pennar industries ltd share price Directors report


Dear Members,

Your Directors are pleased to present the 46th Annual Report and the Companys audited financial statement (Standalone and Consolidated) for the financial year ended 31st March, 2022.

Financial Results:

The Companys financial performance, for the year ended 31st March, 2022 is summarized below

Amount in Rs. crores

Consolidated

Standalone

2021-22 2020-21 2020-21
Revenue from Operations 2,265.75 1,525.35 1,994.75 1,516.54
Operating profit (PBIDT) 188.42 131.49 171.07 128.20
Profit before tax (PBT) 55.91 3.65 45.65 1.07
Income Tax and Deferred Tax 14.00 0.81 11.49 0.18
Profit after tax (PAT) 41.91 2.84 34.16 0.89
Other Comprehensive income/(Loss) (2.53) (0.27) (1.32) 0.14
Total Comprehensive income for the year 39.38 2.57 32.84 1.03
Net profit attributable to Owners of the company 39.30 2.27 32.84 1.03
Profit brought forward from previous year 491.83 489.15 487.25 486.22
Surplus available for appropriation 532.71 491.83 520.09 487.25
Balance of profit carried to Balance Sheet 532.71 491.83 520.09 487.25

Result of Operations and the state of Companys affairs:

Your company has generated a consolidated net revenue of Rs. 2,265.75 Crores, EBITDA at Rs.188.42 Crores, PAT at Rs.41.91 Crores for the financial year 2021-22.

Consolidated Financial Statement:

The Consolidated Financial Statements of the Company, its subsidiaries prepared in accordance with the Companies Act, 2013 and applicable Indian Accounting Standards along with all relevant documents and the Auditors Report form part of this Annual Report. The Consolidated Financial Statements presented by the Company include the financial results of its subsidiary companies. The Financial Statements as stated above are also available on the website of the Company and can be accessed at the website viz., www. pennarindia.com.

Subsidiaries:

The following are three subsidiaries of the company as on 31st March, 2022.

a. M/s. Pennar Global INC, USA

b. M/s. Enertech Pennar Defense and Engineering Systems Private Limited

c. M/s. Pennar Gmbh

The performance of the subsidiaries is as hereunder:

(a) M/s. Pennar Global INC, USA

Pennar Global Inc. is in the business of providing engineering services and marketing Pennar Products across the United States of America. The company has recorded a consolidated net revenue of 51.67 Million USD in the financial year 2021-22.

b) M/s. Enertech Pennar Defense and Engineering Systems Private Limited

Enertech Pennar Defence and Engineering Systems Private Limited has recorded a net revenue of Rs. 13.69 crores in the financial year 2021-22.

c) M/s. Pennar Gmbh

Pennar Gmbh is in the business of providing engineering services to our European clients. The company has recorded a net revenue of 0.57 million Euros for the financial year 2021-22.

The financial position of each of the subsidiaries, as per the Companies Act, 2013 is annexed. The Policy for determining material subsidiaries may be accessed on the Companys website at the link: http://www.pennarindia. com/policy-determining-materiaLhtml. The information on subsidiaries pursuant to Section 129(3) of the Act read with rule 5 of the Companies (Accounts) Rules, 2014 is annexed herewith as Annexure - A in Form AOC - 1.

Sale of Subsidiary:

During the year under review, your company entered into Share Purchase Agreement for disposing its 100 % shareholding in M/s. Oneworks BIM Technologies Private Limited, the said company ceased to be a subsidiary of the company with effect from 31st August, 2021.

Step down subsidiaries:

The following are two step-down subsidiaries of the company as on 31st March, 2022.

a. Pennar Global Metals, LLC

b. Ascent Buildings, LLC

Material Changes and Commitments if any affecting the financial position of the company which have occurred between the end of the financial year of the company to which the financial statements relate and the date of the report

There are no material changes and commitments affecting the financial position of the Company.

Dividend, Fixed Deposits and General Reserves:

The company has been investing in new capital to expand its product profile and increase the markets. This has already shown results by achieving highest sales and EBIDTA. Most of these activities are planned through internal sources. The company has also started buyback of equity shares of the Company by using funds upto a limit of Rs. 4,000 lakhs representing 5.97% and 5.93% of the aggregate of the total paid-up equity capital and free reserves of the Company. Therefore, your Directors are not recommending dividend on equity shares. Your Company has not accepted any fixed deposits and no amount has been carried to General Reserves during the year.

Particulars of Loans given, Investments made, Guarantees given and Securities provided:

Particulars of loans given, investments made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilized by the recipient are provided in the standalone financial statement.

Internal Financial Controls:

The details in respect of internal financial control and their adequacy are included in the Management Discussion & Analysis, which forms part of this report.

