Magna Eletrocasting Ltd Directors Report.

Dear Shareholders,

Your Directors have pleasure in presenting the 30th Annual Report and Audited Accounts of the Company for the year ended 31st March, 2020.

FINANCIAL RESULTS

The highlights of the performance of your Company during the financial year 2019-20 are given hereunder;

(Rs. in Lakhs)
For the Financial year ended 31.03.2020 31.03.2019
Total Revenue 9,847.19 12,587.59
Gross Profit before interest, depreciation, exceptional, extraordinary items and income tax 1,298.13 2,073.93
Finance Cost 11.58 29.03
Depreciation 436.45 543.22
Profit before Exceptional & Extra-ordinary items 850.10 1,501.68
Exceptional Items(Income) - -
Profit before tax 850.10 1,501.68
Provision for Income tax 207.68 374.17
for Deferred tax (26.24) (12.21)
Profit for the period 668.66 1,139.72

IMPACT OF PANDEMIC CORONA VIRUS- COVID 19 AND OUTLOOK FOR THE YEAR 2020-21:

As you are aware the entire world was affected by the deadly novel corona virus commonly known as COVID 19. This virus attack has crippled the entire global economy apart from leading to several loss of lives throughout the world. This had an impact on our Country also resulting in lock down of entire operations for nearly 2 months.

The normal operating activities of the Company were affected from the second half of the March, 2020 and the entire operations were suspended w.e.f. 25th March, 2020. This affected both the turnover and profitability targeted for the month of March, 2020 and the projected targets for the financial year ended 2020 were not met.

The Company commenced its partial operations w.e.f. 6th May, 2020 after the lockdown measures were liberalized and after obtaining necessary approvals from the authorities concerned. This will have a major impact on the financials for the financial year 2020-21 as there was no manufacturing/sales during the month of April, 2020.

There is a lot of uncertainty in the market served by the Company especially in the Auto, Oil & gas, Off Highway and General Engineering sectors. Our Customers are not able to predict their requirements for the year 2020-21. We are operating on a month to month basis based on the immediate requirements of the Customers. Further the exodus of migrant labourers has resulted in the Company not being able to utilize its capacity. Further new labourers, when recruited will entail additional costs like increase labour cost, training, lower productivity and higher rejections. The combination of uncertain market conditions, coupled with unproven labour capability will result in subdued performance for the financial year 2020-21.

After the commencement of partial operations, the Company has put in place Standard Operating Procedures based on the guidelines issued by the Government to be followed by the employees and the Industry.

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 reduced by about 22% from Rs. 12292.39 Lakhs to Rs. 9632.13 Lakhs. Consequent upon the reduction, the Profit Before Tax has also reduced from Rs. 1501.68 Lakhs in the previous year to Rs. 850.10 Lakhs in the current year.

The above decline in operating revenue and profitability is because of the weak demand for castings from both the export and domestic market during the year, coupled with the impact of COVID 19 in March 2020, the details of which have been dealt with separately in this report elsewhere.

Further the increase in prices of key raw materials and other input costs affected the profitability of the Company.

The Wind Energy Division generated a revenue of Rs. 454.13 Lakhs during the year as against Rs. 520.79 Lakhs, in the previous year. The reduced revenue is because of the low wind velocity 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 is implementing a project for reclamation of Green Sand in foundry process. This will enable the Company to conserve precious natural resources apart from being environment friendly and cost effective. The Company is also planning to install a new furnace Hood so that alternate cheaper raw materials can be used.

FUTURE PLANS

The Company for the immediate future plans to judiciously invest in small facilities which will help in the use of alternate raw materials, increased productivity and improved quality.

Though the Company is evaluating various new technologies, it believes the present situation calls for a carefully calibrated actions and situation will be reviewed periodically.

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 obtained ISO 14001:2015 Certification during the year.

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. 3491.59 lakhs is retained in the Statement of Profit & Loss.

