SNL Bearings Ltd Directors Report.

To,

The Members SNL Bearings Limited

Your Directors have pleasure in presenting their Fortieth Annual Report together with Audited Financial Statements for the year ended March 31, 2020

1. Financial Results

Year ended 31st March, 2020 31st March, 2019
(Rs. in lakhs) (Rs. in lakhs)
Revenue from operations (Net) 3414.18 4064.17
Profit before tax 555.10 1140.64
Provision for taxation:
Current tax (net) 137.69 321.38
Deferred tax 0.80 4.90
Profit after taxation 416.61 814.36
Add: Balance brought forward 2062.52 1467.51
Add: Other Comprehensive Income for the year -16.23 -1.65
2462.90 2280.22
Appropriation:
Dividend 288.92 180.58
Tax on distributed profits 59.39 37.12
General Reserve - -
Capital Redemption Reserve - -
Outside basis Tax - -
Profit & Loss Account 2114.59 2062.52
Total 2462.90 2280.22

2. Dividend

Based on the Companys performance, your Board of Directors have declared an Interim Dividend of Rs. 3/- per share (i.e. 30%) of face value of Rs. 10/- each involving an outgo of Rs. 1,30,61,708/- (inclusive of dividend distribution tax) on March 06, 2020 for the F.Y. 2019-20 and paid to the shareholders whose name appeared in the Register of Member as on March 17,

2020. Your Company had paid a Final Dividend of Rs. 5 /- per equity share (i.e. 50%) for the previous financial year 2018-19.

Further, your Directors do not recommend any final dividend for the financial March 31, 2020.

Your Directors have proposed not to transfer any sums to the General Reserve.

3. State of Companys Affairs, Operations & Future Outlook

The performance for the year has to be viewed in the context of the unfavorable macro-economic environment and particularly the weak demand scenario for the auto sector. During F.Y. 2019-20, the overall automobile sales reported the sharpest decline of 18 per cent, year-on-year, during the last five years on the back of price hikes in passenger vehicles and two wheeler segments due to transition to stringent BS-VI emission norms, higher insurance costs, higher ownership costs, liquidity crunch in the NBFC sector. Reduced turnaround time and increased load carrying capacity for CVs led to high inventories and slow movement in CV segment sales. Overall, the challenges impacted the companys business significantly, resulting in de-growth in our Revenues and Profits, compared to the year before.

Rating agencies have revised the outlook for auto sector from stable to negative as the overall outlook, especially in the automotive sector continues to lean towards being challenging with the

Covid-19 pandemic requiring a lockdown of all business activities for a greater part of Q1. Recent relaxations in the restrictions have given hopes for gradual resumption in sales and production over the coming quarters of F.Y. 2020-21.

Net revenues during the year at Rs. 3414.18 Lakhs (previous year Rs. 4064.17 lakhs) are lower by 16% due to lower sales. Profit after tax (PAT) at Rs. 416.61 lakhs (previous year Rs. 814.36 lakhs) has also dropped by 49% due to the fall in volumes, despite continuing efforts to restrict operating and administrative expenses.

For F.Y. 2020-21, the outlook is still uncertain with the likelihood of further de-growth in revenues. Operating margins are also likely to be impacted due to lower capacity utilization and lower absorption of overheads. Company management team will be focused on driving operational efficiencies to restrict costs further. The benefitsof Government support by way of a Relief package to boost slow consumer demand, increased liquidity and lower corporate taxes, are likely to accrue over the medium term, and the forecast of a normal monsoon should accelerate revival of rural demand for two wheelers and farm equipment. With the support of the holding company, we shall strive to further improve our quality and delivery of our products so as to enhance competitiveness with customers.

4. Finance

Your Company has been rated ‘CRISIL A1 for the Short-term Bank facility and the Companys long-term facilities have been rated at ‘CRISIL A/ Negative (outlook revised to ‘Negative from ‘Stable and Rating reaffirmed) as on May 22, 2020.

