Mahindra EPC Irrigation Ltd Directors Report.

Your Directors are pleased to present the 36th Annual Report on business and operations of your Company alongwith the audited financial statements and accounts for the year ended 31st March, 2018.

FINANCIAL HIGHLIGHTS

Highlights for the financial year are as under:

(Rs. in lakhs)

For the Year ended 31st March, 2018

For the Year ended 31st March, 2017*

Revenue from Operations

20480.67

20146.48

Other Income

179.35

158.94

Total Income

20660.02

20305.42

Profit Before Interest,
Depreciation & Tax

1400.44

1,425.57

Finance Cost

50.11

152.89

Depreciation

313.94

304.78

Profit Before Tax

1036.39

967.90

Tax expense

542.53

(22.57)

Profit After Tax

493.86

990.47

Other Comprehensive Income/ (loss) for the year

0.71

(2.21)

Profit for the year attributable to owners of the Company

494.57

988.26

* Figures have been regrouped as per Indian Accounting Standards (IND AS).

Operations and Financial Overview

During the year under review, your Companys turnover was at Rs. 204.81 crore as compared to Rs. 201.46 crore for the previous year. The Company made a Profit Before Tax of Rs. 10.37 Crore for the year 2017-18 as compared to Rs. 9.68 Crores in the previous year. The Profit After Tax was at Rs. 4.94 crore vs. Rs. 9.88 crore in the previous year.

The year under review saw countrywide implementation of Goods and Services Tax (GST). This is a welcome reform that was introduced by the Central Government. Though it impacted your Companys performance in the immediate months after introduction, the impact was mitigated due to implementation of core strategies and acceleration of business in project markets in the remaining months, coupled with improved operational efficiencies. Indian economy continued to grow at a strong pace and is expected to show an improvement over the previous year. It is expected that the economy will grow at 7.2% in 2017-18, slightly higher than 7.1% in the previous financial year. As mentioned earlier, the long awaited GST Act was finally implemented successfully. Consumer spending got a temporary shock upon its implementation. It also impacted the Companys quarter wise performance. However, as the year progressed, demand recovered and achieved normalcy by 4th quarter. In this economic scenario, your Company delivered a marginal growth in revenue and Operating Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA).

A detailed analysis of the financial results is given in the Management Discussion and Analysis Report which forms part of this report.

Dividend

Your Directors are pleased to recommend a maiden dividend of 5% i.e. Rs. 0.50 per equity share of Rs. 10 each for the year ended on 31st March, 2018 after 22 years. The dividend, if approved by the members, would involve a cash outflow of Rs. 1.67 crores (inclusive of tax on dividend).

Corporate Governance & Management Discussion and Analysis Report

Your Company believes that sound practices of good Corporate Governance. Transparency, Accountability, and Responsibility are the fundamental guiding principles for all decisions, transactions, and policy matters of the Company. A Report on Corporate Governance, alongwith a certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this Annual Report. Further, the Management Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is given in Annexure I to this Report.

Stock Options

The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees Stock Option Scheme of the Company. The Stock Option Scheme, 2014 is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and there have been no material changes in the said scheme during the year under review.

During the year under review 37,389 nos. of Stock Options got vested under the Employees Stock Option Scheme -2014, and were exercised immediately after vesting. Accordingly, the Company made the allotment of 37,389 Equity Shares. The Nomination and Remuneration Committee of the Board of Directors further granted 11,129 Stock Options during the year under review, comprising about 0.04% of the current paid up capital.

The applicable disclosures as stipulated under the SEBI Guidelines as on March 31, 2018 (cumulative position) with regard to the Employees Stock Option Scheme (ESOS) are provided in Annexure II to this Report.

Voting rights on the shares issued to employees under the ESOS are either exercised by them directly or through their appointed proxy.

Share Capital

During the year, with the allotment of 37,389 equity shares on exercising of Stock Options by employees, the total paid up equity share capital of the Company increased from 2,76,72,561 equity shares of Rs. 10/- each to 2,77,09,950 equity shares of Rs. 10/- each. The said equity shares have been listed on the Bombay Stock Exchange Limited and they rank pari passu with the existing equity shares in all respects. Accordingly, the Paid-up Share Capital of the Company stood at Rs. 27,70,99,500 divided into equity shares of Rs.310 each as on 31st March, 2018.

