Lumax Auto Technologies Ltd Directors Report.
To The Members,
It is a great privilege for your Directors to present the 36th Annual Report on the business and operations together with Audited Balance Sheet and Statement of Profit & Loss of your Company for the year ended March 31, 2017.
I. FINANCIAL PERFORMANCE
We are pleased to inform you that during the financial year 2016 -17, on consolidated basis your Company crossed the Rs 10,000 million sales landmark for the first time ever. The Company achieved Sales Turnover of Rs 10,123.16 million for the current year as against Rs 9,051.46 million in the previous year, recording a growth of 11.84% on consolidated basis. Our net profits after minority interest increased to Rs 341.43 million for the current year as against Rs 317.66 million in the previous year, recording a growth of 7.48 %.
Key highlights of standalone financial performance of your Company for the year is as follows:
(Rs in Million)
|Profit Before Exceptional items and Tax||103.26||270.43|
|Profit Before Tax (PBT)||71.02||270.43|
|Provision forTaxation, DeferredTax||20.04||74.93|
|Profit AfterTax (PAT)||50.98||195.50|
|Balance of Profit brought forward||624.75||515.54|
|Balance Available for Appropriation||675.73||711.04|
|Corporate Dividend Tax*||-||2.66|
|Transfer to General Reserve||-||19.56|
|Balance carried to Balance Sheet||675.73||624.75|
|Basic and Diluted Earning Per Share (EPS) Rs||3.74||14.34|
Your Company has a long track record of distribution of dividend to the shareholders. Maintaining the said commitment this year as well, your directors are pleased to recommend a Dividend of Rs 4.70/- (47%) per Equity Share of face value of Rs 10/- each for the Financial Year 2016-17 subject to the approval of the shareholders at the ensuing Annual General Meeting. The total amount of dividend proposed to be distributed aggregates to Rs 77.11 Million (Including Dividend Tax). The Dividend pay-out ratio comes to 151.25%.
SUBSIDIARIES AND JOINT VENTURE COMPANIES
During the financial year ended March 31, 2017, your Company had 7 (Seven) subsidiaries and 2 (Two) joint ventures companies. 4 (Four) of these are direct subsidiaries and rest 3 (Three) are step-down subsidiaries.
During the year under review, Company acquired Lumax Management Services Private limited as its 100% wholly owned subsidiary and incorporated Velomax Mobility Private Limited as its step-down subsidiary.
*According to the Companies (Accounting Standards) Amendment Rules, 2016, it has been provided that if a Company declares dividend after the balance sheet date, the Company shall not recognise that dividend as a liability at the balance sheet date hence dividend and tax thereon is not accounted in the FY 2016-17.
A report on the performance and financial position of each of the subsidiaries and joint venture companies as per the Companies Act, 2013 included in the consolidated financial statement is presented in a separate section in this annual report and hence not repeated here for the sake of brevity. Please refer Form AOC-1 annexed to the financial statement in the Annual Report.
CONSOLIDATED FINANCIAL STATEMENTS
The Consolidated Financial Statements of the Company are prepared in accordance with the Accounting Standards, Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and all other applicable laws for the time being in force and the same forms part of this Annual Report.
The Audited Financial Statements, including the Consolidated Financial Statements and related information and audited accounts of subsidiaries are available on the website of the Company i.e. www. lumaxautotech.com. These documents shall also be available for inspection by any shareholder at the registered office of the Company.
INDIAN ACCOUNTING STANDARDS
The Ministry of Corporate Affairs (MCA), vide its notification dated February 16, 2015, notified the Indian Accounting Standards (Ind AS) applicable to certain classes of companies. Ind AS has replaced existing Indian GAAP prescribed under Section 133 of the Companies Act, 2013, read with Rule 7 of the Companies (Accounts) Rules, 2014. The same is applicable from April 1, 2017 to the Company and all its subsidiaries and JV Companies. Your Company will accordingly adopt Ind AS from financial year 2017-18 onwards.
