Sanghvi Forging & Engineering Ltd Directors Report.

To,

The members of

Sanghvi Forging & Engineering Limited

Your Directors take pleasure in presenting the 29th Annual Report of the Company along with the Audited financial statements for the year ended March 31, 2017, for your perusal, consideration and adoption.

Financial Highlights

The financial performance for the fiscal year 2017 is summarized in the following table:

(Rs. in lacs)
Particulars

Standalone

2016-17 2015-16
Income from Operations 5376.59 6686.23
Other Operating Income 165.01 149.07
Other Income 11.44 93.30
Total Income 5553.04 6928.60
Operating & Administrative Expenses 5247.12 5463.79
Operating Profit before Interest, Depreciation and Tax 305.92 1464.81
Interest and Financial Charges 1660.94. 1616.44
Depreciation and Amortization 897.02 842.02
Profit Before Tax (2252.04) (993.65)
Tax Expenses NIL 5.05
Short Provisions for Taxes NIL -
Profit After Tax (2252.04) (998.70)

Financial and Operational Performance

Your Company has achieved a turnover of 5541.59 lacs and incurred a net loss of 2252.04 lacs for the financial year ended March 31, 2017 as against a turnover 6835.30 lacs and net loss of 998.70 lacs respectively during the previous year. Depreciation and amortization charge was increased from 842.02 lacs to 897.02 lacs during the financial year 2016-17.

Interest charges were increased from 1616.44 lacs to 1660.94 lacs during the financial year 2016-17.

Employee benefit expenses have increase from 638.66 lacs making an increase of 0.03%. It signifies that the Company has been constantly making efforts to boost up its human resources and invested in bringing experienced professionals in the organization .

Outlook

The Company has taken a number of steps to sustain its leadership position in the market and has been strengthening its relationships with its customers. In addition it is also making constant efforts to add new customers and widen its customer base.

The combination of additional capacity of our new plant i.e. 15000 MTPA and integration has had a positive impact on the Companys operating margins. Your Company believes to strengthen its topline and margins in the coming years. We have received majority approvals from different customers that validate our product quality.

The Company continued its focus on strengthening local manufacturing capabilities. However, it also analyzed the trends in the steel industry and adapted to rapid development occurring in the world of steel. The Company has adopted strategic measures to minimize the adverse macro-economic implications.

Share Capital

No new Share Capital has been issued by the Company in the Fiscal Year 2016 -17.

Credit Rating

Your company has managed to affirm the CARE D rating for its long-term and short-term-bank facilities. There was no further revision in the ratings signifies that company is somehow managing things even if delay and cost overruns in the new project. The Company expects to improve its ratings in the coming year through capacity utilization with substantial marketing efforts.

Investors Relations and Grievances

All the shareholders/investors complaints/grievances received during the financial year have been resolved and there were no investor grievances pending, as on March 31, 2017. A confirmation to this effect has been obtained from the Companys Registrar and Share Transfer Agent and authentication of the same can be verified from the SCORES website at http://scores.gov.in. The details regarding investor complaints received and resolved during the year are mentioned in the report on Corporate Governance annexed to this report.

Management Discussion and Analysis Report

A detailed review of operations, performance and future outlook of the Company is covered under a separate Annexure to this report as Managements Discussion & Analysis.

Directors

In accordance with the provisions of Section 152 of the Companies Act, 2013, Shri Babulal Sagarmal Sanghvi, Director of the Company will retire by rotation at the ensuing Annual General Meeting and is eligible for reappointment. Necessary resolution is being proposed for his appointment as Director at the ensuing Annual General Meeting of the Company. A brief resume and particulars relating to him are given separately under the report on Corporate Governance.

Key Managerial Personnel

Shri Jayantilal B Sanghvi, Managing Director, Shri Vikram B. Sanghvi, Whole Time Director & CFO and *Mr. Keval Thakkar, Company Secretary are Key Managerial Personnel of the Company.

Meeting of the Board

During the year from April 2016 to March 2017, 4 Board Meetings were convened and held. The details of the Board Meeting with regards to the Dates and attendance of each Director thereat have been provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

Amount Transferred to Reserves

The Board of Directors has not recommended transfer of any amount of profit to reserve.

Declaration Given by Independent Directors

The Independent Directors of the Company have given the declarations to the Company that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013.

Board Evaluation

Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an annual performance evaluation of its own performance, the directors individually as well as the evaluation of the working of its Audit, Nomination & Remuneration and Compliance Committees.

