Subros Ltd Directors Report.

Dear Members,

Your Directors are pleased to present the 35th Annual Report of the Company together with the audited financial statements for the year ended March 31, 2020.

FINANCIAL RESULTS

Standalone Consolidated
Particulars Current Year 2019-20 (Rs. In Lakhs) Previous Year 2018-19 (Rs. In Lakhs) Current Year 2019-20 (Rs. In Lakhs) Previous Year 2018-19 (Rs. In Lakhs)
Revenue from operations 199280 212448 199280 212448
Other income 1999 1025 2035 1030
Profit before depreciation, interest and tax 20903 23835 20938 23847
Less: Financial Charges 3634 4219 3634 4219
Less: Depreciation 9030 7885 9030 7885
Add: Share of profits/loss of joint venture (equity method)

-

-

(8) (1)
Profit before Exceptional items 8239 11731 8266 11742
Less: Exceptional items (4129) 334 (4129) 334
Net profit before Taxation 12368 11397 12395 11408
Less: Tax 3912 3784 3912 3784
Profit after Taxation 8456 7613 8483 7624
Profit brought forward 32765 26052 32711 25988
Profit available for appropriation 40582 32765 40553 32711

as at the date of approval of these financial statements. The Company will continue to monitor any material changes in the future economic conditions.

The performance of the Company is also discussed in Management Discussion and Analysis, as stipulated under Regulation 34 of the Listing Regulations with the Stock Exchanges, which forms part of the Directors Report.

EXPANSION AND FUTURE PROSPECTS

In view of the sudden and unprecedented Covid-19 impact on the business , the Company will be re-aligning its strategy for growth by way of introduction of further efficiency in manufacturing processes, new product development, localisation and cost optimisation.

The expansion during the financial year 2020-21 will be mainly in the new domain of home air-conditioning and the new plant at Nalagarh, District Baddi, Himachal Pradesh is expected to be fully operational during the financial year 2020-21. The Company will continue its research and development activities in the new technology domains of electric vehicles, commercial vehicles, bus and rail air-conditioning.

DIVIDEND

Your Company has earned a net profit (after tax) of Rs. 84.56 crores as against Rs. 76.13 crores in the previous financial year. In line with the Dividend Policy of the Company the Board has recommended a dividend of Rs. 0.80 per share (40% on the face value of equity shares of Rs. 2 each) for the financial year ended March 31, 2020 as against Rs. 1.30 per share (65% on the face value of equity shares of Rs. 2 each) in the

BUSINESS OPERATIONS

The net revenue from operations for the financial year ended March 31, 2020 at Rs.1992.80 crores was lower as against Rs. 2124.48 crores in the previous financial year ended March 31, 2019. This is a direct fallout of Covid-19 lockdown at the end of the financial year 2019-20. However, the Net Profit before tax was higher at Rs. 123.68 crores as compared to Rs.113.97 crores in the previous financial year. During the financial year the ongoing insurance claim in respect of the 2016 Manesar fire incident was fully settled and the same is reflected in the financial statements.

During the financial year 2019-20 the new greenfield plant being set-up in Gujarat to primarily meet the supplies to Suzuki Motor Gujarat Pvt Ltd, became fully operational from November, 2019.

Due to the spread of COVID-19, a global pandemic, the operations of the Company were impacted and all manufacturing plants and offices were shutdown from last week of March, 2020 following a nationwide lockdown imposed by the Government of India. The Company has resumed manufacturing operations in a phased manner in accordance with the directives of the Government of India. The Company has evaluated impact of this pandemic on its business operations and financial position & based on its review of current indicators and considering future economic conditions, there is no significant impact on its financial statements as at 31s* March, 2020. However, the impact assessment of COVID-19 is a continuing process given the uncertainties associated with its nature and duration and accordingly the impact may be different from that estimated previous year. The dividend, if approved by the Members at the ensuing Annual General Meeting, shall absorb a sum of Rs. 521.89 Lakhs (approx).

