Tube Investments of India Ltd Directors Report.

Dear Shareholders,

The Directors take pleasure in presenting the 12th Annual Report together with the audited financial statements of the Company for the year ended 31st March 2020.

1. Business Environment

The countrys growth softened in 2019 as corporate and environmental regulatory uncertainty together with concerns about the health of the non-banking financial sector weighed on demand and applied the brakes on economic growth. Demand slowed more sharply than expected amid stress in the non-banking financial sector and a decline in credit growth. Added to this, the Novel Coronavirus (COVID-19) has come to cast a long shadow over the much-anticipated recovery, albeit expected to be a mild one, in the Indian economy in 2020-21, with the World Health Organisation (W.H.O.) declaring the virus outbreak a pandemic.

Indias GDP decelerated to its lowest in over 6 years during 2019-20 and just that when there were signs of mild recovery of the economy with corporate tax rate cut, the outbreak of the COVID-19 has imposed fresh challenges. Steps taken to contain its spread such as nationwide restrictions/lockdown have brought economic activity to a standstill, with serious implications for both consumption and investment. Three major contributors to GDP- private consumption, external trade and investments are already affected. As per the projections of the International Monetary Fund (IMF), Indias growth rate is seen sliding all the way to 1.9% in 2020.

For the global economy too, the COVID-19 pandemic is inflicting high and rising human costs worldwide. As a result, the global economy is projected to contract sharply by –3% in 2020, much worse than during the 2008–09 financial crisis.

The automobile industry was on the brink of a revival after a torrid year. Looking forward, the expectation was that of a decent current year with a revival from the second quarter onwards. However, the pandemic inflicted lockdown has dealt a decisive blow to the growth of automobile industry. As per the Society of Indian Automobile Manufacturers (SIAM), the Indian auto sector which contributes 9%-10% to the nations

GDP has delivered below potential growth over the last 5 years with a CAGR of ~1.5% for passenger vehicles (PVs) and two-wheelers (2Ws). During the year under review, Indian auto sector witnessed a de-growth of 18% in sales. In the four-wheeler segment, the passenger vehicle and commercial vehicle sale volumes were down by 18% and 29% respectively. In the two-wheeler segment, scooters sales and motorcycles were down by 17% and 18%.

2. Standalone Financial Highlights

Particulars 2019-20 2018-19
Sale of Products 4052.67 4,983.05
Profit Before Exceptional
420.72 371.08
Items and Tax
Profit on Shares tendered
19.11 -
under Buyback Scheme
Provision for Employee
Voluntary Retirement (21.97) -
Scheme Expense
Provision for Impairment on
- (9.00)
Investments (Net)
Profit Before Tax 417.86 362.08
Tax Expense (87.31) (118.57)
Profit After Tax 330.55 243.51

No transfer to the General Reserves has been proposed for the year under review.

3. Performance Overview

During 2019-20, the Company achieved a turnover of 4,053 Cr., registering a de-growth of 19% over the previous year due to slowdown in the auto industry. The Profit before Depreciation, Interest, Exceptional Items and Tax was at 610 Cr. as against 563 Cr. in the previous year. The Profit before Tax and Exceptional Items was at 421 Cr. as against 371 Cr. in the previous year, registering an impressive growth of 13%. The Company focused on reducing fixed costs, working capital and spending capital expenditure prudently on critical growth projects.

During the year, the Company tendered 49 lakh shares in the Buyback Scheme announced by Shanthi Gears Limited (SGL) to all its eligible shareholders at a consideration of 140/- per share, of which, 32.39 lakh equity shares were accepted on a proportionate basis by SGL. The Company received a consideration of 45.35 Cr. and recognised a profit of 19.11 Cr., shown as exceptional profits.

During the year, the Company implemented voluntary retirement schemes in certain locations at a cost of 21.97 Cr. to improve the productivity and competitiveness of its business. This is shown as exceptional loss in the financial statements.

The Cycles and Accessories segment recorded revenue of 781 Cr. as compared to 1,238 Cr. during 2018-19, a de-growth of 37%, since the Cycles market continues to be sluggish and also because of exit from institutional business. The operating profit before interest and tax stood at 26 Cr. as compared to 11 Cr. during the previous year, registering a growth of 128%.

The Engineering segment registered revenue of 2258 Cr. as compared to 2896 Cr. during the previous year. The operating profit before interest and tax stood at 264 Cr. as compared to 254 Cr. during 2018-19, registering a growth of 4%.

The Metal Formed Products segment recorded revenue of 1,399 Cr. as compared to 1,360 Cr. during the previous year, a growth of 3%. The operating profit before interest and tax stood at 123 Cr., remained flat as compared to previous year.

4. COVID-19 and its impact

Consequent to the outbreak of the COVID-19 pandemic and the lockdown/curfew introduced by the Central and State Governments, the operations in the Companys manufacturing plants situated across various locations of the Country had to be shut down or were disrupted towards the latter half of the second fortnight of March 2020 onwards and which continued through the month of April 2020.

With the easing in the lockdown/curfew and the Governments permitting operations to be resumed with necessary permission from the local authorities, the Company from end April 2020 onwards has resumed operations, in a partial manner, in almost all the plants barring very few which are also expected to commence operations shortly as customers start placing their orders. As the situation improves, the

Company expects to scale up operations to the full levels over time.