Holding Company

The promoters of the Company i.e. Mahindra and Mahindra Limited (M & M) hold 1,51,44,433 equity shares which represents 54.65 percent of the total paid up capital of the Company. Your Company continues to be a subsidiary company of M & M. The Company does not have any subsidiary company.

Contracts and arrangements with Related Parties

During the financial year, all contracts/arrangements/ transactions entered by the Company with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. All related party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval is also obtained from the Audit Committee for the related party transactions which are of repetitive nature as well as the transactions which cannot be foreseen and accordingly, the required disclosures are made to the Committee on quarterly basis for approval of the Committee. The Companys major related party transactions are generally with its holding and associate companies. The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sales transactions through tenders or otherwise. All related party transactions are negotiated on an arms-length basis, and are intended to promote the Companys interests. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Companys website at the link: http://www.epcmahindra.com/pdf/EPC_Policy_on_Related Party_ Transactions.pdf. The related party transactions have been set out in the Note No. 31 to the financial statement.

Risk Management

The Company has constituted a Risk Management Committee comprising Mr. Nikhilesh Panchal, Mr. Ashok Sharma and Mr. Anand Daga. Mr. Nikhilesh Panchal is the Chairman of this Committee. The Company has adopted the Risk Management Policy. The Committee is entrusted with the responsibility to assist the Board in (a) overseeing and approving the Companys enterprise wide risk management framework; and (b) overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed.

There is an adequate mechanism in place about risks and uncertainties that can impact itsability to achieve its strategic objectives, risk assessment, risk mitigation and minimization procedures and its periodical review.

Industrial relations

Employees at all levels have contributed to the performance of your Company. Your Directors place on record the cooperation of employees during the year under report. The Directors also place on record the unstinted cooperation extended by the staff members during the period under review.

The Management Discussion and Analysis Report gives an overview of the developments in Human Resources / Industrial Relations during the year.

Safety, Health and Environmental Performance

Your Companys commitment towards safety, health and environment is being continuously enhanced and your Company encourages involvement of all its employees in activities related to safety, including promotion of safety standards. This is also demonstrated by the fact that there has been no single incidence of accident for the last 12603days. The Safety Committee, constituted for the same, regularly reviews the adherence of safety norms. Some of the programs undertaken by the Company include behaviour based safety training, Knowledge based fire extinguisher training, fire fighting training and Safety awareness, etc. Various health checkup programs for employees were regularly undertaken by the Company during the year. Requirements relating to various environmental legislations and environment protection have been duly complied by your Company.

Directors and Key Managerial Personnel a) Key Managerial Personnel (KMP)

In accordance with the provisions of Section 203 of the Act, the following persons have been designated as KMP of the Company as at 31st March, 2018:

Name of the KMP Designation
Mr. Ashok Sharma Managing Director
Mr. Sanjeev Mohoni Chief Executive Officer (CEO)
Ms. Sunetra Ganesan Chief Financial Officer (CFO)
Mr. Ratnakar Nawghare Company Secretary (CS)

b) Directors

Pursuant to the provisions of Section 149 of the Companies Act, 2013, the Non independent Director Ms. Sangeeta Prasad would retire and, being eligible, has offered herself for reappointment.

The Company has received declarations from all the Independent Directors of the Company under Section 149(7) of the Act confirming that they meet the criteria of independence as laid down - in Section 149 (6) of the Companies Act, 2013.

The information required pursuant to Section 197(12) read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of ratio of remuneration of a director to the median remuneration of the employees of the Company for the financial year is given in the Annexure III to this Report.

The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors, which includes criteria for performance evaluation of the non-executive directors and executive director. The statement indicating the manner in which formal annual evaluation of the Directors, the Board and Board level committees is given in detail in the Report on Corporate Governance, which forms part of this Annual Report.