TRANSFER TO RESERVES

Your Company proposes to transfer Rs. 150 Lakhs to the General Reserve and Rs. 750 Lakhs is transferred from the Debenture Redemption Reserve to the General Reserve on account of repayment of Non Convertible Debentures.

MATERIAL CHANGES AND COMMITMENTS AFFECTING FINANCIAL POSITION BETWEEN THE END OF THE FINANCIAL YEAR AND DATE OF THE REPORT

There have been no material changes and commitments which affect the financial position of the Company subsequent to the date of financial statement.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

During the year under review the following changes took place in the Board of your Company:

(i) Mr. Fumitaka Taki, Alternate Director to Mr. Y. Iida vacated his office from 10.07.2019

(ii) Mr. Fumitaka Taki was appointed as an Alternate Director to Mr. Y. Iida with effect from 09.08.2019

(iii) Pursuant to the provisions of Section 152 of the Companies Act, 2013 Mr. Kenichi Ayukawa, Non-Executive Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for reappointment. The brief resume of Mr. Kenichi Ayukawa as required under the Listing Regulations is provided in the Notice of the 35th Annual General Meeting of the Company. The requisite resolution pertaining to the re-appointment appears at the respective item of the Notice along with the Statement and is recommended to the Members for approval.

Declaration from Independent Director: The Company has received necessary declaration(s) from all the Independent Director(s) of the Company as laid down under Section 149(7) of the Companies Act, 2013 confirming that they meet the criteria as laid down under Section 149(6) of the Companies Act, 2013 and the Listing Regulations.

Board Meeting: The Board of Directors met four times during the financial year 2019-20, the details of which are given in the Corporate Governance Report which forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed under the Companies Act, 2013.

Policy on Directors appointment and remuneration: The policy of the Company on Directors appointment and remuneration including criteria for determining qualifications, positive attributes and other matters are available on the website (www.subros.com/investors.html ) of the Company.

AUDIT COMMITTEE

The Composition of Audit Committee of the Company is described in Corporate Governance Report as stipulated under Listing Regulations, which forms part of this Report.

DIRECTORS RESPONSIBILITY STATEMENT

As required under Section 134(5) of the Companies Act, 2013, your Directors hereby confirm that:

(a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures;

(b) The Directors have selected such accounting policies 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 at the end of the financial year and of the profit and loss of the Company for that period;

(c) The Directors have taken proper and sufficient care 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 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 were operating effectively; and

(f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively.

SUBSIDIARIES AND JOINT VENTURES

Thai Subros Ltd., the liquidation process of the non-operational subsidiary company in Thailand has been completed on 1s* August, 2019 vide Certificate issued by Department of Business Development, Ministry of Commerce, Thailand.

Denso Subros Thermal Engineering Centre India Private Limited, a Joint Venture, achieved a revenue of Rs. 1752 Lakhs during the financial year 2019-20. The Joint Venture incurred a loss of Rs. 31.61 Lakhs during the year as against Loss of Rs. 3.23 Lakhs in the previous year. Your Company is holding 26% share in this Joint Venture.

CONSOLIDATED FINANCIAL STATEMENTS

In accordance with the Companies Act, 2013 and IND AS 110 - Consolidated Financial Statements read with IND AS 31 - Interest in Joint Ventures, your Directors have pleasure in attaching the Audited Consolidated Financial Statements, which forms a part of this Annual Report.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

The information in terms of Section 134(3)(m) of the Companies Act, 2013 read with relevant rules is annexed herewith as Annexure-1 and forms integral part of this report.

EXTRACT OF ANNUAL RETURN

The extract of Annual Return as on 31s* March, 2020 in Form MGT 9 in terms of provisions of Section 134(3) and other applicable provisions of the Companies Act, 2013 read with Rules thereto is available on website of the Company www.subros.com/investors.html and forms integral part of this Annual Report.

