Directors’ Report Your Directors are pleased to present the Company’s 59th Annual Report and the audited accounts for the year ended 31 December 2015. The global economy continued to be under pressure throughout the year. The recovery of world economic scenario was impacted by disappointing growth in Q1/2015 of the US economy, the Greek crisis and devaluation of Yuan in China. In this backdrop, the Indian economy relied largely on domestic demand for growth. The growth in GDP though lower than the earlier estimates, was 7.5%, 7.1% and 7.4% in first three quarters of the calendar year 2015, aided by good performance in Manufacturing, Insurance, Financial and Real Estate sectors. The inflation remained below 5%. Rise in food items prices due to weak monsoon, but falling prices of crude oil kept the wholesale price index down. In view of these macroeconomic conditions, the Reserve Bank of India reduced the Policy Rates three times during the year cumulatively by 125 basis points. The foundry industry segment where your Company operates however continued to get affected by lower demand and challenges of excess capacity which made it difficult to improve its productivity and profitability. Foundries catering to the export segment suffered heavily due to lack of orders, with valve industry affected by lower oil prices. Liquidity crunch in the money market due to NPA issues of Banks and higher interest cost affected the performance of Foundry Industry. Dividend Despite a tough year, your Company turned out an excellent financial performance. Your Directors are pleased to recommend for approval of the Shareholders’, a Final Dividend of Rs. 7.00 per share i.e., 70% (on a per Equity Share of Rs. 10/- each) for the financial year ended 31 December, 2015, taking the total dividend to Rs. 26.50 per share (i.e., 265%) (previous year Rs. 21 per share i.e., 210%). Your Directors have declared three Interim Dividends during the financial year ended 31 December, 2015, totalling Rs. 19.50 per Equity Share (195%) on the per Equity Share face value of Rs. 10/- each viz., First Interim Dividend of Rs. 3.50 per Equity Share (35%) in April 2015, Second Interim Dividend of Rs. 8.00 per Equity Share (80%) in July 2015 and Third Interim Dividend of Rs. 8.00 per Equity Share (80%) in October 2015. The total pay-out of the three Interim Dividends and Proposed Final Dividend for the financial year ended 31 December, 2015, inclusive of dividend tax, will aggregate to Rs. 2067.59 Lacs as compared to Rs. 1569.09 Lacs in the previous year. Transfer to Reserves Your Company has transferred Rs. 317.29 Lacs (previous year: Rs. 245.90 Lacs) to the General Reserves out of the current year profit. Financial Year of the Company Pursuant to the provisions of Section 2 (41) of the Companies Act, 2013, your Company had made an application with the Company Law Board, New Delhi Bench, New Delhi (“CLB”), allowing your Company to continue to maintain its Financial Year from 1st day of January of a year to 31st day of December of the same year, in alignment with the financial year of its Holding Company Foseco Overseas Limited, United Kingdom. Your Directors are glad to inform that the CLB has passed an order on 28-10-2015 vide CP No. 95/2(41) MB/2015 accepting the request of the Company thus allowing it to maintain its Financial Year from 1st day of January of a year to 31st day of December of the same year. Subsequently, your Company has filed Form INC-28 viz., a Notice of Order of the CLB, with the MCA online on 20-11-2015, informing them of the above. Report on Corporate Governance & Management Discussion & Analysis Pursuant to Regulation 34(3) read with Schedule V of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015, a separate section titled Report on Corporate Governance together with a Certificate from the Practising Company Secretary forms part of this Report. A detailed Management Discussion and Analysis forms part of this Report. Subsidiaries Your Company does not have any subsidiary / subsidiaries within the meaning of the Companies Act, 2013 (“Act”). Pursuant to the provisions of Section 129(3) of the Act that requires a statement containing salient features of the financial statements of the Company’s subsidiaries in Form AOC-1 to be attached with this Report is therefore not applicable. Public Deposits The Company has not accepted any deposits from the public and accordingly no amount was outstanding as on the date of the Balance Sheet. Extract of the Annual Return As required under Section 92(3) read with Section 134(3)(a) of the Companies Act, 2013, an extract of the Annual Return in Form No. MGT 9, as at the financial year ended 31 December, 2015, is given in Annexure A, which forms part of this Board Report. Number of Meetings of the Board The Board of Directors met four times during the year 2015 on the following dates: viz., 28 January 2015, 24 April 2015, 22 July 2015 and 20 October 2015. The information on the Meetings are given in the Report on Corporate Governance that forms part of this Annual Report. The intervening gap between any two meetings was within the period of 120 days as prescribed by the Companies Act, 2013. Directors and Key Managerial Personnel In accordance with Article 132 of the Articles of Association of your Company, Glenn Allan Cowie (DIN: 07163534) was appointed as an Additional Director (Non-Executive and Non Independent) with effect from 24 April, 2015. Glenn holds office as an Additional Director up to the date of this Annual General Meeting. He has submitted a declaration that he is eligible for appointment and in respect