Lakshmi Automatic Loom Works Ltd Directors Report.

TO THE SHAREHOLDERS

Your Directors submit their Forty Fifth Annual Report together with the Audited Balance Sheet as at 31st March, 2019 and the Statement of Profit and Loss for the year ended 31st March, 2019.

Financial Summary / Highlights in lakhs

2018-19 2017-18
Sales and other income 895.01 831.38
Profit before Depreciation and Amortization Expenses 224.99 272.08
Depreciation and Amortization Expenses 46.99 35.99
178.03 236.09
Add : Comprehensive Income 1.97 1.18
180.00 237.27
Less : Tax Expense
Current Tax (-) 44.17 (-) 61.96
Deferred Tax (-) 8.03 (-) 1.24
Net Profit / Loss (-) 127.80 174.07
Add: Balance from the Previous year (-) 568.51 (-) 742.58
Balance Carried Over (-) 440.71 (-) 568.51

Indian Accounting Standards

In the preparation of Financial Statements, the Company has followed the Indian Accounting Standards (Ind AS) and the Financial Results have been prepared in accordance with the recognition and measurement principles laid down in the said standards.

Operations

The operations during the year have resulted in a net profit of 180.00 lakhs after providing for depreciation and amortization of expenses of 46.99 lakhs. The net profit after Tax for the year is 127.80 lakhs.

The Company has two revenue segments ie. a) Warehousing Rental Services - Unit 1 at Hosur Industrial Complex, Hosur - 635 126 and b) Other Engineering Services - Unit 2 at Pollachi Road, Coimbatore - 642 109.

The Warehousing Rental Services segment consists of Warehousing Rental income on the Land and Buildings at Hosur and the Other Engineering Services segment consists of Manufacture and Sale of Accessories and Spares of Weaving and Knitting Machines and Parts and Accessories for Machine Tools.

Warehousing Rental Services - Unit 1

The income generated from Warehousing Rental Services during the year was 481.34 lakhs against 458.75 lakhs in the previous year.

Other Engineering Services - Unit 2

The sale of Accessories and Spares of Weaving Machines during the year was 131.07 lakhs against 69.06 lakhs in the previous year. The sale of Parts and Accessories for Machine Tools during the year was 185.62 lakhs against 194.69 lakhs in the previous year.

Outlook

The Companys income mainly consists of Warehousing Rental income on Land and Buildings at Hosur. In view of the demand for Warehousing Space at Hosur, near Bangalore, the Company is constructing additional Buildings in the existing land to augment its revenue.

Share Capital

The 4,00,000 - 6% Cumulative Redeemable Preference Shares of 100/- each were reclassified into (a) 2,00,000 - 6% Non Cumulative Compulsorily Convertible Preference Shares of 100/- each and (b) 2,00,000-6% Non Cumulative Optionally Convertible Preference Shares of Rs.100/- each fully paidup.

As approved by the shareholders at their meeting held on 19.09.2018 :

a) The 2,00,000 - 6% Non Cumulative Compulsorily Convertible Preference Shares (CCPS) of 100/- each have been converted into 2,91,757 Equity Shares of 10/- each fully paid up at a premium of 58.55 per share, on preferential basis to Promoter and Promoters group on 16.10.2018.

b) The 2,00,000 - 6% Non Cumulative Optionally Convertible Preference Shares (OCPS) of 100/- each have been converted into 2,91,757 Equity Shares of 10/- each fully paid up at a premium of 58.55 per share on the option exercised by the Optionally Convertible Preference Shareholder on 10.05.2019, on preferential basis to the Promoter and Promoter group. After the said conversions, the issued and paid-up Equity Capital of the Company stands at 6,68,75,020/- and the paid-up Preference Capital of 4,00,00,000/- of the Company was reduced to Nil.

Deposits

The Company has not accepted any deposit from public falling within the ambit of Section 73 of the Companies Act, 2013.

Extract of Annual Return

The Extract of Annual Return pursuant to the provisions of Section 92 of the Companies Act, 2013, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 in Form MGT-9 is furnished in Annexure 1 forming part of the Boards Report.

Board and its Committee Meetings conducted during the year under review.

