wendt india ltd share price Management discussions

In the sections that follow, the information required to be given in the Management Discussion and Analysis Report have been provided

GENERAL PERFORM ANCE REVIEW

The Indian economy has started to see gradual uptick resulting in m o d e r a t e growth in some industry segments although manufacturing activities are yet to experience any appreciable development. As we all see the pace of recovery has been slower than expected, but certainly there seems to be lot of optimism and positive sentiment across segments. Consequently, the Indian economy has achieved a modest growth of around 7.6%, highest growth in the last few years. Assisted by revival in the economy in some of the developed countries such as US and gradual rise in domestic demand as well as inflation being well under control in addition to increased manufacturing activities, have complemented well in rise in demand for products and services. All this has resulted in better performance of industry segments like Engineering, Refractory, Cutting Tools, Ceramics, Automotive and Steel compared to previous year although some sectors Construction, and Infrastructure etc are yet to see any rise in demand and hence growth.

During the year, while your companys domestic business has achieved a growth of 7% the export business has achieved a growth of 24% compared to the previous year with an overall 11% growth for the year. The Super abrasives products sales in the domestic market to industry segments like Automotive, Cutting Tools, Engineering, Ceramics, Refractories and Glass has achieved better performance over the previous year reflecting the industry trend. In order to maintain its leadership position, your company continued to put its best efforts and new initiatives for new product developments and applications in addition to working as closely as possible with customers for new opportunities including import substitutions and technology solutions.

As mentioned above, for the Machine Tools & Precision Components business, the performance level has been 19% higher than last year mainly on account increased machine orders and projects resulting in a growth of 48%. This year also saw some good machine orders from overseas customers which is a testimony to the quality and global standards of your companys machines. The precision component sales remained flat on account of lower offtake which has resonated with the auto component performance. Sales of newly developed components has seen higher volume offtake compared to previous year both in domestic and export front.

ECONOMIC OUTLOOK

As per the estimate by various agencies, the Indian economy is expected to achieve a growth rate in excess of 8% in the coming year and is expected to overtake China in next two years as per several macro-economic indicators. India is now placed 6th among the worlds top 10 manufacturing countries as per UNIDOs recent announcement. Several indicators including index of industrial production (IIP) has also shown positive movement in last several quarters. In the past two years, the government has embarked upon a slew of initiatives towards ease of doing business including the much talked Make in India campaign. These initiatives are expected to enhance the purchasing power of people, rise in demand while also speed up developmental work. As we all know, the SMEs form the backbone of the manufacturing industry contributing to more than 90% in India.

The industry sector that are expected to derive benefit from the above initiatives are Automotive, Engineering, construction, Aerospace, Defense, Ports and Mining, Shipping, Steel, Power, Consumer durables, Electronics during the coming year.

INDUSTRY STRUCTURE & DEVELOPMENTS

With its comprehensive product range and long years of experience, your company continues to be a preferred supplier for many major customers for a wide range of industry segments for Super Abrasive products, and is considered as Total Grinding & Honing Solution Provider. As we know, the Indian Super abrasive tooling market continues to remain fragmented and functions in very competitive environment, often dominated by the presence of few organized players such as your Company and many owner- driven small companies with strong regional focus. Major contribution to your Companys topline continues to come from sectors such as Automotive, Engineering, Cutting Tools, Refractory, Ceramics, Steel, Aerospace and Defence and few others.

As mentioned earlier, your company constantly puts efforts and focus on exploring new opportunities, new projects, new customers and new industrial segments. Accordingly, it has initiated its work on many new projects and continues to add new products every year to the product basket. On the other hand, in order to minimize dependency on few industry segments, your company is relentlessly working on developing products for other industry segments which have long term growth prospects. As a result of these efforts, your company has been able to develop and offer many new products for industries like Aerospace, Gears, Defence, Construction, Painting and Auto components.

PERFORMANCE OVERVIEW

Key Financial Summary

Particulars	2015-16 (Rs in Lacs)	2014-15 (Rs in Lacs)	% change
Domestic Sales	8,354	7,890	6
Export Sales	3,301	2,670	24
Total Sales	11,655	10,560	10
Operating Profit before Finance costs	965	1,108	-13
Capital Employed	9,362	8,990	8

OPPORTUNITIES & THREATS

Opportunities:

While your company recognizes the importance of economic growth and its influence on your companys overall performance, it would continue its quest of achieving higher growth rate with ample confidence on account of the industry spread and the business opportunities exists for the company in those industries. Secondly, the wide basket and comprehensiveness of the same provides ample scope for growth. Thirdly, as always, your company would continue to be on constant look out for new opportunities in both exiting and untapped markets as well as countries. Developing products and aligning the business in line with the strong signals of Mega trends would be another area of focus for your company going forward.

Long experience of providing products and services with its superior offering has been the backbone of success for your company. Contemporary technology has played an important role in this for both Super abrasive tooling and The Precision Grinding/Honing machines. The same also been extended and well integrated with precision component manufacturing as well in last few years. Your company would continue to leverage this unique advantage and derive maximum benefits from being the provider of Total Grinding & Honing Solutions which only few can aspire to have.

As a part of continuous journey, your Company would continue to work on the identified new projects in both Super abrasive tooling, Machines Tools and precision components that are lined up. It has planned some new machine models for manufacturing, development and introduction during the coming year. As regards precision components and growing it into a separate business vertical, your company has been working on some of the new developments having large upside and expect to start the projects soon.

