o e n india ltd Directors report

Directors

To the Shareholders

Your Directors arc pleased to present the 46lh Annual Report of the Company together with audited accounts for the financial year ended 3 1st March 2014.

Performance:

The company achieved a slightly higher gross turnover of Rs.93.28 crores in 2013-14 as against R.s.M) 31 crorcs in the previous year despite the challenging economic situation and adverse market conditions. However, profit before lax declined to Rs. 11.05 crores in 2013-14 as compared to Rs. 12.60 crorcs in the previous year. This is largely due to the increases in costs of materials and other inputs, which have correspondingly affected the bottom line.

Though, due to these negative factors, the profit levels have not increased, we have been extremely successful in achieving improvements in yields, productivity and lean-manufacturing. These efforts, which have positive long-term implications, have already started yielding the desired results with our business performance reflecting continued profitability in our operations, despite adverse cost pressures.

Industry Scenario:

The domestic economic situation in 2013-14 continued to be uncertain and challenging subdued, with only moderate growth in GDP, estimated at between 4.7% to 4.9% compared to 4.5% in the previous year. While inflation raged unbridled, hovering around two-digit levels through the best part of the year, the Indian Rupee first plunged to all-time lows and, thereafter, remained relatively volatile, before ending at a rather stable level after strong, though belated, intervention by the Reserve Bank of India.

The Manufacturing sector performance shrunk by 0.7% for the first time in over two decades, Industrial growth continued to remain negative throughout the year. The only silver lining last year was the healthy growth of 4.7% in the Agricultural sector. However, given the threat of weaker monsoons in 2014-15, the situation on that front now appears uncertain.

The Automotive Industry, from which the Company derives a large proportion of business, was badly affected with four-wheeler production down by almost 6%. compared with the previous year, with direct implications on our sales.

Future Prospects:

The recent Economic Survey lakes a close look at the long-term challenges facing India and paints a cautiously optimistic picture, with the economy likely to accelerate as the reform processes make headway. Indias GDP growth is now expected to touch 6% in financial year 2014-15.

The pick-up in the economy is dependent on the new Governments focus on implementation of stalled infrastructure projects, removing bottlenecks in mining and delivery of coal to the power sector and the expected recovery in manufacturing and industry due to higher external demand, thanks to the strengthening global economy and the growing demand from the internal markets due to improved sentiments.

Now, thanks to a few tax incentives, we are seeing the first signs of a turnaround in the Automotive industry and, with the likelihood of easier financing in the coming months, we should see the beginning of another long overdue boom-phase in this sector. The Company is poised to handle the consequent surge in demand, having used the preceding lean period to gear up capacities and streamline production.

The Company is actively seeking increased engagement in other non-automotive sectors to broaden and diversify the product mix and exposure. With additional production capacity available as well as being established, the intention is to increase exports, apart from intensifying domestic sales.

Your Company is in the Electronics Hardware segment, a sector that has been identified as suffering from sluggish growth and import dependence. All stakeholders know very well that the potential for Electronics Manufacturing in India is huge and, with all-out support from DeitY (Department of Electronics & IT) under the National Policy for Electronics, a sea change can be brought about in the manufacturing scene in the country - in fact, a new era for Electronics in our country. This policy initiative will surely transform that dream into reality.

With clear majority, the new Government has elevated the expectations of the industry, which is waiting for important tax and financial reforms that have been hanging fire due to many unexplained reasons. The new dynamic team of Ministers in the Government would, hopefully, take the economy on a long-term growth path towards establishing a robust electronics industry. This would definitely open up several opportunities to the company, especially in the industrial and power segments.

