nelcast ltd Directors report

DIVIDEND

Your Directors recommend a dividend of 20% ( 0.40/- per share) for the financial year 2022-23. Payment of dividend is subject to the approval of shareholders at the ensuing Annual General Meeting. The dividend distribution policy framed by the Company in accordance with the Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR) and approved by the Board of Directors is available on the website of the Company weblink: http://nelcast.com/policies.

TRANSFER TO RESERVES

No transfer to the General Reserves has been proposed for the financial year 2022-23.

SHARE CAPITAL

The paid up equity share capital as on 31^st March 2023 was 1740.02 Lakhs.

OPERATIONS

During the year, the Company recorded Revenue from Operations by way of Net Sales of 1263.97 Crores as against 927.34 Crores in 2021-22, an increase of about 36%. Our Exports business registered a growth of 49% compared with previous year and stood at 329.41 Crores. Profit After Tax made during the year is 29.73 Crores as against 14.22 Crores in 2021-22, an increase of about 109%. The production during the year was 84,238 MT, compared to the previous years 74,881 MT. During the year the sales and profitability improved due to better market demand from both Commercial Vehicle & Tractor segment and increased exports.

MATERIAL CHANGES & EVENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY

There are no material changes and events affecting the financial position of the Company occurred between the end of the financial year and date of this report.

OUTLOOK

Post slowdown witnessed in the past three years, FY23 turned out to be a good year for the automotive industry driven by strong demand. According to SIAM, the overall Commercial Vehicles sales increased from 716,566 to 962,468 units, up 34% YoY. Sales of Medium and Heavy Commercial Vehicles increased from 240,577 to 359,003 units and Light Commercial Vehicles increased from 475,989 in FY22 to 603,465 units in FY23. Moreover, the auto component industry demonstrated a remarkable turn-around in FY23 as well.

The Indian automotive industry is expected to grow strongly in FY24 on the back of increased demand for trucks and tippers driven by rising infrastructure spending by Government. In addition to this, government has also launched Production Linked Incentive scheme (PLI) for automobile and auto component industry for five years, which will help the industries to be cost competitive in the global market. We believe that the commercial vehicle industry has a strong potential upside for growth in FY24 as India emerges as the global pivot for auto component sourcing.

FY23 turned out to be a strong year for the Indian Tractor Industry as the sale volumes touched alltime high of 944,000 units. The industry reported a growth of about 12% in FY23 against previous year, driven by rise in minimum support prices (MSP), which led to an increase in farm income, as well as another year of above-average monsoon. Coupled with this, technological advancements in high HP tractor ranges further contributed to the growth. Government initiatives regarding rural development and farm mechanization and various factors, such as high rural wages and scarcity of farm labor, are likely to increase the tractor volume over the long term.

CONSOLIDATED FINANCIAL STATEMENTS

The Company has prepared Consolidated Financial Statements of Nelcast Limited and its subsidiary NC Energy Limited as at 31^st March 2023, in accordance with the provisions of Section 129(3) of the Companies Act, 2013 and Regulation 33 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and prepared in accordance with the Indian Accounting Standards prescribed by the Institute of Chartered Accountants of India. As required by the Listing Regulations, the audited Consolidated Financial Statements are circulated with the Annual Report.

SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES

In terms of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the salient features of the financial statements of subsidiary company is set out in the prescribed form AOC-1, which is annexed with this report as Annexure-A. The Company will make available the audited annual accounts and related information of its subsidiary, upon request by any of its shareholders and it has also been placed on the website of the Company. The annual accounts of the subsidiary company will also be kept for inspection, by any member at the Registered Office of the Company and its subsidiary company. The consolidated financial statements presented by the Company, which form part of this annual report, include financial results of its subsidiary company.

QUALITY AND CUSTOMER SATISFACTION

The Company adheres to IATF 16949 quality standards and continuously strives to achieve world class quality by strictly adhering to the quality norms. The Company has also been awarded ISO 14001 & ISO 45001 certifications for implementing Health, Safety & Environmental Management Systems.

