded against loss from unauthorised use or disposal. All transactions are properly checked, verified, recorded and reported correctly.
Regular Internal Audit checks are carried out to ensure that the responsibilities are executed effectively and that proper and adequate systems are in place.
H. Safety, Health and Environment
Your Company believes in "Safety First" and is committed to provide "Safe Workplace" by addressing Safety, Health and Environment related issues by emphasizing safety culture in the organisation. Employees are regularly trained to update their awareness and skills. New employees are being given intensive safety induction training and on job training. On completion, "Safety Passport" related to their work area is issued authorizing the person to enter the plant / department. All the statutory requirements related to safety, health and environment are being complied with. As a proactive approach, the periodical safety audit (internal), cross functional safety audit, external audits are conducted by safety experts to enhance safety performance. National Safety Council and other agencies engaged to identify unsafe conditions / unsafe acts if any and to recommend remedial safety measures / actions. Safety Performance Management System developed through Hazard Identification and Risk assessment (HIRA); Safe Operating Procedures (SOP) were developed emphasizing on engineering controls. Reporting of "Near Miss cases" and "First Aid Injuries" are being practiced to take corrective and preventive action to achieve the goal of zero accidents.
Polices are developed and implemented viz., safety observation and hazard elimination policy, Safety cardinal rules, mission accident free quarter, safety violation penalty policy, Injury On Work (IOW) policy etc., Company is having well equipped "Occupational Health Centre" with a full-time Doctor and qualified paramedical staffs. The pre-employment health check-up of the employees are being conducted and also regular health checkups conducted on annual basis during the continuance of the employment. The Company has provided well equipped two ambulances which are available at all times to fulfill the requirement of emergencies of employees as well as for the neighboring community. Tractor mounted water tanker with capacity of 5.0 KL has been provided round the clock in the plant premises attached to security department to tackle unexpected fire incidents.
Company is certified for Quality Management Systems under IATF 16949:2016, Environmental Management System under ISO 14001:2015 and also certified for Occupational Health and Safety Assessment Series (OHSAS 18001:2007) by Indian Register Quality Systems (IRQS). OHSAS system is in the process of up-gradation.
Requirements of environmental acts and regulations are complied with. Monitoring and analysis of water, stack emissions and ambient air quality etc., are undertaken periodically to verify whether the level of environmental parameters are maintained, well within the specified limits. Sewage Treatment Plant (STP) with 250 KLD (kilo liters per day) capacity is operated to treat domestic wastewater with extended biological aeration system. Sludge generated from STP is being used as manure for garden and treated wastewater is used for plantation development. For effective suppression of dust emissions, jet type fixed sprinklers are provided.
Under ISO: 14001 and OHSAS: 18001, the following management programs have been taken-up and completed during FY2018-19 at its plant at Koppal.
1. Dust extraction system is being installed at DK6 casting unloading area.
2. As a part of environmental improvement project, the existing 376 meters of porous fence (mesh) of 12 meters height has been extended by another 80 meters in northern boundary to prevent the fugitive dust emission.
3. Construction of around 130 meters of concrete roads near cooling water tank to MBF1 to prevent dust emission due to vehicular movement; till date total of 1,951 meters concrete road has been completed.
4. Ambient Air Monitoring Quality System (AAMQS) has been connected to Central Pollution Control Board as per the KSPCB requirement.
5. Plantation of around 5,000 tree saplings during the year in and around the plant premises to increase the green belt area.
I. Social Responsibility
In order to align the Mission and Values of your organization viz. "To be a preferred Employer and responsible neighbour", your Company has taken following measures as a part of its Corporate Social Responsibility. The Company focuses on Rural Education, Health and Hygiene, Infrastructure, Environment, facilities in the local vicinity of the plant. Major activities undertaken during the year are as follows: Rural Education
2,300 school bags and 2,500 note books were distributed among school children of neighboring Government Schools.