The Automotive Industry can be termed as the mother of manufacturing sector in an economy as its fortunes directly impacts the fortunes of several related manufacturing Industries (e.g. Iron & Steel, Aluminium, Lead, Rubber, Plastics, Glass, Machine tools, Moulds & dies, Chemicals and Capital goods) and several in the Services sector (e.g. Logistics, Insurance, Banking, Sales & Distribution, Service & repair and fuels).The rapid growth of the Indian Automotive will further provide a strong fillip to the micro & small and medium Industries of the country across multiple sectors, the development of which is one of the Governments principle objectives.
The Auto sector, which saw a revival last year after two years of turbulence, is set to continue the momentum this year with demand picking up across all segments. The growth of the auto industry is expected to continue in 2017 across all vehicle categories-commercial and passenger vehicles, as well as two and three-wheelers. Owing to its strong forward and backward linkages with several key segments of the economy; this sector has emerged as Sunrise Sector in the Indian economy.
In the above background, we inform that your Company has been in existence for over three decades and has successfully emerged as a preferred supplier to leading OEMs. We are also among the leading automotive companies in Aftermarket Sales of several automotive parts; genuine quality and certified products has been the focus area of our company, which has helped us to establish its strong foothold in the aftermarket. Our clearly defined business structure wherein we have developed a business model, which is channelized through subsidiaries and joint venture, has helped us to operate with multiple product lines and multiple partnerships with these to ensure superior business performance and sustainability.
We have collaborations with technologically competent entities from across the globe, which has enabled us to strengthen our product development capabilities and has helped us to expand our operations, customer base and gain market leadership. Companys products are mainly covered under automotive components, which are further divided in these six product domains i.e. Electrical & Electronics, Metallic, Emission, Body & Trim, Polymer & Paint and Retail. Products and services of the company mainly covers Intake systems, Integrated plastic moulds, 2-wheeler chassis and lighting, Gear Shifters and Seat Structures & Mechanisms, LED Lighting etc.
We have a diverse basket of product offerings for the OEMs and also for the Aftermarket Sales Segment. New product development department is being setup to speed up the introduction of new products to the market. Our new branding strategy to support and create a unique identity of products marketed will be a major step for this division. We are confident that this change will help us to maintain the leadership position in the aftermarket.
Your Company strives to be a supplier of choice across all its customers and is always committed to develop and design new products, in line with its strategy towards delivering competitive advantage to the customers. In the said perspective, Total Productive Maintenance (TPM) has been successfully launched across all plants of the company to create a culture and environment which continuously improves quality, cost and delivery parameters. Further, one of the unit of Company situated at Chakan successfully completed Audit of Japan Institute of Plant Maintenance (JIPM) and was honoured with the prestigious JIPM TPM excellence award. Another unit situated at Bangalore has been endowed with appreciation certification and A1 ranking from Honda Motor Scooter India Private Limited (HMSI) for its quality supply. In addition, the Quality Control Circle (QCC) programs are an integral part across plants of the company. By implementing these various initiatives, improvement of Quality is willingly carried out by employees in true spirit, resulting in minimizing rejection, cost saving.
MANAGEMENT DISCUSSION & ANALYSIS REPORT
Pursuant to the provisions of Regulation 34 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Management Discussion & Analysis Report is annexed as part of this report separately as Annexure A.
III. GOVERNANCE AND ETHICS CORPORATE GOVERNANCE
The report on Corporate Governance together with the Auditors Certificate regarding the Compliance of conditions of Corporate Governance as stipulated in SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed and forms part of this Annual Report as Annexure B.
DIRECTORS & KEY MANAGERIAL PERSONNEL
In accordance with the Articles of Association of the Company and the Companies Act, 2013, Mr. Anmol Jain, Director is retiring by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment.
Your Directors recommend the re-appointment of the above Director at the ensuing Annual General Meeting.
The Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013.
NUMBER OF BOARD MEETINGS AND COMMITTEES OF BOARD
The Board of Directors met 6 (Six) times in the Financial year 2016-17. The details of the board meetings, attendance of the Directors and the details regarding Committees of the Board of Directors of the Company are provided in the Corporate Governance Report.
VIGIL MECHANISM-WHISTLE BLOWER POLICY
The Company has established a Vigil Mechanism named Whistle Blower Policy, for directors, employees and business associates to report to the management, concerns about unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct or ethics policy, in accordance with the provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The mechanism provides for adequate safeguards against unfair treatment of whistle blower who wishes to raise a concern and also provides for direct access to the Chairman of the Audit committee in appropriate/ exceptional cases. The Whistle Blower Policy is uploaded on the website of the Company. To further strengthen this mechanism, the Company has launched an Employee App which is available for both android and iOS users to facilitate easy expression of their opinions/suggestions/complaints.