Threats

As is well known, the Super abrasive tooling market in the domestic front is heavily populated with the presence of few organized players such as your company and many small and unorganized players. The market structure characterized by unorganized, small timers and proprietary-driven companies in one end with strong regional focus and on the other end, few organized players. The small companies, focus on specific markets and addressing customer requirements with lower prices as a matter of survival and continue to service to a section of customers with a limited range of products. On the contrary, the large organized players from both domestic and global arena focus on technology and application engineering. The OEM tie ups arrangements with machine manufacturer for the global players have almost always, benefitted them in terms of ready access to the business right from the beginning.

This has been a unique challenge for your company. To address this, your company continues to adopt its distinctive method of offering low cost and innovative products for the low end competition, and for the high end segment, it focuses on technology solutions and offering import substitutes and value additions.

BUSINESS OUTLOOK

In the still volatile and fragile business environment, your Companys main focus would continue to maintain its leadership position in the domestic arena. Increased market reach & penetration as well as addition of new products to its basket apart from working closely with customers are some of the things your company would pursue with utmost seriousness. Enhancing global presence and depth in the identified countries in the global market is another area for driving growth in the export business. Improving customer engagement levels and effective promotion of its products and services will be ensured through initiatives towards improving awareness levels, brand recall and active participation in both domestic and international exhibitions and trade fairs.

In the Super abrasive business, your Company will continue to drive the growth through New Product Development, Indigenization Efforts and Focus products. While this would give stability to the business, it will also focus on capitalizing on new opportunities in industry segments with high growth potential in conjunction to ensure future growth. The company has planned several new initiatives for the year in this direction so as to achieve the planned growth. The newly acquired Star business is being smoothly integrated into the company which is expected to complement the growth projection.

Machine Tools & Precision Components vertical has been consolidating and is expected to bring greater benefits in the coming years. Like previous years, your company has already planned development of few new machines and launches in the coming year for engineering, defense and aerospace and auto component industries.

As mentioned above, the precision component business is being strengthened with addition of new components and new customers. It is already seeing steady increase in volume and still higher volumes are expected in the coming year. Your company has planned addition of few more precision components to the basket going forward and the discussions and deliberations are ongoing with the potential customers. Accordingly, suitable investments would be planned by your company for the physical infrastructure, capacity, machineries, equipment etc so that the long term objectives are met.

Your company continues its focus on pursuing & growing the International Business through the established Wendt / 3M channel. In addition, for enhancing market reach and penetration, your company works with CUMIs overseas marketing channels as well as other Strategic partners / Alliances operating in some of the countries. Accordingly, your company has started promoting its products under CUMI & Neutral Brand as well, thereby opening up new business opportunities.

Your 100% owned subsidiary Wendt Grinding Technologies Ltd, in Thailand would continue to achieve better results year on year despite the region being affected by global slowdown, shrinking demand and also continued labor and political unrest. As is evident in the past, the subsidiary shows ample resolve and confidence for a better performance in the coming year as well. Your companys subsidiary will continue to embark on new opportunities, addition of new industry segments and markets with improved service levels, while increasing its product basket.

The second fully owned subsidiary, Wendt Middle East FZE, Sharjah has been delivering consistent performance over last few years after initial years of struggle. As mentioned earlier, it operates in an environment that is known for market volatility and political upheavals, continuously falling oil prices, socio-economic crisis and declined investments in the region. However, despite these turbulence and uncertainties, change in Business Strategy and refocusing efforts on certain markets and industries have started yielding good results in past few years. Your subsidiary would continue to operate as the Product Availability Point (PAP) for the entire GCC region with focus on General Engineering, Aerospace, Steel, Ceramics, Auto component, Oil and Gas and associated industry segments & is expected to better its performance in the coming year also.

RISK & CONCERN

Risks are uncertainties and possible outcomes from the environment which can impact a companys performance and future prospects. Your company adopts a comprehensive and robust risk appraisal, mitigation and management process in the areas of operations, financial, technology and other business risk. The Senior management of your Company is involved in mapping the risks arising out of both internal and external environment and effective plans to mitigate the same. Business risk mitigation helps to find ways to manage situations that could adversely impact the financial, physical and human capital of the organization. Your Company would continue to build strategies to retain its leadership position while at the same time improving operational efficiencies would insulate it from various risks.

The Risk management process for your Company encompasses the following sequence: l Identification of risks with the associated risk owners l Evaluation of the risks as to the likelihood of occurrences and related consequences l Assessment of options for risk mitigation l Prioritizing the risk management actions l Development of risk management plans l Authorization for the execution of the risk management plans l Implementation and review of the risk management process

Risk management strengthens the robustness of the business. The Senior Management of your company takes the overall responsibility of total risk management processes in the organization. Through its pursuit of anticipation and identifying risks before risks control your companys actions, the Risk Management Committee of your Company analyses the potential areas of risks and on the current business portfolio and decides which business should receive more focus, where to invest, what needs to be added or discontinued from the product portfolio etc. to mitigate the risks.

Your Company continuously seeks to identify, assesses, review, manage and work on developing the robustness of the system in terms of adequate internal controls and compliances. The business risks of your company are managed through cross functional Team involvement and communications. Some of the risks associated with the business and the related mitigation plans are given below. However, the risks given below are not exhaustive and the assessment of risk is based on managements perception.