The Company continues to focus on judicious management of its working capital. Receivables, inventories and other working capital parameters are continuously monitored. a. Public Deposits

During the year, the Company has not accepted any deposits from the public/ Members under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits)

Rules, 2014. As on 31.3.2020 there are no fixed deposits with the Company. b. Particulars of Loans, Guarantees or Investments

During the year under review, the Company has not advanced any loans, given guarantees, only certain investments of temporary surplus funds in Mutual Funds has been done with Boards approval.

5. Directors and Key Managerial Personnel Retirement by Rotation

In accordance with the provisions of Section 152 and the Articles of Association of the Company, Mr. Satish Rangani (DIN. 00209069) will retire by rotation at the ensuing Annual General Meeting of the Company and being eligible, has offered himself for re-appointment.

Independent Directors

Mr. Jayavardhan Dhar Diwan was appointed as an Independent Director of the Company on January 29, 2015 for a term of 5 years and members of the Company approved his appointment as Independent Directors of the Company at Annual General Meeting held on July 28, 2015. His first term expired on January 28, 2020 and he is eligible for re-appointment of second term up to five (5) consecutive years as per the provisions of sections 149 and 152 and other applicable provisions of the Companies Act, 2013.

The Board of Directors at its meeting held on January 27, 2020, on the recommendation of the

Nomination and Remuneration Committee and considering his qualifications, knowledge, vast business experience and contributions made by him during his tenure, have re-appointed Mr. Diwan as an Independent Director of the Company, not liable to retire by rotation, for a second term w.e.f. January 28, 2020 up to February 15, 2021 as consented by him, subject to approval of the shareholders at the ensuing Annual General Meeting.

All Independent Directors have submitted the Declaration of Independence, as required pursuant to Section 149(6) of the Companies Act, 2013 and Regulation 16 of the SEBI (Listing

Obligations and Disclosure Requirements) Regulations, 2015 stating that they meet the criteria of independence provided therein. The composition of the Board duly meets the criteria stipulated in Section 52 of the Companies Act, 2013 and Regulation 17 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Board Evaluation

For the F.Y. 2019-20, the Board has carried out an annual performance evaluation of its own and that of its Committees and individual directors, using various performance evaluation criteria on the forms circulated to and filled in by the directors. The feedback has been shared and discussed. The Independent Directors – Mr. Jayavardhan Dhar Diwan, Mr. Vivek Sahai and Mr. Claude Alex DGama Rose have met separately on 6th March, 2020 and have conveyed to the Chairman of the Board, their satisfaction with the working of the Board.

Key Managerial Personnel

Pursuant to the provisions of Sections 2(51), 203 of the Companies Act, 2013 read with The Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the following are the Key Managerial Personnel:

Mr. Krishna Kant Prasad Sinha - General Manager
(Designated as CEO w.e.f. 21.05.2019)
Mr. Ram Narayan Sahu - Finance Head
(Designated as CFO w.e.f. 21.05.2019)
Mr. Kamlesh Sondigala - Company Secretary and Compliance Officer

Familiarization Programme for Independent Directors

In order to familiarize the Independent Directors with the business, the Company makes a presentation covering nature and scope of business, nature of industry in which Company operates, profitability and future scope. Regularly at meetings updates are given to the Board, by the Companys Senior Management in areas of operations, industry and regulatory trends, competition and future outlook.

Remuneration Policy

The Board has on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, senior management and their remuneration. As part of its policy the company strives to ensure that the Remuneration to Directors, KMPs and Senior Management involves a balance between fixed and incentive pay, reflecting short and long term performance objectives appropriate to the working of the Company and its goals. The remuneration policy is posted on the companys website at www.snlbearings.in. Details of remuneration paid to Directors, KMP and the Independent Directors forms part of the Corporate Governance Report attached to this Report. Meetings

During the year 5 (five) Board meetings and 4 (four) Audit and held (details are given in Corporate Governance Report). The intervening gap between the meetings was less than 120 (one hundred and twenty) days. The date for the next meeting is fixed in advance at the previous meeting for both Board and Audit committee meetings.

6. Subsidiary, Associate and Joint Venture Companies

As of March 31, 2020, the Company does not have any Subsidiary, Associate and Joint Venture Companies.

