Magna Eletrocasting Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the 31st Annual Report and Audited Accounts of the Company for the year ended 31st March, 2021.

FINANCIAL RESULTS

The highlights of the performance of your Company during the financial year 2020-21 are given hereunder; (Rs. in lakhs)

For the Financial year ended 31.03.2021 31.03.2020
Total Revenue 9901.87 9847.19
Gross Profit before interest, depreciation, exceptional, extraordinary items and income tax 1123.77 1298.13
Finance Cost 5.16 11.58
Depreciation 417.18 436.45
Profit before Exceptional & Extra-ordinary items 701.43 850.10
Exceptional Items(Income) - -
Profit before tax 701.43 850.10
Provision for Income tax 211.49 207.68
for Deferred tax (27.92) (26.24)
Profit for the period 517.86 668.66

COVID 19 Impact:

The Covid 19 pandemic has impacted the businesses across the world including India and has emerged as a global challenge to mankind. There was a severe disruption in the operations of the Company, especially during the first quarter of the FY 2020-21, when the Government imposed total lockdown measures and various restrictions were put in place to mitigate the Covid 19 impact.

The Company took various initiatives to support the employees and their families during this crucial period as the well-being, of the employees, both physical and emotional, is of utmost importance.

The Company assessed the impact of Covid 19 on various parameters, especially on the liquidity position, carrying amounts of inventories, trade receivables, fixed and other assets of the Company.

This assessment was based on various inputs from internal and external sources and estimates and the same does not indicate any material impact on the carrying value of its assets and liabilities.

The Company will continue to monitor and assess the impact of Covid 19 especially on the financials.

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 remained more or less at the same level as in the previous year and increased only by about 1.55 % from Rs. 9632.13 Lakhs in the previous year to Rs. 9781.88 Lakhs in the current year. Whereas the Profit Before Tax has reduced from Rs. 850.10 Lakhs in the previous year to Rs. 701.43 Lakhs in the current year.

The above decline in profitability was mainly because of the fact that the plant did not operate for almost six weeks during April and May 2021 due to the general lockdown arising out of the Covid 19 pandemic. As a result, there were no production and dispatches during this period. Despite the Company was able to marginally increase the turnover compared to the previous year.

The key factors for the sharp decline in the profitability of the Company were because of

(i) decline in Export Incentive as the Government discontinued the MEIS scheme during the Financial year,

(ii) increase in Employee costs incurred during the pandemic period in order to retain the employees,

(iii) one time expenditure incurred for Buy back of Equity Shares and

(iv) the unprecedented increase in prices of critical raw materials by almost 50% during the last quarter of the financial year. Though the Company has approached its customers for price increase, the compensation from the customers will come about only in the current financial year.

The Wind Energy Division generated a revenue of Rs. 460.72 Lakhs during the year as against Rs. 454.13 Lakhs, in the previous year. The marginal increase in revenue was because of better wind evacuation during the year.

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

NEW PROJECTS IMPLEMENTED DURING THE YEAR

During the year under review, the Company installed Green Sand Reclamation Plant. This will help the Company in conserving the precious natural resource namely sand apart from being environment friendly and cost effective. The Company also installed a new Fume Extraction System in the furnaces which will enable the Company to use alternative raw materials at a lower cost as well as keeping the environment free of pollution. The Company also installed certain balancing equipments to enhance the manufacturing capabilities. The total capital expenditure during the year was Rs. 445.18 Lakhs, out of which Capital work in progress is Rs. 226.44 which will be installed and commissioned during the Financial Year 2021-22.

The Company also developed new grades of castings for its customers especially in the areas of turbo chargers, which have been well received by the customers.

FUTURE PLANS

The Company has plans to enhance its existing furnace capacity by installing one more furnace to augment its melting capacity. This will enable the Company to use its molding capacity more judiciously to meet the requirements of the customers. Necessary orders have been placed and will be commissioned by the second quarter of the current financial year.

QUALITY RECOGNITIONS

The Company has received certification for ISO/TS 16949:2016 standards, Pressure Equipment Directive and the existing standards 97/23/EC has improved to 2014/68/EU and Marine Certificate under DNV GL Rules for Classification- Ships. Further the Company has also obtained ISO 14001:2015 Certification.