DIVIDEND

For the financial year 2019-20, the Board of Directors at their meeting held on 13th February, 2020, had declared an interim dividend of Rs. 2.50/- per share (25%) on the paid-up share capital of 45,82,200 equity shares. An amount of Rs. 114.56 Lakhs has been paid as interim dividend on March, 2020. The Board of Directors have recommended that the interim dividend be considered as final dividend for the financial year ended 31st March, 2020.

SHARE CAPITAL

The paid-up capital of the Company as at 31.03.2020 stood at Rs. 4,58,22,000/- divided into 45,82,200 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 2012-13 is due for remittance on 1st November, 2020 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, 7900 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.

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 B and forms part of this report.

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 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 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.

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 2019-20 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 for fixing and revising remuneration of Directors, Key Managerial Personnel, Senior Management Personnel and employees of the Company. The detailed Remuneration Policy can be accessed on the Companys website at the link https://www.magnacast.com/uploads/invsubpdf/invsubpdf2020-01-29-5b8n5e315cdee65eb.pdf and the Salient features of Remuneration policy of the Company:

i. Formulate the criteria for determining qualifications, positive attributes and independence of a director and recommend to the Board a policy relating to the remuneration of Directors, key managerial personnel and other employees.

ii. Formulation of criteria for evaluation of performance of Independent Director and the Board

iii. Devising a policy on Board diversity and succession plan

iv. Identify persons who are qualified to become Director and persons who may be appointed in Key Managerial and Senior Management positions in accordance with the criteria laid down in this policy.

v. Recommend to the Board, appointment and removal of Director, KMP and Senior Management Personnel.

vi. Identify whether to extend or continue the term of appointment of the Independent Director on the basis of the report of their performance evaluation.

vii. To formulate any other policies and or schemes for the benefit of employees of the Company.

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 2019-20 were in the ordinary course of business and on an arms length basis. The particulars of material related party transactions is provided in the Form AOC-2 and annexed to the Boards Report as Annexure-C.

The Policy on Related Party Transactions as approved by the 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/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, 2020 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 D 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 ad 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 2019-20, the Company has undertaken projects in the areas of Healthcare, Education,Environment and Women/Children Welfare etc,. These projects are by and large in accordance with Schedule VII of the Companies Act, 2013.

As part of its CSR activities, the Company had laid Pavered Blocks at the Government Higher Secondary School, Kinathukadavu manufactured by the Company out of residual sand from foundry process. The total value of such Pavered Block laid was Rs. 5.00 Lakhs.

The details of CSR activities for the year are furnished separately vide Annexure E 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/invsubpdf2020-01-29-q6y15e315c4861a78.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. Further, the Members at the Annual General Meeting held on 19th August, 2019 re-appointed Sri. C. R. Swaminathan (DIN: 00002169), Sri. K. Gnanasekaran (DIN: 00133645), Dr. R. Nandini (DIN: 00002223) & Dr. Jairam Varadaraj (DIN: 00003361) as Independent Directors of the Company for a second term of 5 years with effect from 19th August, 2019.

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

During the year, the Company did not accept or renew any fixed deposits and no fixed deposits remained unclaimed with the Company as on 31st March, 2020.

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. 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. The Company has received a certificate from the Statutory Auditors to the effect that their appointment as the Statutory Auditors of the Company, would be within the limits prescribed under section 139 of the Companies Act, 2013.

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 2020-21 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 2019-20 is annexed as Annexure F 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 2020-21. 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 2020-21 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.

HUMAN RESOURCES AND INDUSTRIAL RELATIONS

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.

This has ensured to retain talent within the organization.

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 2019-20:

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 G 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 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/ invsubpdf2020-02-10-9q3i5e4127030df7c.pdf

ACKNOWLEDGEMENT

The Directors wish to place on record their appreciation of the support and co-operation extended by the Companys Bankers M/s. 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.