magna electro castings ltd share price Directors report


Dear Shareholders,

Your Directors have pleasure in presenting the 33rd Annual Report and Audited Accounts of the Company for the year ended 31st March, 2023.

FINANCIAL RESULTS

The highlights of the performance of your Company during the financial year 2022-23 are given hereunder;

(Rs. in lakhs)

For the Financial year ended

31.03.2023 31.03.2022

Total Revenue

16793.63 13747.47

Profit before interest, depreciation, exceptional, extraordinary items and income tax

2896.54 1526.10

Finance Cost

34.42 32.32

Depreciation

550.37 458.88

Profit before Exceptional & Extra-ordinary items

2311.75 1034.90

Exceptional Items (Income)

- -

Profit before tax

2311.75 1034.90

Provision for Income tax

646.58 300.00

for Deferred tax

(47.06) (38.00)

Profit for the period

1712.23 772.90

FINANCIAL HIGHLIGHTS

The financial summary /highlights for the last five years is furnished vide Annexure-A to this Report

OPERATIONS

The Operating Revenue of the Company has increased by 21.20% from Rs.13584.04 Lakhs in the previous year to Rs.16464.29 Lakhs in the current year. Further the Profit Before Tax has also increased by 123.38% from Rs.1034.90 Lakhs in the previous year to Rs.2311.75 Lakhs in the current year. The increase in operating revenue and profitability was due to favourable market condition, product mix and input cost. The Export Revenue has also registered an increase of 28.15% over the previous year.

The raw material cost were relatively stable during the financial year ended 31st March, 2023. However the power tariff was increased by TANGEDCO and this has resulted in a marginal increase of 3.5% in Power Cost.

In order to comply with the ESG requirements of Multi-National companies, we are pleased to report that 80% of the Companys energy is green/ renewable energy which is met through our existing Windmills and generation of Solar Power on a Captive User basis. Further we plan to invest in Sand Reclamation Systems so that the burden on the environment is substantially reduced.

The Wind Energy Division generated a revenue of Rs.397.48 Lakhs during the year as against Rs.461.13 Lakhs, in the previous year. One Wind Energy Generator 750 KW was disposed off during the financial year 2022-23.

During the year, the Company has invested Rs.144 Lakhs in the equity shares of First Energy TN1 Private Limited for generation of Solar Power on a Captive User basis for a capacity of 4 MW. This project was commissioned during the last week of December, 2022 and has since been generating Solar Power.

There has been no change in the nature of business of the Company.

DIVIDEND

Your Directors are pleased to recommend, subject to the approval of the shareholders, a dividend of Rs.3.00 per share, i.e. at the rate of 30% for the year on the paid-up equity share capital of the Company as on the reporting date. The dividend, if approved, will absorb an amount of Rs.126.96 Lakhs and will be paid to shareholders on approval, subject to deduction of tax at source.

NEW PROJECTS IMPLEMENTED DURING THE YEAR

During the year under review, the Company has installed some balancing equipments/machinery which will enhance the production activities of the Company. Civil works were also undertaken to increase the floor space of the finishing division and machine shop. Roads were also laid/ re-laid to facilitate easy of movement of vehicles inside the Plant.

The Company has procured land of 1.80 acre near the plant for future use of the Company.

FUTURE PLANS

The Company is planning to augment its molding capacity, which will enable the Company to produce castings in different weight segments to cater to the requirements of its customers.

QUALITY RECOGNITIONS

As a part of quality improvement initiatives, the Company has obtained new certification under Pressure Equipment Safety Regulations (PESR). During the year the Company obtained re-certification of the following standards-IATF 16949 & ISO 9001 Certification, Pressure Equipment Directive (PED) requirements, Transportation & Power Generation (TPG) requirements. Further the Company has also received Re- Certification of EMS ISO 14001 Environmental System certification and Marine Certification as per DNV Rules for Classification of Ships. In addition to this, the Company also complies with Supplier Assessment Audits conducted by its customers constantly.

FINANCE

The Company incurred a finance cost of Rs.34.42 Lakhs during the year. As on the date of this report, there is no long term debt obligation for the Company.