Four Meetings of the Board of Directors were held on 24.05.2018, 07.08.2018, 13.11.2018 and 11.02.2019, during the Financial Year from 1st April, 2018 to 31st March, 2019. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

Details of Attendance of each Director at the Meetings of the Board and various Committees of the Board during the Financial Year ended 31st March, 2019 are as below:

Name of Directors Board Meetings attended Audit Committee Meetings attended Nomination & Remuneration Committee Meetings attended Stakeholders Relationship Committee Meetings attended Last AGM Attended (Yes/ No)
1 Sri S.Pathy 4 - - - Yes
2 Sri R.Santharam 2 2 1 1 Yes
3 Sri R.C.H.Reddy 4 4 2 1 Yes
4 Smt.Aishwarya Pathy 2 - 2 - No
5 Sri R.Varadarajan 3 3 2 - Yes
6 Sri C.Kamatchisundaram 4 - - - Yes
7 Sri N.Jaychander 4 - - 1 Yes
8 Sri R.R.Balasundharam 4 4 - - Yes

Audit Committee

The Independent Audit Committee constituted as below consists of three Independent Directors and one Non-Executive Director as its members. Sri R.C.H.Reddy, Independent Director is the Chairman of the Committee.

1. Sri R.C.H.Reddy Chairman Independent Director
2. Sri R.Santharam Member Non Executive Director
3. Sri R.Varadarajan Member Independent Director
4. Sri R.R.Balasundharam Member Independent Director

The Company Secretary is the Secretary of the Audit Committee.

Four Committee Meetings were held during the Financial Year ended 31st March, 2019 on 24.05.2018, 07.08.2018, 13.11.2018 and 11.02.2019. The Statutory Auditors, Internal Auditors, the Chief Executive Officer and the Chief Financial Officer attend the Audit Committee Meetings on invitation. The Senior Managerial Personnel attend the meetings as may be required by the Committee.

Nomination and Remuneration Committee:

The Committee has been set up as below with four Directors as members of which two members are Independent Directors. The Chairman of the Committee, Sri R.C.H.Reddy is an Independent Director.

1. Sri R.C.H.Reddy Chairman Independent Director
2. Sri R.Santharam Member Non Executive Director
3. Smt Aishwarya Pathy Member Non Executive Director
4. Sri R.Varadarajan Member Independent Director

The Company Secretary is the Secretary of the Committee.

The Committee has met two times during the Financial Year ended 31st March, 2019 on 07.08.2018 and 11.02.2019.

Nomination and Remuneration Policy

The Board has, on the recommendation of the Nomination & Remuneration Committee framed a Policy for selection and appointment of Directors, Key Managerial Personnel and their remuneration in terms of Section 178(3) of the Companies Act, 2013. The Nomination and Remuneration Policy as approved by the Board is disclosed on the Companys website at the link at : http://www.lakshmiautomatic.com/investors/policies/nomination-and-remuneration-policy/ in terms of the proviso to Section 178(4) of the Companies Act, 2013.

Salient Features of the Policy include:

• To lay down criteria and terms and conditions with regard to identifying persons who are qualified to become Directors (Executive and Non-Executive) and persons who may be appointed in Senior Management and Key Managerial positions and to determine their remuneration.

• To determine remuneration based on the Companys size and financial position and trends and practices on remuneration prevailing in peer companies, in the manufacturing sector.

• To carryout evaluation of the performance of Directors, as well as Key Managerial and Senior Management Personnel.

• To compensate them to their effort, performance, dedication and achievement relating to the Companys operations.

• To retain, motivate and promote talent and to ensure long term sustainability of talented managerial persons.

• To perform such other functions as may be necessary as appropriate for the performance of the Directors.

Annual Performance Evaluation

The Nomination and Remuneration Committee has laid down the criteria and the manner for effective evaluation of the performance of the Board, its Committees and individual Directors for the Financial Year 2018-19. Accordingly a peer evaluation excluding the Director evaluated was carried out by the Board on 11.02.2019. By a questionnaire circulated, each Board member was requested to give his/her views in evaluation of the Company performance, strategy and the performance of the Board, its Committees and individual Directors. Some of the performance parameters on which the independent Directors were evaluated include contribution, commitment, Initiative, Integrity, Independence, Independent views and judgment, fulfillment of functions, Qualifications, Knowledge, Experience and Competency and Role in active participation in Board and Committee Meetings.