As the pandemic is ongoing, the Company continues to take various measures to safeguard the health and safety of its employees and further to ensure total adherence to the guidelines issued by the Central and the respective State Governments besides the local authorities at all its business locations.

The Company has considered the possible effects/ impact arising from COVID-19 on its financial results for the year 2019-20 and at this stage, it has concluded that no material adjustments are required to the same. The Company will continue to closely monitor any material changes to future economic conditions. A note in this regard is included in the Standalone Audited Financial Statements for the year under review vide Note 32 – Significant Accounting Judgements, Estimates and Assumptions forming part of this Annual Report for the financial year 2019-20.

5. Business Review – Standalone 5.1. Cycles and Components TIs Presence

The Cycles and Components segment of the Company comprises of bicycles of the Standard and Special variety including alloy bikes & specialty performance bikes, cycling accessories, bicycle components sold as spares and home fitness equipment.

Industry Scenario

Bicycles fall under two distinct categories - Standards and Specials. While Standard cycles are largely used for commuting, especially in small towns & rural areas, Special cycles cater to recreational usage, where the product is used for fun, fitness and leisure activities. During the financial year, the Trade industry witnessed a sharp drop of 17% as against the previous year majorly due to the economic slowdown and lower discretionary spends. Standards have de-grown by 17% and Specials have de-grown by 18%. However Premium Cycles Group as a subset of Specials have declined by 38% due to lower affinity for premium products in general. In addition to this, movements by the unorganized players based on economy offerings have also impacted the organized trade (All India Cycle Manufacturers Association-AICMA) players sales volume.

Over 79% of the countrys requirements are met by four major players. The smaller regional players and imports constitute the balance. TI Cycles enjoys a share of 24% of the total organised trade market with a much higher share in the premium segment.

Review of Performance

TI Cycles sold 19.8 lakh bicycles during the year in Trade, which is 16% lower as compared to 2018-19. Overall Trade bicycle industry itself registered a negative growth of 17% over the previous year. The thrust on Specials segment was driven by a concerted effort to enhance consumer experience through exclusive retail outlets under the exclusive retail brand ‘Track & Trail. Moreover the expansion of export business and domestic spares business is considered to be a new avenue of business to the Company. To participate in the growing economy sub-segment, 14 low cost products were launched in major categories like Kids and Mountain Terrain Bikes (MTB).

In 2019-20, 70 new model bicycles were launched, and 53 older models were refreshed. 38% of the trade sales volume came from new products. Multiple innovations were introduced for the first time in the industry, notable among them being the night vision handlebar on ‘Hercules Jackal bicycle. The night vision handlebar is a ground-breaking innovation in the category–extremely easy to assemble and use the integrated headlight. This feature is aimed at ensuring that the adventurous youngster has no worries about riding at night or in low visibility. Design registration was also filed to protect this idea from imitation. In addition, patented anti-slip chain technology was brought to the market in a new avatar last year – ‘BSA Ladybird Summer ASC bicycle to create more buzz in the marketplace.

On the consumer outreach front, the business consistently ran digital campaigns for its major brands, BSA Ladybird, Hercules, Roadeo, Mach City and Montra delivering a significant lift in brand awareness. A television commercial campaign "Hercules-Made For More" was launched wherein it was showcased on how the rugged & fierce Hercules bicycle enables teenagers to do more by pushing boundaries and emerge victorious. The objective of the campaign was to increase brand awareness and product consideration among the target group. In addition, the Disney licence has been renewed to continue offering premium range of bicycles with Disney/Marvel characters.

The operating profit before interest and tax (PBIT) stood at 26 Cr., as compared to 11 Cr. in the previous year, a growth of 128%.

5.2. Engineering

TIs Presence

The Engineering Segment of the Company consists of cold rolled steel strips and precision steel tubes viz., Cold Drawn Welded tubes (CDW) and Electric Resistance Welded tubes (ERW). These products primarily cater to the needs of the automotive, boiler, bicycle, general engineering and process industries. The Company is further engaged in the manufacture of large diameter welded tubes mainly for non-auto application which are largely imported.

Industry Scenario

During 2019-20, the automotive industrys production volume was lower by 15%.

Across all segments of automotive industry, there was a de-growth over the last fiscal year. Passenger vehicle, commercial vehicle and two-wheeler segments were lower by 15%, 32% and 14% respectively over the last fiscal year.

The lower industry growth was mainly due to the following factors:

• BS IV to BS VI transition being mandatory from 1st April 2020 brought in a sense of cautious approach both from the consumers and the auto majors.

• Increase in truck load norms by the Government enabling the transporters to increase the per trip truck loads.

• Increase in insurance premium and compulsory ABS leading to increase in cost of acquisition of vehicles for the consumer.

• NBFC debacle leading to lower loans disbursement.

• General consumer sentiments being low leading to lower demand.

With the Government, in the second quarter of the financial year under review, ahead of the festival season, announcing measures to spur growth through reduction in income tax rates for corporates and increase in Government spend on infrastructure etc, a marginal improvement in the growth rates was witnessed in the second half of the financial year.

Globally also, with all countries witnessing slowdown in each of their economies, they started initiating actions to protect their own markets. US continued with its tariff barriers imposed on various countries and products including steel. Europe brought in quota system to restrict imports into the region.

Review of Performance

The Engineering segment revenues were impacted due to the de-growth in the automotive industry.

During the year, volumes of the tubes business de-grew by 21%, cold rolled steel strips business de-grew 16% and large diameter tubes by 26%.