TRANSFER TO RESERVES

The Company has transferred Rs.200 Lakhs out of the current year profits to General Reserves during the year and an amount of Rs.4961.80 lakhs is retained in the Statement of Profit & Loss.

SHARE CAPITAL

The paid-up capital of the Company as at 31.03.2023 stood at Rs.4,23,21,040/- divided into 42,32,104 equity shares of Rs.10/- each. During the year under review, the Company has not made any fresh issue of shares.

TRANSFER OF UNCLAIMED DIVIDEND TO EDUCATION AND PROTECTION FUND:

In terms of Section 124 & 125 of the Companies Act, 2013, any unclaimed or unpaid Dividend relating to the Financial Year 2015-16 is due for remittance on 22nd October, 2023 to the Investor Education and Protection Fund established by the Central Government.

Further, pursuant to Section 124(6) of the Companies Act, 2013 read with Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, 8500 Equity Shares of Rs.10/- each on which dividend had remained unclaimed for a period of 7 years have been transferred to the credit of Demat Account identified by the IEPF Authority during the year under review.

WEB LINK OF ANNUAL RETURN

The Annual Return of the Company for the financial year 2022-23 as required under Section 92(3) of the Companies Act, 2013 is available on the website of the Company and can be accessed on the Companys website at the link https://www.magnacast.com.

BOARD AND ITS COMMITTEE MEETINGS CONDUCTED DURING THE PERIOD UNDER REVIEW

The details of the composition of the Board and its Committees namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, CSR Committee and of the Meetings held and attendance of the Directors at such Board / Committee Meetings are provided in the Corporate Governance Report under relevant heads which forms a part of this Report.

STATEMENT ON COMPLIANCE WITH SECRETARIAL STANDARDS

The Directors have devised proper systems to ensure compliance with the provisions of all applicable Secretarial Standards and that such systems are adequate and operating effectively. The Company has duly complied with Secretarial Standards issued by the Institute of Company Secretaries of India on meeting of the Board of Directors (SS-1) and General Meetings (SS-2).

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to requirement of Section 134(3)(c) of the Companies Act, 2013, with respect to Directors Responsibility Statement, it is hereby confirmed that -

a) In the preparation of the annual accounts, the applicable accounting standards have been followed and there are no material departure from those standards;

b) 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 of the Company for that period;

c) The Directors have taken proper and sufficient care for 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 have prepared the annual accounts 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; and

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

DETAILS IN RESPECT OF FRAUDS REPORTED BY AUDITORS UNDER SECTION 143(12) OF THE COMPANIES ACT, 2013 OTHER THAN THOSE WHICH ARE REPORTABLE TO THE CENTRAL GOVERNMENT

There were no instances of frauds identified or reported by the Statutory Auditors during the course of their audit.

DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 and Regulation 16(1)(b) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [‘SEBI (LODR) / Listing Regulations] so as to qualify themselves as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 [‘SEBI (LODR)/Listing Regulations]. Further, they have also declared that they are not aware of any circumstance or situation, which exists or may be reasonably anticipated, that could impair or impact their ability to discharge their duties with an objective independent judgment and without any external influence.

Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent:

Sri. K Gnanasekaran, Dr. R Nandini, Dr. Jairam Varadaraj, Sri. G D Rajkumar and Smt. Vijayalakshmi Narendra.

Pursuant to Rule 6(3) of the Companies (Appointment and Qualification of Directors) Rules, 2014, the Independent Directors have submitted necessary declaration of compliance with Rule 6(1) and Rule 6(2) of the said Rules. They have confirmed that their names have been included in the data bank of the Indian Institute of Corporate Affairs.

STATEMENT REGARDING OPINION OF THE BOARD WITH REGARD TO INTEGRITY, EXPERTISE AND EXPERIENCE (INCLUDING THE PROFICIENCY) OF THE INDEPENDENT DIRECTORS APPOINTED DURING THE YEAR

The Board of Directors have evaluated the Independent Directors appointed/ re-appointed during the year 2022-23 and opined that the integrity, expertise and experience (including proficiency) of the Independent Directors is satisfactory.

COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND OTHER MATTERS PROVIDED UNDER SECTION 178(3) OF THE COMPANIES ACT, 2013

The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy on nomination, appointment and remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and employees of the Company including criteria for determining qualifications, positive attributes, independence of a Director and other matters pursuant to the provisions of Section 178 of the Companies Act, 2013 and in terms of Regulation 19(4) of the SEBI Listing Regulations. The detailed Remuneration Policy can be accessed on the Companys website at the link https://www.magnacast.com/uploads/invsubpdf/nomination-and-remuneration- policy-31012022-amended-subd62d0ea3371161.pdf

COMMENTS ON AUDITORS REPORT

There are no qualifications, reservations or adverse remarks or disclaimers made by M/s. VKS Aiyer & Co, Statutory Auditors and M/s. MDS & Associates LLP Secretarial Auditors in their respective audit reports.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

There were no loans, guarantees made by the Company under Section 186 of the Companies Act, 2013 during the year under review. However, the Company has invested in the Equity Shares of First Energy TN1 Private Limited to the extent of Rs.144 Lakhs for Captive Consumption Model- Solar Power Project during the year.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All transactions entered into with related parties as defined under the Companies Act, 2013 and Regulation 23 of SEBI (Listing Obligations & Disclosure Requirements) Regulations, 2015 (as amended) during the financial year 2022-23 were in the ordinary course of business and on an arms length basis. Since there are no transactions which are not on arms length basis and material in nature, the requirement of disclosure of such related party transactions in Form AOC-2 does not arise.

The Policy on Related Party Transactions as approved by the Audit Committee and Board of Directors of the Company has been uploaded on the Companys website and may be accessed through the link at https://www.magnacast.com/uploads/invsubpdf/rpt-policy-revised-01042022-i08w626a42626c262.pdf

MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There have been no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year of the Company to which the financial year ended 31st March, 2023 relate and the date of the report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

The information pertaining to conservation of energy, technology absorption, Foreign Exchange Earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is furnished in Annexure-B and is attached to this report.

STATEMENT CONCERNING DEVELOPMENT AND IMPLEMENTATION OF RISK MANAGEMENT POLICY OF THE COMPANY

The Company continues to focus attention on the risk areas identified and in case of any adverse situation, suitable mitigation steps are taken. The Company has adopted a comprehensive and integrated risk appraisal, mitigation and management process. The risk mitigation measures and procedures of the Company are placed before the Audit Committee/ Board periodically for review and improvement. The Company does not have any Risk Management Policy as the elements of risk threatening the Companys existence are very minimal.

DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Board had formed a Corporate Social Responsibility Committee of Board of Directors comprising of Dr.R.Nandini, Sri. G. D. Rajkumar and Sri.N.Krishna Samaraj. The CSR policy of the Company deals with allocation of funds, activities, identification of programs, approval, implementation, monitoring and reporting mechanisms under the policy.

The brief outline of the Corporate Social Responsibility ("CSR") Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are furnished separately vide Annexure-C to this Report. The policy relating to CSR has been displayed on the Companys website and can be accessed at https://www.magnacast.com/uploads/invsubpdf/csr-policy-tzos608aa07b65155.pdf

ANNUAL EVALUATION OF THE BOARD ON ITS OWN PERFORMANCE AND OF THE INDIVIDUAL DIRECTORS

Pursuant to the provisions of the Companies Act, 2013, the Board of Directors evaluated the annual performance of the members of the Board and its Committees vis-a-vis the nature of business of the Company, its performance during the year and the contribution of each of the Directors based on the criteria laid down by the Nomination and Remuneration Committee.

The Independent Directors held a meeting during the year and inter-alia, reviewed the performance of the NonIndependent Directors and the Board as a whole and assessed the quality, quantity and timeliness of flow of information between the Company and the Board.

DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors at their Meeting held on 30th May, 2023 have appointed Sri. Ajeya Vel Narayanaswamy (DIN: 07553660) as an Additional Non-Executive and Non-Independent Director and he holds office up to the date of this Annual General Meeting in compliance with Regulation 17(1C) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In the opinion of the Board, Sri. Ajeya Vel Narayanaswamy fulfils the conditions as specified under the Act read with the Rules made thereunder for his appointment as a Non-Executive Director of the Company subject to approval of the shareholders in the ensuing Annual General Meeting.