FINANCE

We are pleased to inform the members that the Company continues to be debt free as at the reporting date.

TRANSFER TO RESERVES

The Company has transferred Rs. 200 Lakhs to General Reserves during the year and an amount of Rs. 3075.52 lakhs is retained in the Statement of Profit & Loss.

SHARE CAPITAL AND BUYBACK OF SHARES

In terms of Resolution passed by the Board of Directors at their meeting held on and after complying with necessary requirements of SEBI (Buy Back of Securities) Regulations, 2018, the Company had bought back 3,50,096 Equity Shares of Rs. 10/- each at an average cost of Rs. 175/- aggregating to Rs. 6,12,66,800/- from all the existing shareholders on a proportionate basis through Tender Offer process. The Buy-Back commenced on 27th October, 2020 and closed on 10th November 2020. During the Buy- Back equity shares were bought and extinguished in tranches in compliance with the SEBI (Buy-Back of Securities) Regulations, 2018 and SEBI (Depositories and participants) Regulations, 2018.

Consequent to the above, the paid-up share capital of the Company has been changed from Rs. 4,58,22,000/- divided into 45,82,200 equity shares of Rs. 10/- each to Rs. 4,23,21,040/- divided into 42,32,104 equity shares of Rs. 10/- each as at 31.03.2021.

DIVIDEND

Your Directors are pleased to recommend, subject to the approval of the shareholders, a dividend at the rate of Rs. 1.50 per share, i.e. at the rate of 15% 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. 63.48 Lakhs, subject to deduction of tax at source.

TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR 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 2013-14 is due for remittance on 1st November, 2021 to the Investor and 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, 7250 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 2020-21 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 Company’s website at the link https://www.magnacast.com/uploads/invsubpdf/magna-formmgt-7-2021-5-iwfe60e2ee115320a.pdf.

BOARD MEETINGS CONDUCTED DURING THE PERIOD UNDER REVIEW

The details of meetings of Board of Directors and Committees thereof and the attendance of the Directors in such meetings have been enumerated in the Corporate Governance 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 departures 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 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 have devised proper system to ensure compliance with the provisions of all the applicable laws and such systems were adequate and operating effectively;

COMPLIANCE WITH REQUIREMENT UNDER SECTION 143(12) OF THE COMPANIES ACT, 2013

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 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Based on the confirmation / disclosures received from the Directors and on evaluation of the relationships disclosed, the following Non-Executive Directors are Independent: Sri. C R Swaminathan, Sri. K Gnanasekaran, Dr. R Nandini and Dr. Jairam Varadaraj.

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

During the year 2020-21, there were no appointment/ re-appointment of the Independent Directors. However, the Board of Directors opined that the integrity, expertise, and experience (including proficiency) of the Independent Directors is satisfactory.

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

The Company pursuant to the provisions of Section 178 of the Companies Act, 2013 and in terms of Regulation 19(4) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 has formulated a policy on Nomination and Remuneration for its Directors, Key Managerial Personnel and senior management which interalia provides the diversity of the Board and provides the mechanism for performance evolution of the Directors. The details of this policy can also be accessed on the Company’s website at the link https://www.magnacast.com/uploads/invsubpdf/ invsubpdf2020-01-29- 5b8n5e315cdee65eb.pdf

COMMENTS ON AUDITORS’ REPORT:

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

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

There were no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provisions are not applicable.

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 during the financial year 2020-21 were in the ordinary course of business and on an arm’s length basis. The particulars of material related party transactions are provided in the Form AOC-2 and annexed to the Board’s Report as Annexure-B.

The Policy on Related Party Transactions as approved by the Board of Directors of the Company has been uploaded on the Company’s website and may be accessed through the link at https://www. magnacast.com/uploads/invsubpdf/invsubpdf2020-01-29-mfgw5e315d14263f1.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, 2021 relate and the date of the report except COVID-19 impact as stated above in this report and also explained in Management Discussion and Analysis 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 - C and is attached to this report.

RISK MANAGEMENT

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 is taking on necessary steps to safeguard the health hazards post by the Corona Virus and has put in place necessary measures. The Company also established risk management plan and assessment and the same has been reviewed by the Audit Committee and the Board on periodical basis.