During the year under review, the segment registered revenue of 2,258 Cr. as compared to 2,896 Cr. during the previous year. The operating profit before interest and tax stood at 264 Cr., as compared to 254 Cr. during 2018-19, registering a marginal growth of 4%.

Given the situation of a lower demand, the business focused on internal measures to control cash fixed expenses, flexing manpower and other fixed expenses to partially offset the drop on account of lower volumes.

The business focused on reducing working capital and spending capital expenditure prudently on critical growth projects.

A greenfield Tube Manufacturing plant in Rajpura, Punjab was inaugurated in November 2019 to cater to the increased demand from the customers in the northern region.

The business continued to focus on Total Quality Management (TQM) journey to improve its quality and focused on employee development. Career path initiatives were taken up to provide opportunities to employees within the organization for new openings and to enable cross function exposure and growth.

With regard to the ongoing investigation on the Companys exports to the US market for the Countervailing Duty (CVD) and Anti-dumping Duty (AD) by the US Department of Commerce (USDOC) on complaint of alleged dumping of cold-drawn steel mechanical tubes from India and some other countries, the Company has participated in the first review and filed all the responses as per timelines to USDOC. The outcome is expected during the current financial year.

5.3. Metal Formed Products

TIs presence

Automotive & industrial chains, fine blanked products, stamped products, roll-formed car doorframes and cold rolled formed sections for passenger coaches constitute the Metal Formed Products segment.

Industry scenario

During 2019-20, production of two-wheeler segment and passenger vehicles de-grew by 14% and 15% respectively.

This segment is one of the major players manufacturing roller chains and fine blanked parts for the automotive industry in India. The replacement market for chains and sprockets continued to register a good growth due to the increasing two-wheeler population.

With international car majors continuing to invest in the country and increasingly using India as an export base, many component manufacturers have the opportunity to cater to the global needs of automobile manufacturers and their Tier-1 suppliers. The passenger coach segment witnessed good growth as the Ministry of Railways is focussing on passenger safety by initiating conversion of all old type coaches into stainless steel coaches. This segment has achieved considerable volume growth over previous year, supplying to various customers.

Review of Performance

Sale of automotive chains dropped by 12% and industrial chains grew by 10% when compared to

2018-19 in volume terms. The Company continued to expand its presence in the aftermarket segment benefiting from the two-wheeler population growth. In spite of challenging external environment, industrial chains recorded growth. Despite de-growth in passenger vehicles segment, fine blanked components volumes had a nominal growth, primarily through new parts developed for the four-wheeler segment.

Doorframe sale volumes were lower by 16% during 2019-20, as against the passenger car segments de-growth of 15% due to higher sales on select models with two of the renowned auto majors. The focus is on generating more business from the auto Original Equipment Manufacturers (OEMs), leveraging the Tier-1 position with specific emphasis on roll form products and other tubular parts used in passenger cars. In addition, strengthening the current position in respect of coach parts and expanding the customer base are some of the opportunities that are looked into closely to sustain the drive towards growth.

The chains business segment will continue its core business processes to handle both volume fluctuations and change in the product mix to meet customers demand. The replacement market continues to provide opportunities for growth notwithstanding good competition and the business expects to strengthen on the sales structure, deepen its coverage and launch new products for new categories.

During the year under review, the segment recorded revenue of 1,399 Cr. as compared to 1,360 Cr. during the previous year, a growth of 3%. The operating profit before interest and tax which stood at 123 Cr. remained flat as compared with the previous year.

6. Dividend

The Board of Directors declared an Interim Dividend of 3.50 per share on equity share of face value of 1 each for the financial year 2019-20, which was paid on 18th March 2020 to all the eligible shareholders. A Dividend Distribution Tax (DDT) of 12.60 Cr. was remitted to the Government in respect of the said Interim Dividend. No Final Dividend has been proposed by the Board for the said financial year and the Interim Dividend of 3.50 per equity share, already declared and paid, in respect of the financial year 2019-20 will be considered as the Dividend for the said financial year.

The dividend pay-out is in accordance with the Companys policy on Dividend Distribution. The said Policy as approved by the Board is uploaded and is available on the following link on the Companys website, http://www.tiindia.com/article/values/601. Details thereof also form part of this Annual Report for the information of shareholders as Annexure–A.

7. Share Capital

The paid-up Equity Share Capital as on 31st March 2020 was 18.79 Cr.

8. Finance

Cash and Cash Equivalents as at 31st March 2020 were 21.64 Cr. In addition, the Company has investments in Liquid Schemes of Mutual Funds for 90 Cr. The Company continues to focus on judicious management of its working capital. The Company has taken many steps during the year to improve the working capital turns. The working capital parameters were kept under strict check through continuous monitoring.

8.1. Non-Convertible Debentures

During the year, Non-Convertible Debentures (NCDs) aggregating 100 Cr. were redeemed and no fresh NCDs were issued during the year. As on 31st March 2020, NCDs aggregating 100 Cr. were outstanding.

8.2. Deposits

The Company has not accepted any fixed deposits under Chapter V of the Companies Act 2013 and as such no amount of principal and interest were outstanding as on 31st March 2020.

8.3. Particulars of Loans, Guarantees or Investments

During the year under review, the Company has not given any loans or guarantees under the provisions of Section 186 of the Companies Act 2013. The Company purchased 9,05,250 Equity Shares of the face value of 10 each, fully paid up, at par, of M/s. Watsun Infrabuild Private Limited, for an aggregate amount of 0.91 Cr. during the year.