User Industry Concentration Risk

Why is it considered as a Risk?

• Significant exposure to select sectors. l Time lag in passing of the price correction / variations in input costs to the customers.

• Effect on Customer Relationship with change in ownership.

• Global economic scenario leading to decline in demand. l Cessation of the technology agreement and access to new developments in the super abrasive field.

• Rebranding of products and the resultant delay in brand establishment.

• Disruptive innovation & process changes.

Mitigation Plan / Counter Measure to address

• De risking the business with widening the customer base/ new industry segment & new geographies.

• Exploring growth opportunities in Construction, Infrastructure, Steel, Defense, Aerospace, Glass, Ceramics and other industries.

• Continuously pursuing product innovation and new application development for diverse sectors.

• Improving the on time delivery levels through operational efficiency measures like Lean addressing the sustained competitive advantage.

• Leveraging relationship and Engagement with the customer-WOW initiative / Exhibitions like IMTEX, participation in international exhibitions like GRINDTECH, MAC, CRM & knowledge management application.

• Setting up of the In-house DSIR approved R&D center. Also the innovation focusing on New Product Development, is now well embraced at Wendt to yield results.

• Developing and promoting alternative brands one being well-known “CUMI”.

• Entering new geographies globally

Competition Risk

Why is it considered as a Risk?

• Presence of too many unorganized regional players often adopting Low pricing strategy, free samples, higher credit days etc.

• Cheaper Imports from China.

• Imports Direct and through OEM route.

• New Organized Players entry - Setting up manufacturing base in India consequent to Make in India Drive.

Mitigation Plan / Counter Measure to address

• Offer sustained competitive advantage to customer through operational efficiencies

• Focus on Lean & Address QCD Superior Quality, Cost competitive products & Reliable, Consistent Delivery

• Internal Efficiency Measures/ process automation/ Reduce throughput time

• Creating entry barriers for competition / exit barriers for customers - key account management

• Continued drive on Innovation on products, process and applications

• Enhancing value added services

• Increasing the product basket & offerings

• Increased focus on New product development

• Central Monitoring System

• Building agile Supply chain

• Drive E-Commerce and online sales

• Automation and Robotization to address Lower manufacturing cost and enhance Competitiveness

Technology Risk

Why is it considered as a Risk?

• The rapid changes taking place in the fields of grinding technology and material science.

• Adoption of Disruptive technologies like 3D printing.

• Access to New Alternate technology following the expiry & Non-renewal of technical collaboration agreement with Wendt GmbH post Sept 2012.

Mitigation Plan / Counter Measure to address

• Indigenous development of Bonds independently /external consultant

• Collaboration with external consultants

• Established DSIR approved R&D center and build on self-sufficiency in technology & new products

• Association with external Research laboratories / Technical institutes for technological upgradation.

• Product and Process Innovations

Online Data & Information Security Risk

Why is it considered as a Risk?

• Data breach leading to loss and critical information infrastructure breakdown

Mitigation Plan / Counter Measure to address

• Policy in place for Technical Controls Business Continuity Plan and Disaster Recovery Strategy in place.

• Security operations center under process

• Authorized access to the Data center

• Crisis Management Group in Place.

INFORMATION TECHNOLOGY

Use of technology and SAP ERP system and harnessing the benefits for smooth functioning of the business has been one of the key success factors for your company. Accordingly, your company continues to work on some of the critical business processes such as production planning, materials management and scheduling, stores and receipts, financials and controls as part of seamless integration towards driving productivity improvement and work prioritization.

Started last year, the IT enabled Knowledge Management System which your company has been working on is expected to further facilitate the companys application engineering capabilities and offering technology solutions to the customers. This initiative once completed and fully integrated with SAP CRM would take your company one step closer to the customers in terms of real time interactions, better understanding of their requirements and addressing them with precise technology solutions.

INTERNAL CONTROL SYSTEM & ADEQUACY

Your Company has in place well-defined and adequate internal control system commensurate with the size of the Company and the nature of its business. These measures are regularly reviewed and updated by incorporating changes in the regulatory provisions. These are regularly tested for their effectiveness by Statutory as well as Internal auditors. The internal control system have been built to ensure that all assets are safeguarded and all transactions are authorized, recorded and correctly reported. Material errors and irregularities are detected and prevented in time. Your company is committed in its endeavor & ensures an effective internal control environment that provides assurance on the efficiency and effectiveness of operations, reliability of financial reporting, statutory compliance.

Capital and revenue expenditures are monitored and controlled with reference to approved budgets. Budget overrides, if any is brought to the notice of the Board and suitable actions is taken to control the expenditure.

The Company has well established, time tested, robust internal processes in place to ensure smooth functioning of the operations. This is ensured by well documented policies, authorization guidelines commensurate with the level of responsibility and standard operating procedure specific to the respective business. This is enhanced by an extensive review & monitoring system whereby the management regularly reviews your companys performance periodically as per its relevance for both financial and operational parameters and takes timely measures to address variances, if any.

The internal audit function is carried by external independent Chartered Accountant firm which covers all operational areas and ensures that the revenue has been correctly deployed and that there is no wastage / leakage of any resources. The Internal Audit firm reports to the Chairman of the Audit committee. The scope of the Internal Audit is firmed up with inputs from the Audit Committee, Board of Directors, Statutory auditors and the Company management so that all the critical areas are covered. Significant audit observations and corrective and preventive actions thereon are presented to the Audit Committee.