of whom the Company has received a Notice in writing, under Section 160 of the Companies Act 2013, from Vesuvius Holdings Limited, a Member of the Company, proposing his candidature for the office, liable to retire by rotation. Merryl Durrenbach (DIN: 06920690) retires by rotation as Director at the ensuing Annual General Meeting and being eligible, offers herself for re-appointment. Pursuant to the provisions of Section 149 of the Act, Pradeep Mallick (DIN: 00061256), Ajit Shah (DIN: 02396765) and Indira Parikh (DIN: 00143801) were appointed as Independent Directors at the Annual General Meeting of the Company held on 27 March 2015. The terms and conditions of appointment of Independent Directors are as per Schedule IV of the Act. They have submitted a declaration confirming that each of them meets the criteria of independence as provided in Section 149(6) of the Act and there has been no change in the circumstances which may affect their status as Independent Director during the year. During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company. The Board recommends the appointment / re-appointment of the Directors as mentioned above. Brief resume and other detail of the Directors seeking appointment / re-appointment at the ensuing Annual General Meeting are provided in the Corporate Governance Report which forms part of this Annual Report. Sanjay Mathur (DIN: 00029858) was re-appointed as Managing Director of the Company for a period of three years from 1 April, 2013 to 31 March, 2016 at the Annual General Meeting of the Company held on 22 April, 2013. The Board of Directors at its Meeting held on 21 January, 2016 has re-appointed him as the Managing Director and Chief Executive Officer of the Company for a further period of three years effective from 1 April, 2016, and have also revised his remuneration on the recommendation of the Nomination and Remuneration Committee. The Board recommends his re-appointment and fixation of his remuneration to the Members of the Company. A Resolution in this regard is contained in the Notice of the Annual General Meeting. The following persons were designated as Key Managerial Personnel during the year 2014: 1. Sanjay Mathur, Managing Director and Chief Executive Officer, 2. R Umesh, Chief Financial Officer, and 3. Mahendra Kumar Dutia, Company Secretary and Compliance Officer. There was no change in the Key Managerial Personnel during the year 2015. However, Mahendra Kumar Dutia was appointed as a Compliance Officer replacing R Umesh. Directors’ Responsibility Statement Pursuant to Section 134(5) of the Companies Act 2013, your Directors confirm that: a) in the preparation of the annual accounts, the applicable accounting standards have been followed with no material departures; b) they have selected such accounting policies and applied them consistently and made judgments and estimates that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit of the Company for the same period; c) they have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) they have prepared the annual accounts on a going concern basis; e) they have laid down internal financial controls in the Company that are adequate and are operating effectively; and f) they have devised proper systems to ensure compliance with the provisions of all applicable laws and that these are adequate and are operating effectively; Policy on Directors’ Appointment and Remuneration The policy of the Company on Directors’ Appointment and Remuneration, including criteria for determining qualifications, positive attributes, independence of a Director and other matters provided in Section 178(3) of the Companies Act, 2013, adopted by the Board is covered in the Report on Corporate Governance which forms part of this Report. Performance Evaluation of the Directors etc. The Nomination and Remuneration Committee has laid down the criteria for performance evaluation by the Board of its own performance and that of the various Committees of the Board and the individual Directors. The framework of performance evaluation of the Directors captures the following points: - Key attributes of the Independent Directors that justify his / her extension / continuation on the Board of the Company; - Participation of the Directors in the Board proceedings and his / her effectiveness; The evaluation was carried out by means of the replies given / observations made by all the Directors on the set of questions developed by them which brought out the key attributes of the Directors, quality of interactions among them, adequacy and effectiveness of the various Committees of the Board and the performance of the Board. Composition of the Audit Committee The Audit Committee comprises Ajit Shah as its Chairperson, Pradeep Mallick and Indira Parikh, all of whom are Independent Directors and Merryl Durrenbach as a Non-Executive, Non-Independent Member. Further details on the Committee are given in the Report on Corporate Governance. Internal Financial Controls (IFC) The Company has an Internal Control System, commensurate with size, scale and complexity of its operations. The internal financial controls are adequate and are operating effectively so as to ensure orderly and efficient conduct of business operations. The internal controls are designed in a manner that facilitates achievement of three-pronged objectives viz., i) support the achievement of the Company’s business objectives, ii) mitigate risks to acceptable level, and iii) support sound decision making and good governance. The adequacy and effectiveness of the internal financial controls are demonstrated