Mahindra Composites Ltd Merged Directors Report

The Directors are pleased to present herewith the Thirty-second Annual Report and the Audited Accounts for the year ended 31st March, 2014 of your Company.

1. FINANCIAL RESULTS:

(Rupees in Lakhs)

	Year ended 31st March, 2014	Year ended 31st March, 2013
Gross income.	7380.43	5680.63
Profit/(Loss) before depreciation and interest.	280.48	190.07
Interest .	102.52	112.43
Depreciation.	202.96	172.50
Profit/(Loss) before tax	(24.99)	(94.86)
Provision for taxation:
	-	-
- Deferred	(7.00)	3.00
- Short provision for earlier years	-	-
	(7.00)	3.00
Exceptional item	96.19	-
Net profit/(loss) after tax	78.20	(97.86)
Balance in profit & loss account - B/F	759.08	856.94
	837.28	759.08
Appropriation recommended by the Directors:
	Nil	Nil
Income tax on distributed profit	Nil	Nil
Transfer to general reserve	-	-
Balance in profit & loss account	837.28	759.08
	837.28	759.08

2. OPERATIONS:

Sales of Company has grown by 30% in F14 inspite of slowdown in switchgear, construction and automotive industry. This was possible due to customer engagement in Electrical switch gear industry and strongly connecting with meter manufacturers for Electra.

Company produces SMC/DMC compounds and sells them to Electrical Switchgear OEMs and their moulding vendors. The Company itself moulds a portion of these compounds to produce automotive components and own products like electra and Sarovar. The Compound business has grown up 27% and major growth in compound has received from DMC which has grown 36%. The sales to Legrand has gradually increased to 45T per month in F14.

Though the component business was flat compared to previous year, Electra received better orders and as a result its sales grew by 69%. Last years investment to increase product range is giving results. However some of the orders received have been postponed to next year due to slow movement in infrastructural development in the country.

Company has launched new product, SMC Panel Water Tank with brand name Sarovar on Mahindra Groups founder day 2nd October, 2012. The F14 sales for Sarovar was Rs.143 Lacs.

Rising input cost and rupee depreciation continue to reduce margins. Although initiatives of using alternative materials and sources resulted in limiting this impact, reduced volumes in market did not allow passing on all the cost increase to customers.

The Company has emphasized sustainability and both the plants have been certified for ISO 14001 & OHSAS 18001. This is helping to control wastages. The Company has been also certified TS16949 during F14.

3. DIVIDEND:

To conserve the resources of the Company your Directors do not recommend any payment of dividend.

4. DIRECTORS:

The Board has appointed Mr. Antonio Maria Pradera Jauregui, Mr. Ignacio Artazcoz Barrena, Mr. Jesus Maria Herrera Barandiaran, Mr. Jose Ramon Berecibar Mutiozabaland, Mr. Jose Velasco as an Additional Directors of the Company on 4th October, 2013. They hold office up to the forth coming Annual General Meeting.

The Company has received notices from members signifying their intention to propose Mr. Antonio Maria Pradera Jauregui, Mr. Jesus Maria Herrera Barandiaran, Mr. Jose Ramon Berecibar Mutiozabaland Mr. Jose Velasco as Directors of the Company.

Mr. Ignacio Artazcoz Barrena resigned as Director of the Company. Your Board wish to place on record the valuable contribution made by him during his tenure as Director of the Company.

The Board has appointed Mr. Pedro Jesus Echegaray Larrea as an Additional Director of the Company on 10th February, 2014. He holds office up to the forth coming Annual General Meeting.

The Company has received notice from member signifying his intention to propose Mr. Pedro Jesus Echegaray Larrea as Director of the Company.

Mr.Hemant Luthra, Mr. R. R. Krishnan and Mr. B. M. Kataria , Directors of the Company retire by rotation and being eligible, offer themselves for re-appointment.

Mr. Dhananjay Mungale who is an independent director on the Board has expressed his intention for reappointment as Director of the Company at the forthcoming Annual General Meeting of the Company to comply with SEBI guidelines.

The Company has received notice from member signifying the intention to propose Mr. Dhananjay Mungale as Director of the Company.

5. AUDITORS:

M/s. Deloitte Haskins & Sells, Chartered Accountants, Mumbai retire and are eligible for re-appointment.

6. COST AUDIT REPORT:

Messrs. Dhananjay V. Joshi & Associates, Cost Accountants, Pune, (Firm Registration No.000030) conducted the audit of Cost Accounting Record maintained by the Company for the Financial Year 2012-13 and submitted their report to the Central Government, Ministry of Corporate Affairs, New Delhi. They were reappointed to conduct the Audit of the cost Accounting Records maintained by for Company for the Financial Year 2013-14. The Cost Auditors shall forward their report to the Central Government, Ministry of Corporate Affairs, New Delhi for the Financial Year 2013-14 within the prescribed time.

