DIRECTORS' REPORT FOR FINANCIAL YEAR 2015-16 TO THE MEMBERS, The Directors have pleasure in presenting 22nd Annual Report with the Audited Annual Accounts of the Company for the year ending 31 March 2016. II. DIVIDEND: Interim Dividend of 200% (Rs. 20 per equity share of Rs.10 each) was paid in the month of March 2016. Your Directors do not recommend Final Dividend for the year 2015-16 (Total dividend paid in the previous year was 200%). III. CLASSIFICATION OF THE COMPANY AS ACORE INVESTMENT COMPANY (CIC): The Company is classified as a Core Investment Company (CIC) and exempt from registration with the Reserve Bank of India (RBI). IV. MANAGEMENT DISCUSSION AND ANALYSIS REPORT: A. OPERATIONS OF THE COMPANY: WINDMILLS: The Company has seven windmills in Maharashtra with total installed capacity of 5.6 Megawatt (MW). The windmills are located at Tirade Village, Tal.-Akole, Dist. -Ahmednagar. The windmills have generated net wind energy of 89.93 Lakh units of electricity in the year under review as against 80.89 Lakh units of electricity in the previous year showing increase of 9.04% over the previous year. The Company is required to apply for Open Access Permission to Maharashtra State Electricity Distribution Company Limited (MSEDCL) every financial year. The Company had applied for Open Access Permission to MSEDCL for the period from 1 April 2015 to 31 March 2018, well in time. MSEDCL, in response to the application made for No Objection Certificate (NOC) for Open Access, informed the Company, that the approval for sale of wind power under Open Access shall be granted with effect from the date of certain compliances by the Open Access Consumer. Pending such compliances, revenue from sale of wind power for the period from 1 April 2015 to 30 June 2015, has been accounted for at the rate at which MSEDCL shall purchase the wind power from the Open Access Generator. The Company has received Open Access Permission from 1 July 2015 to 31 October 2018. All the seven windmills are registered with the National Load Dispatch Centre (NLDC) and are eligible for the Renewable Energy Certificates (RECs). During the year, the Company has sold 3,243 RECs as against 3,000 RECs in the previous year. This has resulted in revenue of X 49 Lakhs (previous year X 45 Lakhs) during the year. The Company is having 9,593 RECs as on 31 March 2016. OTHERS: The Company owns lands and buildings thereon and apartments and offices in Pune, Bangalore, New Delhi and Jaipur. The Company has granted most of these lands and buildings and offices on leave and license basis to group and other companies. During the year under review, your Company made investments of Rs. 8,942 Lakhs in equity shares of Kirloskar Oil Engines Limited (KOEL). Pursuant to the said investment, the Company's holding in KOEL has increased to 5.68% as on 31 March 2016. B. COMPANY PERFORMANCE: During the year under review, your Company earned an income of Rs.7,670 Lakhs (previous year Rs. 6,248 Lakhs). In the year under review, the Company received dividend of Rs. 2,034 Lakhs declared by the investee companies for the Financial Year 2014-15. The Company also received interim dividend of Rs. 1,471 Lakhs declared by some of the investee companies in the year 2015-16, which their respective Boards have considered as final dividend. The Profit Before Tax is at Rs. 6,838 Lakhs (previous year Rs. 5,429 Lakhs) after providing for depreciation of Rs. 89 Lakhs (previous year Rs. 92 Lakhs). C. HUMAN RESOURCES: As on 31 March 2016, the Company has 8 employees on its roll, including the Executive Director. D. CONCERNS AND THREATS: Following are the identified risk/ concerns and threats for the operations of the Company: Natural calamities like cyclones, earthquake and fire or act of God will damage the windmills. Agitation by the local people against the operation of windmills. Frequent and erratic changes in the Open Access Rules and Regulations and administrative delay in issuing NOC. Underutilization by customer of units generated specially due to non-working in various Time Zones. Major maintenance due to failure of important components of the windmills. Disturbances and failure in the Maharashtra State Electricity Distribution Company Limited (MSEDCL) grid. E. PROSPECTS: Wind energy generation is largely dependent on natural factors such as velocity of wind, continuity of the flow, etc. and are unpredictable and beyond control. The business is also largely impacted adversely by frequent and erratic changes made by the MSEDCL in the open access policies. However, the Company has the Open Access Permission up to October2018.The Company's windmill project continues to be registered under the Renewable Energy Certificates (RECs) Mechanism, which entitles the Company to RECs benefits. The market for RECs continues to be sluggish and this trend is expected to continue through the current Financial Year. F. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY: The Company has adequate internal control systems to ensure operational efficiency, accuracy and promptness in financial reporting and compliance of various laws and regulations. The internal control system is supported by the internal audit process. An Internal Auditor has been appointed for this purpose. The Audit Committee of the Board reviews the Internal Audit Report and the adequacy and effectiveness of internal controls periodically. G. CAUTIONARY STATEMENT: Statements in this Report, particularly those which relate to Management Discussion and Analysis, describing the Company's objectives, projections, estimates and expectations may constitute 'forward looking statements' within the meaning of applicable laws and regulations. Actual results might differ materially from those either expressed or implied. H. SEBI REGULATIONS AND LISTING FEES: The annual listing fees for the year under review have been paid to BSE Limited and National Stock Exchange of India Limited, where your Company's shares are listed. I. SUBSIDIARY COMPANY AND CONSOLIDATED FINANCIAL STATEMENTS: As on 31 March 2016, the Company has one subsidiary i.e., Kirloskar Ferrous Industries Limited (KFIL). The Board presents Audited Consolidated Financial Statements incorporating the duly Audited Financial Statements of KFIL and as prepared in compliance with the applicable Accounting Standards and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, (the Regulations). Pursuant to Rule 5 of the Companies (Accounts) Rules, 2014, the Statement containing the salient feature of the Financial Statement of a Company's subsidiary and associate companies under the first proviso to Sub-Section (3) of Section 129 of the Companies Act, 2013, (the Act), in Form AOC - 1 is required to be enclosed to the Financial Statements. The Consolidated Financial Statements prepared as per applicable provisions and duly audited by the Statutory Auditors, are presented elsewhere in this Annual Report along with FormAOC-1. Further, the Company undertakes that the Annual Accounts of the Subsidiary Company and the related detailed information shall be made available to the shareholders on demand, at any point of time. The Annual Accounts of the Subsidiary Company shall also be kept open for inspection by any shareholder at the Registered Office of the Company. BRIEF HIGHLIGHTS OF BUSINESSES OF SUBSIDIARY COMPANY: KIRLOSKAR FERROUS INDUSTRIES LIMITED (KFIL): KFIL is in the business of manufacturing of iron castings and has its manufacturing facilities at Bevinahalli Village in Karnatakaand Solapurin Maharashtra. Interim Dividend of 25% (Rs. 1.25 per equity share ofRs. 5 each) was paid on 29 March 2016. No additional dividend is being proposed and Interim Dividend declared shall be the Final Dividend. KFILachieved net sales ofRs. 1,11,390 Lakhs (previous yearRs. 1,36,509 Lakhs). The Profit Before Tax (PBT) for the year under review stood at Rs. 8,522 Lakhs, as compared to Rs. 7,184 Lakhs of previous year after providing for depreciation and amortisation. Also the Profit After Tax (PAT) for the year under review stood at Rs. 5,773 Lakhs, as compared to Rs. 4,928 Lakhs of the previous year. KFIL sold 2,89,485 MT of Pig Iron valued at Rs. 62,312 Lakhs during the Financial Year 2015-16, as compared to 3,18,023 MTof Pig Iron valued atRs. 84,366 Lakhs in the previous year. The slowdown in tractor industry has impacted the demand for castings. However, KFIL managed to maintain sales on the strength of its 'strategic planning'. KFIL sold 56,661 MT castings aggregating toRs. 46,067 Lakhs during the Financial Year 2015-16, as compared to 57,257 MT castings aggregating to Rs.47,446 Lakhs in the previous year. KFIL succeeded to keep the cost of production under check through good procurement policy and continuous cost reduction drive. PARTICULARS OF INFORMATION FORMING PART OF THE BOARDS' REPORT PURSUANT TO SECTION 134 OF THE COMPANIES ACT, 2013, RULE 8 OF THE COMPANIES (ACCOUNTS) RULES, 2014 AND RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014: 1. EXTRACT OF ANNUAL RETURN: The details forming part of the extract of the Annual Return in Form MGT - 9, are annexed herewith as 'Annexure I' to this Report. 