Financial Highlights:

	Year ended
	31-3-2014	31-3-2013
	(Rupees in crores)
Turnover :
Relays	85.848	81.404
Switches	2.325	2.067
Others	-	0.125
Purchased Goods	5.105	6.713
Total	93.278	90.309
Exports :
Relays	5.375	2.165
Switches	0.282	0.245
	5.657	2.410
Profit before Depreciation & Tax	15.684	17.153
Less: Depreciation	4.629	4.552
Profit before Taxation	11.055	12.601
Less: Provision for Taxation	2.559	3.160
Net profit before appropriations *	8.496	9.441
Transfer to General Reserve	7.600	8.500
Proposed Dividend	0.765	0.765

 

	As at
	31-3-2014	31-3-2013
	(Rupees in crores)
Financial position:
Current Assets	37.165	34.954
Current Liabilities	17.362	14.743
Net Current Assets	19.803	20.211
Fixed Assets	38.448	37.944
Investments	23.495	16.889
Long term loans & Advances	1.195	0.710
Net Tangible Assets	82.941	75.754
Less: Long term borrowings & provisions	1.689	2.721
Deferred Tax Liability	1.999	1.381
Shareholders Funds	79.253	71.652
Represented by:
Equity	5.099	5.099
Reserves & Surplus	74.154	66.553
	79.253	71.652

Research & Development:

The company continues to give paramount importance to Research & Development (R&D) since R%D holds the key to market leadership. We constantly keep upgrading our existing running products to match increasingly demanding customer expectations both with regard to higher specifications and lower prices. We also add new products that supplement our product range. We therefore continue to invest in R&D. The current recognition by Ministry of Science & Technology, Govt, of India, of our R&D was upto March 2014 and the application for renewal of recognition is pending for approval at Department of Scientific and Industrial Research.

Research & Development facility of the company has also received approval from Department of Scientific and Industrial Research, Ministry of Science and Technology, Govt, of India under section 35(2AB) of the Income Tax Act, 1961 for two years starting from 1st April 2012. The recognition given by the Department of Scientific & Technology will be a confidence booster for the company to invest more in its R&D activities. This will enable the company to work at technologies that are being adopted globally and keep pace with trends in electronics, automotive & other product applications we pursue at present/future with appropriate products. This will also help the company to design and develop moulds/tools to produce child parts for the products as well as develop/ set up automated stations and inspection/ test systems before the products arc moved into regular production lines. This way we hope to remain competitive in the domestic and international markets.

New products introduced during the year have received customer approvals. We would see better results in the coming years. Most of the new products need to go through extended evaluation and field trials as a result of which introduction of new products into the market arc to slow process. We are working on several other new product/project proposals and identifying contemporary products for the future.

The company incurred capital expenditure of Rs.5.21 crores (includes last years capital work in progress Rs.2.37 crores) for new tools and equipments for existing product lines. New Products and R&D initiatives.

Quality Initiatives :

The Company continues to be qualified to ISO 9001 for our Quality Management Systems and our Automotive Production Lines arc further qualified to ISO/TS 16949.

Our Environmental Management Systems arc covered by approval to ISO 14001 & our Occupational Health & Safety Management Systems are approved to OHSAS Rs. 18001.

Minimizing or eliminating use of specified substances of concern has become a global issue and your company already complies with the relevant ROHS directives for products being exported. Other products will also be rapidly covered by ROHS in the near future.

To maintain our market leadership and to remain a global player it is imperative that we exceed expectations of the customer and the market. We continue to do this successfully.

Borrowings :

During the year the company neither availed the Cash Credit facility nor borrowed funds from outside other than the unsecured loan being the Fixed Deposits accepted from general public.

Reserves & Surplus:

Out of the current years profit, an amount of Rs.7.60 crores has been transferred to Genera! Reserve Account. Together with this, the total balance in Reserves and Surplus as on 31.03.2014 stood at Rs.74.15 crores.

Dividend:

Considering the companys financial performance during the year, the Directors have recommended payment of dividend @ 15% of the equity capital (Rs.1.5/- per equity share on 5099260 Equity shares of Rs. 10/-each) for the financial year ended 31st March 2014.

Investments:

The Company holds 2001 equity shares of the face value of Rs.10/- each in O/E/N Electrocom Private Ltd. 20000 equity shares of the face value of Rs. 1()/- each are held in Kerala Enviro Infrastructure Ltd. Investment in the partnership firm. R Engineering as on 31.03.2014 stood at Rs.9.36crorcs.