The Company is a supplier to several leading OEM customers like Tata Motors, Ashok Leyland, TAFE, Eicher Tractors (TMTL), Volvo-Eicher Commercial Vehicles, SAME Tractors, Escorts Tractors, International Tractors (ITL), Daimler India, Caterpillar, etc., Tier I customers like Automotive Axles, American Axles, Dana, Rane Madras, Rane-TRW, ZF India, etc., and Export customers like Meritor, American Axles, Daimler, Dana, Comer, ZF Industries etc., the Company is closely working with several of our customers in terms of new product development, improvement in quality, etc., to improve our products.

DEPOSITS

The Company has not accepted any public deposits during the year and as such, no amount on account of principal or interest on deposits from public was outstanding as at 31^st March 2023.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

Composition

The Corporate Governance Report annexed to this Boards Report contains the composition of the Board of Directors of the Company.

Directors appointment

Mr. P. Deepak, Managing Director (DIN: 02785326) was reappointed as Managing Director by the board of directors at their meeting held on 18^th May 2023 for a further period of five years from 1^st July 2023 to 30^th June 2028 on the recommendation made by the Nomination and Remuneration Committee subject to approval of shareholders. The resolution seeking shareholders approval for his reappointment forms part of the Notice.

Mr. P. Deepak, Director (DIN: 02785326) is due to retire by rotation and being eligible offers himself for reappointment.

Mr. P. Deepak, Managing Director and Mr. S.K. Sivakumar, Chief Financial Officer & Company Secretary hold the office of Key Managerial Personnel.

Independent Directors

The Independent Directors have fulfilled the criteria of Independence as defined under Section 149(6) and requisite declarations in terms of Section 149(7) of the Companies Act, 2013 have been received. During the year under review a separate meeting of independent directors was held on 1^st February 2023.

BOARDS REPORT - (Contd.)

COMMITTEES OF THE BOARD

In compliance with the provisions of Sections 135, 177, 178 of the Act and Listing Regulations, the Board constituted Corporate Social Responsibility Committee, Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee, Risk Management Committee. The details of composition of all the committees are furnished in the Corporate Governance Report which is attached to this report.

MEETINGS OF THE BOARD AND COMMITTEES

During the year, four meetings of the Board of Directors were held. The details of the meetings of the Board and its Committees are furnished in the Corporate Governance Report which is attached to this report.

COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The provisions of Section 178(1) of the Companies Act, 2013 relating to constitution of Nomination and Remuneration Committee are applicable to the Company and hence, the Company has devised a policy relating to appointment of Directors, payment of managerial remuneration, Directors qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013. The said policy is posted on the Companys website http://nelcast.com/policies.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(3)(c) of the Companies Act, 2013 the Board of Directors, to the best of their knowledge and ability, confirm that:

a) in preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanations relating to material departures, if any;

b) the Directors had 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 ended 31^st March 2023 and of the profit of the Company for that period;

c) the Directors had taken proper and sufficient care for the 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 had prepared the annual accounts on a going concern basis;

e) the Directors had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively;

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

CORPORATE GOVERNANCE

The Company has been pro-active in following the principles and practices of good Corporate Governance. The Company has taken adequate steps to ensure that the conditions of Corporate Governance as stipulated in the Listing Regulations are complied with letter and spirit. A certificate issued by the auditors of the Company regarding compliance of conditions of Corporate Governance is also annexed to this report. The matters relating to Corporate Governance as per the Listing Regulations are attached to this report. The managements discussion and analysis report as required by the Listing Regulations is also annexed which forms part of this report.

CERTIFICATE FROM COMPANY SECRETARY IN PRACTICE

L. Dhanamjaya Reddy, Practicing Company Secretary, has issued a certificate as required under the Listing Regulations, confirming that none of the directors on the Board of the Company has been debarred or disqualified from being appointed or continuing as director of companies by the SEBI / Ministry of Corporate Affairs or any such statutory authority. The certificate is enclosed with this section as Annexure-B.

BUSINESS RESPONSIBILITY AND SUSTAINABILITY REPORT (BRSR)

Pursuant to Regulation 34(2)(f) of the Listing Regulations and SEBI (Listing Obligations and Disclosure Requirements) (Second Amendment) Regulations, 2021 w.e.f. 5^th May 2021, the Companies are required to file Business Responsibility and Sustainability Report in place of Business Responsibility Report. Accordingly, the Company is pleased to present its 1^st Business Responsibility and Sustainability Report (BRSR) for the financial year 2022-23 in the prescribed format is given as Annexure-C to this Report and is also available on the Companys website www.nelcast.com.

PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All contracts/arrangements/transactions entered by the Company during the financial year 2022-23 with related parties were in the ordinary course of the business and at Arms Length basis. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. The details of the transactions with related parties are given in the financial statements. The Related Party Transaction Policy is posted on the Companys website http://nelcast.com/policies.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy in line with the provisions of Section 177(9) and 177(10) of the Act and Regulation 22 of the Listing Regulations, to provide a formal mechanism to the Directors and Employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Companys Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company have been denied access to the Audit Committee. The Whistle Blower Policy is posted on the Companys website http://nelcast.com/policies.

DIVIDEND DISTRIBUTION POLICY

The Company has formulated the policy on dividend distribution with a view to specify the external and internal factors including financial parameters that shall be considered while declaring dividend and the circumstances under which the shareholders of the Company may or may not expect dividend and how the retained earnings be utilised etc., The dividend distribution policy framed by the Company in accordance with the Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR) and approved by the Board of Directors is available on the website of the Company weblink: http://nelcast.com/policies.

REMUNERATION POLICY OF THE COMPANY

The Company has adopted a Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to Section 178(3) of the Companies Act, 2013 and as per the Listing Regulations. The Company affirms remuneration is as per the remuneration policy of the Company. The said policy is posted on the Companys website http://nelcast.com/policies.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

Disclosures pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in “Annexure-D” to this Report.

The information required pursuant to Section 197(12) of the Companies Act, 2013 read with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company forms part of this report.

In terms of Section 136(1) of the Companies Act, 2013, the Annual Report and financial statements are being sent to the members and others entitled thereto, excluding the aforesaid information. The said information is available for inspection by the members at the Registered office of the Company during business hours on working days of the Company up to the date of ensuing Annual General Meeting and any member interested in obtaining such information may write to the company secretary and the same will be furnished.

INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY

In terms of Section 134(5)(e) of the Act, the term Internal Financial Control means the policies and procedures adopted by a company for ensuring orderly and efficient conduct of its business, including adherence to companys policies, safeguarding of its assets, prevention and detection of frauds and errors, accuracy and completeness of the accounting records, and timely preparation of reliable financial information. The Internal Audit is in place in the Company and the Internal Auditors are conducting the Internal Audit periodically and the same is reviewed by the Audit Committee. The Company has in place adequate internal financial controls.

STATUTORY AUDITORS

At the Annual General Meeting of the Company held on 3^rd August 2022, M/s. K. Nagaraju & Associates, Chartered Accountants (Firm Registration No.002270S) were appointed as Statutory Auditors of the Company for a period of 5 (five) years from the conclusion of 40^th Annual General Meeting till the conclusion of the 45^th Annual General Meeting. They have confirmed that their appointment is in accordance with Section 139 read with Section 141 of the Companies Act, 2013.

The Reports given by M/s. K. Nagaraju & Associates, Chartered Accountants on the Financial Statements of the Company for the financial year 2022-23 does not contain any qualifications, reservations or adverse remarks and forms part of the Annual Report.

No frauds have been reported by the Statutory Auditors during the Financial Year 2022-23 pursuant to the provisions of Section 143(12) of the Act.

SECRETARIAL AUDITORS

Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors had appointed M/s. L.D. Reddy & Co., Practicing Company Secretaries as Secretarial Auditors of the Company to conduct the Secretarial Audit for the financial year 2022-23. The Secretarial Audit Report for the financial year ended 31^st March 2023 in Form No. MR-3 is annexed with this report in Annexure-E. The Secretarial Audit report does not contain any qualification, reservation, adverse remark, or any disclaimer.

Pursuant to Regulation 24(A) of SEBI Listing Regulations, the Company has obtained Annual Secretarial Compliance Report from M/s. L.D. Reddy & Co., Practicing Company Secretaries and the same has been submitted to the stock exchanges within the prescribed time.

COST AUDITORS AND COST RECORDS

Pursuant to the provisions of Section 148(3) of the Act, the Board of Directors had appointed M/s. Jayaram & Associates, Cost Accountants as Cost Auditors of the Company, for conducting the audit of cost records under Companies (Cost Records and Audit) Rules, 2014 for the financial year ended 31^st March, 2023. The audit is in progress and the report will be filed with the Ministry of Corporate Affairs within the prescribed period.