7. Business Risk Management

The Company has in place an enterprise risk management framework to identify risks and minimize their adverse impact on business and strives to create transparency which in turn enhances the Companys competitive advantage. The Company has identifiedhigh share of sales to the holding company as a concern area associated with its operations and is working towards progressively reducing this share. Another risk to operations arises from the expiry of leases in respect of certain portions of the companys factory land and buildings as the Lessor is under liquidation proceedings by the Official Liquidator in the Delhi High Court. The High Court order could affect operations. As part of its action plan for risk mitigation, the Company has been successfully impleaded in the proceedings and has filed its application seeking certain reliefs. The company is hopeful that there will be a favorable outcome to its offer to renew the leases for reasonable terms and at favorable rates.

8. Conservation of energy, technology absorption, foreign exchange earnings and outgo

Information pursuant to Section 134(3)(m) of the Companies Act, 2013 and Rule no.8 of Companies (Accounts) Rules 2014 are given as below: a. Measures taken for conservation of energy

During the year, Company has replaced old blackening furnace of 54 KW with a new furnace of 30 KW, which has resulted in energy saving of 17280 KWH per month amounting to Rs. 13 Lakhs. b. Technology absorption

With the objective of improving productivity as well as quality, during the year the Company has continued its efforts on improvements in process parameters and reduction in cycle times. Improvements made on press machines for manufacturing cage bearings by reduction in set-up time and resetting time. As a result average production quantity has increased. Upgradation of technology is a key focus area and the Company has initiated necessary mapping of its machines with this objective and management is taking all efforts towards developing low cost technological solutions. c. Foreign exchange earnings & outgo for the year ended 31st March 2020

Foreign Exchange Earnings : Export of goods - Rs. 27.12 lakhs
Foreign Exchange Outgo : Raw materials & Components - Rs. 186.01 lakhs
Consumables, Spares, tools - Rs. 1.76 lakhs
Fixed Assets - Rs. 255.35 lakhs

9. Industrial Relations/ Vigil Mechanism and Whistle Blower Policy

During the year, the Company maintained cordial relations with the workmens unions. Regular training programmes are conducted for imparting understanding of bearing and engineering principles, modern manufacturing practices and in attitudinal and behavioural aspects. The Company has formulated and implemented the whistle Blower Policy/ Vigil Mechanism. This has provided a mechanism for Directors and employees of the Company and other persons dealing with the Company to report to the Chairman of the Audit Committee, any instance of unethical behaviour, actual or suspected fraud or violation of the Companys code of conduct. More details about this Policy are given in the Corporate Governance Report, which forms part of this Annual Report. The Whistle Blower Policy is available on the Companys website viz. www.snlbearings.in.

Your Company hereby affirms that no complaints were received during the year.

10. Safety, Healthy & Environment

The Company is committed to establish and maintain safe working environment that promotes good health and high performance of the employees and simultaneously takes measures to protect the environment. We also ensure that safety behaviour is well demonstrated by our employees while working on the shop floor by using personal protective equipments as required. The Companys plant at Ranchi has been awarded internationally recognized external certification viz. ISO14001:2015 (for adherence to environmental processes), OHSAS:18001:2007 (for Health

& Safety) and IATF:16949:2015 (quality management system). The Company is in the process of adopting new external certification viz. ISO 45001:2018 (for

Work force is trained at regular intervals in preventive aspects of safety and prevention of work related accidents. Besides creating general awareness among employees towards environmental protection, the management encourages initiatives which are targeted towards conserving natural resources and improvements in resource efficiency across all processes.

Consequent upon the re-opening of the plant post Covid-19 lockdown, the employees have painstakingly adhered to the SOPs prescribed by the authorities to ensure social distancing norms for staying safe and healthy. Usage of prescribed PPEs by all employees and frequent sanitization of the workplace / employees by washing of hands is also meticulously followed.

11. Corporate Social Responsibility

In line with the activities specifiedin schedule VII relating to the provisions of sections 135 of the

Companies Act, 2013, your company has been focusing on:

Promotion of education

Employment enhancing vocational skills

Promoting social business projects

Contribution to funds set up by Central/State Governments for social economic development and relief.