Fixed Deposits:

During the financial year the company has repaid all fixed deposits that had matured and for which depositors had applied for discharge and refund. Deposits amounting to Rs.0.13 lakhs from five depositors became due for repayment before the close of the financial year which remained, unclaimed as on 31st March 2014. Notice has been sent to the depositors concerned to close the fixed deposit accounts falling due for payment as we are not planning to accept any further deposits in future.

Statutory Disclosure :

Information pursuant to Section 217(i)(e) of the Companies Act read with the Companies (Disclosure of particulars in the Report of the Board of Directors) Rules 1988 relating to the Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and outgo is given in the Anncxure to the Report. Your company is committed to ensuring pollution free environment as well as a clean environment and friendly work place.

Information pursuant to Section 217(2A) of the Companies Act, 1956 read with the Companies (Particulars of Employees) Rules 1975 is given in the Anncxure forming part of this Report.

Directors :

As required by Article 90 of the Articles of Association of the company, Ms.Sarah Mathew would retire by rotation at the ensuing Annual General Meeting. She is not offering herself for reappointment.

Auditors:

M/s.Vanna & Varma, Companys auditors will be vacating office at the ensuing General Meeting of the company. They are eligible for reappointment under Section 139(1) of the Companies Act, 2013 and offer themselves for reappointment for five years subject to ratification at every Annual General Meeting.

Observations made in the Auditors Report are dealt with in the Notes to the accounts at appropriate places and are self explanatory.

Industrial Relations:

Industrial relations with employees at Electrogiri and CSEZ at Cochin, Chakan, Pune and Peenya, Bangalore remain reasonably cordial and peaceful.

The Board records its appreciation for the commitment and co-operation extended by employees at all levels and looks forward to their total involvement. Employees continue to participate in the training and development programmes initiated by Management for productivity and quality improvements.

Global Compact:

As has been reported earlier, the company had signed up to promote the United Nations Global Compact, which lays down ten key principles lo specifically address issues in the areas of human rights, labour standards, environment and corruption. The company is committed to uphold and promulgate these ten principles of Global Compact. The underlying emphasis will be on

a) Sensitising Corporate Social Responsibility.

b) Highlighting initiatives in business ethics, environmental policies, community development etc.

c) Aligning suslainability through development programmes.

Responsibility Statement:

Pursuant to Section 217(2 A A) of the Companies Act, 1956 your directors confirm that:

(a) in the preparation of the Annual Accounts, the applicable accounting standards have been followed.

(b) appropriate accounting policies have been selected and applied consistently, and have made judgments and estimates that are reasonable and prevalent so as to give a true and fair view of the state of affairs of the company as at 31st March, 2014 and profit for the year ended as on that dale.

(c) proper and sufficient care has been taken 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.

(d) the annual accounts have been prepared on a going concern basis.

Audit Committee:

The Audit committee formed by the Board of Directors of the Company consists of three directors. The Chairperson of the committee is Ms.Sarah Malhew. Ms.Pamela Anna Mathew and Dr.D.Babu Paul are the other members. Mr.Saju Varghese, General Manager- Finance acts as Secretary lo the Committee. The Statutory Auditors and Internal Auditors attend the meetings at the invitation of the Chairman.

The Audit Committees functions include review of companys Internal Control System, audit procedures, compliance with statutory and regulatory requirements, financial reporting process and disclosure of financial information to ensure that the financial statements are true, correct and credible. Audit Committee acts as a link between Board of Directors and statutory Auditors. Besides having access to all the required information from within the Company, the committee can obtain external professional advice whenever required.

Internal Control System and its adequacy:

The company has implemented ORACLE ERP system which integrates Accounting, Production, Procurement, Sales & HR functions. This would improve productivity, utilization of resources and bring transparency, accountability and efficiency across the entire organization. Apart from Statutory Audit, Internal Audit is carried out every quarter by an independent firm of Chartered Accountants and observations are reported to management. All significant audit observations are discussed in Management meetings and immediate steps taken lo rectify discrepancies. The Internal Audit report is also reviewed at the Audit Committee meeting and the adequacy of Internal Control System is periodically reviewed at the Board level.

