Sanghvi Forging & Engineering Ltd Directors Report.

BOARDS REPORT

To,

The Members of

Sanghvi Forging & Engineering Limited

Your Directors take pleasure in presenting the 31st Annual Report of the Company along with the Audited financial statements for the year ended March 31, 2019, for your perusal, consideration and adoption.

Financial Highlights

The financial performance for the fiscal year 2019is summarized in the following table

(Rs in lakhs)
Particulars

Standalone

2018-19 2017-18
Income from Operations 6029.56 5433.09
Other Operating Income 88.60 128.13
Other Income 25.88 102.08
Total Income 6144.04 5663.30
Operating & Administrative Expenses 5707.83 5400.14
Operating Profit before Interest, Depreciation and Tax 436.21 263.16
Interest and Financial Charges 1572.48 1689.93
Depreciation and Amortization 859.09 883.31
Profit Before Tax (1995.36) (2310.08)
Tax Expenses NIL NIL
Short Provisions for Taxes NIL NIL
Profit After Tax (1995.36) (2310.08)

Financial and Operational Performance

Your Company has achieved a turnover of Rs 6144.04 lakh and incurred net loss of Rs 1995.36 lakh for the financial year ended March 31, 2019 as against a turnover Rs 5663.30 lakh and net loss of Rs 2310.08 lakh respectively during the previous year.

Depreciation and amortization charge was decreased from Rs 883.31 lakh to Rs 859.09 lakh during the financial year 2018-19.

Interest charges were decreased from Rs 1689.93 lakh to Rs 1572.48 lakh during the financial year 2018-19.

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 second 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 all 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 2018 -19.

Dividend

No Dividend has been declared in the Fiscal year 2018-19.

Credit Rating

Your company has no Credit rating for its long-term and short-term-bank facilities. There was no revision in the ratings signifies that company is somehow managing things even if delay and cost overruns in the new projects. The Company expects to improve its ratings in the coming year through capacity utilization with substantial marketing efforts. The Company faced liquidity constraints rendering its account as NPA in November 2016. We working closely with our both the Bankers for the resolution for the same.

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, 2019. 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 Naresh Babulal Sanghvi, Director of the Company will retire by rotation at the ensuing Annual General Meeting and is eligible for re-appointment. 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 Babulal Sanghvi, Chairman & Managing Director, Shri Babulal Sagarmal Sanghvi, Whole Time Director(tiU 04/08/2019), Shri Naresh Babulal Sanghvi, Whole Time Director, Shri Vikram Babulal Sanghvi, Whole Time Director & CFO, Mr. Harish Punwani (till 30/05/2018), Company Secretary & Ms. Deepika Agrawal (w.e.f. 30/05/2018) Company Secretary are Key Managerial Personnel of the Company.

Meetings of The Board Of Directors

During the year from April 2018 to March 2019, 4 Board Meetings were convened and held. The details of the Board Meeting with regards to their dates and attendance of each of the Directors thereat have been provided in the Corporate Governance Report that forms part of Annual Report. The intervening gap between the Two 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 the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out the annual performance evaluation of the Directors individually as well as evaluation of the working of the Board and of the 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 theMajority of Independent Directors as mentioned in the below table. The Committee interalia 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 Swaroop Kaushal Chairman Non-Executive and Independent
Shri Baba Karnire Pai Member Non-Executive and Independent
Shri Vikram Babulal Sanghvi Member Executive and Non-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 thewebsiteoftheCompanyi.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.

Composition of the Committee is as below:

Name Designation Category
Shri Jayantilal B Sanghvi Chairman Managing Director
Shri Baba Pai Member Non-Executive and Independent
Shri Ram S Kaushal Member Non-Executive and Independent

Policy on Nomination and Remuneration

The contents of Nomination and Remuneration Policy of the Company prepared in accordance with the provisions of Section 178 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.

Composition of the Committee is as below:

Name Designation Category
Shri Baba Karnire Pai Chairman Non-Executive and Independent
Shri Ram Swaroop Kaushal Member Non-Executive and Independent
Mrs. Aruna Khasgiwala Member Non-Executive and Independent

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-transactio n.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 and 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 2018-19 has 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 Companyi.e.http://www.sanghviforge.com/pdf/famiiiarisati on-program.pdf

Auditors

• Statutory Auditor

In compliance with the Companies (Audit and Auditors) Rules, 2014, the Company has appointed M/s. V. K. Shastri & Co., Practicing Chartered Accountants, as Statutory Auditors of the Company at the 29th Annual General Meeting held on September 28, 2017 to hold office till the conclusion of the 34th Annual General Meeting of the Company.

• 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 Secretarial Audit of the Company for the Financial Year2019- 20. The Audit Report is unqualified and without reservation or adverse comment on compliance. The report of Secretarial Audit is annexed as "Annexure A".

There have been no qualifications, reservations, adverse remarks or disclaimers in the auditors reports, requiring explanation or comments by the Board.

• Internal Auditor

M/s.Dhirubhai Shah & Co. LLP, Chartered Accountants, the existing Internal Auditors of the Company for the F.Y. 2018-19. Pursuant to the provisions of Section 138 of the Companies Act, 2013 and The Companies (Accounts) Rules, 2014 the Board of Directors has appointed M/s. Ambalal M. Shah & Co., Chartered Accountants, for the FY 2019-20.

There is no qualification, reservation, adverse remark or disclaimer by the Statutory Auditors in their report, by the Internal 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.

• Report of Fraud by Auditors

During the year under review, the statutory Auditors, Internal Auditors and Secretarial Auditors have not reported any instance of fraud committed under Section 143(12) of the Companies Act, 2013 details of which needs to be reported.

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, 2019, 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, 2019 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. The report of Particulars of employees and related disclosureis annexed in"Annexure C".

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 theseitems 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 second 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.

Compliance of Secretarial Standards

The Company has complied with Secretarial Standards issued by the Institute of Company Secretaries of India on Meetings of the Board of Directors and General Meetings.

Risk Management

The Constitution of Risk Management Committee is not applicable to the company however the company has voluntarily constituted Risk management Committee to monitor the risk and to take actions on deviations. No orders passed by Regulators or the Courts or the Tribunals.

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
Jayantilal Babulal Sanghvi
Place: Vadodara Chairman & Managing Director
Date: August 12, 2019 DIN:00291657