by following the below mentioned procedures:- i. The internal controls have been designed to provide reasonable assurance with regard to recording and providing reliable financial and operational information, complying with applicable statutes, safeguarding assets from unauthorised use, executing transactions with proper authorisation and ensuring compliance with corporate policies. The Company has a well-defined delegation of power with authority limits for approving revenue as-well-as expenditure. Processes for formulating and reviewing annual and long term business plans have been laid down. ii. The Audit Committee periodically deliberates on the operations of the Company with the Members of the Management. It also independently meets B S R & Associates LLP, the Statutory Auditors, to ascertain, inter-alia, their views on the internal financial control systems. iii. The Company has appointed P G Bhagwat, Chartered Accountants, as Internal Auditors of the Company. The Audit Committee in consultation with the Internal Auditors formulates the audit plan, scope, functioning and methodology, which are reviewed every year, such that they cover all areas of operation in a span of three years. The Internal Audit covers inter alia, monitoring and evaluating the efficacy and adequacy of internal control systems in the Company, its compliance with operating systems, accounting procedures and policies at all locations, adequacy of insurance coverage of all assets and submit their periodical Internal Audit Reports to the Audit Committee, to ensure complete independence, which is then extensively deliberated at every Audit Committee Meetings in the presenceof the Internal and External Auditors. Based on the review by the Audit Committee, process owners undertake corrective actions in their respective areas and consider suggestions for improvement. The Internal Auditors have expressed that the internal control system in the Company is robust and effective. iv. The Board has also put in place requisite legal compliance framework to ensure compliance of all the applicable laws and that such systems are adequate and operating effectively. v. The Company’s financial records are maintained on the ERP System which is effective and adequate in line with the size of its operations. The testing of such controls shall also be carried out independently by the Statutory Auditors from the Financial Year 2016 onwards as mandated under the provisions of the Companies Act, 2013. Particulars of Loans, Investments, Guarantees and Securities Your Company has neither advanced any loans, nor made any investments or had given any guarantees and / or provided any securities to anybody, whether directly or indirectly, within the meaning of Section 185 of the Companies Act, 2013. Hence, there are no details worth providing. Particulars of Contracts or Arrangements with Related Parties All contracts / arrangements / transactions entered into by the Company during the financial year ended 31 December, 2015 with related parties were on an arm’s length basis and were in the ordinary course of business. During the year, the Company had not entered into any contract / arrangement / transaction with related parties which could be considered material, and therefore, Shareholders’ approval was not required to be obtained, in accordance with the Policy of the Company on materiality of related party transactions. Thus, provisions of Sections 134(3)(h) and 188(1) of the Companies Act, 2013 and Rule 8(2) of the Companies (Accounts) Rules, 2014 are not applicable to the Company and therefore, Form No. AOC-2 has not been attached. In compliance with the requirements laid down in the erstwhile listing agreement, all related party transactions were placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee had been obtained for the transactions which were of foreseeable and repetitive nature. All transactions entered into with the related parties are presented to the Audit Committee by way of a statement giving details of all transactions. This procedure is continued to be followed under the relevant provisions of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015. The Policy on materiality of Related Party Transactions and dealing with Related Parties as approved by the Board has been uploaded on the Company’s website at URL: FosecoIndia/View/policies.aspx. Your Directors draw attention of the Members to Note 28 to the financial statement which sets out related party disclosures. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo Information under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in Annexure B to this Report. Particulars of Employees and Related Disclosures Disclosure pertaining to remuneration and other details as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 and also the Statement containing particulars of employees as required under Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rule, 2014 is provided in Annexure C forming part of this Report. Auditors and Auditors’ Report Statutory Auditors At the Annual General Meeting held on 27 March, 2015, B S R & Associates LLP (ICAI Firm Registration Number: 116231W / W-100024), Chartered Accountants, were appointed as the Statutory Auditors of the Company to hold office until the conclusion of the 60th Annual General Meeting to be held in the year 2017. In terms of the provision of Section 139 of the Companies Act, 2013, the appointment of the Statutory Auditors shall be placed for ratification at every Annual General Meeting. Accordingly the re-appointment of B S R & Associates LLP, as Statutory