As part of treasury management, the Company also deploys any short-term surplus in units of mutual funds, the details relating to which form part of the Notes to the financial statements provided in this Annual Report.

8.4. Consolidated Financial Highlights

Particulars 2019-20 2018-19
Revenue from contract with customers (net) 4750.39 5773.05
Profit Before Exceptional items and Tax 425.18 383.49
Exceptional items (21.97) 3.00
Profit Before Tax and 403.21 386.49
exceptional items
Tax Expense (89.94) (126.81)
Profit for the year before 313.27 259.68
Minority Interest and
share of profit from
Associate
Share of loss from Associate - 8.85
Net Profit for the Year 313.27 250.83

9. Business Review – Subsidiaries and Joint Venture

9.1. Shanthi Gears Ltd (SGL)

SGL, a subsidiary of the Company, recorded revenue of 242 Cr. in 2019-20 in line with previous year. Profit before tax was 33 Cr. (previous year: 42 Cr.). During the year, SGL renewed its focus on re-establishing itself in the market and gaining new customers.

SGL continued to look at enlarging its market presence, create a robust channel, enhance its process capabilities and launch new products to meet the growing expectations of customers.

During the financial year 2018-19, Buyback Scheme was announced by SGL to all its eligible shareholders to purchase up to 50 lakh shares at a consideration of 140/- per share. Under the Scheme, the Company tendered 49 lakh shares, of which, 32,38,958 equity shares were accepted on a proportionate basis by SGL, considering the overall response to the Buyback. The Company received a consideration of 45.35 Cr. as Buyback consideration during the year under review viz., on the 5th April 2019 from SGL. Post-Buyback, the Company holds 70.47% of SGLs paid up share capital as against 70.12% held pre-Buyback.

SGL also declared and paid an Interim Dividend of 2 per share for the financial year 2019-20.

9.2. Financire C10 SAS (FC10)

FC10, the Companys wholly owned subsidiary in France, recorded consolidated revenue of Euro 32 Mn. in 2019 (previous year: Euro 34 Mn.). The loss after tax for the year was Euro 0.70 Mn. as compared with the profit of Euro 0.39 Mn. in the previous year. The consolidated results of FC10 include results of its subsidiaries viz., Sedis SAS, Sedis GmbH and Sedis Co Ltd in UK.

9.3. TI Tsubamex Private Limited (TTPL)

TTPL is a joint venture of the Company with M/s. Tsubamex Company Limited, Japan to engage in the business of design and engineering of sheet metal dies and fixtures and providing related services.

Arising from operational challenges that TTPL had to face in terms of winning new orders, and also in meeting rising customer expectations on quality and price parameters vis--vis its small size of operations and high working capital intensity, TTPL had sold, during the financial year 2018-19, its identified manufacturing assets to the identified buyer and fully utilised the amount realised through the sale and from the collections from supplies made earlier for repaying its creditors during the financial year under review.

Necessary impairment in the entire investment has already been recognized in the books of account of the Company for the financial years, 2017-18 and 2018-19.

9.4. Great Cycles (Private) Limited (GCPL)

GCPL is the Companys subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of GCPLs equity capital.

During the year under review, GCPL recorded revenue of 3 Cr. (previous year: 16 Cr.) and registered loss before tax of 1 Cr. (previous year profit before tax: 2 Cr.)

9.5. Creative Cycles (Private) Limited (CCPL)

CCPL is the Companys subsidiary in Sri Lanka acquired in March 2018. The Company holds 80% of CCPLs equity capital.

During the year under review, CCPL recorded revenue of 8 Cr. (previous year: 55 Cr.) and registered loss before tax of 2 Cr. (previous year profit before tax: 1 Cr.).

The statement containing salient features of the financial statements of the Companys Subsidiaries/ Joint Venture is attached as Annexure-B. The Consolidated Financial Statements of the Company and its subsidiaries, prepared in accordance with the Indian Accounting Standards, form part of the Annual Report.

10. Financial Review

10.1. Profits & Profitability

The Profit before Tax and exceptional items registered a growth of 13%, through better operating efficiencies, input and fixed cost reduction initiatives and reduction in interest costs.

All the business segments of the Company maintained their focus on servicing customers, improving efficiencies, controlling working capital and reducing resources employed in the business.

10.2. Capital Expenditure

The Company continues to assess the trends emerging in industry and the changing requirements of its customers and invests appropriately for the long-term, with a view to servicing its customers in a more timely and efficient manner.

10.3. Interest Cost

The Companys interest cost reduced to 29 Cr. in the financial year 2019-20 from 52 Cr. in the previous year mainly on account of lower borrowing and better management of net working capital. With strong focus on cash generation, the Company achieved a significant level of net debt reduction of 342 Cr. during the year. The total borrowings (net of Cash, Debt Securities and Current investments) were reduced to 149 Cr. as on 31st March 2020 from 491 Cr. as on 31st March 2019.