Acknowledgements :

The Directors of the company gratefully acknowledge the support extended by the principal bankers, Bank of India. IDBI Bank Ltd and Axis Bank Ltd. We also acknowledge the continued patronage of our esteemed customers and loyalty of the large family of the companys stockists, suppliers & shareholders. Companys mission of enhancing customer satisfaction while simultaneously increasing shareholder value has made it possible to report satisfactory performance.

We record our appreciation to Kerala Stale Industrial Development Corporation Ltd., for their continuing support. We take this opportunity to thank all trade related associations with which we have interacted. The dedication and preparedness of the companys leadership and employees have remained at a high level resulting in their being able to exploit opportunities meaningfully and respond smartly to the dynamic business scenario. We thank our employees for their sincere efforts which helped the company achieve satisfactory results.

	On behalf of the Board
	Sd/-	Sd/-
	(PAMELA ANNA MATHEW)	(D. BABU PAUL)
	MANAGING DIRECTOR	DIRECTOR
27th June 2014	DIN: 00742735	DIN: 00103047

ANNEXURES TO THE DIRECTORS REPORT

STATEMENT CONTAINING PARTICULARS PURSUANT TO THE COMPANIES (DISCLOSURE OF PARTICULARS IN THE REPORT OF THE BOARD OF DIRECTORS)

RULES 1988 AND FORMING PART OF DIRECTORS REPORT

A. Conservation of Energy:

a) Energy conservation measures undertaken

The Company has constantly been emphasizing on optimization of energy consumption in every possible area in its units. Various avenues are being explored at periodic intervals and after careful analysis and planning measures are initiated to minimize the consumption of energy by optimum utilization of energy consuming equipments. Energy consumed by equipments & manufacturing processes are directly linked to production levels. The two main areas of energy consumption where control is possible are air-conditioning & lighting.

Electricity is one of the major inputs in the manufacturing process for maintaining the required ambient at 22 2C and hence conservation of electrical energy is always given utmost importance.

b) Additional investments and proposals if any being implemented for the reduction of consumption of energy.

Replaced the old centralized air conditioning plants with new energy efficient chiller plants which consume only 0.7KW/TR against 1.1KW/TR consumed by the old plants. This is achieved by the closed loop electronic control system in the new units.

Three very old 200 cfm air compressors run by 60HP motors were replaced by 220 cfm oil free air compressors run by 40HP motors reducing the energy consumption in this category.

Installed new synchronisation system for generators to optimise usage and reduce diesel consumption during KSEB power failures.

Provided individual controls to switchoff unwanted lights when not required.

Rain water harvesting incorporated in more areas reduces consumption of electricity for pumping water during rainy season.

Changed to,LED lighting in corridors, where only general lighting is required, reduces power consumption. LED Lighting in more areas, where only general lighting is required, are planned to further reduce the power consumption.

c) Impact of measures at (a) & (b) for reduction of energy consumption and consequent impact on the cost of production of goods.

As a result of the continuous efforts, like those mentioned above and monitoring of section wise monthly consumption and controlling, the electricity charges have been contained inspite of the increase in the manufacturing activities and increase of tariff by KSEB. By changing over to the modern chiller A/C plants the consumption of non-eco-friendly refrigerant, used for topping up due to leakage, is completely stopped. Installation of RO Plant enabling reuse of a portion of the treated plating effluent reduces the energy consumption and helps in preserving water, one of the precious natural resources.

d) Total energy consumption and energy consumption per unit as prescribed in Form A. Not furnished as the company is not covered in the list of specified industries.

B. Technology Absorption:

Research and Development (R&D)

1. Specific areas in which R&D is carried out by the company.

R&D activities carried out by the Company continued to be mainly oriented towards design, development, pilot production of electromechanical components and modification/ improvement of existing products, including specialized and automated testing systems. Special purpose products have also been designed as required by customers.

2. Benefits derived as a result of the above R&D.

Products & modified/improved processes were transferred for use in commercial production.

3. Future plan of action:

With increasing miniaturization, we have several technological challenges to confront in being able to offer products at competitive prices to match the price expectations of the market. The new relays being added are all very contemporary and would therefore have a global market. As customer expectations are increasingly more demanding and competition is intense, we have to keep a step ahead of others in this environment.