AUDITORS AND AUDITORS REPORT

Statutory Auditors: M/s Price Waterhouse Chartered

Accountants LLP, Chartered Accountants, hold office until the conclusion of the 37th annual general meeting. The Auditors

Report to the Members for the year under review does not contain any qualification, reservation or adverse remark. The observations of the Auditors and the relevant notes on accounts are self-explanatory and therefore do not call for any further comments.

Cost Auditors: The Company has re-appointed M/s. Chandra Wadhwa & Company, Cost Accountants, as Cost Auditors of the Company to conduct the audit of cost records maintained by the Company for the financial year 2020-21. The ratification of remuneration payable to Cost Auditors for the financial year 2020-21 is being sought from the Members of the Company at the ensuing Annual General Meeting.

Secretarial Auditors: The Company has re-appointed M/s. RSM & Co., Company Secretaries as Secretarial Auditors to conduct the audit of secretarial and related records of the Company for the financial year ended 2020-21. The Secretarial Audit Report for the financial year ended March 31, 2020 is annexed as Annexure-2 and the same is self-explanatory. The said Secretarial Audit Report does not contain any qualification or adverse remark.

DEPOSITS

During the year under review, your Company has neither invited nor accepted any deposits from the Public.

SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

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

INTERNAL FINANCIAL CONTROLS

The adequacy of Internal Financial Controls is discussed in Management Discussion and Analysis, as stipulated under the Listing Regulations with the Stock Exchanges, which forms part of this Report.

LOANS, GUARANTEES OR INVESTMENTS

The Company has not made any transaction relating to intercorporate loans, guarantees and investments during the year.

CORPORATE SOCIAL RESPONSIBILITY

The Company has formulated a Corporate Social Responsibility (CSR) Policy to undertake CSR initiatives as specified in Schedule VII of the Companies Act, 2013. The Company has constituted a robust and transparent governance structure to oversee the implementation of CSR Policy, in compliance with the requirements of Section 135 of the Companies Act, 2013. The Annual Report on CSR activities is annexed as Annexure-3 and forms integral part of this report. The Policy is placed on the website of the Company www.subros.com/investors.html .

RISK MANAGEMENT

The Company has a risk management policy and framework in place to ensure proper identification and treatment of risks. The identification and mitigation of strategic, business, operational and process risks are carried out for all functions. The key strategic risks along with mitigation plan are presented to the risk management committee on half-yearly basis. Few of such risks which may pose challenges are set out in the Management Discussion and Analysis which forms part of this Annual Report. The implementation of the ERM framework

is continuously evolving and has progressed well during the financial year 2019-20.

VIGIL MECHANISM

Pursuant to Section 177(9) of the Companies Act, 2013, the Company has established a Vigil Mechanism for directors, employees, suppliers, contractors and other stakeholders of the Company. The same is also intended to cover the Whistle Blower Policy under the Listing Regulations. The purpose and objective of this Policy is to cover serious concerns that would have a larger impact on image and values of the Company due to incorrect financial reporting or improper conduct. The Whistle Blower Policy has been placed on the website of the Company www.subros.com/investors.html .

The Statutory Auditors, Cost Auditors or Secretarial Auditors have not reported any frauds under Section 143(2) of the Companies Act, 2013 and rules made thereunder.

SEXUAL HARASSMENT

The Company has in place a Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. Two Complaints were received during the financial year and the same were satisfactorily addressed.

RELATED PARTY TRANSACTIONS

The Board of Directors has formulated a Related Party Transaction Policy for determining material related party transactions. The Related Party Transaction Policy is available on the website of the Company. A statement of all particulars of Contracts or Arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, is annexed as Annexure-4 and forms integral part of this Report.

LISTING

The Equity Shares of your Company continue to be listed on BSE Limited (BSE), NSE Limited (NSE) and Delhi Stock Exchange Limited (DSE). The listing fees for the year 201920 have been paid to the said stock exchanges except to DSE as Securities and Exchange Board of India has withdrawn the recognition granted to DSE on November 19, 2014.