Financial assistance was given to Government Higher Primary School of Bevinahalli for providing educational tour for children.
Provided 50 writing desks and benches to Government Higher Primary School Koppal.
Financial assistance given to Koppal District Administration, for awareness program on Child marriage prevention.
Scholarship provided to the students of neighboring villages who scored 80 percent and above in SSLC and PUC examination.
Financial assistance for an Educational Trust at Koppal for construction of Rs.Samudaya Bhavan.
Health and Hygiene
Implemented Kirloskar WaSH initiative at Koppal and Solapur (clean and Beautiful School). Koppal Plant covered 54 schools and 13,000 students were benefitted while Solapur Plant covered 8 schools and 4,800 students were benefitted.
Organized Free Cancer Screening Camp in association with Indian Cancer Society, Bangalore at Koppal. 223 people were screened and one person was detected positive. Further, Company has supported for higher medical treatment and the patient is recovering.
Engaged a General Physician doctor once in a week and Pediatrician every 1st Saturday of month to Bevinahalli village and also the Company Medical Officer visit twice a week. The Company is providing free medicines.
Support towards pulse polio programme.
Company Ambulance facility has been extended to the neighboring village in case of emergency.
Conducted Rs.Blood Donation Camp in association with Indian Red Cross Society, Koppal. 150 employees donated blood.
Financial support is given for higher medical treatment for deprived villagers.
Constructed 300 meters long storm water drain at Bevinahalli village.
Provided RO Water units at Government Higher Primary School, Hosahalli and Bevinahalli.
Provided drinking water stations (RO water) at Gavisiddeshwara Car festival at Koppal for 10 days.
Provided 100 Beds to Government Hospital, Hosapete.
Bevinahalli village is being developed as a Model Village in Koppal Taluk, by 2021.
The Company supports the following activities undertaken at Bevinahalli village:
Primary Information Centre.
Garment Tailoring Training.
Beautician training for ladies.
Food processing and marketing.
Provided tree guards at schools and Gram Panchayat at Bhagyanagar, Koppal.
Kirloskar - Vasundhara International Film Festival (KVIFF) was organized both at Koppal and Solapur in order to bring awareness among people to take care of the environment under the theme "Prevent Pollution, Protect Rivers". Screening of films at schools and colleges, conducted various competitions on environment, enacted Street Plays, Cycle Jatha at Hosapete were organized.
J. Human Resource
Your Company considers human resource to be an important and valuable asset for the organization. Therefore, it constantly strives to attract and retain best "Talents" for the present and future business needs.
The Company has taken-up the following initiatives-
To develop future leaders, Company organized Management Development Programmes (MDP) on various topics. The training program was also organized for Senior Leadership team.
Training programmes on behavioral and technical skills were organized on a continuous basis by engaging internal and external faculties to enhance competencies and skills of employees.
For developing leadership pipeline, an external agency was entrusted to identify competence of fast trackers through Development Center (DC), one to one feedback that led to Individual Development Plan (IDP) and subsequent interventions.
To enhance safety culture "Behavioral Based Safety" training programmes were conducted.
Training Programme on Structured Problem Solving Technique was organized.
Performance of employees is monitored through an effective performance management system on quarterly basis.
Communication meet by top management with managerial staff on the Business Scenario and Annual Operating Plan / Long Range Plan, as well as sharing knowledge with young professionals through staff dialogues was organised.
The talented employees are continuously recognised and are motivated through rewards and recognitions.
Conducted skill development programmes for apprentices / trainees as per their trade.
Initiated monthly Swachh Abhiyan at Company premises to eliminate waste and to keep the area clean and aesthetic for better working atmosphere.
Training Programme on Life Management and Stress Management was organized by external faculties.
Training programme on 5S and TPM were organized on a regular basis.
Engaged a human development consultant to conduct HR diagnostic and submit a detailed report, which are being implemented in a phased manner.
As on 31st March, 2019, the total number of salaried employees stood at 1,371. The Employer - Employee relations was cordial throughout the year.