10.4. Financial Ratios

The key financial ratios of the Company in which there were significant changes (more than 25%) during the financial year compared to the previous financial year, with reasons therefor, are as under:

Sl. No. Financial Ratio* FY 2019-20 FY 2018-19 % change over previous year Reasons
1. Interest Coverage Ratio 21.1 10.7 97% Reduction in borrowing & finance charges and increase in the Profit before Interest, Tax and Depreciation.
2. Debt-Equity Ratio 0.2 0.4 57% Reduction in debt and increase in net worth due to higher profits.
3. Net Profit Margin 8.2% 4.9% 66% Improvement in profits, reduction of fixed costs, reduction of interest cost and reduction of tax rate.
4. Revenue Growth (19.1%) 15.6% (222%) Lower sales on account of de-growth in auto industry.

*Ratios are tracked by the Company on a standalone basis

10.5. Internal Control Systems

Internal control systems in the organisation are looked at as the key to its effective functioning. The Company believes that internal control is one of the key pillars of governance which provides freedom to the management within a framework of appropriate checks and balances. Given the nature of business and size of operations, the Company has designed and instituted a robust internal control system that comprises well-defined organisation structure, roles and responsibilities, documented policies and procedures to reduce business risks through a framework of internal controls and processes. These controls ensure:

• Recording of transactions are accurate, complete and properly authorised;

• Adherence to Accounting Standards, compliance to applicable Statutes, Company policies and procedures and timely preparation of financial statements;

• Effective usage of resources and safeguarding of assets;

• Prevention and detection of frauds/errors;

• Efficient conduct of operations.

To ensure efficient internal control systems, the Company has a well-established, independent and multi-disciplinary in-house Internal Audit function that carries out periodic audits across locations and functions. The scope and authority of the Internal Audit function is derived from the Internal Audit charter duly approved by the Management.

The Internal Audit function reviews compliance vis-a-vis the established design of the internal control, as also the efficiency and effectiveness of operations. Internal Audit function is responsible for providing, assurance on compliance with operating systems, internal policies and legal requirements as well as suggesting improvements to systems and processes. It reviews and reports to management and the Audit Committee about compliance with internal controls and the efficiency and effectiveness of operations as well as the key process risks. The Company also has established whistle-blower mechanism operative across the Company.

The Audit Committee of the Board of Directors, comprising of independent directors, regularly reviews the audit plans, significant audit findings, adequacy of internal controls, compliance with Accounting Standards as well as reasons for changes in accounting policies and practices, if any.

The summary of the Internal Audit findings and status of implementation of action plans for risk mitigation are submitted to the Audit Committee every quarter for review and concerns, if any, are reported to the Board. This process ensures robustness of internal control system and compliance with laws and regulations including resource utilisation and system efficacy.

Revenue and capital expenditures are governed by approved budgets and the levels are defined by a delegation of authority mechanism. Review of capital expenditure is undertaken with reference to benefits expected in line with the policy for the same.

Investment decisions are subject to formal detailed evaluation and approved by the relevant authority as defined in the delegation of authority mechanism. The Audit Committee reviews the plan for internal audit, significant internal audit observations and functioning of the Companys Internal Audit department on a periodic basis.

10.6. Internal Financial Control Systems with reference to the Financial Statements

The Company has complied with the specific requirements of the Companies Act 2013 which call for establishment and implementation of an Internal Financial Control framework that supports compliance with requirements of the said Act in relation to the Directors Responsibility Statement.

The Companys business processes are enabled by an Enterprise-wide Resource Platform (ERP) as its core IT system. The operating management is not only responsible for revenue and profitability, but for also maintaining financial discipline and accountability. The systems and processes are continuously improved by adopting best in class processes, automation and implementing latest Information Technology tools.

The Company has a formal system of internal financial control to ensure the reliability of financial and operational information, and regulatory and statutory compliances. This is reviewed regularly and tested by Internal Audit Team. The Companys business processes are enabled by the ERP for monitoring and reporting processes resulting in financial discipline and accountability.

11. Enterprise Risk Analysis and Management

The Company has an established risk assessment and minimisation framework. This framework provides a mechanism to identify the risk, evaluation of likelihood of happening and consequences. It also provides for assessment of options to mitigate the risk and develop appropriate risk management plans. There are normal constraints of time, efficiency and cost.

The Risk Management Committee of the Board of Directors reviews the risk mitigation plans periodically to monitor the key risks of the Company and evaluate the management of such risks for effective mitigation.

During the year under review, the Risk Management Committee met on 23rd July 2019 and 31st October 2019 and reviewed the risks and mitigation plans of the SBUs of the Company.

Some of the risks associated with the business and the related mitigation plans are discussed hereunder. The risks given below are not exhaustive and the evaluation of risk is based on managements perception.

11.1. Bicycles and Components

Risk Why considered as Risk Mitigation Plan / Counter Measure
Product Obsolescence Risk • Availability of alternatives • Higher variety in all sub-segment, Economy, Mass and Premium
• Increased affordability for motorised vehicles
• Shrinking road space for cycling • E-bike will be introduced to reduce cycling effort
• Cycling as a concept beyond commuting - leisure, fitness, fun and recreation
Sourcing Risk • Dependence on vendor base • Continuous upgrading of vendor capability
• Consistent quality and supplies • Relationship building
• 25% of vendors located in residential area • Reduce import dependency
• Rationalize vendor base
Competition Risk • Competition from domestic suppliers • Enhancing the Brand awareness
• Imports • Introducing new models with a healthy
innovation funnel
• Consistent quality and timely delivery
• Enhancing price competitiveness
Volume & Profitability Risk • Rapid decline in Standards segment • Drive growth in Premium cycles segment
• Low price competition in Specials segment • Build capability to compete in Specials segment at various price points
• Growth in Premium segment not sufficient to offset the overall drop in volume
• Cost reduction measures to enhance profitability
• Closure of all warehouses and optimize logistics costs
Technology Risk • Lack of capacity and capability to handle large scale shift to alloy bikes • Capability building for manufacture and assembly of alloy bikes
• Establishing reliable source for high end bikes