During the year there were no changes in internal control over financial reporting that have materially affected, or are likely to have any financial reporting lapse.

The company continues its efforts to align all its processes and controls with best global practices.

Internal Controls Over Financial Reporting (ICFR)

Your Company has in place adequate internal financial controls commensurate with its size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in the design and operations were observed. The company has policies and procedures in place for ensuring proper and efficient conduct of its business, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

The Company has adopted accounting policies which are in line with the Accounting Standards and the Act. These are in accordance with generally accepted accounting principles in India. Changes in policies, if required, are made in consultation with the Auditors and are approved by the Audit Committee.

The Company has a robust financial closure, certification mechanism for certifying adherence to various accounting policies, accounting hygiene and accuracy of provisions and other estimates.

FINANCIAL REVIEW Earnings Revenues

During the year, your company achieved total sales of Rs.11655 Lacs, higher by 10% as compared to 2014-15. While the domestic sales is 6% higher than last year at Rs. 8354 Lacs, the export sales recorded a robust growth of 24% compared to the previous year at Rs 3301 Lacs. As briefed earlier, the major industry segments which contributed to the growth of domestic business are auto, auto component, engineering, cutting tool, ceramics, steel, glass, refractories etc. The improved performance in export is contributed by the higher exports to countries like UK, USA, UAE, Spain, Belgium, Austria, Australia etc. during the year.

Profit before Tax

The profit before tax is lower by 19% at Rs.1422 Lacs compared to Rs.1764 Lacs in 2014-15. The reason for the drop in profitability is the difference in product mix as well as rise in the cost.

Profit after Tax

The profit after tax is lower by 34%, at Rs.974 Lacs, compared to Rs.1485 Lacs in 2014-15. This is due to lower R&D capex, hence lower tax benefit during the year.

Liquidity and Cash Equivalents

Your company retains its status of debt free company, maintaining sufficient cash and cash equivalents to meet its futuristic strategic initiatives. Your company has been prudent in its investment policy over the years, maintaining a reasonably high level of cash and cash equivalents which enable the company to completely eliminate short and medium term liquidity risks. The objective of cash management at Wendt India is to : a. Conserve sufficient cash as reserves that will aid the company in seizing meaningful business opportunities that unfolds during the year. b. Use cash to provide sufficient working capital to address business objectives of the company & to add value to all stakeholders by continued enhancement. c. Prudently Invest surplus funds that the business generates in debt schemes of mutual funds as per Group norms.

This ensures availability, safety and liquidity of Companys funds while allowing reasonable yield as per the prevailing market rates.

During the year your companys investment in mutual funds decreased from Rs.1436 Lacs to Rs.897 Lacs in 2015-16. This is on account of acquisition of Star Diamond Tools Pvt. Ltd., and other Capex spent made during the year. As the earnings are ploughed back, the capital expenditure need of your company for the year was met entirely form the mutual funds investment.

Costs

The Fixed costs excluding depreciation has grown by 18% compared to last year. However, fixed cost as percentage of sales controlled at 34% against 32% of last year.

The variable costs have been controlled during the year through indigenization of raw material and other input costs which has helped marginally in improving the margins of the company. The Lean Management Initiative undertaken by your company has also helped in significant savings during the year. Your companys price correction initiative from both customers and key suppliers during the current year is expected to improve its profitability in the coming year.

Financial Position

Share Capital

The paid up equity share capital as on March 31, 2016 was Rs. 200 Lacs. During the year under review, the Company has neither issued shares with differential voting rights nor granted stock options or sweat equity.

Shareholders Funds

The shareholders fund as on 31.03.2016 was Rs.9362 Lacs against Rs.8990 Lacs of previous year, an increase of 4%.

Accordingly, the book value of the share stands at Rs.468/- as compared to Rs.450/- during the previous year.

Loan Funds

Your Company Continues to utilize its cash credit limit with State Bank of India to bridge the short term fund requirement and for meeting the temporary mismatches in its cash flow. Your Company does not have any interest bearing term loan.

During current year also, the working capital limits of your Company continues to be rated by ICRA as AA- (pronounced ICRA double A minus) rating assigned to the Rs.2.0 crore Long term Fund facilities of your Company which signifies low credit risk and stable. The short Term (Non Fund based) Rating also continued to be reaffirmed as A1+ (pronounced ICRA A one plus). Overall your Companys rating continues to be stable and low credit risk.

ASSETS

FIXED ASSETS

Your company continues with the policy of being prudent in its capex spend. During the current year, the capital expenditure was Rs.1285 Lacs. The major capex spent was on addition of new plant & machinery towards capability building in fast growing products and new products capacity enhancements, which are critical for the future growth of the company. Company continued to adopt policy of funding all the capex through the internal accruals.

Inventories and Sundry Debtors

The overall inventory levels as on 31st Mar2016 is Rs. 1787 Lacs, an increase by 9% over the last year. There was an increase in the stores & spares inventory by Rs.40 Lacs, and the trading inventory by Rs. 21 Lacs. This was due to delay in dispatch / clearance for from few customers. The higher inventory was also strategically necessary for addressing the On-call supplies.

Receivables as on 31st March2016, were higher at Rs. 2907 Lacs from last year of Rs.2111 Lacs, mirroring sales growth of 10%. However, the average credit days have gone up from 64 days to 75 days due to the tight liquidity position. Your Companys aggressive receivable management system including close follow ups and credit lock through the SAP system will ensure that receivables are kept under control and payments received in time.

