Pitti Engineering Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 35th Annual Report on the business and operations of the Company together with the Audited Financial Statements for the year ended 31st March 2019.

BUSINESS OVERVIEW

Pitti Engineering Limited, formerly known as Pitti Laminations Limited, is engaged in the manufacturer of specialised sheet metal components, its sub-assemblies for rotating electrical equipment and various machined components. Pitti Engineering products find varied end use across sectors such as industrial drives, freight and passenger rail, mass urban transportation, power generation, aerospace, oil & gas, mining and earth moving equipment, renewable energy and infrastructure projects amongst others.

FINANCIAL RESULTS

The financial performance of your Company for the year ended 31st March 2019 is summarised below:

Rs. in lakhs
Particulars 2018-19 2017-18
Net Revenue from Operations 62,221.47 37,879.24
Other Income 226.67 294.30
Profit before Finance Costs, 9,236.59 5,742.85
Depreciation, Amortisation and Tax
Less: Finance costs 2,961.40 2,348.15
Profit before Depreciation, 6,275.19 3,394.70
Amortisation and Tax
Less: Depreciation & Amortisation 2,241.38 1,763.21
Profit before Tax 4,033.81 1,631.49
Less: Tax expenses 1,661.85 503.53
Profit after Tax 2,371.96 1,127.96
Add: Other comprehensive income (85.07) 26.45
Total comprehensive income for the year 2,286.89 1,154.41
Add: Surplus at the beginning of the year 6,349.64 5,342.13
Less: Dividend - -
Less: Transferred to General reserve - -
Surplus carried to Balance sheet 8,636.53 6,496.54

OPERATING RESULTS AND BUSINESS

TheCompanyhasachievedthehighest ever annual revenue and profits for the financial year 2018-19. The net revenue and total comprehensive income have registered a growth of 64.26% and 98.10% respectively compared to the same period last year. We owe this historical financial achievement to the successful implementation of our "Mega Project" at Aurangabad, in addition to our efforts to become smarter and more efficient with the implementation of advanced manufacturing techniques and automation at our facilities.

The Company is in the process of obtaining approvals for availing incentives under the Package Scheme of Incentives (PSI) 2013 for its Aurangabad plant and under the T-IDEA (Telangana State Industrial Development and Entrepreneur Advancement) Incentive Scheme 2014 for its Hyderabad plant.

The Net revenue from operations for the financial year 2018-19 was Rs. 622.21 crore as against Rs. 378.79 crore in the previous year and the total comprehensive income for the period was Rs. 22.87 crore as against Rs. 11.54 crore in the previous year.

The total debt as on 31st March 2019 was Rs. 248.45 crore which includes Rs. 75.60 crore long-term debt and Rs. 172.85 crore of short term debt. Cash and cash equivalents at the year end was Rs. 13.96 crore resulting in a net debt position of Rs. 234.49 crore. We continued to maintain a conservative leverage profile with a total debt to equity ratio of 1.41x.

MATERIAL CHANGES

There have been no material changes and commitments affecting the financial position of the Company between the end of the financial year of the Company to which the financial statements relate and the date of this report. Further, it is hereby confirmed that there has been no change in the nature of business of the Company.

TRANSFER TO RESERVES

The Company does not propose to transfer any amount to the General reserve out of the amount available for appropriation.

DIVIDEND

In view of the increased operations and requirement of higher working capital for the purpose of business of the Company, your Directors express their inability to recommend dividend for the financial year 2018-19. The Board of Directors of the Company has adopted a dividend distribution policy. The policy is also available on the website of the Company www.pitti.in.

SHARE CAPITAL

During the year under review there has been no change in the authorised and paidup share capital of the Company.

The Company has allotted 22,22,222 convertible warrants at a price of Rs. 90/- each to be converted into 22,22,222 equity shares of Rs. 5/- (including a premium of Rs. 85/- per share) on preferential basis to the persons belonging to Promoter/ Promoter Group on 14th February 2018. The subscription amount of 25% of warrant price has been received and fully paid- up equity shares of the Company will be allotted on receipt of balance 75% warrant price within 18 months from date of allotment.