The Board of Directors at their Meeting held on 30th May, 2023 have appointed Smt. Vijayalakshmi Narendra (DIN: 00412374) as an Additional Non-Executive and Independent Director to hold office for a period of 5 years w.e.f. 30.05.2023 and they hold office up to the date of this Annual General Meeting in compliance with Regulation 17(1C) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In the opinion of the Board, Smt. Vijayalakshmi Narendra fulfils the conditions as specified under the Act read with the Rules made thereunder and the Listing Regulations for his appointment as an Independent Non-Executive Director of the Company subject to approval of the shareholders in the ensuing Annual General Meeting. The Company has also received declaration from the appointee Director that she fulfils the criteria of independence as prescribed under Section 149(6) of the Act as well as Regulation 16(1)(b) of the Listing Regulations.

The Board of Directors on recommendation of the Nomination and Remuneration Committee recommends their respective appointment to the shareholders, at the ensuing Annual General Meeting. Accordingly, necessary resolutions proposing the appointment of Sri. Ajeya Vel Narayanaswamy as Director and Smt. Vijayalakshmi Narendra as Independent Director of the Company have been included in the Agenda of the Notice convening the Annual General Meeting for the approval of the members.

Sri. J. Vijayakumar (DIN: 00002530) Director retires by rotation at the Annual General Meeting and being eligible, offers himself for reappointment. Your Directors recommend his re-appointment.

Key Managerial Personnel of the Company as required pursuant to Section 2 (51) and 203 of the Companies Act, 2013 are:

Sri. N. Krishna Samaraj

- Managing Director,

Sri. M. Malmarugan

- Executive Director

Sri. R. Ravi

- Chief Financial Officer and

Smt. Sangeetha. C

- Company Secretary.

SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiaries, Joint ventures or Associate Companies.

FIXED DEPOSITS

Since the Company has not accepted any fixed deposit covered under Chapter V of the Companies Act, 2013, there are no deposits remaining unclaimed or unpaid as on 31st March, 2023 and accordingly, the question of default in repayment of deposits or payment of interest thereon during the year does not arise.

DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANYS OPERATION IN FUTURE

There were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Companys operation in future.

ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS

The Company has an adequate Internal Control System, commensurate with the size, scale and complexity of its operations. The Audit Committee of the Board periodically reviews the Internal Financial Control Systems and their adequacy and recommends corrective action as and when necessary to ensure that an effective internal control mechanism is in place.

The Directors confirm that the Internal Financial Control (IFC) systems are adequate with respect to the operations of the Company. The report of Auditors pursuant to Section 143(3)(i) of the Companies Act, 2013 certifying the adequacy of Internal Financial Control is annexed with the Auditors Report.

AUDITORS

STATUTORY AUDITORS

M/s. VKS Aiyer & Co., (Firm Registration No. 000066S), Chartered Accountants, Coimbatore, were appointed as the Statutory Auditors of the Company to hold office from the conclusion of the 31st Annual General Meeting held on 23rd September, 2021 for a period of 5 consecutive years till the conclusion of the 36th Annual General Meeting to be held in the year 2026.

The Company has received necessary consent letter and certificate from M/s. VKS Aiyer & Co., (Firm Registration No. 000066S), Chartered Accountants, Coimbatore, to the effect that their appointment, if made, would be within the prescribed limits under Section 141(3) of the Act and that they are not disqualified from being appointed as the Statutory Auditors of the Company.

SECRETARIAL AUDITORS

The Board has appointed M/s. MDS & Associates LLP! Company Secretaries, Coimbatore (Peer Review No. 3030/2023) as the Secretarial Auditors of the Company for the year 2023-24 to carry out the Secretarial Audit, pursuant to the provisions of Section 204 of the Companies Act, 2013.

The report of the Auditors for the financial year 2022-23 is annexed as Annexure-D to this Report.