For the financial year ended 31.3.2020 an aggregate amount of Rs. 22.42 lakhs has been contributed to various organizations doing commendable work for the cause of promoting education to the under privileged sections of society viz; i. Sankalp (A pledge to change) - Running schools providing education to the poor sections of society in slums in and around Jamshedpur, Dhanbad and other backward areas of Jharkhand. ii. TISS (Tata Institute of Social Sciences): Running scholarship scheme through Vidyasaarathi (VSS), an online platform operated transparently by TISS for needy students, particularly in the state of Jharkhand where the Companys plant is located. iii. Ugam Foundation – Runs the Kasturba Gandhi Balika Vidyalaya (KGBV) scheme which was launched by the Government of India in August, 2004 for setting up residential schools at upper primary level for girls belonging predominantly to the SC, ST, OBC and minorities in difficult areas. Currently they are running KGBV in Jharkhand (Hazaribag District) for adolescent girls, with the project expected to reach 10 KGBV, 150 teachers and 3900 girls. At the Companys request, the Foundation has successfully completed signing of the work order with the district education department and started conducting programmes at KGBV Mandar located in Ranchi, close to the SNL Plant.

Detailed report on CSR activities including amount spent is given in Annexure I. 12. Corporate Governance

Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis, Corporate Governance Report and Auditors Certificate regarding compliance of conditions of Corporate Governance are made part of the Annual Report. Details of Board meetings held during the year under review and the composition of the various committees are included therein.

The Code of Conduct for directors and Senior Management personnel of the Company, as approved by the Board, has been affirmed on an annual basis by all the Directors, Company

Secretary, Finance Head (CFO) and the General Manager (CEO) of the Company. All Independent

Directors have also submitted the declaration of independence confirming that they meet the criteria of independence as provided under section 149 of the Companies Act, 2013.

The relevant certification on the various matters specified under Regulation 17(8) of SEBI (LODR)

Regulations, 2015 has been done by CEO and CFO.

During the year under review the Company has complied with all the applicable Secretarial Standards.

All pecuniary relationships or transactions of the Non-executive directors vis--vis the Company along with criteria for such payments and disclosures on remuneration of Directors along with their shareholding are disclosed in Form MGT-9, which forms a part of this Report. There are no relationships between the Directors inter-se.

13. Extract of Annual Return

The details forming part of the extract of the Annual Return (MGT-9) as required under the

Companies Act, 2013 is given in Annexure II.

14. Directors Responsibility Statement

Pursuant to the requirements under Section 134 (3) (c) of the Companies Act, 2013, your Directors state that: i. in the preparation of annual accounts, the applicable Accounting Standards have been followed along with proper explanations relating to material departures, if any, have been furnished; ii. the accounting policies have been selected and these have been applied consistently and judgments and estimates made thereon 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, 2020 and of the profit of the Company for that period; iii. proper and sufficient care for the maintenance of adequate accounting records has been taken 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; iv. the Annual Accounts have been prepared on a going concern basis. v. internal financialcontrols have been laid down and being followed by the Company and that such financial controls are adequate and are operating effectively. vi. proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems are adequate and operating effectively.

15. Related Party Transactions (RPT) on an arms length basis and were AllRPTthatwereenteredinto during the financial in the ordinary course of business. The Company had obtained approval of the members of the Company for Material RPTs entered with its holding Company M/s. NRB Bearings Limited, at 39th

Annual General Meeting for the F.Y. 2019-20. There were no other materially significant RPT by the Company with promoters, Directors, key managerial personnel or other designated persons, other than the same.

All RPT are placed before the audit committee as also the board for approval. Prior approval of the audit committee is obtained on periodic basis for transactions which are foreseen and repetitive in nature. The compliance of the transfer pricing norms in relation to such transactions is certified by the tax advisors.

The RPT policy as approved by the Board is uploaded on the Companys website. The particulars of contracts or arrangements with related parties referred to in Section 188 (1) of the Companies Act, 2013 in Form AOC-2 pursuant to Section 134 (3) (h) of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014 is attached as Annexure-III to this Report.