On recommendation of the Audit Committee, the Board at its meeting held on 18^th May, 2023, has appointed M/s. Jayaram & Associates (Firm Registration No. 101077), Cost Accountants as Cost Auditors to audit the cost records of the Company for the Financial Year 2023-24. The Company has also received necessary certificate under Section 141 of the Act, 2013 from them conveying their eligibility to act as cost auditors. A sum of 2.00 lakhs plus applicable taxes have been fixed by the board as remuneration in addition to reimbursement of all applicable taxes, travelling and out-of-pocket expenses payable to them, which is required to be approved and ratified by the members, at the ensuing AGM as per Section 148(3) of the Act, 2013.

The cost records as specified by the Central Government under Section 148 (1) of the Act, as required is maintained by the Company.

SECRETARIAL STANDARDS

The Company have devised proper systems and processes for complying with the requirements of applicable Secretarial Standards issued by the Institute of Company Secretaries of India and that such systems were adequate and operating effectively.

INVESTOR EDUCATION AND PROTECTION FUND

The details regarding shares and dividend transferred / proposed to be transferred to the Investor Education and Protection Fund (IEPF) and other relevant details in this regard, have been provided in the Corporate Governance section of this Annual Report.

ANNUAL RETURN

INDUSTRIAL RELATIONS

RISK MANAGEMENT POLICY

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

CORPORATE SOCIAL RESPONSIBILITY (CSR)

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

CHANGE IN NATURE OF BUSINESS

During the year under review, there has been no change in the Companys nature of business.

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

No application was made or any proceeding pending under the Insolvency and Bankruptcy Code, 2016 (31 of 2016) during the financial year 2022-23.

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

The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. An Internal Complaints Committee has also been constituted for this purpose. During the year under review, there were no cases filed pursuant to the above Act.

DETAILS OF ESTABLISHMENT OF CODE OF CONDUCT FOR REGULATING, MONITORING AND REPORTING OF TRADING BY INSIDERS

The Company has a Code of Conduct for Regulating, Monitoring and Reporting of Trading by Insiders (“PIT Policy”) for connected persons, designated persons, and the insiders (collectively “Insiders”) as defined under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”). The Audit Committee reviews the Institutional Mechanism for prevention of insider trading. The aforementioned policy is available on the website of the Company at http://nelcast.com/policies.

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

In the opinion of Board of Directors of the Company, Independent Directors on the Board of Company hold highest standards of integrity and are highly qualified, recognized, and respected individuals in their respective fields. Its an optimum mix of expertise (including financial expertise), leadership and professionalism.

PERFORMANCE EVALUATION OF THE BOARD, ITS COMMITTEES AND DIRECTORS

Pursuant to the provisions of the Companies Act, 2013 and under regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, during the year, the Board has carried out an evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its committees.

The Nomination and Remuneration Committee has defined the evaluation criteria, procedure, and time schedule for the Performance Evaluation process for the Board, its Committees and Directors. Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/ support to the management outside Board/ Committee Meetings.

Areas on which the Committees of the Board were assessed included degree of fulfilment of key responsibilities, adequacy of Committee composition and effectiveness of meetings.

The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of Non-Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board, its Committees and of the Directors.

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

The information pertaining to conservation of energy, technology absorption, research and development, 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 given in the Annexure-G forming part of this Report.

OTHER DISCLOSURES

a. There are no instances 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

b. The electronic copies of the 41^st Annual Report and the Notice Convening the 41^st AGM would be sent to all shareholders whose e-mail addresses are registered with the Company or their respective Depository Participants (DP) in accordance with the circulars issued by the Ministry of Corporate Affairs (MCA) read with circulars issued by the SEBI. The full Annual Report is available on the website of the Company and shall also be disseminated to the stock exchanges.

c. In compliance with Section 134(3)(a) and 92(3) of the Act, the Annual Return is being uploaded on the website of the Company at www.nelcast.com.

ACKNOWLEDGEMENTS

The Directors place on record their sincere appreciation for the dedicated efforts of the employees and co-operation of associates, suppliers and customers. We also express our sincere thanks to Companys Bankers namely State Bank of India, Standard Chartered Bank, The Hongkong and Shanghai Banking Corporation Ltd., Kotak Mahindra Bank Ltd. and HDFC Bank Ltd. for their trust and continued support.