As required under the provisions of Section 224(1 B) read with Section 233B(2) of the Companies Act, 1956, the Company has obtained a written confirmation from Messrs. Dhananjay V. Joshi & Associates to the effect that they are eligible for re-appointment as Cost Auditors under the above-mentioned sections. The Audit Committee has also received a certificate from the Cost Auditor certifying their independence and arms length relationship with the Company.

7. PUBLIC DEPOSITS AND LOANS / ADVANCES :

Your Company has not accepted any deposits from the public or its employees during the year under review.

8. INFORMATION UNDER SECTION 217(1)(e) THE COMPANIES ACT, 1956:

Information required to be disclosed in terms of Section 217 (1) (e) of the Companies Act, 1956 read with Companies (Disclosure of particulars in the report of Board of Directors) Rules 1988 and also forming part of this report is given in the enclosed annexure A.

9. PARTICULARS OF EMPLOYEES :

Information required in terms of Section 217 (2A) of the Companies Act, 1956, read with amended Companies (Particulars of employees) Rules, 1975 and forming part of this Report is not enclosed as none of the employees is covered under these rules.

10. DIRECTORS RESPONSIBILITY STATEMENT :

Directors hereby state that:

i. In preparation of the annual accounts, the applicable accounting standards have been followed.

ii. The Directors have selected such accounting policies and applied them consistently and made judgment 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 or loss of the Company for that year.

iii. The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 1956 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities.

iv. The Directors have prepared the annual accounts on a going concern basis.

11. CORPORATE GOVERNANCE :

The Company has obtained a certificate from the Auditors of the Company regarding compliance of conditions of Corporate Governance. The same is annexed to this Report.

12. COMPLIANCE CERTIFICATE:

As per the requirement of Section 383A of the Companies Act, 1956, a Certificate from a Company Secretary stating that the Company has complied with all the provisions of this Act is attached to this report.

13. CHANGE IN SHAREHOLDING PATTERN AND PROPOSED SCHEME OF MERGER :

As a part of Mahindra Group Strategy to consolidate the auto components business and formation of a global alliance with CIE Automotive, Spain., the Board of Directors of the Company at their meeting held on 15th June, 2013, duly considering the recommendation of the Audit Committee and subject to regulatory approvals, have approved a Scheme of Amalgamation under Sections 391 to 394 of the Companies Act,1956, involving the Company with Mahindra Forgings Limited- subsequently renamed as Mahindra CIE Automotive Limited ("Transferee Company"), with effect from 1st October, 2013.("the Scheme").

As part of the above arrangement and in accordance with the Share Purchase Agreement dated 15th June, 2013, 1,341,203 equity shares representing 29.95% of the paid up equity share capital have been transferred by Mahindra & Mahindra Limited, and 220,000 equity shares representing 4.91% of the paid up equity share capital have been transferred by Mahindra Holdings Limited to Participaciones Internacionles Autometal DOS, S.L. ("PIA 2") in October2013. Consequently PIA has become a promoter and the Board of Directors of the company and the committees thereof have been reconstituted.

Also, PIA 2 (Acquirer) along with Autometal S.A, and CIE Automotive S.A., in their capacity as "Persons acting in Concert" with the Acquirer, made an open offer for acquisition of 1,164,616 equity shares of Rs.10 each representing 26.01% of the Total Equity Capital (including potential equity shares of ESOP scheme) from the public shareholders of the Company at a price of Rs.74.70 per share as described in Detailed Public Statement dated 15th June, 2013 and Letter of Offer dated 13th September, 2013. Consequent to the Open Offer, the Acquirer acquired 1,164,616 equity shares representing 26.01 % of the paid up capital of the Company. Accordingly, the Acquirer now holds 60.87% of the total equity capital of the company (including potential equity shares of ESOP scheme).

Securities and Exchange Board of India ("SEBI") vide its observation letter dated 7th March, 2014 has conveyed its comments on the draft Schemes to the BSE Limited ("BSE"), the designated stock exchange.

Pursuant to the above SEBI letter, the BSE vide its Observation letter dated 7th March 2014 has conveyed its no-objection to file the Schemes with the Honble High Court of Bombay, subject to certain conditions specified therein.

Accordingly, on 14th March, 2014, the Company has filed applications under Sections 391 to 394 of the Companies Act, 1956 before the Honble High Court Of Judicature at Bombay, for seeking its directions for holding meetings of its equity shareholders and holding/ dispensation of meetings of its secured and unsecured creditors, to seek their approvals to the said Scheme. The Company has also taken approval of the public shareholders to the said scheme by holding Shareholders Meeting on 6th June, 2014 and through a postal ballot/e-voting process on 19th June, 2014 as required under the provisions of the relevant circulars issued by SEBI.