The Independent Directors at their meeting held on 11.02.2019 reviewed the performance of Non-Independent Directors, the Board and the Chairperson of the Company.

The performance of the Key Managerial and Senior Management Personnel of the Company was evaluated based on their qualifications, experience and the duties and responsibilities carried out by them.

Directors Responsibility Statement

Pursuant to the requirement under Section 134(5) of the Companies Act, 2013 the Board of Directors of the Company state that: a) in the preparation of the annual accounts for the year ended 31st March, 2019, the applicable Accounting Standards had been followed along with proper explanation relating to material departure, if any;

b) the Directors had selected such Accounting Policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March 2019 and of the profit of the Company for the year ended 31st March, 2019;

c) the Directors had taken proper and sufficient care 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 Directors had prepared the Annual Accounts for the Financial Year ended 31st March, 2019 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.

f) the Directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

Declaration by Independent Directors

The Company has received declaration from all the Independent Directors of the Company in terms of Section 149(7) of the Companies Act, 2013 and Regulation 25(8) of SEBI (Listing Obligation and Disclosure Requirements) Regulations, 2015 confirming that they meet with the criteria of independence as prescribed under sub section (6) of Section 149 of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI(Listing Obligation and Disclosure Requirements) Regulations, 2015.

Auditors Report

There are no qualifications, reservations or adverse remarks made by the Statutory Auditors, M/s.Subbachar & Srinivasan. Chartered Accountants, (Membership No.004083S) in the Auditors Report.

Secretarial Auditor

The Board has appointed Mr.M.R.L.Narasimha, Practising Company Secretary, (Membership No.2851, CP 799) to conduct Secretarial Audit for the Financial Year 2018-19. The Secretarial Audit Report for the Financial Year ended March 31, 2019 is annexed to this Report as Annexure 2. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Particulars of Loans, Guarantees or Investments:

The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013.

Related Party Transactions:

All Related Party Transactions entered into during the Financial Year were on arms length basis and were in the ordinary course of the business. There are no materially significant Related Party Transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with the interest of the Company at large. Hence Form AOC - 2 pursuant to Section 134(3)(h) of the Companies Act, 2013 read with Rule 8 (2) of the Companies (Accounts) Rules, 2014 is not applicable.

The Policy on materiality of Related Party Transactions and dealing with Related Party Transactions as approved by the Board may be accessed on the Companys website at the link at www.lakshmiautomatic.com / investors / policies / related-party-transaction-policy/

Dividend

The Directors were unable to recommend a dividend on the Equity Shares for the year on account of carried over previous years losses. The Preference Shareholder has given consent in writing for waiver of the Dividend and the shares have since been converted into Equity Shares as approved by the shareholders.

Risk Management

The Company has laid down the Risk Assessment and Minimisation Procedures and on evaluation by the Audit Committee, are reviewed by the Board from time to time.

Corporate Social Responsibility

Your Company is not coming under the purview of the Corporate Social Responsibility under Section 135 of the Companies Act, 2013.

Directors and Key Managerial Personnel

Sri S.Pathy and Smt Aishwarya Pathy, Directors of the Company retire by rotation at the ensuing Annual General Meeting and being eligible offer themselves for re-appointment. A brief profile of the Directors retiring by rotation and seeking re-election, is annexed to the Notice of the ensuing Annual General Meeting.

The tenure of Sri R.C.H.Reddy, Sri R.Varadarajan and Sri C.Kamatchisundaram Independent Directors of the Company expires on 17th September, 2019 and the tenure of Sri R.R.Balasundharam on 22nd September 2019. The Nomination and Remuneration Committee and the Board of Directors having regard to the credentials and vast experience of the Independent Directors have recommended the re-appointment of Sri R.C.H.Reddy, Sri R.Varadarajan, Sri C.Kamatchisundaram and Sri R.R.Balasundharam, as Non-Executive Independent Directors of the Company for a second term of 5 (five) consecutive years to the members for their approval at the ensuing Annual General Meeting.There are no other changes in the Key Managerial Personnel (KMP) during the year.

The details as 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 are furnished in Annexure 3 forming part of the Boards Report.