The Company had on the basis of the Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors, followed a process of evaluation by the Board for its own performance and that of its Committees and individual Directors.

The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company. During the year, the Independent Directors of the Company met on 27th April, 2017.

The following policies of the Company are attached herewith marked as Annexure IV and Annexure V: a) Policy on Appointment of Directors and Senior Management and Succession Planning for Orderly Succession to the Board and the Senior Management.

b) Policy for Remuneration of the Directors, Key Managerial Personnel and other employees.

Significant and material orders passed by the Regulators or Courts or Tribunals

During the previous year, the Director Horticulture –Maharashtra had issued the Order dated 30th July, 2016 deregistering the Company in the State of Maharashtra for a period of 10 years and also restricting to participate in any subsidy related business in the State on account of failure of samples in testing.

The Company had taken up the matter at the appropriate levels and based on the merits, the samples were subsequently retested and passed at the recognized laboratory. Subsequently, the Department of Horticulture had registered the Company as per Order dated 26th September, 2017 for a period of 5 years from 2017-18 and accordingly, the earlier order of July, 2016 stands set aside.

Further the Order dated 28th March, 2017 from the Director Horticulture and Farm forestry, Madhya Pradesh inter alia, de-registering the Company in the State of Madhya Pradesh from participating in State Sponsored Horticulture Subsidy Scheme in the country for a period of 1 year was stayed vide its Order dated 1st April, 2017. Subsequently based on the merits of the matter, the said order was cancelled vide Order dated 29th June, 2017 by the Director Horticulture, Madhya Pradesh.

Directors Responsibility Statement

Pursuant to section 134 (5) (e) of the Companies Act, 2013, your Directors, based on the representations received from the Operating Management, and after due enquiry, state that: a) in the preparation of the annual accounts for the year ended March 31, 2018, the applicable accounting standards read with requirements set out under Schedule III to the Act, have been followed and there are no material departures from the same; b) the Directors have selected such accounting policies and applied them consistently and made judgements and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at March 31, 2018 and of the profit of the Company for the year ended on that date; c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the 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 are operating effectively; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively.

Corporate Social Responsibility Committee

The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board.

The CSR Policy may be accessed on the Companys website at the link: http://www.epcmahindra.com/pdf/EPC_CSR_Policy.pdf The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability.

During the year under review, your Company initiated few projects such as supply of drinking water pipe line, upgradation of the toilet facilities of a school in the rural area, medical check-up camps. These projects were mainly implemented directly through employee participation. During the year under review, the Company has spent Rs. 16.44 lacs, which is over 2% of the average net profits of last three financial years, on CSR activities.

The Annual Report on CSR activities is annexed herewith, marked as Annexure VI.

Disclosures under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder

During the year under review, there were no complaints reported/ resolved pursuant to the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules framed thereunder.

Vigil Mechanism/Whistle Blower policy

In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the Company has adopted a vigil mechanism policy. Whistle Blower or Complainant, as the case may be under the said Policy, shall be entitled to direct access to the Chairperson of the Audit Committeein appropriate or exceptional cases.This policy is explained in the Report on Corporate Governance and also posted on the website of Company.

Auditors

The Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants, Baroda holds office under second term of five years until the conclusion of the Annual General Meeting to be held in the year 2021 as per the Resolution passed by the Shareholders on July 29, 2016 subject to the ratification by members in every Annual General Meeting. The Auditors are eligible for reappointment under Section 139 (1) of the Companies Act, 2013 and have furnished a certificate to this effect. The Directors recommend for ratification of their reappointment as Auditors of the Company.

Cost Auditors

The Company had filed the Cost Audit Report as per the Companies (Cost Accounting Records) Rules, 2011 prescribed under Section 148 (6) of Companies Act, 2013 and Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014 pertaining to the financial year 2016-17 before the due date of filing. Pursuant to section 148 of the Companies Act, 2013, the Board of Directors, on the recommendation of the Audit Committee appointed M/s Shilpa & Company, Cost Accountants, as the Cost Auditors of the Company for the financial year 2018-19. M/s Shilpa & Company have confirmed that their appointment is within the limits of section 139 of the Companies Act, 2013 and have also certified that they are free from any disqualification specified under Sections 141(3) and 148(5) of the Companies Act, 2013.

