Nelcast Ltd Directors Report.

Your Directors are pleased to present the Thirty Eighth Annual Report along with the audited financial statements for the financial year ended 31st March 2020:

PERFORMANCE

( in Lakhs)

FINANCIAL RESULTS 2019-20 2018-19
Total Income 57733.57 86220.74
PBIDT 5883.89 8181.57
Profit Before Tax (PBT) 3080.77 5771.62
Less: Provision for Tax -519.74 1927.54
Profit After Tax (PAT) 3600.51 3844.08
Add: Profit brought forwarded from previous year 6500.84 6230.63
Other Comprehensive Income -48.34 -25.02
Total Comprehensive Income
available for Appropriation 10053.01 10049.69
Appropriations:
General Reserve - 2500.00
Dividend on Equity Shares 870.01 870.01
Distribution Tax on Dividend 178.84 178.84
Surplus Carried to Balance Sheet 9004.16 6500.84

DIVIDEND

The Board of Directors, taking in to consideration, the operational performance and uncertainties faced by the automotive sector, do not recommend any dividend for the financial year 2019-20.

TRANSFER TO RESERVES

No transfer to the General Reserves has been proposed for the financial year 2019-20.

SHARE CAPITAL

The paid up quity share capital as on 31st March 2020 was Rs 1740.02 Lakhs.

OPERATIONS

During the year, the Company recorded Revenue from Operations by way of Net Sales of Rs 566.76 Crores as against Rs 856.27 Crores in 2018-19, a reduction of about 34%. Our Exports business registered a growth of 25% compared with previous year and stood at Rs 112.43 Crores. Profit After Tax made during the year is Rs 36.01 Crores as against Rs 38.44 Crores in 2018-19. The production during the year was 52175 MT, compared to the previous years 92533 MT. The overall reduction in Turnover and Profit Before Tax was due to slow down in the economy especially in the auto sector. This has resulted in poor performance of most of the auto component industries, Nelcast being no exception to this.

OUTLOOK

The automotive industry in India has been witnessing a slowdown and 2019-20 was a challenging year for the Company in terms of Sales as well as Profit. The Indian automotive and related industries witnessed several headwinds in the financial year 2019-20 due to slowdown in the economy and regulatory changes such as emission norms, axle load & other norms, which hindered the industrys performance. During the year the Medium and Heavy Commercial Vehicle industry and Tractor industry registered a negative growth of 45% and 11% respectively which has severely impacted the auto component industry. The Commercial Vehicle industry expected a strong year due to pre-buying in the year 2019-20 due to the BS-VI emission norm introduction, but due to demand slowdown, low freight rates and uncertainty of recovery, these expectations did not materialise. Due to delayed monsoon and flooding, the Tractor industry witnessed a negative growth in the financial year 2019-20. Due to Covid-19, lockdown was imposed by the Government of India and respective State Governments in March 2020 and the company had to shut down its manufacturing operations and partially resumed operations in its facilities subsequently with minimum workforce, as per the guidelines issued by the Ministry of Health and Family Welfare. The Company has taken steps to build in all the safety and precautionary measures across all its facilities and locations. The impact of COVID-19 will be felt in the Financial Year 2020-21 as it is expected to further drag the slowness in the auto industry and the revival is bound to be slow. However, the Tractor industry expects a strong growth in the year 2020-21 due to good rainfall in the previous year, increased Minimum Support Prices, credit availability, positive farm sentiment and normal monsoon expected in the current year. The long-term outlook remains positive for the Automotive Industry with most major global players having a base in India for manufacturing, global sourcing and engineering.

CONSOLIDATED FINANCIAL STATEMENTS

The Company has prepared Consolidated Financial Statements of Nelcast Limited and its subsidiary NC Energy Limited as at 31st March 2020, in accordance with the provisions of Section 129(3) of the Companies Act, 2013 and SEBI Listing Regulations 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 certifi cations 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, Simpson & Co., 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 31st March 2020.

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.

Your Directors record their profound grief on the sad demise of our Deputy Managing Director Mr. P. Vijaya Bhaskar Reddy on 24th November 2019. The Company wishes to place on record his valuable contribution to the Company for more than thirty six years. The Board further expresses their heartfelt condolences for his untimely death and wishes to put on record their sincere and deep appreciation of his invaluable guidance and contribution to the Companys growth over the years.