We continue to take up fresh development initiatives which should result in introduction of new relays and value a^ded products in the succeeding year also. Apart from inhouse development of new products, emphasis is also laid to improve processes and adapt new processes. Capital investment planned in the next couple of years is expected to strengthen such activities further.

4. Expenditure on R&D:

	Rs.
a) Capital	6273323
b) Recurring	16736782
Total	23010105

c) Sales of pilot products from R&D during the year 2013-14 : Rs.1.74 lakhs

d) Revenue during the year from sale of products developed by R&D during past three years : Rs.214.57 lakhs

e) Total R&D expenditure as a percentage of total Turnover 2.47%

Technology Absorption, Adaptation and Innovation:

1. Efforts made towards technology absorption, adaptation and innovation in brief:

The focus on technology absorption, adaptation and innovation include efforts made in alternate sourcing of imported parts and materials, application of value engineering techniques, steps aimed at improvement of productivity through better tool design, better machinery, better processes including automation. Lean manufacturing concept is being introduced. First steps to adopt Six Sigma methodology have also been adopted.

2. Benefits derived as a result of the above efforts eg. Product improvement, Cost reduction, Product development, Import substitution.

Benefits in different areas are:

a) Product improvement:

Increased Customer Satisfaction by offering enhanced product reliability, better features, Quality Enhancement, Superior Methodology of production, Higher Rating in quality, etc.

b) Cost reduction:

Achieved through alternate sourcing, change in material selection, simple and lean methods of production, automation, lower inventory levels etc.

c) Product development:

Better mix of specifications, custom engineered products, have added value to customers and have enhanced the range of products, thereby offering better choice for customers.

d) Import substitution:

Results in foreign exchange savings, better deliveries, lower inventory levels etc.

3. In case of imported technology (imported during the last 5 years reckoned from the beginning of the financial year) following information may be furnished.

a) Technology imported : NIL

b) Year of import : NIL

c) Has technology been fully absorbed? : NOT APPLICABLE

d) If not fully absorbed, areas where this has not taken place, reasons thereof and future plans of action. NOT APPLICABLE

e) Foreign Exchange Earnings and outgo:

Particulars with regard to Foreign Exchange earnings and outgo are detailed in Note No.2 of the Accounts andhence not separately dealt with.

	On behalf of the Board
	Sd/-	Sd/-
	(PAMELA ANNA MATHEW)	(D, BABU PAUL)
	MANAGING DIRECTOR	DIRECTOR
27th June 2014	DIN: 00742735	DIN: 00103047

STATEMENT PURSUANT TO SECTION 217 (2A) OF THE COMPANIES ACT, 1956

I. PARTICULARS OF PERSONS EMPLOYED THROUGHOUT THE FINANCIAL YEAR 2013-14 ON AN ANNUAL REMUNERATION OF NOT LESS THAN Rs.60,00,000/-.

Name and Age (Designation/ Nature of duties)	Remuneration Gross	Qualification and experience (years)	Date of commencement of employment	Last employment held	Whether relative of any director or manager
Ms. Pamela Anna Mathew (64) (Managing Director & Company Secretary)	A) 5603348	M.A. (Econs.)	3-9-1973	Not applicable	Yes*
	B) 3471715	M.B.A. (40)

* Related to Ms. Sarah Mathew and Ms. Sunela Sarah Thomas, Directors.

A) Denotes gross remuneration including Salary, Commission, Bonus, Medical expenses, Leave Travel, Taxable value of perquisites, Companys contribution to Provident Fund, Superannuation Fund and Gratuity.

B) Denotes net take home pay after statutory deductions and contributions to Funds.

II. PARTICULARS OF PERSONS EMPLOYED FOR A PART OF THE FINANCIAL YEAR 2013-14 ON A MONTHLY REMUNERATION OF NOT LESS THAN Rs.5,00,000/-

Name and Age (Designation/ Nature of duties)	Remuneration Gross	Qualification and experience (years)	Date of commencement of employment	Last employment held	Whether relative of any directors or manager
NOT APPLICABLE