PERFORMANCE EVALUATION OF BOARD, COMMITTEE AND DIRECTORS
In accordance with applicable provisions of the Act and Listing Regulations, the evaluation of the Board as a whole, committees and all the Directors was conducted, as per the internally designed evaluation process approved by the Board. The evaluation tested key areas of the Boards work including strategy, business performance, risk and governance processes. The evaluation considers the balance of skills, experience, independence and knowledge of the management and the Board, its overall diversity, and analysis of the Board and its Directors functioning.
The evaluation methodology involves completion of questionnaires consisting of certain parameters such as Evaluation factor, Ratings and Comments, if any.
The performance of entire Board is evaluated by all the Directors based on Board composition and quality, Board meetings and procedures, Board development, Board strategy and risk management etc.
The performance of the Managing Director and Executive Directors is evaluated by all the Board
Members based on factors such as leadership, strategy formulation, strategy execution, external relations etc.
The performance of Non- Executive Director and Independent Directors is evaluated by other Board Members based on criteria like managing relationship, Knowledge and skill, personal attributes etc.
It also involves self-assessment by all the directors and evaluation of Committees of Board based on Knowledge, diligence and participation, leadership team and management relations, committee meetings and procedures respectively.
Further, the assessment of Chairmans performance is done by each Board Member on similar qualitative parameters.
The feedback of the evaluation exercise and inputs of directors were collated and presented to the Board and an action plan to further improve the effectiveness and efficiency of the Board and Committees is put in place.
The Board as a whole together with each of its Committees was working effectively in performance of its key functions- Providing strategic guidance to the Company, reviewing and guiding business plans, ensuring effective monitoring of the management and overseeing risk management function. The Board is kept well informed at all times through regular communication and meets once per quarter and more often as and when need arises. Comprehensive agendas are sent to all the Board Members well in advance to help them prepare and keep the meetings productive. The Company makes consistent efforts to familiarize the Board with the overall business performance covering all Business verticals, by way of presenting specific performance of each Plant, Product Category and Corporate Function from time to time.
The performance of the Chairman was evaluated satisfactory in the effective and efficient discharge of his role and responsibilities for the day to day management of the business, with reference to the strategy and long term objectives.
The Executive Directors and Non-executive Directors provided entrepreneurial leadership to the Company within a framework of prudent and effective controls, with a balanced focus on policy formulation and development of operational procedures. It was acknowledged that the management afforded sufficient insight to the Board in keeping it up-to-date with key business developments which was essential for each of the individual Directors to maintain and enhance their effectiveness.
The Company follows a policy on remuneration of Directors and Senior Management Employees. The Policy is approved by the Nomination & Remuneration Committee and the Board. The Remuneration Policy is stated in the Corporate Governance Report.
RELATED PARTY TRANSACTION AND POLICY
In accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 the Company has formulated a policy on Related Party Transactions, which is available on the Companys website at http:// www.lumaxautotech.com/downloads/related-party-transaction-policy.pdf. All Related Party Transactions, which are foreseen and repetitive in nature, are placed before the Audit Committee on an yearly basis for obtaining prior omnibus approval of the committee. The transactions entered into pursuant to the omnibus approval are placed before the Audit Committee for review and approval. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the provisions of the Companies Act, 2013 and the Listing Regulations 2015.
All related party transactions entered during the financial year were in the ordinary course of business and on arms length basis. The particulars of contracts or arrangements with material related parties referred to in Section 188 of the Companies Act, 2013 in the prescribed Form AOC-2 is annexed herewith as Annexure - C.
COMPLIANCE MANAGEMENT FRAMEWORK
Your Company has a robust and effective framework for monitoring compliances with applicable laws. The Company has adopted comprehensive Compliance Manual for structured control over applicable compliances by each of the units of the Company. A separate Corporate compliance management team periodically reviews and monitors compliances by units and supports in effective implementation of same in a time bound manner. The Board and Audit Committee alongwith Compliance team periodically monitors status of compliances with applicable laws based on quarterly certification provided by senior management.