Contract and Arrangement with Related Parties:

All contracts / arrangements / transactions entered by the Company during the financial year with related parties were in the ordinary course of business and on an arms length basis. During the year, the Company had entered into contract / arrangement / transaction with material related party which could be considered material in accordance with the policy of the Company on materiality of related party transactions. 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: https://www.pennarindia.com/policy- related-party-transactions.php

The Information on transactions with related parties pursuant to Section 134(3)(h) of the Act read with rule 8(2) of the Companies (Accounts) Rules, 2014 are annexed herewith as Annexure - B in Form AOC-2

Change in the nature of business, if any:

There is no material change in the nature of business affecting the financial position of the Company for the year ended 31st March, 2022.

Credit Rating:

CARE has reaffirmed the CARE A- Stable (Single A Minus; Outlook: Stable) with rating assigned to long term bank facilities. Further, CARE has reaffirmed the CARE A2+ (A Two Plus) rating to short term bank facilities of the Company.

Cash profit:

Your company has undertaken a number of steps to maintain strong liquidity levels. The consolidated cash profit is at Rs. 95.99 Crore. Your company continues to focus on generating strong cash flows to meet its future growth plans and is comfortable with its current liquidity positions.

Board of Directors and Key Managerial Personnel:

None of the Directors of the company are disqualified under the provisions of the Act or under the Listing Regulations.

Appointment:

Mr. Nrupender Rao and Mr. Aditya Rao who retire by rotation and being eligible offer themselves for reappointment. Your Board recommends their appointment.

Resignation:

Ms. Bharati Jacob, Non-Executive Independent Director of the company resigned from the office of directorship and same was taken note by the Board of Directors at its meeting held 25th May, 2022. Your Board place on record their appreciation and gratitude for the guidance and direction that Ms. Bharati Jacob has provided to Pennar Industries during her tenure as non-executive independent director.

Pursuant to the provisions of Listing Regulations, brief particulars of the Directors who are proposed to be appointed/re-appointed are provided as an annexure to the notice convening the Annual General Meeting.

The Company has received declarations from all the Independent Directors of the Company confirming that they meet with the criteria of independence as prescribed both under sub-section (6) of Section 149 of the Companies Act, 2013 and under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. 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 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 at the link: https://www.pennarindia.com/policy-familiarization-programme.php

Meetings of the Board:

Five meetings of the Board of Directors were held during the year. For further details, please refer the same in Corporate Governance report in this Annual Report.

Buyback of Equity Shares:

The Board of Directors at its meeting held on 9th March, 2022 has approved a proposal for the buy-back of equity shares of the Company by using funds upto a limit of Rs. 4,000 lakhs representing 5.97% and 5.93% of the aggregate of the total paid-up equity capital and free reserves of the Company based on the audited standalone and consolidated financial statements of the Company respectively for last financial year ended on 31st March, 2021.

As on 31st March, 2022, the scheme of Buyback was open, the Company bought back 50 equity shares. Out of the 50 equity shares bought back, the company extinguished nil equity shares as at 31st March, 2022 and subsequently shares were extinguished in the month of April, 2022 in line with the requirements of Companies Act, 2013 and Securities and Exchange Board of India (Buy-Back of Securities) Regulations, 2018.

Directors Responsibility Statement:

In terms of Section 134 (3)(c) of the Companies Act, 2013, the Board of Directors state that:

a) in the preparation of the annual accounts for the year ended 31st March, 2022, the applicable accounting standards 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 31st March, 2022 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 Governance:

The Company is committed to maintain the highest standard of corporate governance and adhere to the corporate governance requirements set out by Securities Exchange Board of India. The Report on corporate governance as stipulated under the Listing Regulations is annexed herewith as Annexure - C. The requisite certificate from Statutory Auditors confirming compliance with the conditions of corporate governance is annexed herewith as Annexure - D.

Corporate Social Responsibility (CSR):

Pursuant to the provisions of Section 135 and Schedule VII of the Companies Act, 2013, CSR Committee of the Board of Directors had framed the policy on Corporate Social Responsibility. The same is hosted on the website of the Company viz., https://www.pennarindia.com/csr-policy.php. The Company has a CSR Committee to monitor adherence to Corporate Social Responsibility Policy and to track transactions related to Ongoing / Non-ongoing projects etc. A detailed report on the CSR activities inter- alia disclosing the composition of CSR Committee and CSR activities is attached as Annexure - E to this Report.

Nomination and Remuneration Policy:

The Nomination and Remuneration Committee of the Company identifies the persons, who are qualified to become Directors of the Company / who may be appointed in Senior Management in accordance with the criteria laid down and recommend to the Board for their appointment and removal. The Committee also carries out evaluation of every Directors performance. The Committee has formulated the criteria for determining qualifications, attributes, independence of the Directors and recommend to the Board a Policy, relating to the remuneration for the Directors, Key Managerial Personnel and other employees.

Risk Management:

Pursuant to section 134 (3) (n) of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, the company has formulated a policy on risk management. At present, the company has not identified any element of risk which may threaten the existence of the company.