Internal Financial Controls

The Company has in place adequate internal financial controls with reference to financial statements. The Internal Audit objectives, scope, functioning, periodicity and methodology is defined in the Internal Audit Programme. The quarterly internal Audit Report is placed before the Audit Committee of the Board. The internal Auditors monitor the adequacy of internal control systems, Accounting Procedures and Policies of the Company and corrective actions based on the observations are taken wherever necessary. During the year, such controls were reviewed and no reportable material weakness in the system or operation was observed by the Audit Committee.

Auditors

M/s.Subbachar & Srinivasan, Chartered Accountants, have been appointed as the Statutory Auditors of the Company, for a term of five financial years, commencing from 2017-18 at the 43rd Annual General Meeting held on 28th July 2017. Pursuant to the amendment of Section 139 of the Companies Act, 2013, the Company is no longer required to seek the ratification of the appointment of the Auditors at every Annual General Meeting. Accordingly, it has been proposed to obtain the approval of the members to continue the appointment of the Statutory Auditors without ratification of their appointment at every Annual General Meeting.

The Company has received a Certificate from the Statutory Auditors to the effect that their continued appointment as the Statutory Auditors of the Company, would be within the limits prescribed under Section 139 of the Companies Act, 2013. Members are requested to grant their approval for the continuation of the appointment of the Auditors for a period up to the conclusion of the Annual General Meeting to be held in 2022 without ratification at every Annual General Meeting.

Report on Corporate Governance and Management Discussion and Analysis

The report on Management Discussions and Analysis (Annexure 4) form part of the Annual Report.

Pursuant to Regulation 15(2)(a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 the compliance with the Corporate Governance provisions as specifed in Regulations 17, 17A, 18, 19, 20, 21, 22, 23, 24, 24A, 25, 26, 27 and Clauses (b) to (i) of sub-regulation (2) of Regulation 46 and para C, D and E of Schedule V shall not apply to the Company. Hence the reporting on Corporate Governance in a separate section is not furnished. The Certificate from the Auditors of the Company to this effect is furnished as Annexure 5 to the Annual Report. However, as a good Corporate Governance practice the company has implemented the Corporate Governance provisions and shall report the same in the Annual Report when it becomes applicable to the Company.

Vigil Mechanism

The Company has adopted the Vigil Mechanism/Whistle Blower Policy for Directors and Employees to report concerns about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or ethics policy. No personnel is denied access to the Audit Committee. No protected disclosures were received by the Nodal Officer during the year ended 31st March, 2019.

A copy of the Vigil Mechanism / Whistle Blower Policy is posted on the Companys website at www.lakshmiautomatic.com.

Disclosure under the Sexual Harassment of Women at the Workplace (Prevention, Prohibition and Redressal)

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. No complaints reported during the year under review.

Demat Suspense Account / Unclaimed Suspense Account

The Share Certificates of the Company issued to the Shareholders on amalgamation of the erstwhile The Coimbatore Pioneer Machine Works Limited in exchange of the Share Certificates held by them, remained unclaimed were transferred to the Unclaimed Suspense Account. The details of the said Shares in Demat suspense Account of the Company are :

S.No Particulars No of Share holders No. of Shares
(a) Aggregate Number of Shareholders and the outstanding shares held in Demat suspense account lying at the beginning of years. 1107 3191
(b) Number of Shareholders who approached the Company for transfer of shares from suspense account during the year. 1 6
(c) Number of Shareholders to whom share were transferred from Suspense account during the year 1 6
(d) Aggregate Number of Shareholders and the outstanding Shares in the suspense account lying at the end of the year 1106 3185
(e) The Voting Rights on these shares shall remain frozen till the rightful owner of such shares claims the Shares. 1106 3185

General

Information with respect to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is appended hereto.

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to Deposits covered under Chapter V of the Companies Act 2013

2. Issue of Equity Shares with differential rights as to dividend, voting or otherwise in terms of Section 43 and 47 of the Companies Act, 2013 and the Rules made there under.

3. Issue of shares (including Sweat Equity Shares) to employees of the Company under any scheme.

Your Directors further state that during the year under review:

1. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future.

2. There have been no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year under review and the date of this report.

3. The Annual Listing Fees for the year 2019-20 has been paid by the Company to BSE Limited.

4. No penalty or strictures have been imposed on the Company by the Capital Market Authorities for non-compliance of law, during the last three years.

By Order of the Board
(Sd.) S. PATHY
Place : Coimbatore Chairman
Date : 05.08.2019 DIN No.00013899