CHANGE IN NAME OF THE COMPANY

Further to the special resolution passed by the shareholder of the Company at the Extra-Ordinary General Meeting held on 11th April 2018 approving the change in the name of the Company from ‘Pitti Laminations Limited to ‘Pitti Engineering Limited, the Ministry of Corporate Affairs, Office of Registrar of Companies, Hyderabad has issued a Certificate of Incorporation pursuant to change of name on 8th May 2018.

Consequent to change in name of the Company from Pitti Laminations Limited to Pitti Engineering Limited the scrip code of the Company on the National Stock Exchange of India Limited has been change from PITTILAM to PITTIENG.

PUBLIC DEPOSITS

During the year under review, your Company has not accepted any deposit within the meaning of Section 73 and 74 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 (including any statutory modification(s) or re-enactment for the time being in force.

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

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo pursuant to Section 134(3)(m) of the Companies Act, 2013, read with the Rule 8(3) of the Companies (Accounts) Rules, 2014 is annexed as an Annexure-1 and forms an integral part of this report.

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the regulators / courts that would impact the going concern status of the Company and its future operations.

DIRECTORS & KEY MANAGERIAL PERSONNEL

In accordance with the provisions of Section 152 of the Companies Act, 2013 Shri Akshay S Pitti, Vice-Chairman & Managing Director retires by rotation and being eligible offers himself for re-appointment.

The details of the Directors seeking re-appointment including re-appointment of Independent Directors of the Company for a second term is provided in the notice convening the 35th Annual General meeting of the Company.

The Independent Directors of the Company have submitted a declaration confirming that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the Listing Regulations and that they are not aware of any circumstance or situation, which exist or may be reasonably anticipated, that could impair or impact their ability to discharge duties with an objective independent judgment and without any external influence. In the opinion of the Board, all Independent Directors are independent of the management. There has been no change in the Key Managerial Personnel during the year. Shri Sharad B Pitti, Chairman & Managing Director; Shri Akshay S Pitti, Vice-Chairman & Managing Director; Shri N K Khandelwal, President Corporate Resources & CFO and Ms. Mary Monica Braganza, Company Secretary & Compliance Officer are the Key Managerial Personnel of the Company as on the date of this report.

Meetings of the Board

Four meetings of the Board were held during the year. The details of composition of the Board, particulars of meetings held and attended by each Director are detailed in the Corporate Governance Report, which forms part of this Report.

Committees of the Board

Detailed composition of the mandatory Board committees namely Audit Committee, Nomination and Remuneration Committee, Stakeholders Relationship Committee and Corporate Social Responsibility Committee, number of meetings held during the year under review and other related details are set out in the Corporate Governance Report which forms a part of this Report.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and Listing Regulations, the Board has carried out the annual evaluation of the Directors as well as the evaluation of the Board and its Committees. The performance evaluation of the Independent Directors was carried out by the entire Board, except the director being evaluated. The performance evaluation of the Chairman & Managing Director and the Vice-Chairman & Managing Director was carried out by the Independent Directors. The process was carried out by circulating questionnaires on the functioning of the Board, its Committees and Individual Directors on parameters approved by the Nomination and Remuneration Committee.

As an outcome of the above exercise, it was noted that the Board functioned as a cohesive body and is well engaged with different perspectives. The Board has a good blend of corporate and professional experience with relevant and diverse skills suited to the requirements of the Company which enables focused discussion and decision making. It was also noted that the Committees of the Board are functioning well and satisfaction and appreciation was expressed on the performance of Independent Directors and the Executive Directors of the Company.

PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information relating to remuneration and other details as required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, as amended, is provided as an Annexure-2 to this report.

There are no employees who draw remuneration in excess of the limits prescribed in Rule 5(2)(i), (ii) and (iii) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Pursuant to the provisions of the first proviso to Section 136(1) of the Act, the annual report excluding the remuneration details of top ten employees is being sent to the Members of the Company. The said information is available for inspection on all working days, during business hours, at the Registered Office of the Company. Any member interested in obtaining such information may write to the Company Secretary and the same will be furnished on request.