Foreign Exchange Hedging

Your Company, being a net exporter, follows the policy of natural hedging of foreign exchange earnings and outflow

and hence it does not take any forward covers. The net forex gain during the year has been Rs.49 Lacs.

Enhancing Shareholder Value

Your Company firmly believes that its success in the marketplace and good reputation are among the primary determinants of value to the shareholder. The organizational vision is founded on the principles of good governance and by the resolve to be a customer centric organization which motivates the companys management to be aligned to deliver highly customized products with dependable after sales services.

Your Company is committed on creating and maximizing long-term value for shareholders and essentially follows a four pronged approach to achieve this end.

a) by increasing all round operational efficiencies

b) by identifying strategies that enhance its competitive advantage

c) by managing risks and pursuing opportunities for profitable growth, and

d) by building relationship with other important stakeholder groups through meaningful engagement processes and mutually rewarding associations that enable it to create positive impacts on the economic, societal and environmental dimensions of the Triple Bottom Line

Underlying this is also a dedication to value friendly financial reporting that assures the shareholder and investor of receiving transparent and unfettered information on the Companys performance.

Financial Performance with respect to Operational Performance

Despite the tough Business Scenario, your Company strives to keep its Operating profit and Contribution better than the industry average and record reasonable growth. This is on account of stringent control measures taken for improved operational efficiency led by the Lean Initiative undertaken by your company and also the better product mix. This was aided by accurate information & customer data, centralized drawing management system, better planning & scheduling through SAP ERP System and effective vendor management. Your Companys improved MIS reporting and ability to respond to customer with real time information helped in giving rich experience to the customers there by providing value addition to the customer.

INSURANCE

Your company continued its adequate care on providing required insurance cover for your companys asset buildings, plant and machinery including inventories, and for liabilities under legislative enactments.

HUMAN RESOURCE

The people policies and practices of your company are effectively aligned to the organizational goals and objectives. Your company has in place well-established human resource processes for attracting, retaining and nurturing talent by adopting a transparent system of performance evaluation and rewarding performers. This has been evident from the fact that your companys employees have longer average tenure and low attrition rate. Individual KRAs are derived from the annual BSC (Balanced Score Card) and carefully deployed at all level and are reviewed periodically.

In order to sustain its leadership position in India, your company finds it pertinent to remain customer-focused, performance-driven and future-capable. Your Companys Human Resource Development strategy seeks to fulfill this mandate through careful selection and effective implementation of a range of innovative programmes and interventions. Needless to mention that the human resource policies of your company ensure motivation to the employees to give their best and remain committed to achieve the overall objective of the company. It is a constant endeavor for your company to adopt some of the industry best practices and aligning them with the strategic directions, goals and objectives in terms of people processes.

Your Companys Human Resource policies are continuously reviewed and realigned based on people expectations,

making it more employee-friendly thereby creating an engaged workforce which focuses on productivity.

Every employee of your company is considered as an appreciating asset, thus the personal development plans focus on how each individuals strength can be best leveraged to deliver to his/her full potential. To this effect, your company provides specific training programmes and cross functional learning opportunities. The company attains high degree importance to enhancing employees competency and skills through on the job training and external training programmes. Special attention is given on improving the health and safety of the employees.

Your company focuses on Business Excellence and continual improvement journey (TQM) in its quest to improve the quality of products, processes and systems. All this requires ongoing learning, job enrichment, aligning rewards and recognition with performance, high engagement levels, conducive work environment and a cordial industrial relationship. Your company continues to have a smooth and enabling work climate that promotes performance, customer focus and innovative thinking while adhering to the highest standard of integrity, trust and ethical behavior. Your Company continues to enjoy the support of a committed, experienced and satisfied workforce. To this effect, your company offers a compensation package which is one of the best in industry.

Employee relations continue to be smooth and cordial and the work atmosphere remained congenial throughout the year. The manpower strength of confirmed employees of your company as on 31st March 2016 was 338.

RELATED PARTY TRANSACTIONS

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

All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained on a quarterly basis for the transactions which are of foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are audited and a statement giving details of all related party transactions is placed before the Audit Committee for their approval on quarterly basis

The Policy on Related Party Transactions as approved by the Board is uploaded on the Companys website.

None of the Directors have any pecuniary relationships or transactions vis-a-vis the Company.

GOVERNANCE

BOARD OF DIRECTORS

Mr. K Srinivasan, Director retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. The necessary Resolution is being placed before the shareholders for approval. The Board of Directors of your company is of the opinion that his continued association with the Board will be beneficial to the company and recommend his re-election.

All the Directors of the company have confirmed that they are not disqualified from being appointed as directors in terms of Section 164 of the Companies Act, 2013. All the independent Directors have given a declaration under section 149(6) of the Companies Act 2013, confirming their independence.

MEETINGS

A calendar of Meetings is prepared and circulated in advance to the Directors.

During the year, five Board Meetings and four Audit Committee Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013.

BOARD EVALUATION

Pursuant to the provision of the Companies Act, 2013 and SEBI Regulations, the Board has carried out the annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Audit, Stakeholder Relationship, CSR and Nomination & Remuneration Committees. The manner in which evaluation has been carried out has been explained in the Corporate Governance Report.

REMUNERATION POLICY

The Board has framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Remuneration policy is stated in the Corporate Governance Report.