The Audit Committee has also received a Certificate from the Cost Auditor certifying their independence and arms length relationship with the Company.

The Directors recommend the remuneration payable to the Cost Auditors of the Company for the year 2018-19. The approval from Shareholders for the remuneration payable to the Cost Auditors is being sought at the ensuing Annual General Meeting.

Secretarial Auditors

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Rules therein, the Secretarial Audit Report for the financial year ended on 31st March, 2018 issued by Mr. Sachin Bhagwat, Practising Company Secretary is attached as Annexure VII to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Public Deposits & Loans / Advances

During the year, the Company did not accept any fixed deposit. There were unclaimed/unpaid deposits and unclaimed/ unpaid interest warrants outstanding as on 31st3March, 2018 amounting to Rs.0.16 lacs. Your Company has neither made any loans or advances nor did any guarantees or securities which are required to be disclosed in the Annual Accounts of the Company.

Uses & Application of Funds raised under Rights Issue

In the year 2012, the Company had allotted 1,03,58,199 equity shares at a price of Rs. 40 per share (including a premium of Rs. 30/- per share) resulting in total issue size of Rs. 41.43 crores under the Rights Issue. The uses and application of funds raised under Rights Issue are given in Note No – 34 to the Financial Statement. With this, the Rights Issue proceeds of Rs. 41.43 crores have been fully utlised.

Energy Conservation and Technology Absorption and Foreign Exchange Earnings and Outgo

The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo as required to be disclosed under sub-section(3) (m) of Section 134 of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are provided in Annexure VIII to this Report.

DISCLOSURES: Audit Committee

The Audit Committee comprises Independent Directors namely M/s. Vinayak Patil (Chairman), S Durgashankar and Anand Daga as other members. All the recommendations made by the Audit Committee were accepted by the Board.

CSR Committee

The CSR Committee comprises M/s Ashok Sharma (Chairman), S Durgashankar and Vinayak Patil as other members.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee comprises Directors namely M/s. Anand Daga (Chairman), S Durgashankar and Vinayak Patil as other members.

Meetings of the Board

Four meetings of the Board of Directors were held during the year. For further details, please refer the Report on Corporate Governance of this Annual Report.

Extract of Annual Return

Pursuant to Sub- section 3(a) of Section 134 and Sub-section 3 of Section 92 of the Companies Act, 2013, read with Rule 12(1) of the Companies (Management and Administration) Rules 2014, the extracts of Annual Return of the Company as at 31st March, 2018 is annexed herewith as Annexure IX to this Report.

Statement of deviation(s) or variation(s)

During the year under review, there were no deviations of funds reported to the Audit Committee in respect of the funds raised in the year 2012, under the Rights Issue.

General

Your 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.

Further, your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

1. Details relating to deposits covered under Chapter V of the Companies Act, 2013.

2. Issue of equity shares with differential rights as to dividend, voting or otherwise.

3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report.

4. There were no frauds reported by auditors (including Secretarial and Cost auditor) to the Audit Committee or Board and also not reported to the Central Government.

5. There were no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year and the date of this Report.

Particulars of Employees

Particulars of employees as required under Section 197 of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed to this Report and marked as Annexure III (B) and (C). In accordance with the provisions of Section 136 of the Act, the Annual Report and Accounts are being sent to all the Members of the Company excluding the aforesaid information and the said particulars will be made available on request and also made available for inspection at the Registered Office of the Company. Any Member interested in obtaining such particulars may write to the Company Secretary at the Registered Office of the Company.

Acknowledgements

Your Directors take this opportunity to place on record their sincere appreciation for the co-operation and continued support received from customers, vendors, suppliers, bankers, business associates and shareholders.

For and on behalf of the Board

Vinayak Patil Ashok Sharma

Director Managing Director

Place : Nashik
Dated: 3rd May, 2018