DIRECTORS RESPONSIBILITY STATEMENT

Pursuant to Section 134(3)(c) of the Companies Act, 2013, the Directors of your Company confirm that: a) in the preparation of the annual accounts for the financial year ended 31st March 2019, the applicable Accounting Standards have been followed and there are no material departures from the same; b) such accounting policies as mentioned in the notes to the financial statements have been applied consistently and judgements and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the Company as at 31st March 2019 and of the profit of the Company for the year ended on that date. c) proper and sufficient care has been taken 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 annual accounts have been prepared on a ‘going concern basis; e) proper internal financial controls laid down by the Directors were followed by your Company and that such internal financial controls are adequate and operating effectively; and f) proper systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively.

INDUSTRIAL RELATIONS

Your Company has always considered its workforce and their skills as its valuable asset and continues to enhance the performance driven environment with emphasis on aligning it with the changing business requirements.

PREVENTION OF SEXUAL HARRASSMENT

Your Company has formulated a policy for the prevention of sexual harassment at the workplace. It ensures prevention and deterrence of acts of sexual harassment and communicates procedures for their resolution and settlement. The Company is committed to creating and maintaining a healthy working environment that enables employees to work without fear or prejudice, gender bias and sexual harassment. The Company believes that all employees have a right to be treated with respect and dignity and has zero tolerance towards violations of its code of conduct, in general, and its sexual harassment policy, in particular. During the year, no complaint under the sexual harassment policy has been received by the Company.

VIGIL MECHANISM / WHISTLE BLOWER POLICY

The Company has adopted a whistle blower policy and has established necessary vigil mechanism as defined under Regulation 22 of the Listing Regulations and section 177 of the Companies Act, 2013 for the Directors and Employees to report their concerns about unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct or ethical policy. The policy provides for adequate safeguards against victimisation of employees who avail of the mechanism. Effective from 1st April 2019 a revised vigil mechanism/whistle blower policy was adopted to comply with the amended SEBI (Prohibition of Insider Trading) Regulations, 2015 to report instances of leak of unpublished price sensitive information. During the year under review, no personnel was denied access to the Audit Committee. The policy is posted on the website of the Company at www.pitti.in.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

Your Company has an effective internal control and risk-mitigation system, which are constantly assessed and strengthened with new / revised standard operating procedures. The Companys internal control system is commensurate with its size, scale and complexities of its operations. The internal audit is entrusted to M/s. SVD & Associates, Chartered Accountants. The main thrust of internal audit is to test and review controls, appraisal of risks and business processes, besides benchmarking controls with best practices in the industry.

The Audit Committee actively reviews the adequacy and effectiveness of the internal control systems and suggests improvements to strengthen the same. The Company has a robust Management Information System, which is an integral part of the control mechanism.

Further, the Statutory Auditors of the Company have also issued an attestation report on internal control over financial reporting (as defined in section 143 of Companies Act, 2013) for the financial year ended 31st March 2019, which forms part to the Statutory Auditors Report.

RISK MANAGEMENT

Risk management is embedded in yourCompanysoperatingframework. Your Company believes that managing risks help in maximizing returns. The Companys approach to addressing business risks is comprehensive and includes periodic review of such risks and a framework for mitigating controls and reporting mechanism of such risks. The risk management framework is periodically reviewed by the Board and the Audit Committee. However, some of the risks which may pose challenges are set out in the Management and Discussion Analysis which forms an integral part of this report.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

As a part of its initiative under the CorporateSocialResponsibility(CSR) drive, the Company has undertaken projects in the areas of urban and rural development, welfare activities, women empowerment eradicating hunger, promoting health care and education. These projects are in accordance with Schedule VII of the Companies Act, 2013 and the Companys CSR policy. The report on CSR activities as required under the Companies (Corporate Social Responsibility Policy) Rules, 2014 is annexed as Annexure-3 and forms an integral part of this report.

PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS BY THE COMPANY

During the year under review, the Company has not given any loans, provided any guarantees nor made any investments.