AUDITORS AND AUDITORS REPORT

M/s Deloitte Haskins & Sells, Chartered Accountants, (FR No.008072S), the statutory auditors of the Company, Bangalore hold office until the conclusion of the ensuing Annual General Meeting and being eligible, have offered themselves for appointment, by shareholders at the Annual General Meeting. The auditors of your Company have submitted a certificate of their eligibility for appointment under Section 139 of the Companies Act, 2013. Your company has ensured that the auditors are subject to the peer review process of the Institute of Chartered Accountants of India (ICAI) and hold a valid certificate issued by the Peer review Board of the ICAI. The statutory auditors have confirmed their compliance with the relevant provisions.

The notes on accounts referred to in the Auditors Report are self- explanatory and do not call for any further comments.

SECRETARIAL AUDIT

Pursuant to the provisions of Section 204 of the Act, and the Rules framed thereunder, the Company has appointed M/s Apeksha Nagori, practicing Company Secretary to undertake the secretarial audit for the financial year 2015-16. The Report of the Secretarial Auditor confirming compliance with the applicable provisions of the Companies Act 2013 and other rules and regulations issued by SEBI/other regulatory authorities forms part of the Annual Report.

The explanation to the observations of the Secretarial Audit Report by the Secretarial Auditor has been furnished in the respective sections of the Corporate Governance Report.

KEY MANAGERIAL PERSONNEL

Mr. Rajesh Khanna, Chief Executive, Mr. Mukesh Kumar Hamirwasia, Chief Financial Officer and Ms. Akanksha Bijawat, Company Secretary are the Key Managerial Personnel of the Company pursuant to Section 2 (51) and Section 203 of the Companies Act 2013.

None of the Key Managerial Personnel have resigned during the year under review.

CORPORATE GOVERNANCE

Your Company strives to maintain high standards of Corporate Governance in all its interactions with various stakeholders. The company continues to be a sustainable and trusted organization as sustained governance is the cornerstone in building and maintaining relationship with all its stakeholders. It has embedded into its system the strong culture of values, ethics and integrity living with the Five Lights The Spirit of the Murugappa Group. It rigorously pursues a policy of 100% compliance with all statutory requirements and has a robust review system in place. The Board fully supports and endorses Corporate Governance practices in accordance with provisions of Regulation 27 of the SEBI (LODR) Regulations 2015. The Report on Corporate Governance along-with the Auditors Certificate regarding compliance of the conditions of Corporate Governance pursuant to Regulation 27 of the Listing Regulations is annexed hereto and forms part of the Annual Report. Further, as required under Regulation 17 (8) of the SEBI (LODR) Regulations 2015, a certificate from the Chief Executive and the Chief Financial Officer of your Company is being annexed with this Report.

VIGIL MECHANISM UNDER WHISTLE BLOWER POLICY

The Company has a vigil mechanism under Whistleblower Policy to provide necessary safeguards for protection of Directors, employees from reprisals or victimization. The details of the policy are explained in the Corporate Governance Report and also posted on the website of the Company.

Extract of Annual Return

The extract of the Annual Return in form MGT 9 as required under Section 92(3) of the Act and the Rules framed thereafter is annexed to and forms part of this report. (FORMAT IN ANNEXURE I)

RATIO OF REMUNERATION TO EACH DIRECTOR:

Details / Disclosures of Ratio of Remuneration paid to each Director to the median employees remuneration as

ANNEXURE III

Directors Responsibility Statement

To the best of their knowledge and belief and according to the information furnished and explanations obtained by them, your Directors confirm the following in terms of Section 134 of the Act:

• In the preparation of the annual accounts for the financial year ended 31st March 2016 and the Balance Sheet as at that date (“Financial Statements”), the applicable accounting standards have been followed and no material departures have been made from the same.

• The Directors have selected appropriate 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 as at the end of accounting year and of the profit of the Company for the year ended 31st March2016.

• 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.

• The Directors have prepared the annual accounts on a going concern basis. l The Directors have laid down proper internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively.

• 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.

Disclosure of Statutory Particulars

• The particulars as prescribed under Section 134(3)(m) of the Companies Act,2013, read with Rules 8(3) of The Companies (Accounts) Rules 2014 are set out in Annexure A which forms part of this report.

• The information required under Section 197(12) of The Companies Act2013 read with Rules 5(2) & (3) of The Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 and forming part of Directors report for the year ended 31st March2015 is annexed in Annexure B.

ACKNOWLEDGEMENTS

Your Directors would like to express their sincere appreciation to investors, bankers, customers, suppliers, business associates, shareholders, auditors and other statutory authorities who have extended their precious continued support and encouragement to your company during the year. Your Directors extend their sincere gratitude to all the regulatory agencies like SEBI, Stock Exchanges, Registrar of Companies and other Central and State Government authorities/agencies, Stakeholders, vendors and sub-contracting partners for their support.

Your Directors also place on record their appreciation and thanks to all employees for their dedicated services and the high degree of professionalism, commitment rendered at various levels of the company without whose contribution, could not have achieved the companys performance for the year and are also looking forward to their continued involvement and support.

Finally, the Directors also wish to place on record their gratitude to the members of the Company for their Continued Support & Confidence.