11.2. Engineering

Risk Why considered as Risk Mitigation Plan / Counter Measure
User Industry Concentration Risk • Significant exposure to auto sector • New products / applications to existing customers
• Time lag in pass through of input cost changes
• Introduction of new products catering to non- auto users
• Leverage application engineering skills for tubular solutions
• Drive operational efficiencies vigorously
Technology Obsolescence Risk • Cheaper alternatives for auto applications affecting revenue streams • Imbibing new and relevant technologies
• Equipment upgradations
Raw Material Risk • Volatility in steel price • Alliance with steel producers
• Inconsistency in quality • Global sourcing
• High inventory holding • Strategic sourcing
• Rationalization and standardization of grades
• Move to products with higher value addition
Competition Risk • Competition from integrated steel mills • Consistent quality and timely delivery
• New entrants with financial strength • Import substitution, development of new grades
• Imports
• Product range of offering leveraging all businesses of the Company
• Innovate on products, process and applications
• Leveraging metallurgy skills
Export related risks • Increased trade protectionism and import • Identification of new export markets and
tariff customers
• Global competition • Capability building
• Need for higher capability • Enhanced domestic sales

11.3. Metal Formed Products

Risk Why considered as Risk Mitigation Plan / Counter Measure
Product Risk • Revenues are model specific • Indigenization of equipment
• Pursue options for other business using the same facilities
• Model specific investments to be done by
OEMs
• More rigorous analysis of risks before taking
up the project
User Industry • Dependence on auto sector • Diversification into non-auto business
Concentration Risk • Impact of slow down • Focus on industrial applications
• Develop range of power transmission products
Customer Retention • Availability of alternative source • Cost competitiveness through Operational
Risk • Disruption in supplies Excellence initiatives
• Leverage design strength
• Leverage proximity to customer
• Build technology superiority
• Product - plant rationalization
Entry of competition • Low technology barrier • Leverage position with customer as technology leader
• Impact on profit
• Continuous upgrading of technical specifications
• Cost reduction
• Concentration in focus markets
Entry of • Better product range • Enhance product portfolio leveraging
internationally • Tie-up with local player/end user acquisition
established players • Leverage leadership and competitive position
• ‘High quality image
in domestic market in industry
• Strengthen collaboration with R&D team of
customers
• Pursue opportunities in systems/components
• Pursue options for collaborating with other
multi-national player(s) of repute
Sourcing Risk • Dependence on a few vendors for certain • Vendor relationship building
components • Enhancing vendor base, both locally as well
as overseas
• Leveraging strength of combined entity
Pricing risk • Year-on-year price reduction expectation • Utilisation of existing assets, optimal
• Price recovery due to dependence on a few OEMs investment assumptions and reduced cost of operations
• Value engineering and value analysis in
business re-engineering process
• Claims from customer for lower volumes

11.4. General

Risk Why considered as Risk Mitigation Plan / Counter Measure
Human Resource • Ability to attract talent, especially people with • Corporate Brand Building
Risk domain knowledge for new projects • Robust recruitment process
• Retention of talent • Structured induction and on the job training
• Availability of adequate flexible workforce post COVID-19 • Coaching and team building
• Individual career and development plan
• Effective communication exercises
• Continuous engagement with identified talent pool
• Deskill operations
• Continuously engage with contractors and contract labour for their wellness & engagement
• Making policy changes in line with government directives for health and safety & keeping the workforce safe without disruption to business
Currency Risk • Foreign currency exposure on exports, imports and borrowings • Early identification and monitoring of exposures
• Hedging of exposures based on risk profile
IT/Cyber Related • Confidentiality, integrity and availability • Access controls
Risk • Secure Network Architecture
• Infrastructure redundancies & disaster
recovery mechanism
• Audit of controls
Project • Delay in implementation • Effective project management
Management Risk • Increase in cost • Pre-implementation planning
• Potential delay in stabilization of production • Deployment of adequate resources
• Effective monitoring

12. Corporate Social Responsibility (CSR)

The Company, being part of the Murugappa Group, is known for its tradition of philanthropy and community service. The Companys philosophy is to reach out to the community by establishing service-oriented philanthropic institutions in the field of education and healthcare as the core focus areas. The CSR Policy of the Company is available on the Companys website at the following link, http://www.tiindia.com/article/values/467.

As per the provisions of the Companies Act 2013, the Company was required to spend 4.94 Cr., during the financial year 2019-20. The Company incurred

5.29 Cr. but spent for 5.13 Cr. in cash towards the identified CSR projects in the fields of education, health care and public infrastructure during the year.

The Annual Report on CSR for 2019-20 is annexed to and forms part of this Report as Annexure–C as well as in the Companys website at the following link, http://www.tiindia.com/article/values/546

13. Alteration of Memorandum of Association

During the financial year 2019-20, with the approval of the Members by means of a Special Resolution passed with the requisite majority, through postal ballot and electronic voting, a new sub-clause 10 was inserted in III(A) [Main Objects Clause] of the Memorandum of Association to facilitate the Companys foray into the business of vision products and components.