16. Internal Control System

There are adequate internal financial controls in place with reference to the financial statements. The upgraded ERP system provides reports to validate the required internal finance controls.

Further, last improvements by way of biometric attendance and linked leave records and payroll systems have been implemented with existing system. The Internal Auditors have been regularly reviewing the same, and their recommendations for improvements have been included in the ERP upgrade implementation. During the year under review, these controls were evaluated and no significant weakness was identified either in the design or operation of the controls.

This formalized system of internal control facilitates effective compliance of Section 138 of the Companies Act, 2013 and the Listing Regulations.

Your Companys Statutory Auditors have, in their report, confirmed the adequacy of the internal control procedures.

17. Particulars of Employees

In terms of the provisions of Section 197(12) of the Act, there are no employees of the Company drawing remuneration in excess of the limits set out in the said provision.

The disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed to this report at Annexure IV.

18. Auditors Statutory Auditor

Appointment of M/s Walker Chandiok & Co. LLP, Chartered Accountants as statutory auditors were approved at the 38th Annual General Meeting held on August 1, 2018 for a term of five (5) years upto March 31, 2023.

Cost Auditor

Pursuant to the provisions of Section 148 of the Companies Act, 2013 and the Companies (Cost Records and Audit) Rules, 2014 the products manufactured by the Company and based on the criteria laid down under the aforesaid rules, Cost Audit is not applicable to your Company. However, from the F.Y. 2018-19, maintenance of prescribed Cost records is applicable to your Company and accordingly such accounts and records are made and maintained by the Company. Secretarial Auditor

Pursuant to the provision of section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board has appointed Mr. Upendra Shukla, Practicing Company Secretary, to carry out Secretarial Audit of the Company for the Financial Year 2019-20. The report of the Secretarial Auditor is annexed to this report as

Annexure V.

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

19. Significant and Material Orders passed by the Regulators or the Courts or the Tribunals

There are no orders passed by the Regulators or Courts or Tribunals impacting the going concern status of the Companys operation.

20. Change in nature of business

During the year under review there was no change in the nature of the business carried on by the Company.

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

In accordance with the provisions of the Sexual Harassment of Women at the Workplace

(Prevention, Prohibition and Redressal) Act, 2013, the Company is not required to setup Internal

Complaints Committees (ICC) to redress complaints as the Company has no women employee and during the year under review there were no complaints received. 22. Material changes and commitments, if any, affecting the financial position of the

Company

There are no material changes and commitments, other than the impact of the lockdown restrictions arising from Covid-19 pandemic, affecting the financialposition of the Company which have occurred between the close of the financial year on March 31, 2020 to which the financial statements relate and the date of this Report.

However, the COVID-19 pandemic has had an unprecedented impact on the nation, the people and the economy and business. The government announced a stringent nationwide lockdown from March 25, 2020, to control the spread of COVID-19. However, even before the nationwide lockdown, various state governments and local administrations had implemented different containment measures such as sealing borders, closing public places, suspending transport services and state-specific lockdown. The operations of the Company were severely disrupted.

The Company has moved at speed to support its stakeholders and maintain operations through crisis and prepare for business in a new normal. The Companys utmost priority has been the health, safety and well-being of our people and partners. The Company has rapidly implemented protocols for safe operations. However, compliance with the restrictions on number of employees and the shift working hours permitted has resulted in non-optimum capacity utilisation, which your Company expects will improve as lockdown conditions are gradually relaxed. Ranchi plant and all warehouses of the Company have on the date of this report been opened with the requisite government permissions and adherence to highest safety standards. While we are seeing some demand revival in the farm equipment and 2 wheeler categories, the overall demand has contracted to a great extent and the exact time which these categories and the other segments, like Commercial vehicles and Passenger vehicles, will take to recover fully remains to be seen.

23. Acknowledgements

The Board wishes to acknowledge and express their gratitude for the whole hearted support and cooperation extended by the shareholders, NRB group, Companys bankers, customers, suppliers and all employees of the Company for their efforts in a difficult year.

For and on behalf of the Board of Directors

SNL Bearings Limited Harshbeena Zaveri

Chairman

Place : Mumbai Date : June 23, 2020

Annexure I