Ms. P. Divya, Director is due to retire by rotation and being eligible offers herself for reappointment.

Mr. S.K. Sivakumar has been appointed as Chief Financial Officer of the company during the year.

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

Independent Directors

The Independent Directors have fulfi lled 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 11th February 2020.

BOARD MEETINGS

During the year, four meetings of the Board of Directors were held. The details of the meetings 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 www.nelcast.com.

DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(5) 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 31st March 2020 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 PRATICE

L. Dhanamjaya Reddy, Practicing Company Secretary, has issued a certificate as required under the Listing Regulations, confi rming 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 REPORT

In terms of Regulation 34 of the Listing Regulations, the Business Responsibility Report for the year 2019-20 describing the initiatives taken from an environment, social and governance perspectives, in the prescribed format is given as Annexure-C to this Report and is also available on the Companys website www.nelcast.com.

RELATED PARTY TRANSACTIONS

All transactions entered by the Company 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 www.nelcast.com.

VIGIL MECHANISM/ WHISTLE BLOWER POLICY

The Company has adopted a Whistle Blower Policy, 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.

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 affi rms remuneration is as per the remuneration policy of the Company. The said policy is posted on the Companys website www.nelcast.com.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

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, will be provided upon request. In terms of Section 136(1) of the Companies Act, 2013, the reports and accounts are being sent to the members and others entitled thereto, excluding the information on employees particulars which is available for inspection by the members at the Registered offi ce of the Company during business hours on working days of the Company up to the date of ensuing Annual General Meeting.

The 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 provided in the Annexure forming part of the Annual Report.

With regard to the provisions of Section 136(1) read with its relevant provision of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee and at free of cost.

AUDITORS

At the Annual General Meeting of the Company held on 3rd August 2017, M/s. K.Nagaraju & Associates, Chartered Accountants (Firm Registration No.002270S) were appointed as Statutory Auditors of the Company for a term of 5 (fi ve) consecutive years from conclusion of 35th Annual General Meeting till the conclusion of the 40th Annual General Meeting. They have confi rmed that their appointment is in accordance with Section 139 read with Section 141 of the Companies Act, 2013.

SECRETARIAL AUDITOR

The Company has appointed M/s. L.D. Reddy & Co., Practicing Company Secretaries to conduct Secretarial Audit for the year 2019-20. The Secretarial Audit Report for the financial year ended 31st March 2020 is annexed with this report in Annexure-D.

COST AUDITORS

As per Section 148 and other applicable provisions, if any, of the Companies Act, 2013, read with Companies (Audit & Auditors) Rules, 2014, the Board of Directors of your Company has appointed M/s. Jayaram & Associates, Cost Accountants as the Cost Auditors of the Company for the year 2020-21 on the recommendations made by the Audit Committee.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The details are provided in the Management Discussion and Analysis Report attached to this report.

The Internal Auditors reviews the efficiency and effectiveness of the systems and procedures. The Audit Committee approves and reviews the internal audit plan for the year.

SECRETARIAL STANDARDS

The Directors 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.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in form MGT-9 is annexed with this report in Annexure-E.

INDUSTRIAL RELATIONS

The employee relations have remained cordial throughout the year and industrial harmony was maintained. Measures for the safety, training and development of the employees continued to receive top priority. The Directors wish to place on record their appreciation of the valuable contribution made by the employees of the Company at all levels towards the performance and growth of the Company.

RISK MANAGEMENT POLICY

Risk Management is an essential element in achieving business goals and deriving benefits from market opportunities while protecting the Company. The Company has an adequate Risk Management Policy commensurate with its size and operations. The Risk Management Policy includes identifying types of risks and its assessment, risk handling, monitoring and reporting.

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

The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the financial statements.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The CSR Policy of the Company and details about the initiatives taken by the Company on CSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 have been disclosed as part of this report in Annexure-F. Further details of composition of the Corporate Social Responsibility Committee and other details are provided in the Corporate Governance Report which forms part of this report.

INTERNAL COMPLAINTS COMMITTEE

The Company has in place a policy for prevention, prohibition, and redressal against sexual harassment of women at the workplace to protect women employees and enable them to report sexual harassment at the workplace. An Internal Complaints Committee has also been constituted for this purpose. No complaints were received during the year.

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 fulfi lment 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.

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.

For and on behalf of the Board
Place: Chennai D. Sesha Reddy
Date : 19th June 2020 Chairman