During the year under review, the Company identified a suitable location in the Sri City Special Economic Zone (SEZ), Chittoor District, Andhra Pradesh for the aforesaid vision products and components project and after entering into necessary agreements with the Sri City SEZ authority for lease of the land, the installation of machinery and other civil work have been completed. Production is expected to commence in the second quarter of the current financial year.

14. Corporate Governance

The Company is committed to maintaining high standards of corporate governance.

The Company was wholly in compliance with the requirements of the Listing Agreement with the Stock Exchanges as well as the SEBI Listing Regulations.

A report on corporate governance together with a certificate from the Auditors is annexed in accordance with the terms of the SEBI Listing Regulations and forms part of the Boards Report as Annexure-D. The Managing Director and the Chief Financial Officer have submitted a certificate to the Board regarding the financial statements and other matters in terms of Part B of Schedule II [Corporate Governance] of the SEBI Listing Regulations.

The Report further contains details as required to be provided in the Boards Report on the policy on Directors appointment and remuneration including the criteria, annual evaluation by the Board and Directors, composition and other details of Board committees, implementation of risk management policy, whistle-blower policy/vigil mechanism, dividend policy etc.

15. Business Responsibility Reporting

As required under the SEBI Listing Regulations which mandate the inclusion of a Business Responsibility Report as part of the Annual Report for the top 500 listed entities, the Business Responsibility Report forms part of the Annual Report as Annexure-E.

The Business Responsibility Policy of the Company is displayed in the Companys website at the following link, http://www.tiindia.com/article/values/667.

16. Human Resources

The Company continued to lay emphasis on a high performing work culture to achieve organisational goals of the present as well as those of the future in a sustainable way by establishing a culture of process discipline, organisational oneness and achievement orientation across its businesses through simplification and digitization, empowerment, project-based working, customer centricity and process discipline. The initiatives taken by the Company are in line with its long-term Human Resources Strategy which has been drawn up with three broad thrust areas - capability building, improved accountability and high-performance work culture.

As part of the capability building initiatives, a leadership program to create and develop a talent pool for managing the various growth businesses of the Company enabling the identified leaders to operate with greater speed, efficiency and capability aligned to the Companys structure and strategy was initiated during the year under review. All critical positions have been mapped to ensure a smooth succession planning. A structured career path framework for those with high potential by mapping them to business-critical projects as well as for grooming internal talent among the management staff was piloted during the year under review.

A framework covering building of trust, role clarity, technical capability, change champions and recognition/reward for high performers was conceptualized in order to develop and improve ownership and accountability among the blue collared employees and rolled out during the year. The framework is presently under implementation.

In order to achieve a high-performance work culture through a systematic approach to managing performance of organisations, teams and individuals, various actions were implemented across three themes viz., better, faster and more efficient.

The initiatives launched with the help of Japanese consultants in the form of Total Quality Management (TQM) for the Chains and the Tubes Divisions and the Toyota Production System (TPS) for the Cycles Division are making good progress, with a strong emphasis on reduction in the overall plant rejections and improvement in product capability.

The total number of permanent employees on the rolls of the Company as on 31st March 2020 is 3302.

Industrial relations continued to remain cordial at all the Companys units during the period under review.

The information relating to employees and other particulars required under Section 197 of the Companies Act 2013 read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 will be provided upon request. In terms of Section 136 of the Companies Act 2013, the Report and Accounts are being sent to the Members excluding the information on employees, particulars of which are available for inspection by the Members at the Registered Office of the Company during business hours on all working days of the Company up to the date of the forthcoming Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in the said regard.

The disclosure with regard to remuneration as required under Section 197 of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is attached and forms part of this Report as Annexure-F.

17. Prevention of sexual harassment at workplace

The Company has policy on prevention of sexual harassment at workplace in line with the requirement of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act 2013. An Internal Complaints Committee (ICC) to redress complaints received regarding sexual harassment has been constituted in compliance with the requirements of the said Act. The policy extends to all employees (permanent, contractual, temporary and trainees). Employees at all levels are being sensitized about the new Policy and the remedies available thereunder. No complaints were received and disposed of during the year under review.

18. Employee Stock Option Scheme

During the year under review, the Company has granted 38,684 stock options to eligible employees under its Employee Stock Option Plan viz., ESOP 2017.

Details in respect of the ESOP 2017 as required under the relevant SEBI Regulations are displayed in the Companys website at the following link, http://www.tiindia.com/article/values/554

19. Sale of shares held by Employees Trust

TII Employees Share Purchase Scheme, a trust, was holding 7,03,680 equity shares or 2 each of the erstwhile Tube Investments of India Limited (Demerged Company under the Scheme of Arrangement for demerger approved by the Honble National Company Law Tribunal, Chennai in July 2017). Consequent to the demerger of the manufacturing business from the Demerged Company, the Trust was allotted 7,03,680 equity shares of 1 each of the Demerged Company and 7,03,680 equity shares of 1 each of the Company (being the Resulting Company under the demerger). These shares are treated as treasury shares in the standalone financial statements of the Company. During the year under review, the Trust had, in compliance with the SEBI (Share Based Employee Benefits) Regulations 2014 sold these shares as they were not backed by any ESOP grants. The net gain from sale of such shares aggregating 56.56 Cr. net of tax has been credited to retained earnings in the Companys books of account for the financial year ended 31st March 2020.