Recognition / Awards received by the Company during the year under review:
Best Business Partner" Award from M&M Tractor Division, 2018.
Best Delivery Performance" Award from TAFE, 2018.
MSES "B" Level certification Award from M&M Ltd., 2018.
Faster component Development" Award from SONALIKA, 2018.
Our State, Our Organization" Award in large industry category, Second State Level HR Professional Kannada Conference 2018.
"5S EXCELLENCE" Award from IIF JAN"19.
IIF Jayaswal Neco Quality Award 1st in India.
M&M - "Sustainable Performance Award.
Mahindra Supplier Excellence Award Business Partner of the year.
III. PARTICULARS OF INFORMATION FORMING PART OF THE BOARDS REPORT PURSUANT TO SECTION 134 OF THE COMPANIES ACT, 2013, RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014
1. ANNUAL RETURN
The details forming part of the Extract of the Annual Return in form MGT-9 are annexed herewith as Annexure A.
The Annual Return filed with the Registrar of Companies (ROC) for the financial year 2017-2018 is available at the website of the Company viz. www.kfil.com and the Annual Return for the financial year 2018-2019 will be made available on the website once it is filed with ROC.
2. NUMBER OF MEETINGS OF THE BOARD
During the financial year 2018-2019 five Board Meetings were convened and held, the details of which are given in Clause 2(b) of the Corporate Governance Report.
3. DIRECTORS RESPONSIBILITY STATEMENT
Pursuant to the requirements under Section 134(5) of the Companies Act, 2013 in respect of Directors Responsibility Statement, your Directors state that:
a) inthepreparationoftheannualaccountsfortheyearended31stMarch,2019,theapplicable accounting standards had been followed and there were no material departures;
b) accounting policies as mentioned in Note 2 of the Notes forming part of the Financial Statements have been selected and applied consistently. Further, judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2019 and of the profit of the Company for the year ended on that date;
c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;
d) the annual financial statements have been prepared on a going concern basis;
e) proper internal financial controls were laid down and such internal financial controls were adequate and were operating effectively; and f) proper systems to ensure compliance with the provisions of all applicable laws were in place and such systems were adequate and operating effectively.
4. STATEMENT ON DECLARATION BY THE INDEPENDENT DIRECTORS
All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and also confirmed that they have complied with the Code for Independent Directors prescribed in Schedule IV of the Companies Act, 2013.
The Company has laid down a Code for the Board of Directors and Senior Management of the Company. The said Code is available on the website of the Company viz., www.kfil.com All the Board Members and Senior Management Personnel of the Company have afirmed compliance with the Code of Conduct.
5. NOMINATION AND REMUNERATION POLICY
The Board has, on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, KMPs and Senior Management Personnel and their remuneration. The policy is available on the website of the Company, viz. www.kfil.com
6. EXPLANATION OR COMMENTS ON AUDITORS REPORT AND SECRETARIAL AUDIT REPORT
There are no qualifications, reservations or adverse remarks or disclaimer made by the statutory auditors in their audit report or by the practicing company secretary in the secretarial audit report.
7. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013
The Company has granted loans aggregating to Rs. 22,927,000 during the year ended 31st March, 2019. These primarily consist of loans to employees as per the policies of the Company and loans to suppliers in the normal course of business of the Company. The closing balances of these loans are disclosed under the schedule of Loans and Advances in the financial statements. The Company has not given any guarantees or made any investments during the year, which would be covered by Section 186 of the Companies Act, 2013.
8. RELATED PARTY TRANSACTIONS
Pursuant to Section 134 of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with Related Parties have been done at arms length and are in the ordinary course of business. Hence, no particulars are being provided in Form AOC-2.
9. STATE OF COMPANYS AFFAIRS
Discussion on state of Companys affairs has been covered as part of the Management Discussion and Analysis.