The COVID-19 situation has brought a lot of uncertainties and the indications are that there will be shrinkage of volumes. The Company therefore is taking necessary actions to control variables and fixed costs, thereby increasing margins and lowering Break Even Point.

CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The Board had formed a Corporate Social Responsibility Committee of Board of Directors comprising of Sri.C.R.Swaminathan, Dr.R.Nandini 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.

As part of the initiatives under CSR for the year 2020-21, the Company has undertaken projects in the areas of Healthcare facilities exclusively due to Covid 19 spread. The Company also distributed daily household grocery products to the needy people residing in the nearby villages in collaboration with the local authorities. These projects are in accordance with Schedule VII of the Companies Act, 2013. The Company organized Covid 19 vaccination camps in its facility in collaboration with the local authorities for the benefit of its employees and also for persons residing in the nearby areas. The response was quite overwhelming.

The details of CSR activities for the year are furnished separately vide Annexure - D to this Report. The policy relating to CSR has been displayed on the Company’s 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 Non-Independent 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

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

Sri. N. Krishna Samaraj was re-appointed as Managing Director of the Company for a further period of 5 (Five) years with effect from 17th January, 2022 on the terms and conditions as set out in the Notice convening the Annual General Meeting. Necessary resolution in this regard has been proposed for the approval of the members at the ensuing Annual General Meeting.

Other than the above, there was no change in the composition of the Board of Directors of the Company.

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 - Chief Executive Officer
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 Deposits covered under Chapter V of the Companies Act, 2013, there are no deposits remaining unclaimed or unpaid as on 31st March, 2021 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 COMPANY’S OPERATION IN FUTURE

There were no significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and Company’s 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. Srikishen & Co, (FRN 004009S) Chartered Accountants, Coimbatore were appointed as the Statutory Auditors of the Company for a period of five years at the 26th Annual General Meeting of the Company held on 15th September, 2016. Hence M/s. Srikishen & Co., Chartered Accountants, Coimbatore retire at the forthcoming Annual General Meeting. The Directors take this opportunity in thanking M/s. Srikishen & Co., for the valuable services rendered by them during their tenure of audit.

Consequently the Board recommends the appointment of M/s. VKS Aiyer & Co., ( Firm Registration No.000066S), Chartered Accountants, Coimbatore as Statutory Auditors of the Company for a term of 5 years from the conclusion of the 31st Annual General Meeting of the Company, based on the review and recommendation of the Audit Committee. Further, the Company has received a certificate from the Statutory Auditors to the effect that their appointment, if made, would be within the limits prescribed under Section 139 of the Companies Act, 2013. The Directors take this opportunity in welcoming the new auditors M/s VKS Aiyer & Co.

Necessary resolution for the appointment of Statutory Auditors have been included in the Notice of the Annual General Meeting for the approval of the Members.

SECRETARIAL AUDITORS

The Board has appointed M/s. MDS & Associates, Company Secretaries in Practice, Coimbatore as the Secretarial Auditors of the Company for the year 2021-22 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 2020-21 is annexed as Annexure - E to this Report.

COST AUDITORS

The Board of Directors on the recommendation of the Audit Committee, has appointed M/s.SBK & Associates, Cost Accountants as the Cost Auditors of the Company for the financial year 2021-22.

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 2021-22 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 one-time settlement with the banks or financial institutions.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

During the year under review, the Company has provided necessary facilities especially healthcare insurance coverage and other sanitation facilities to employees of the Company to safeguard them and their family members from COVID-19 infection. The Company has been continuously focusing its attention on nurturing the talent of its employees by recognizing their performance and creating enough opportunities for their growth in the Company. 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 2020-21:

i. Number of complaints received - Nil

ii. Number of complaints disposed of – NA

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 - F 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 Obligation & 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 Company’s Code of Conduct. During the year under review, there were no complaints received under this mechanism. The policy can be accessed on the Company’s website at https://www.magnacast.com/uploads/invsubpdf/ invsubpdf2020-02-10- 9q3i5e4127030df7c.pdf

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation of the support and co-operation extended by the Company’s Bankers M/s. Union Bank of India (erstwhile Corporation Bank) and M/s. Indian 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 C.R.Swaminathan N. Krishna Samaraj
Date : 25.06.2021 Director Managing Director
DIN: 00002169 DIN: 00048547