Evaluation Criteria:

a. For Independent Directors :-

• Professional conduct

• Duties, Role, integrity and functions

• Knowledge and Skills

b. For Executive Directors :-

• Professional Conduct and Integrity

• Sharing of Information with the Board

• Key Performance in achievement of Goals The Directors expressed their satisfaction with the evaluation process.

Composition of Audit Committee

Pursuant to the provision of Section 177 (8) of the Companies Act, 2013, Audit Committee consists of All Independent Directors as mentioned in below table. The Committee inter alia reviews the Internal Control System, Reports of Internal Auditors and Compliance of various regulations. The Committee also reviews at length the financial statements before they are placed before the Board.

Composition of the Committee is as below:

Name Designation Category
Shri Ram S Kaushal Chairman Non-Executive and Independent
Shri Baba Pai Member Non-Executive and Independent
Shri Vikram B Sanghvi Member Executive and NonIndependent
Shri Shantaram Yarlagadda Member Non-Executive and Independent

Vigil Mechanism / Whistle Blower

In staying true to our values of Strength, Performance and Passion and in line with our vision of being one of the most respected companies in India, the Company is committed to the high standards of Corporate Governance and stakeholder responsibility.

Pursuant to the provisions of Section 177(9) & (10) of the Companies Act, 2013 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Vigil Mechanism or ‘Whistle Blower Policy for directors, employees and other stakeholders to report genuine concerns has been established. The same is also uploaded on the website of the Company i.e. http://www. sanghviforge.com/pdf/whisler blower policy.pdf

Internal Financial Control

The Companys internal control procedure which includes internal financial controls, ensure compliance with various policies, practices and statutes and keeping in view the organizations pace of growth and increasing complexity of operations. The internal auditors team carries out extensive audits throughout the year across all locations and across all functional areas and submits its reports to the Audit Committee of the Board of Directors.

Corporate Social Responsibility

The Company, having regard to its size and scope, is generally compliant with relevant guidelines on Corporate Social Responsibility (CSR), even though not presently applicable to the Company. The Board has also constituted a committee at their Board Meeting held on May 26, 2014 in accordance with Section 135 of the Companies Act 2013 to mentor and monitor CSR activities.

The call of fulfilling our CSR activities has sincerely been taken by us and we accord as much significance to CSR as any business project and the results are there for everyone to see. Dedicated need-based interventions have been initiated in areas where we operate. Enabling local people by fostering self-reliance is the motive behind our community development efforts.

Therefore, our interventions are structured around promoting education as well as informal education of Tribal Children, generating livelihood, empowering women and overall, social mobility.

Your Company is also constantly making efforts to maintain a greener planet and reduce its carbon footprint as much as possible. Through financial contributions and active participation of employees, your Company provides support to non-profit organisation that addresses community sustainability. Your Company contributed through donations, rain water harvesting sponsorship and by participating in various activities.

Policy on Nomination and Remuneration

The contents of Nomination and Remuneration Policy of the Company prepared in accordance with the provisions of Section178 of the Companies Act, 2013 and Regulation 19 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 are provided in the Corporate Governance Report.

Related Party Transactions

All related party transactions that were entered into during the financial year were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained during the year for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee and the Board of Directors for their approval. The Company has developed a Related Party Transactions policy for purpose of identification and monitoring of such transactions.

The policy on Related Party Transactions as approved by the Board is uploaded on the Companys website i.e. http:// www.sanghviforge.com/pdf/related party transaction.pdf

Report on Corporate Governance

A separate Section on Corporate Governance is forming part of the Annual Report and the Certificate from M/s Samdani Shah& Kabra, Company Secretaries, Vadodara, the Companys Secretarial Auditors confirming the compliance of conditions on Corporate Governance as stipulated under Schedule V of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is attached to the report on corporate governance.

Fixed Deposits

Your Directors report that the Company has not accepted any deposits during the current financial year.

Insurance

Your Directors confirm that all the properties and insurable interests of the Company, including buildings, plant and machinery and stocks have been adequately insured.

Loan, Guarantee or Investment

Details of Loans, Guarantees and Investments covered under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements.

Listing of Shares

The Equity Shares of the Company are listed on the BSE Limited (BSE)with scrip code No. 533411 and on the National Stock Exchange of India Limited (NSE) with scrip code of SANGHVIFOR. The Company confirms that the annual listing fees to both the stock exchanges for the financial year 2016-17 have been paid.

Subsidiary Company

Company has its Wholly Owned Subsidiary Company in Netherlands in the name of “Sanghvi Europe BV”.

Statement containing salient features of the financial statement of subsidiaries/associate companies / joint ventures is attached in Form AOC-I in Separate Section of this Annual Report.