10. AMOUNTS PROPOSED TO BE CARRIED TO RESERVES
Particulars of the amounts proposed to be carried to reserves have been covered as part of the financial performance of the Company.
11. MATERIAL CHANGES AND COMMITMENTS, IF ANY AFFECTING FINANCIAL POSITION OF THE COMPANY
There are no adverse material changes or commitments occurring after 31st March, 2019 which may affect the financial position of the Company or may require disclosure.
12. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is annexed herewith as Annexure "B".
13. RISK MANAGEMENT POLICY
The process of risk management at Company encompasses risk identification, classification and evaluation. The Company identifies strategic, operational and financial risks that the Company faces. The Company deploys mitigation activities and plans for current and future risks that the Company may face.
The Company has set up a Risk Review Team (Team) to review the risks faced by the Company and monitor the development and deployment of risk mitigation action plans. The Team reports to the Board of Directors and the Audit Committee who provide oversight for the risk management framework in the Company.
The Directors have reviewed progress on the risk management activities in the current year.
14. CORPORATE SOCIAL RESPONSIBILITY (CSR) ACTIVITIES
The Company has been carrying out Corporate Social Responsibility (CSR) activities. These activities are carried out in terms of Section 135 read with Schedule VII of the Companies Act, 2013 and the Companies (Corporate Social Responsibility Policy) Rules, 2014. Annual Report on CSR activities includes details about the CSR policy developed and implemented by the Company. CSR initiatives taken during the year is annexed herewith as Annexure "C".
15. BOARD EVALUATION
Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Nomination and Remuneration and other statutory committees. Performance evaluation has been carried out as per the Nomination and Remuneration Policy.
16. CHANGE IN THE NATURE OF BUSINESS
During the year under review, there has been no change in the nature of business of the Company.
17. DETAILS OF APPOINTMENT AND RESIGNATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. Rahul C. Kirloskar retires by rotation and being eligible, offers himself for re-appointment. Upon recommendation of the Nomination and Remuneration Committee, the Board of Directors has recommended re-appointment of Mrs. Nalini Venkatesh, Mr. R. Sampathkumar and Mr. B. S. Govind as Independent Directors of the Company to hold office for second term as per details given below, pursuant to provisions of Section 149 of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 :
|Name of the Director||Term of||Upto|
|Mrs. Nalini Venkatesh||5 consecutive years||12th August, 2024|
|Mr. R. Sampathkumar||3 consecutive years||12th August, 2022|
|Mr. B. S. Govind||1 year||12th August, 2020|
The resolutions seeking approval of the Members by special resolution for re-appointment of Independent Directors have been incorporated in the Notice of Annual General Meeting.
Directors / Key Managerial Personnel (KMP) appointed during the FY 20182019
The Members at their Annual General Meeting held on 25th July, 2018 have re-appointed Mr. R. V. Gumaste as the Managing Director of the Company for a period of 5 years with effect from 1st July, 2018. He is also Key Managerial Person (KMP).
The Members at their Annual General Meeting held on 25th July, 2018 have also re-appointed Mr. A. R. Jamenis as Independent Director to hold office for a second term of two consecutive years upto 12th August, 2020.
There was no change in other Key Managerial Personnel during the FY 2018-2019.
18. NAMES OF THE COMPANIES WHICH HAVE BECOME / CEASED TO BE SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR
The Company did not have any subsidiaries, associates or joint ventures during the year.
The Company has not accepted deposits under Chapter V of the Companies Act, 2013.
20. SIGNIFICANT ORDERS PASSED BY REGULATORS, COURTS OR TRIBUNALS IMPACTING GOING CONCERN AND COMPANYS OPERATIONS
To the best of our knowledge, the Company has not received any such orders from Regulators, Courts or Tribunals during the year, which may impact the going concern status or the Companys operations in future.