Directors Responsibility Statement
As required under Section 134(5) of the Companies Act, 2013, the Directors state: (i) that in the preparation of the Annual Accounts for the Financial Year ended 31st March, 2017, the applicable Accounting Standards have been followed along with proper explanation relating to material departures in the Auditor Report and Notes to Accounts; (ii) that the Directors have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the company at the end of the financial year and of the profit and loss of the company for that period; (iii) that the Directors have 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; (iv) that the Directors have prepared the Annual Accounts on a "going concern" basis.
(v) that the directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.
(vi) that 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.
PARTICULARS OF EMPLOYEES
Information on particulars of employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms an integral part of this report as Annexure D.
The information required pursuant to section 197 of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of your Company is available for inspection by the members at the registered office of the Company during business hours on working days up to the date of ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent.
IV. INTERNAL FINANCIAL CONTROLS AND AUDIT INTERNAL FINANCIAL CONTROL
The Company has a comprehensive internal control system to provide reasonable assurance about the achievement of its objective, reliability of financial reporting, timely feedback on achievement of operational and strategic goals, compliance with policies, procedures, laws and regulations, safeguarding of assets and economical and efficient use of resources. Appropriate review and control mechanisms are built in place to ensure that such control systems are adequate and are operating effectively.
The monitoring and reporting of finance systems is supported by a web-based system SAP which helps in obtaining accurate and complete accounting records and timely preparation of reliable financial disclosures at all levels of organization.
RISK MANAGEMENT POLICY
The Company has adopted an enterprise risk management policy and established a risk management framework with an objective of timely identification, mitigation and control of the risks, which may threaten the existence of the Company, in accordance with the provisions of Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. The Company has also constituted an internal Risk Management Committee to review the risk trend, exposure, potential impact and their mitigation plans, and periodically the key risks are also discussed at the Audit Committee.
The members in their meeting held on July 23, 2014 had appointed M/s S.R. Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company for a period of 5 consecutive years in terms of the provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, to hold the office of auditors till the conclusion of the sixth consecutive Annual General Meeting of the Company to be held in the year 2019, subject to ratification by the Members at every Annual General Meeting. Your Directors recommend for ratification of their appointment in the ensuing Annual General Meeting.
During the year, all the recommendations of the Audit Committee were accepted by the Board. Hence there is no need for disclosure of the same in this Report.
The Board has re-appointed M/s Jitender, Navneet
& Co. as the Cost Auditors of the Company in accordance with Section 148 and other applicable provisions, if any, of the Companies Act, 2013, for the audit of the cost accounts of the Company for the Financial Year 2016-17. The Cost Audit Report for the Financial Year 2015 -16 has been filed with the Central Government within the stipulated time on September 30, 2016.
Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. I.U. Thakur, Practicing Company Secretary as the Secretarial Auditor of the Company to undertake the Secretarial Audit for the financial year 2016-17. The Report of the Secretarial Audit is annexed herewith as Annexure - E.
V. CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY AND INITIATIVES
Your Company is committed to grow and operate in a socially sustainable manner and continue to give back to society. A well-outlined CSR program creates social and environmental value thus impacting and improving the lives of communities. The key focus areas of your Company have been Education and Healthcare for disadvantaged sections of the society. The companys focus areas are largely covered under Schedule VII of the Companies Act, 2013. Under its healthcare initiatives, the Company is focussing on preventive healthcare by continuously organising health check-up camps, lending financial support to hospitals for juvenile diabetes, cataract operations and partnering in special drives organised by various agencies for this cause.fi
Your Company endeavored to meet the budgeted expenditure in its CSR activities and has committed to incur expenditure for CSR initiatives, however, discontinuance of support to one school has resulted into a shortfall as such in the CSR expenditure as compared to the stipulated 2% of the average net profits of the last three financial years. The Company is committed to spend 2% of the average net profits of the last three financial years on CSR activities and it shall ensure compliance of the same going forward.
The Company has constituted a CSR Committee of the Board and also developed & implemented a CSR Policy in accordance with the provisions of Companies Act, 2013. The Committee monitors and oversees various CSR initiatives and activities of the Company. The details of CSR policy is available on the companys website http://www.lumaxautotech.com/ downloads/CSR-policy-28-05-2015.pdf. The detailed Report on CSR activities is annexed herewith as
Annexure - F.