14. STOCK OPTIONS :

The Remuneration / Compensation Committee of the Board of Directors of the Company ("the Committee") has allotted 510 equity shares to the permanent employee and 834 equity shares to non-executive Director of the company under Employees Stock Options Scheme. The Remuneration / Compensation Committee of your Company has not granted any Stock Options to the employees during the year under review.

Details required to be provided under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are set out in Annexure 1 to this Report.

15. ENVIRONMENT & HEALTH :

Mahindra Composites Mangaon unit took measures to conserve Energy. Successful efforts were taken to reduce hazardous waste by controlling process loss.

16. INDUSTRIAL RELATIONS :

During the year under review industrial relations remained satisfactory.

	FOR AND ON BEHALF OF THE BOARD
	HEMANT LUTHRA
	Chairman
Mumbai: 29th July, 2014.

ANNEXURE "A" TO THE DIRECTORS REPORT

Particulars as per the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules, 1988 and forming part of the Directors Report.

COMPOUND MANUFACTURING

1. The Company obtained UL approval against new customer requirements for Injection DMC as well Sheet Molding Compound towards MCCB global supply.

2. The DMC developed for Head lamp reflector, under validation with two prospective customers.

A. TECHNOLOGY ABSORPTION, ADAPTATION AND INNOVATION:

1. Mahindra Composites has entered into Technology License Agreement with Polmix srl, an Italian Compound manufacturer and Molder, tier one global supplier to one of our key customer in the field of MCB.

2. Expenditure on R & D:

	2013-2014	2012-2013
	Rs. in lakhs	Rs. in lakhs
(a) Capital . ........	Nil	Nil
(b) Recurring . ...	26.94	28.00
Total	26.94	28.00
Total R&D Expenditure as % of Total turnover .	0.41%	0.56%

B. FOREIGN EXCHANGE EARNINGS & OUTGO: Total Foreign Exchange Earnings and Outgo:

	2013-2014	2012-2013
	Rs. in lakhs	Rs. in lakhs
Earnings	464.56	430.54
Outgo.	831.96	663.57

 

	FOR AND ON BEHALF OF THE BOARD
	HEMANT LUTHRA
	Chairman
Mumbai: 29th July, 2014.

ANNEXURE 1 TO THE DIRECTORS REPORT FOR THE YEAR ENDED 31st MARCH, 2014.

Information to be disclosed under the Securities and Exchange Board of India (Employee Stock Option Scheme and Employee Stock Purchase Scheme) Guidelines, 1999.

	: 90,000
(b) The pricing formula . .	: Exercise Price of Rs.47.40 is calculated at a discount not higher than 15% of the average of the daily high and low of the price for the companys equity shares quoted on the Bombay Stock Exchange Limited during the 15 days preceding the Grant of the Options.
(c) Options vested . ........	: Nil
	: 1,344
(e) The total number of shares arising as a result of exercise of options .	: 1,344
(f) Options lapsed . ........	Nil
(g) Variation of terms of options . ..	Nil
	Rs.63,706
(i) Total number of options in force.	90,000
(j) Employee-wise details of options granted to:
(i) Senior managerial personnel. ......	As per list attached.
(ii) Any other employee who received a grant in any one year of option amounting to 5% or more of option granted during that year	None
(iii) Identified employees who were granted option, during any one year, equal to or exceeding 1% of the issued capital (excluding outstanding warrants and	None
Diluted Earnings per Shares (EPS) pursuant to issue of shares on exercise of option calculated in accordance with Accounting Standard (AS) 20 Earnings per Share .....	(Rs.1.77)
Where the Company has calculated the employee compensation cost using the intrinsic value of the stock options, the difference between the employee compensation cost so computed and the employee compensation cost that shall have been recognised if it had used the fair value of the options, shall be disclosed. The impact of this difference on profits and on EPS of the Company shall also be disclosed.	The Company has calculated the employee compensation cost using the intrinsic value of stock options. Had the fair value method been used, in respect of stock options granted, the employee compensation cost would have been higher by Rs.2.03 lakhs, profit after tax would have been lower by Rs.2.03 lakhs & both the basic and diluted earning per share would have been lower by Rs.0.05.
Weighted average exercise prices and weighted average fair values of options shall be disclosed separately for options whose exercise price either equals or exceeds or is less than
A description of the method and significant assumptions used during the year to estimate the fair values of options, including the following weighted-average information:
(i) risk free interest rate . ........	-
(ii) expected life . .....
(v) the price of the underlying share in market at the time of option grant .....	-

During the year the Company has not granted any options to employees or senior managerial persons.

Statement attached to Annexure 1 to the Directors Report for the year ended 31st March, 2014:

Name of the Senior Management Persons of the Company to whom Stock Options have been granted	Number of Options granted in 2009-10
Mr. B. M. Kataria	2,500
Mr. R. R. Krishnan	2,500
Mr. C. S. Devale *	2,500

* Resigned w.e.f.4th October, 2013.