Statutory Auditors:

The Audit Committee and the Board of Directors of the Company at their meetings held on 8th August, 2022 and 9th August, 2022 respectively, recommended the appointment of M/s. MSKA & Associates, Chartered Accountants (Firm Registration No. 105047W), as the Statutory Auditors (new auditors) of the Company in place of the existing Statutory Auditors to hold office for a term of five consecutive years from the conclusion of the ensuing Annual General meeting to be held in the year 2022 till the conclusion of the Annual General Meeting to be held in the year 2027. The necessary resolution is being placed before the shareholders for approval. The new Auditors have confirmed their eligibility to the effect that their appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for appointment.

The Auditors Report is unmodified i.e. it does not contain any qualification, reservation or adverse remark or disclaimer.

Cost Auditors:

The Cost Audit Report for the year ended 31st March, 2021 was reviewed by the Audit Committee at its meeting held on 11th August, 2021 and has been filed with Registrar of Companies on 30th November, 2021. The Board of Directors at its meeting held on 4th June, 2021 appointed M/s. Kandikonda & Associates., Cost Accountants, Hyderabad as Cost auditors of the company for the year ending 31st March, 2022. The Cost Audit report for the year ended 31st March 2022 was approved by the Board of Directors at its meeting held on 9th August, 2022 and the same will be filed with the Registrar of Companies within the stipulated time.

Secretarial Auditor:

The Board has appointed Mr. Subhash Kishan Kandrapu, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2021-22. The Secretarial Audit Report for the financial year ended 31st March, 2022 is annexed herewith as Annexure - F. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark.

Audit Committee:

The details pertaining to composition of audit committee are included in the Corporate Governance Report, which forms part of annual report.

Vigil Mechanism/Whistle Blower Policy:

Pursuant to Section 177 of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014, the Company has established a Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Whistle Blower Policy are explained in the Corporate Governance Report. The Policy on vigil mechanism and whistle blower policy may be accessed on the Companys website at the link: https://www.pennarindia.com/vigil-mechanism.php and https://www. pennarindia.com/whistle-blower-policy.php.

Conservation of energy, technology absorption and foreign exchange earnings and outgo:

The particulars relating to conservation of energy, technology absorption, foreign exchange earnings and outgo, as required to be disclosed under the Act, is annexed herewith as Annexure - G.

Extract of Annual Return:

Extract of Annual Return of the Company is annexed herewith as Annexure - H.

Secretarial Standards:

The Company complies with all applicable secretarial standards issued by the Institute of Company Secretaries of India.

Particulars of Employees and related disclosures:

The information required under section 197 of the Companies Act, 2013 read with rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is annexed herewith as Annexure - I.

Disclosure under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013:

The Company has zero tolerance for sexual harassment of women at workplace and has adopted a Policy for prevention, prohibition and redressal of sexual harassment at workplace, in terms of provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the rules framed thereunder and constituted Internal Complaint Committee (ICC) for safe working environment where all employees treat each other with courtesy, dignity and respect, irrespective of their gender, race, caste, creed, religion, place of origin, sexual orientation, disability, economic status or position in the hierarchy.

The following is the summary of sexual harassment complaints received and disposed off during the year:

i) No. of complaints received : nil

ii) No. of complaints disposed off: nil

Listing of Equity Shares:

The Companys equity shares are listed at the Bombay Stock Exchange Limited, National Stock Exchange of India Limited.

Dematerialisation of Shares:

99.51% of the companys paid-up equity share capital is in dematerialized form as on 31st March, 2022 and balance 0.49% is in physical form.

Managing Directors Declaration:

Pursuant to the provisions of Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a declaration by the Vice-Chairman and Managing Director of the company declaring that all the members of the board and the senior management personnel of the company have affirmed compliance with the Code of Conduct of the company is annexed herewith as Annexure - J.

The CFO certification to the board pursuant to Regulation 15 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is annexed herewith Annexure - K.

Personnel / Industrial Relations:

The Company maintained cordial and harmonious relations at all levels at the offices and plants of the Company and its subsidiaries throughout the year under review.

The details of significant and material orders passed by the Regulators or Courts or Tribunals impacting the going concern status and companys operations in future:

In terms of sub rule 5(vii) of Rule 8 of Companies (Accounts) Rules, 2014, there are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations.

Reporting of Frauds by Auditors:

During the year under review, neither the statutory auditors nor the secretarial auditor has reported to the audit committee, under section 143(12) of the companies act 2013, any instances of fraud committed against the company by its officers or employees, the details of which would need to be mentioned in the Boards report.

Management Discussion and Analysis:

The "Management Discussion and Analysis Report" highlighting the industry structure and developments, opportunities and threats, future outlook, risks and concerns etc. is furnished separately and forms part of this Boards Report.

Appreciation:

Your directors take this opportunity to express their appreciation for the co-operation to all the suppliers and customers who have been associated with the Company as partners. The Directors would also like to take this opportunity to thank the financial institutions, banks, regulatory and government authorities as well as the shareholders for their continued co-operation and support. The Directors also wish to place on record their appreciation of the devoted and dedicated services rendered by all employees of the Company. We look forward to further support.

By Order of the Board
for Pennar Industries Limited
Nrupender Rao
Place : Hyderabad Chairman
Date : 09.08.2022 DIN No. 00089922