21. INTERNAL FINANCIAL CONTROLS
The Company has deployed controls including defined code of conduct, whistle blower policy, management review and MIS mechanisms, internal audit mechanism. The process level controls have been instituted through Company policies and procedures and continuous monitoring of efficiency in operations. There is regular management oversight of the internal controls environment at Company. The Audit Committee along with Management oversees results of the internal audit and reviews implementation on a periodic basis.
22. INFORMATION FORMING PART OF THE DIRECTORS REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014
|Sr. No.||Information Required||Input|
|1||The ratio of the remuneration of each Director to the median remuneration of the employees of the Company for the financial year||Please refer Annexure D-1|
|2||The percentage increase in remuneration of each Director, Chief Financial Officer, Chief Executive Officer, Company Secretary or Manager, if any, in the financial year;||Please refer Annexure D-2|
|3||The percentage increase in the median remuneration of employees in the financial year||12.18 percent|
|4||The number of permanent employees on the rolls of Company||1,371|
|5||Average percentile increase already made in the salaries of employees other than the managerial personnel in the last financial year and its comparison with the percentile increase in the managerial remuneration and justification thereof and point out if there are any exceptional circumstances for increase in the managerial remuneration||Percentage increase in salaries of managerial personnel at 50th percentile: 25.71 percent Percentage increase in salaries of Non-managerial personnel at 50th percentile: 5.57 percent (Note: Percentage increase in salaries of Non-managerial personnel is in the range 1 percent to 71 percent).|
|The salary increases are a function of various factors like individual performance vis-a-vis individual Key Peformance Indicators (KPIs), industry trends, economic situation, future growth prospects, etc. besides Company performance. There are no exceptional circumstances for increase in the managerial remuneration.|
|6||Affirmation that the remuneration is as per the remuneration policy of the company.||The remuneration paid to the Directors is as per the Remuneration policy of the Company.|
|7||Statement showing the names of the top ten employees in terms of remuneration drawn and the name of every employee, who-||Please refer Annexure E|
|(i) if employed throughout the financial year, was in receipt of remuneration for that year which, in the aggregate, was not less than one crore and two lakh rupees;|
|(ii) if employed for a part of the financial year, was in receipt of remuneration for any part of that year, at a rate which, in the aggregate, was not less than eight lakh and fifty thousand rupees per month;|
|(iii) if employed throughout the financial year or part thereof, was in receipt of remuneration in that year which, in the aggregate, or as the case may be, at a rate which, in the aggregate, is in excess of that drawn by the managing director or whole-time director or manager and holds by himself or along with his spouse and dependent children, not less than two percent of the equity shares of the company.|
IV. VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Board of Directors has adopted the Vigil Mechanism / Whistle Blower Policy. The policy has provided a mechanism for Directors, Employees and other persons dealing with the Company to report to the Chairman of the Audit Committee, any instance of unethical behaviour, actual or suspected fraud or violation of the Code of Conduct of the Company or leakage of Unpublished Price Sensitive Information (UPSI), by any person, who is in possession of UPSI, to any other person in any manner whatsoever, except as otherwise permitted under the SEBI (Prohibition of Insider Trading) Regulations or any other instance.
The details of the policy have been uploaded at the website of the Company, viz. www.kfil.com.
V. COMPOSITION OF AUDIT COMMITTEE
The composition of the Audit Committee has been mentioned in the Corporate Governance Report annexed to this report.
VI. EMPLOYEE STOCK OPTIONS SCHEME (ESOS):
Your Company has instituted a stock option plan in order to motivate, incentivize and reward employees. This plan is called KFIL Employee Stock Option Scheme 2017 (hereinafter referred as KFIL ESOS 2017 or Scheme). Your Company views employee stock options as an instrument that would enable the employees to share the value they create for the Company and align individual objectives of the employees with the objectives of the Company. The Board of Directors of your Company and the Nomination and Remuneration Committee of the Company are authorised to administer the said scheme pursuant to the provisions of the Scheme. The Nomination and Remuneration Committee at its meeting held on 30th October, 2018, approved the grant of 120,000 stock options exercisable into 120,000 Equity Shares of the Company pursuant to the approval of the shareholders received at the Annual General Meeting held on 3rd August, 2017. KFIL ESOS 2017 is in compliance with the applicable provisions of the Companies Act, 2013 and its rules, Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 ("Employee Benefits Regulations") and other applicable regulations, if any.