20. Directors Responsibility Statement

The Board of Directors confirm that the Company has in place a framework of internal financial controls and compliance system, which is monitored and reviewed by the Audit Committee and the Board besides the statutory, internal and secretarial auditors. 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 Statements for the year ended 31st March 2020, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) that such accounting policies as mentioned in the Notes to the Financial Statements have been selected and applied consistently and judgment and estimates have been made that 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 the year ended 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 the Companies Act 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities;

d) that the annual Financial Statements have been prepared on a going concern basis;

e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; &

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

21. Auditors

M/s. S R Batliboi & Associates LLP, Chartered Accountants (LLP Identity no.AAB-4295) were appointed as Statutory Auditors at the 9th Annual General Meeting held on 6th November 2017 for a period of five years viz., from the conclusion of the said 9th Annual General Meeting till the conclusion of the 14th Annual General Meeting.

In terms of the resolution passed by the Members with regard to the appointment of the Statutory Auditors, the said appointment is subject to ratification by the Members at every Annual General Meeting and their remuneration will be recommended to the Shareholders at the time of taking up such ratification of appointment each year. In the said regard, by an amendment to the Companies Act 2013 under the Companies (Amendment) Act 2017, the requirement for ratification of appointment of the Statutory Auditors at each Annual General Meeting has been done away with. Accordingly, there is no requirement under the law for ratification of appointment of the Statutory Auditors by shareholders and hence, the same is not proposed. The remuneration payable to them in respect of their remaining term viz., for FYs 2020-21 and 2021-22 needs to be fixed at the Annual General Meeting as required under Section 142 of the Companies Act 2013.

Accordingly, the Board recommends the terms of remuneration payable to the Statutory Auditors as set out in the resolution contained in the Notice of the ensuing Annual General Meeting.

The Company is required to maintain cost records in respect of Steel Products, Metal Formed Products and parts & accessories of auto components of the Company and such accounts and records are made and maintained. M/s. S Mahadevan & Co., (firm no.000007), Cost Accountants were appointed as the Cost Auditors of the Company for auditing the cost accounting records maintained by the Company in respect of the applicable products for the financial year 2020-21. Necessary resolution for ratification of their remuneration in respect of the aforesaid terms of appointment for financial year 2020-21 forms part of the Notice for the ensuing Annual General Meeting.

22. Related Party Transactions

All related party transactions that were entered into during the financial year under review were on an arms length basis and were in the ordinary course of business. There are no materially significant related party transactions during the year which may have a potential conflict with the interest of the Company at large. Necessary disclosures as required under the Indian Accounting Standards have been made in the notes to the Financial Statements.

The policy on Related Party Transactions as approved by the Board is uploaded and is available on the following link on the Companys website, http://www.tiindia.com/article/values/476. None of the Directors had any pecuniary relationships or transactions vis--vis the Company.

23. Directors

Mr. M M Murugappan, Director will retire by rotation at the ensuing Annual General Meeting under

Section 152 of the Companies Act 2013 ("the Act") and being eligible, he offers himself for re-appointment.

The Board takes pleasure in recommending the re-appointment of Mr. M M Murugappan as Director at the forthcoming Annual General Meeting.

All the Independent Directors of the Company have furnished necessary declaration in terms of Section 149(6) of the Act affirming that they meet the criteria of independence as stipulated thereunder. In the opinion of the Board, all the Independent Directors have the integrity, expertise and experience including the proficiency as required to effectively discharge their roles and responsibilities in directing and guiding the affairs of the Company.

Mr. Pradeep V Bhides term as Independent Director ends at the conclusion of the ensuing Annual General Meeting. The Board places on record its appreciation of the distinguished services rendered by Mr. Pradeep V Bhide during his long association, since October 2010, as Director of TII, before and after its demerger.

24. Declarations/Affirmations

During the year under review:

- there were no material changes and commitments affecting the financial position of the Company, which have occurred between the end of the financial year of the Company to which the financial statements relate viz., 31st March 2020 and the date of this Report; &

- there were no significant material orders passed by the regulators or courts or tribunals impacting the Companys going concern status and its operations in future.

25. Secretarial Audit

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 Mr. R Sridharan of Messrs R. Sridharan & Associates, a firm of Company Secretaries in Practice to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith and forms part of this Report as Annexure-G.

The Company has ensured compliance of the Secretarial Standards issued by the Institute of Company Secretaries of India during the period under review. Accordingly, no qualifications or observations or other remarks have been made by the Secretarial Auditor in his said Report.

26. Annual Return

Extract of the Annual Return of the Company is annexed and forms part of the Report as Annexure-H. The same is also available on the website of the Company at the following link, http://www.tiindia.com/investors/750

27. Key Managerial Personnel

Mr. Vellayan Subbiah, Managing Director, Mr. K Mahendra Kumar, Chief Financial Officer and Mr. S Suresh, Company Secretary are the Key Managerial Personnel (KMPs) of the Company as per Section 203 of the Companies Act 2013.

28. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3) (m) of the Companies Act 2013 read with Rule 8 of The Companies (Accounts) Rules 2014 is annexed herewith and forms part of this Report as Annexure-I.

The Directors thank all Customers, Vendors, Financial Institutions, Banks, State Governments, Joint Venture Partners and Investors for their continued support to your Companys performance and growth. The Directors also wish to place on record their appreciation of the contribution made by all the employees of the Company resulting in the good performance during the year under review.

On behalf of the Board
Chennai M M Murugappan
27th May 2020 Chairman