	By order of the Board
	For Wendt (India) Limited
Place: Chennai	M M Murugappan
Date: 28th April 2016	Chairman

Annexure to the Directors Report

A) Information under section 134(3)(m) of the Companies Act,2013, read with Rules 8(3) of The Companies

(Accounts) Rules 2014 and forming part of Directors Report.

a) Conservation of Energy

Your Company does not fall under the category of power intensive industries. However, your company adopts sustained efforts to reduce energy consumption. The organization is an ISO 14001 certified company which is an International Management System Standard. The environmental policy of your Company focusses on conservation of natural resources and minimization of pollution. The following energy conservation measures were taken by your Company during the year:

i) Installation of energy efficient lamps in new installations. Existing energy inefficient lamps are gradually replaced with energy efficient lamps.

ii) Introduction of light dependent resistance sensor harnessing natural daylight for all outdoor lighting with automatic controls

iii) Time switches installed at various places for automatic control of street lights. iv) Installation of occupancy sensors in washrooms & lavatories v) Power capacitors added/ replaced wherever necessary to improve power factor. vi) Modification in lighting circuit for automatic ON/OFF controls

vii) Optimum utilization of energy through process redesigning as well as maximum utilization of equipment that offers improved energy efficiency.

viii)Your company has taken measures to save water whereby 100% of the domestic effluent and the trade effluent are treated and used for gardening and electroplating processes (Zero discharge). is recycled and reused for gardening.

ix) Periodic Energy Audit being conducted to improve the energy conservation measures further.

x) Various energy conservation measures are taken and general awareness is propagated among all concerned for efficient use of energy.

b) Technology Absorption, Adaptation and Innovation

Your company thrives on quick absorption of latest technology and its adaptation in both Super abrasive and Non Super abrasive business verticals. As mentioned earlier, the expiry of the technical collaboration with Wendt GmbH happened four years back. Pre-empting this, your company had already embarked on developing its own technology & appended process by aggressively pursuing its R&D efforts through the establishment of R&D Centre and also collaborating with renowned institutes & Laboratories who have gained sufficient knowledge in your companys product lines. As a result, your company has been able to develop some of the products that are extensively used in wide range of industries like Refractory, Ceramics, Construction, Glass and Composite, Cutting Tools, Steel and Textile & Paper. Your Company has also identified and initiated some more areas for bond development for industries such as Rotary Tools, Ceramics, Bearing, Glass, Automobile etc with the help of a well qualified and experienced external consultant.

Through its independent endeavors to strengthen the technology base and R &D activities, your Company has had close association with one of the renowned research institutes based in Europe for in house development and manufacture of Brazed products. Your Company also banks on the rich experience, knowledge pool and R&D facility of its Indian Joint venture partner Carborundum Universal who are leaders in the field on conventional abrasive & material science for some of the application developments for specific areas.

Your Company continuously focuses towards the re-engineering of processes and works on cost economical raw material alternatives for its products in order to improve operational efficiency, thereby reducing costs and waste elimination.

Your Company makes efforts towards value engineering of existing products to deliver better price to performance ratios, new processes for the manufacture of certain products, improvement in products to match evolving requirements of customers and development of capability to manufacture products addressing specific market niches.

Based on your companys needs for modern technology and growth opportunity, strategic acquisitions/collaborations in related areas are being explored.

RESEARCH & DEVELOPMENT

In line with its strategic intent, your Company seeks to become significant global player in offering customized functionally superior products to maintain its competitive edge and retain its market leadership position. Since the advancement of technology is at a greater pace, the grinding technology needs to be constantly updated on an ongoing basis to keep pace with rapid change in material science and machining techniques. As an acknowledgement of this important aspect, your company has a well-established R&D centre which is anchored by R&D head who is well experienced and knowledgeable in his domain. Apart from research and development activities, he also collaborates with external research labs and renowned institutes & collaboration with technical consultants for the required technological up gradation.

As you may be aware, your Companys R&D Centre was accorded Certificate of recognition from the Ministry of Science and Technology, Government of India, valid upto 31st March15. During the year your Company had applied and received the R&D Renewal Recognition Certificate valid from 1st April2015 to 31st March2018.

The recognition of the R&D centre by DSIR gives your company a major impetus not only to pursue development of new Bond / Matrix, new products for itself but also provide opportunities for collaboratively working with external institutes / research laboratories on leading technologies in future. In order to grab the opportunity of collaborative work with research laboratory, your company’s R&D center has undergone a technology transfer agreement with Bhaba Atomic Research center (BARC-Mumbai) for development of futuristic nano finishing machine.

This R & D venture continues to carry out indigenous Bond development in a major way and help the organization to be ahead of competition with launch of newer products.

Your company has a state of art R&D facility with all ultra-modern equipments and facilities supported by well qualified and dedicated R&D team which is involved round the clock in various R&D projects and activities in order to develop new products with new features for the grinding and finishing applications, improve the existing one, develop new methods, technology up-gradation etc. State of the art condition monitoring grinding machines have been established & commissioned in your company R&D for qualifying the bonds in-house, which is a major breakthrough in terms of validation process.

Your Company continuously focuses towards the re-engineering of processes and works on developing cost economical raw material alternatives like raw materials for improving operational efficiency, reducing costs and waste elimination.

Continuous efforts are made towards value engineering of existing products to deliver better price to performance ratios, new processes for the manufacture of certain products, improvement in products to match evolving requirements of customer.