The certificate from M/s. Kirtane & Pandit LLP, Chartered Accountants, Statutory Auditors of the Company, confirming that the scheme has been implemented in accordance with the aforesaid regulations and in accordance with the resolution passed by the Company at its Annual General Meeting held on 3rd August, 2017, would be placed before the shareholders at the ensuing Annual General Meeting. A copy of the same will also be available for inspection at the Companys registered office. There have been no material changes to the KFIL ESOS 2017 during the financial year. The Disclosures on the plan, details of options granted, shares allotted upon exercise etc. as required under Employee Benefits Regulations are enclosed herewith as Annexure No. G and the same is included in the annual report uploaded on the Companys website at www.kfil.com.
No employee has been granted stock options equal to or exceeding 1% of the issued capital of your Company (excluding convertible shares and warrants).
In line with the Indian Accounting Standards ("Ind AS") 102 on Share Based Payments issued by the Institute of Chartered Accountants of India ("ICAI"), your Company has computed the cost of equity-settled transactions by using the fair value of the options at the date of the grant and recognized the same as employee compensation cost over the vesting period.
1. Statutory Auditors
At the 25th Annual General Meeting held on 28th July, 2016, M/s. Kirtane & Pandit LLP, Chartered Accountants [Firm Registration No.: 105215W/W100057], were appointed as Statutory Auditors of the Company to hold office till the conclusion of the 30th Annual General Meeting to be held in the year 2021. The Company has received a certificate from the Auditors to the effect that they are fulfilling requirements prescribed under provisions of Section 141 of the Companies Act, 2013.
2. Secretarial Audit
Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Mahesh J. Risbud, Practicing Company Secretary to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith as Annexure "F".
Mr. Mahesh J. Risbud, Practicing Company Secretary has also submitted Secretarial Compliance Report as laid down in SEBI Circular CIR/CFD/CMD1/27/2019 dated 8th February 2019 and has also confirmed that the Company has complied with of all applicable SEBI Regulations and circulars / guidelines issued thereunder, for the Financial Year 2018-2019.
3. Cost Auditor
The Board of Directors at its meeting held on 3rd May, 2019 has appointed M/s. Parkhi Limaye and Co, Cost Accountants as the Cost Auditors of the Company to conduct the audit of cost records maintained by the Company for the financial year ending 31st March, 2020.
The Central Government has specified maintenance of cost records under sub-section (1) of section 148 of the Companies Act, 2013 and such accounts and records are maintained by the Company.
VIII. CORPORATE GOVERNANCE
The Company conforms to the norms of Corporate Governance as envisaged in the Listing Regulations with the BSE Limited. Pursuant to Regulation 34(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Report on the Corporate Governance and the Auditors Certificate on Corporate Governance are annexed to this report.
IX. SECRETARIAL STANDARDS
During the year under review, the Company has complied with Secretarial Standards issued by The Institute of Company Secretaries of India and approved by the Central Government under Section 118(10) of the Companies Act, 2013.
X. DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The Company has in place a Policy for Prevention of Sexual Harassment at workplace. This would, inter alia, provide a mechanism for the resolution, settlements or prosecution of acts or instances of sexual harassment at workplace and to ensure that all employees are treated with respect and dignity. There were no complaints / cases filed / pending with the Company during the year under review.
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.
Your Directors wish to place on record their appreciation towards the contribution of all the employees of the Company and their gratitude to the Companys valued customers, bankers, vendors and members for their continued support and confidence in the Company.
|For and on behalf of the Board of Directors|
|ATUL C. KIRLOSKAR|
|Pune : 3rd May, 2019||DIN : 00007387|