COST AUDITORS

The Board of Directors on the recommendation of the Audit Committee, has appointed M/s. SBK & Associates, Cost Accountants, Chennai as the Cost Auditors of the Company for the financial year 2023-24. Pursuant to Section 148 of the Companies Act, 2013 read with Rule 14 of the Companies (Accounts) Rules, 2014, the remuneration payable for the year 2023-24 to the Cost Auditors of the Company is subject to ratification by the Shareholders at the ensuing Annual General Meeting. The Board recommends their remuneration.

DISCLOSURE ON MAINTENANCE OF COST RECORDS

The maintenance of cost record as specified by the Central Government under Section 148(1) of the Companies Act, 2013 is applicable to the Company and accordingly the cost accounts and records are made and maintained.

DETAILS OF APPLICATION MADE OR ANY PROCEEDING PENDING UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 DURING THE YEAR

No applications have been made and no proceedings are pending against the Company under the Insolvency and Bankruptcy Code, 2016.

DETAILS OF DIFFERENCE BETWEEN AMOUNT OF THE VALUATION DONE AT THE TIME OF ONE TIME SETTLEMENT AND THE VALUATION DONE WHILE TAKING LOAN FROM THE BANKS OR FINANCIAL INSTITUTIONS ALONG WITH THE REASONS THEREOF

The disclosure under this clause is not applicable as the Company is debt free and has not undertaken any onetime settlement with the banks or financial institutions.

INDUSTRIAL RELATIONS

The relationship between the management and the employees at all levels during the year under review has been cordial and productive.

DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORK PLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013

The Company has complied with the provisions relating to the constitution of Internal Complaints Committee under the Sexual Harassment of Women at Workplace in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has been set up to define the policy and redress complaints received. All employees (permanent, contractual, temporary, trainees) are covered under this policy.

The following is a summary of sexual harassment complaints received and disposed of during the year 2022-23:

i. Number of complaints received - Nil

ii. Number of complaints disposed of - NA

iii. Number of complaints pending - Nil

PARTICULARS OF EMPLOYEES

Statement pursuant to Section 134 of the Companies Act, 2013, read with the Companies (Particulars of Employees) Rules, 1975 and Section 197(12) of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed to Annexure-E is attached to this report.

CORPORATE GOVERNANCE

A report on Corporate Governance is annexed and forms part of this report. The Company has complied with the conditions relating to Corporate Governance as stipulated in Regulation 27 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

AUDIT COMMITTEE

The Audit Committee of the Board of Directors has been duly constituted in accordance with the provisions of Section 177 of the Companies Act, 2013. Details relating to the composition, meetings and functions of the Committee are set out in the Corporate Governance Report forming part of this Annual Report. The Board has accepted the Audit Committee recommendations during the year whenever required and hence no disclosure is required under Section 177(8) of the Companies Act, 2013 with respect to rejection of any recommendations of Audit Committee by the Board.

CEO/CFO CERTIFICATION

As required under Regulation 33 (2) (a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Managing Director and the Chief Financial Officer of the Company have furnished necessary certificate to the Board on the Financial Statements presented.

VIGIL MECHANISM AND WHISTLE BLOWER POLICY

The Company has provided for adequate safeguards to deal with instances of fraud and mismanagement and to report concerns about unethical behavior or any violation of the Companys Code of Conduct. During the year under review, there were no complaints received under this mechanism. The policy can be accessed on the Companys website at https://www.magnacast.com/uploads/invsubpdf/whistle-blower-policymagna-30012022- m7cc63f9e7353a01a.pdf

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation of the support and co-operation extended by the Companys Bankers M/s. Union Bank of India and M/s. Axis Bank, the various Government Agencies and in particular the Tamil Nadu Electricity Board and the employees of the Company at all levels. The Directors would also like to thank all the stakeholders for continuing to repose faith in the Company and its future.

We pray for the grace of the Almighty for further growth of the Company.

By Order of the Board

For MAGNA ELECTRO CASTINGS LIMITED

Place : Coimbatore

K Gnanasekaran

N. Krishna Samaraj

Director

Managing Director

Date : 30.05.2023

DIN: 00133645

DIN: 00048547