Familiarisation Programme for Independent Directors

The details of programmes for familiarization of Independent Directors and training 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 i.e. http://www.sanghviforge. com/pdf/familiarisation program.pdf

Auditors

Statutory Auditor

M/s Shah & Bhandari, Chartered Accountants, the existing Statutory Auditors of the Company were reappointed at the 27th Annual General Meeting (AGM) held on September 26, 2014 to hold office till the conclusion of forthcoming 29th AGM. Accordingly, they will retire at this AGM. In accordance with the provision of Section 139 and other applicable provisions, if any, of the Companies Act, 2013 and the relevant Rules framed thereunder, the Board of Directors have proposed to appoint M/s. V.K. Shastri & Co., Chartered Accountants, as Statutory Auditors of the Company for a term of five consecutive years at the ensuing 29th AGM till the conclusion of 34th AGM subject to ratification at every annual general meeting, in place of retiring Auditors M/s. Shah & Bhandari., Chartered Accountants.

Secretarial Auditor

Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s Samdani Shah &Kabra, Practicing Company Secretary, Vadodara,to undertake the Secretarial Audit of the Company for the FY 2017-18. The Report of the Secretarial Audit Report is annexed herewith as “Annexure A” for the year ended on March 31, 2017. There is no qualification in the Secretarial Report submitted by M/s. Samdani Shah & Kabra to the Company.

Internal Auditor

The Board of Directors has appointed M/s Parikh Mehta & Associates, Chartered Accountants as Internal Auditors of the Company for the FY 2017-18 Pursuant to the provisions of Section 138 of the Companies Act, 2013 and The Companies (Accounts) Rules, 2014.There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their report or by the Secretarial Auditor in their Secretarial Audit Report and hence no explanation or comments of the Board is required in this matter.

Directors Responsibility Statement

To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013:

(a) that in the preparation of the annual financial statement for the year ended March 31, 2017, the applicable accounting standards had been followed along with proper explanation relating to material departures, if any

(b) that the accounting policies to the financial statement have been selected 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 as at March 31, 2017 and of the profit and loss of the company on that date;

(c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities;

(d) that the annual financial statement on a going concern basis; and

(e) that the proper internal financial controls were in place and that the internal financial controls were adequate and were operating effectively.

(f) that systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively.

Human Resources

Many initiatives have been taken to support business through organizational efficiency, process change support and various employee engagement programmes which has helped the Organization achieve higher productivity levels. A significant effort has also been undertaken to develop leadership as well as technical/ functional capabilities in order to meet future talent requirement.

The Companys HR processes such as hiring and on- boarding, fair transparent online performance evaluation and talent management process, state-of-the-art workmen development process, and market aligned policies have been seen as benchmark practices in the Industry.

Pursuant to The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 notified on December 9, 2013, the Company has set up a Committee to look into complaints under the said Act. The Company has not received any complaints relating to sexual harassment at work place from any woman employee during the year.

Disclosure by Senior Management Personnel i.e. One Level Below the Board Including all HODs

None of the senior management personnel have undertaken financial and commercial transactions with the Company, where they have personal interest that would have a potential conflict with the interest of the Company at large.

Disclosure

Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review:

No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Companys operations in future.

Material Changes and Commitments

Your Directors are of the opinion that there are no material changes and commitments affecting financial position of the Company which have occurred between end of financial year of the Company and the date of this report.

Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as “Annexure B”.

Conservation of Energy

The Company has taken several steps towards conserving energy through its ‘Sustainability initiatives, disclosed separately in the Annual Report. The information on Conservation of Energy as required under Section 134(3) (m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is provided in “Annexure D” of this Annual Report.

Safety, Health and Environment

The Company has continuously exercised effective safety, health and environment policies. Water and air pollution control measures are successfully operated and industrial trade effluents are used for gardening. The tree plantation at the factory site is maintained properly and the same shall be duly taken care of at our new plant.

Ratio of Remuneration of Director

The information required pursuant to Section 197 read with Rule, 5 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 of the Act, the

Report 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 Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting.

If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard.

Risk Management

The Constitution of Risk Management Committee is not applicable the company however the company has voluntarily constituted Risk management Committee to monitor the risk and to take actions on deviations.

Acknowledgement

Your Directors express their sincere appreciation for the wholehearted and continued support assistance and cooperation extended by the shareholders banks, suppliers, customers, employees, and all concerned towards the Company during the year under review.

On the behalf of the Board of Directors
Place: Vadodara Babulal S Sanghvi
Date: August 11, 2017 Chairman