Auditors of the Company, is placed for ratification by the Shareholders’. Your Company has received a written confirmation from the Statutory Auditors to the effect that their re-appointment as the Auditors of the Company, if made, will be as per the requirements laid down under Section 139 and 141 of the Companies Act, 2013 read with Rule 4 of the Companies (Audit and Auditors) Rules, 2014 and that they are not disqualified for re-appointment. The observations of the Auditors and the relevant notes to the financial statement are self-explanatory and therefore do not call for any further comments. The Auditors’ Report does not contain any qualification, reservation or adverse remark. Further, during the year, in the course of the performance of their duties as Auditor, no fraud was reported by them for which they have reason to believe that an offence involving fraud has been committed against the Company by officers or employees of the Company. Report on Frauds, if any During the year under review, no incidence of any fraud has occurred in the Company. Neither the Audit Committee of the Board, nor the Board of the Company had received any report involving any fraud, from the Statutory Auditors of the Company. As such, there is nothing to report by the Board, as required under Section 134 (3) (ca) of the Companies Act, 2013. Cost Auditors Joshi Apte & Associates, Cost Accountants, were appointed as the Cost Auditors of the Company to examine the Cost Records and submit the Cost Audit Report. The Company has maintained the required cost accounting records as per the Companies (Cost Records and Audit) Rules, 2014 and the Company is in compliance therewith. The due date of filing the Cost Audit Report of the Company in Form 1-XBRL relating to the year ended 31 December, 2014 was 30 September, 2015 and the same was filed with the Ministry of Corporate Affairs on 14 May, 2015. Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Rules made thereunder, Grishma Khandwala, Practicing Company Secretary (ACS 6515; C P No. 1500), Mumbai, was appointed to conduct a secretarial audit of the Company’s Secretarial and related records for the year ended 31 December, 2015. The Practicing Company Secretary has submitted her Report on the secretarial audit conducted by her which is given in Annexure D and forms part of this Board Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Significant and Material Orders passed by the Regulators or Courts There are no significant and material orders passed by the Regulators or Courts which would impact the going concern status of the Company and its future operations. Vigil Mechanism / Whistle Blower Policy The Company has established a vigil mechanism (which incorporates a whistle blower policy in terms of listing agreement) for directors and employees to report their genuine concerns. The details of the same are provided in the Report on Corporate Governance forming part of this Report. The Policy is also available on the Company’s website at URL: FosecoIndia/View/policies.aspx. Policies of the Company Your Company has posted the following documents on its website at URL: FosecoIndia/View/policies.aspx. - Code of Conduct; - Familiarisation Programme for the benefit of the Independent Directors; - Archival Policy; - Policy for Determination of Material Events or Information; - Policy of Preservation of Documents. Risk Management Policy The Board regularly reviews the risk management strategy of the Company to ensure the effectiveness of implementation of the risk management policies and procedures. Your Directors do not foresee any elements of risk, which in its opinion, may threaten the existence of the Company. Corporate Social Responsibility (CSR) The Board of your Company have constituted a CSR Committee. As on 31 December 2015, the Committee comprises four Directors. The brief outline of the CSR Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure E of this Report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The CSR Policy is attached as Annexure F, which forms part of this Board Report. The policy is available on the website of the Company at URL: FosecoIndia/View/policies.aspx. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Your Company has in place an Anti-Sexual Harassment Policy in line with the requirements of The Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. An Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. Your Directors have to report that, during the year under review, neither any complaints of sexual harassment were received by it from the ICC, nor were there any complaints relating thereto which required any disposal thereof. Employee Relations Employee relations throughout the Company were harmonious. The Board wishes to place on record its sincere appreciation of the devoted efforts of all employees in advancing the Company’s vision and strategy to deliver good performance. Acknowledgements Your Board of Directors would like to place on record their sincere appreciation for the wholehearted support and contributions made by all the employees of the Company as well as customers, suppliers, bankers and other authorities. The Directors also thank the Government of various countries, Government of India, State Governments in India and concerned Government Departments/Agencies for their co-operation. Last but not the least, the Board of Directors wish to thank all the stakeholders of the Company and the parent Company, for their continuous support. For and on behalf of the Board of Directors Pradeep Mallick Chairperson DIN: 00061256 Place: Pune Date: 21 January 2016 |