ANNUAL EVALUATION

In compliance with the provisions of the Companies Act, 2013, Listing Regulations and Guidance Note issued by SEBI the Board has formulated a framework, inter alia, for a formal mechanism of evaluation of its performance as well as that of its committees and directors.

In this regard the Board has, inter alia, carried out an annual evaluation of the performance of all the independent director(s). The Nomination & Remuneration Committee ("NRC"), inter alia, reviewed the performance of directors and the Board as a whole and its committee(s). The Independent Directors, inter alia, reviewed performance of non-independent directors, the Board as a whole and its committee and assessed the quality, quantity and timeliness of flow of information between the Companys management and the Board.

The evaluation criteria of the performance of every director, Board & its committees included, inter alia, their structure/ composition, meeting attendance, expertise drawn from diverse

and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure-5 to this Report.

However, with regard to the provisions of the first proviso to Section 136(1) of the Companies Act, 2013, the Annual Report excluding the said statement of particulars of employees under Section 197(12) of Companies Act, 2013 read with Rule 5(2) of Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is being sent to the Members of the Company. The said information is available for inspection at the registered office of the Company during working hours and any Member interested in obtaining said statement may write to the Company Secretary at the registered office of the Company.

OTHER DISCLOSURES

The Company has complied with the secretarial standards issued by the Institute of Company Secretaries of India on meetings of Board of Directors and General Meetings.

ACKNOWLEDGMENT

Your Board wishes to convey their sincere gratitude and appreciation to all the employees for their enormous efforts as well as collective contribution to the Companys performance. Your Directors also acknowledge with thanks the co-operation and support extended by Companys bankers, HDFC Bank, Kotak Mahindra Bank & other Banks and our collaborators, DENSO Corporation, Japan and Suzuki Motor Corporation, Japan for their continued assistance. Your Directors also take this opportunity to convey heartfelt gratitude to the Companys valued customers, particularly Maruti Suzuki India Limited, Tata Motors Limited, Mahindra & Mahindra Limited, Renault Nissan Automotive India Pvt. Ltd and Force Motors Limited, for the trust and confidence reposed by them in addition to their unwavering co-operation, encouragement and support extended to the Company.

Last but not the least the Board wishes to thank all Members, vendors and business associates for their immense trust and backing to the Company.

domains banking, administration, strategic and technical and bring specific competencies relevant to the Companys business. The Board members participation and the overall functioning was quite satisfactory and effective during the year under review. There are no specific observations on the Board evaluation carried out during the year as well as for the previous year.

NON-COVERTIBLE DEBENTURES

Your Company has redeemed the last tranche of Non-Convertible Debentures and the same was made on 30th April, 2020. Accordingly, the entire issue of Non-convertible Debentures of Rs. 50 crores stands redeemed on 30th April, 2020.

CREDIT RATING

ICRA has assigned / reaffirmed the Long Term Ratings at [ICRA] AA- "Stable" and for Short Term Ratings at [ICRA] A1 + "Stable". The NCD Program has been assigned a rating of [ICRA] AA- "Stable".

CORPORATE GOVERNANCE AND SHAREHOLDERS INFORMATION

The Company is committed to maintain the highest standards of corporate governance. The Company has complied with the corporate governance requirements, as stipulated under the Listing Regulations. A report on Corporate Governance along with a Certificate from the Practicing Company Secretaries of the Company regarding compliance on the conditions of corporate governance pursuant to Listing Regulations is annexed herewith and forms integral part of this Report. All Policies of the Company are available on the website of the Company www.subros.com/investors .

BUSINESS RESPONSIBILITY REPORT

A report on adoption of responsible business practices in the interest of the social, governance and environmental perspective are as vital as their financial and operational performance. Conforming to the requirements of clause (f) of sub-regulation (2) of Regulation 34 of Listing Regulations the Business Responsibility Report for financial year 2019-20 is annexed herewith and forms integral part of this Annual Report.

For and on beh. alf of the Board of Directors
RAMESH SURI
Place : New Delhi Chairman
Dated : 29th June, 2020 (DIN: 00176488)