Your R&D centre has a dedicated team to work on various Research concepts for bringing cutting edge technology solutions for offering to the customers. During the year 2015-16 our Research center has added high end scientific instruments Rheometer (for testing the powder flow), High resolution metallurgical microscope (for analysis of microstructure of the bonds), as well as Charpy impact tester (for analysis of bonds impact strength) along with supportive infrastructure to strengthen the development activities.

Our R&D Department focus areas are on:

a. State -of the -art new futuristic machine for internal validation

b. Development of new bonds for glass grinding applications

c. Development of next generation grinding wheel body material for high speed grinding

d. Development of vitrified fine grinding wheel for lapping application

e. Development of special bond for the carbide insert grinding Application

f. Development of special vitrified bond for carbide flute grinding application

g. To develop Self Sufficiency in wide range of Bonding Materials for Grinding application.

h. New Process and Design for precision Honing Applications

i. Products for Cutting & Grinding of New Materials

j. Building customized Products for local and global markets

k. Working not just as product development partners but also as Go-To Market partners with customers

Specific areas in which R & D is carried out by the Company

Following are the areas in which R&D is carried out by the Company

1. Development of integral body thin wheels for slicing operation

2. Development of light- weight -high -strength composite body material of grinding wheel

3. Development of new bonding system for glass grinding application

4. Development of a new state of the art ultra-surface finishing machine with collaboration of BARC-Mumbai

5. Development of special bond for the carbide insert grinding Application

6. Development of special vitrified bond for carbide flute grinding application

7. Development of new Bonding System for Super abrasive grinding wheels Vitrified, Metal and Resin bond

8. Development of vitrified super finishing sticks for honing/lapping application

9. Study and analysis of grinding process with condition monitoring system for optimizing the process 10. Development of new manufacturing methods by using resistance heating technique

11. Establishing the network with academic institutes/PSUs for any opportunities relevant to the companys activities.

Benefits derived as a result of the above R & D

Business organization gain considerable benefit through investing in research and development. Furthermore, ongoing research in Wendt R&D brings new opportunities in the market. Following are the benefits of R&D

1. Development of bonds for self sufficiency

2. Indigenisation of Bonding Materials for super abrasives as an import Substitute.

3. Grinding Solutions for New application

4. Upgrading Manufacturing Technologies with current Needs

5. Development of Futuristic products in the area of super abrasives

6. Development of new body materials for our products machine parts & components

7. Since the companys R&D facility has got the recognition and approval from DSIR, tax benefit can be availed on the R&D capital & revenue expenditure.

Your Companys continued investment in research and development has resulted in development of some of the new products with special features for the grinding and finishing applications in the previous year.

Some of the new products developed by your company last year are

• Brazed wheels for steel grinding, ceramic, ophthalmic and composite

• Indigenized Vitrified diamond wheel for PCD/PCBN lapping applications

• Vitrified super finishing honing sticks for bearing and textile

• Integral thin wheels by using resistance heating methods

• Vitrified fine grinding wheels

• Vitrified CBN ID grinding wheel for fuel pumps

Wendt India R&D plant includes inter alia, New Technology Development, Technology upgradation, and Self Sufficiency in Bond Development.

During the year Company has filed patents, one Non-Super abrasive and few patents are in pipeline for Super abrasives.

During the year, your company also successfully developed 7 new machines such as Vertical Single & Double spindle Honing machines, Angular Head Grinding machine and Surface Grinding Machine.

Benefits derived: Your Company mainly caters to niche market where majority of customers are OEMs and look for technologically superior products and reliable performance. With majority of the customers considering your Company as a Single-Stop Shop for Complete Grinding and Honing Solutions, they look forward to have technologically advanced products with superior and consistent performance. Your company is able to address these ever changing needs & expectations of the customers, by virtue of its strong R&D focus and long years of experience. This facilitates your Company to retain its dominant position and also enable the customer to justify the due premium for its product reflecting on your companys profitability.

Sl. No Particulars	2015-16	2014-15
a) Capital Expenditure	8	432
b) Recurring (revenue expenditure)	238	263
c) Total Expenditure	246	695
d) Total R&D Expenditure as a percentage of turnover	2.11%	6.58%

 

Sl. No Particulars	2015-16	2014-15
a) Foreign Exchange Used	3519	2985
b) Foreign Exchange Earned	3656	3214

B) Particulars of Employees: The details of employees drawing remuneration in excess of Rs 5,00,000 per month or Rs. 60,00,000 per annum as required under Section 197(12) of The Companies Act2013 read with Rules 5(2) & (3) of The Companies (Appointment & Remuneration of Managerial Personnel) Rules 2014 is as follows:

Name and Age	Designation/ Nature of duties	Gross remuneration paid in 2015-16 Rs	Qualification and experience (Years)	Date of commencement of employment	Previous employment
Rajesh Khanna (55)	Chief Executive Officer	87,92,392/-	B.E (Mech), PGDBA (33 years)	01-10-1982	NIL

Note :

1) Accordingly, perquisite have been valued in terms of actual expenditure incurred by the company in providing benefits to the employees except in cases where the actual amount of expenditure cannot be ascertained with reasonable accuracy in such case, a notional amount as per Income Tax Rules has been added.

2) The above mentioned employee is not a relative (in terms of the Companies Act 2013) of any Director of the Company.

3) The nature of the employment is contractual and terminable with 3 months notice.

	By order of the Board
	For Wendt (India) Limited
Place: Chennai	M M Murugappan
Date: 28th April 2016	Chairman