RELATED PARTY TRANSACTIONS

All transactions entered into with related parties for the year under review were on arms length basis and in the ordinary course of business and is in accordance with the provisions of the Companies Act, 2013 and the SEBI Listing Regulations. The material related party transactions entered into by the Company are made with the approval of the Members. The information on transactions with related parties is given in Annexure-4 in Form No. AOC-2 and the same forms part of this report.

All related party transactions are placed before the Audit Committee and omnibus approval is obtained for transactions which are of repetitive nature.

Effective from 1st April 2019 a revised policy on related party was adopted to comply with the amended SEBI Listing Regulations. The policy on related party transactions as approved by the Board of Directors has been uploaded on the website of the Company www.pitti.in.

EXTRACT OF ANNUAL RETURN

The extract of annual return in form MGT-9, as required under section 92 of the Companies Act, 2013 and the rules made thereunder is annexed as Annexure-5 and forms an integral part of this Report. The form is also available on the website of the Company www.pitti.in.

SECRETARIAL STANDARDS

During the year under review, your Company has complied with all the applicable secretarial standards. The same has also been confirmed by Secretarial Auditors of the Company.

MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report on the operations of the Company as required under SEBI Listing Regulations is provided in a separate section and forms an integral part of this Report.

CORPORATE GOVERNANCE

As per Regulation 34(3) read with Schedule V of the SEBI Listing Regulations, a detailed report on corporate governance, together with a certificate from the Companys Auditors confirming compliance forms an integral part of this Report.

AUDITORS AND AUDITORS REPORT Statutory Auditors

M/s. Laxminiwas & Co, Chartered Accountants were appointed as Statutory Auditors of the Company at the Annual General Meeting held on 6th September 2017 for a term of five years, subject to ratification by the Members at every Annual General Meeting (AGM). Pursuant to the notification dated 7th May 2018 issued by Ministry of Corporate Affairs, the requirement of seeking ratification of appointment of statutory auditors by Members at each AGM has been done away with. Accordingly, no such item has been considered in notice of the 35th AGM.

M/s. Laxminiwas & Co, Chartered Accountants have confirmed that they are not disqualified from continuing as Auditors of the Company.

The Notes on financial statement referred to in the Auditors Report are self explanatory and do not call for any further comments. The Auditors Report does not contain any qualification, reservation, adverse remark or disclaimer. The Statutory Auditors of the Company have not reported any fraud under Section 143(12) of the Companies Act, 2013 .

Cost Auditors

The Company is required to maintain cost records as specified by the Central Government under section 148(1) of the Companies Act, 2013 and accordingly such accounts and records are maintained by the Company. The Board of Directors, on the recommendation of Audit Committee has appointed M/s. S S Zanwar & Associates, Cost Accountants (Firm Registration No.100283) as the Cost Auditors to audit the cost accounts of the Company for the financial year 2019-20. As required under the Companies Act, 2013 a resolution seeking Members ratification for the remuneration payable to the cost auditor forms part of the notice convening the 35th AGM.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and rules made thereunder, the Board has appointed Shri Ajay Kishen, Practicing Company Secretary (CP. No. 5146) to conduct Secretarial Audit for the Financial Year 2018-19. The Secretarial Audit Report for the financial year ended 31st March 2019 is annexed to this Report. The Secretarial Audit Report does not contain any qualification, reservation, adverse remark or disclaimer.

CAUTIONARY STATEMENT

Statements in this Directors Report and Management Discussion and

Analysis describing the Companys objectives, projections, estimates, expectations or predictions may be "forward-looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied.

ACKNOWLEDGEMENT

Your Directors wish to place on record their appreciation for dedicated service and contribution made by the employees of the Company at all levels. Your Directors would also like to place on record their appreciation for the continued co-operation and support received by the Company during the year from its customers, suppliers, bankers, financial institutions, government authorities, business partners and other stakeholders.

For and on behalf of the Board of Directors
Sharad B Pitti
Place : Hyderabad Chairman & Managing Director
Date : 6th May 2019 DIN: 00078716