VI. OTHER DISCLOSURES
EXTRACT OF ANNUAL RETURN
In accordance with the requirement of Section 92 of Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the annual return in Form MGT 9 is annexed as Annexure - G.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF) Transfer of unpaid dividend
Pursuant to the provisions of Section 124(5) the Companies Act, 2013, read with the IEPF Authority (Accounting, Audit, Transfer and Refund) Rules, 2016 (the Rules), all unpaid or unclaimed dividends are required to be transferred by the Company to the IEPF established by the Central Government, after the completion of seven years. Consequently, your company has transferred Rs 42,579/- during the year to the Investor Education and Protection Fund, lying with it for a period of seven years pertaining to year 2008-09 and the interim dividend aggregating to
Rs 33, 531/- pertaining to year 2009 -10, was transferred during the year 2016 -17, to the Investor Education and Protection Fund established by the Central Government.
Transfer of shares underlying unpaid dividend
Further, pursuant to recent enforcement of Section 124(6), the shares in respect of which dividend has not been paid or claimed by the shareholders for seven consecutive years or more shall also be transferred to the Demat account of IEPF authority. Accordingly, all such shares shall be transferred as per the requirement of IEPF Rules. The details of such shares is are also available on the Companys website http://www.lumaxautotech.com/investors/ iepf-investor-details.html.
In view of above, due reminders were sent to Shareholders informing them to encash their dividend and the complete List of such Shareholders whose Shares are due for transfer to the IEPF is also placed in the Unclaimed Dividend section of the Investor Section on the website of the Company.
During the year under review, the Company has not accepted any Deposit under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014.
PARTICULARS OF LOANS, GUARANTEES AND INVESTMENTS
The particulars of loans, guarantees and investments covered under the provisions of section 186 of Companies Act, 2013 are given in the Notes to financial statements.
MATERIAL CHANGES AND COMMITMENTS
During the year under review, the Company had closed down the manufacturing operations of its unit Situated at A -8, Waluj MIDC, Aurangabad w.e.f. 30.12.2016 due to low customer demand and financial constraints.
Further, the Company had also sold its manufacturing unit situated at Kala amb to Lumax Ancillary Limited, one of the Group Company by way of Slump sale.
Against investment by your Company in various entities, your Company has received financial of these entities for the year 2016-17 confirming that the dividend income for the said year amounting to
Rs 87.49 mn is due to your Company. The same will be received by the Company after approval of dividend by shareholders of respective entities in their AGM.
No other material changes and commitments affecting the Financial position of the Company have occurred between April 1, 2017 and the date of this report.
INFORMATION ON CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO
Disclosure of information regarding Conservation of Energy, Research & Development, Technology Absorption and Foreign Exchange Earning and Outgo etc. under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is annexed separately as Annexure H.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There were no significant and material orders passed by the Regulators / Courts / Tribunals, which would impact the going concern status of the Company and its future operations.
SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013
The Company has zero tolerance towards sexual harassmentattheworkplaceandtowardsthisend,has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. All employees are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints, if any, received on sexual harassment. During the financial year under review, the Company has not received any complaints of sexual harassment from any employees of the Company.
The Company is a regular payer of taxes and other duties to the Government. During the year under review, company paid all its statutory dues & presently no dues are outstanding more than six months. Company ensures payment of all dues to exchequer well within timeline as applicable.
It is our belief that we have a leadership team with the right experience and skills to take us into the next decade of growth. We continue to build our skills and add appropriate resources, which will help the company deliver solid results in the years to come. Your Directors place on record their appreciation for the continued co-operation and support extended to the Company by its highly valued customers, Joint Venture Partners, all the shareholders, Financial institutions & Banks, various Government Agencies.
Your Directors also wish to place on record their sincere thanks and appreciation for the continuing support and unstinting efforts of vendors, dealers, business associates and employees in ensuring an excellent all around operational performance.
|For and on behalf of the Board of Directors||D.K. JAIN|
|Place: New Delhi||Chairman|
|Dated: May 15, 2017||DIN:00085848|