2. NUMBER OF MEETINGS OF THE BOARD: During the year under review, six Board 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. 3. DIRECTORS' RESPONSIBILITY STATEMENT: Pursuant to the requirements under Section 134 (5) of the Companies Act, 2013, in respect of Directors' Responsibility Statement, your Directors' state that: a) in the preparation of the Annual Financial Statements for the year ended 31 March 2016, the applicable accounting standards have been followed and there were no material departures; b) accounting policies as mentioned in Note 1 of the Notes to the Financial Statements have been selected and applied consistently. Further, judgments 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 31 March 2016 and of the Profit of the Company for the year ended on that date; c) 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) the Annual Financial Statements have been prepared on a going concern basis; e) proper internal financial controls were in place and that the financial controls were adequate and were operating effectively; and f) proper systems to ensure compliance with the provisions of all applicable laws were in place and were adequate and operating effectively. A STATEMENT ON DECLARATION GIVEN BYTHE INDEPENDENT DIRECTORS: All Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Companies Act, 2013 and Regulation 16 (1) (b) of the Regulations. 5. COMPANY'S POLICY ON DIRECTORS'APPOINTMENT AND REMUNERATION: The Board has on the recommendation of the Nomination and Remuneration Committee framed a policy for selection and appointment of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel and their remuneration. The policy is annexed as 'Annexure II' to this Report. 6. AUDITORS: a. Statutory Auditors: G. D. Apte & Co., Chartered Accountants, (Firm Registration Number 100515W), Pune, are proposed to be re-appointed as Statutory Auditors of the Company, to hold the office for a second term of five years from the conclusion of this Annual General Meeting till the conclusion of the Annual General Meeting of the Company, to be held in the year 2021, subject to ratification of the appointment by the members at every Annual General Meeting held afterthis Annual General Meeting of the Company. The requisite certificate as per Section 139 of the Companies Act, 2013, has been received by the Company. b. Cost Auditors: Pursuant to the Companies (Cost Records and Audit) Rules, 2014, dated 31 December 2014, the Company is neither required to maintain cost records relating to Electricity Industry (Windmills) for the Financial Year 2015-16, in Form (CRA-1) nor is required to get the records audited. c. Secretarial Auditors: 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. Mahesh J. Risbud, Practicing Company Secretary (FCS 810 CP 185) to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as 'Annexure III' to this Report. 7. EXPLANATION OR COMMENTS OF STATUTORY AUDITORS AND SECRETARIAL AUDITORS: There are no qualifications, reservations or adverse remarks or disclaimers made by G. D. Apte & Co., Statutory Auditors, in their Audit Report and by Mr. Mahesh J. Risbud, Practicing Company Secretary, in his Secretarial Aud it Report. 8. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT UNDER SECTION 186 OF THE COMPANIES ACT, 2013: Your Company has not granted any loan or guarantee. During the year under review, the Company has invested of Rs. 8,942 Lakhs in equity capital of Kirloskar Oil Engines Limited (KOEL). 9. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES REFERRED TO IN SUB-SECTION (1) OF SECTION 188 OF THE COMPANIES ACT, 2013: Pursuant to the provisions of Section 134 of the Companies Act, 2013, read with Rule 8 (2) of the Companies (Accounts) Rules, 2014, the particulars of contracts or arrangements entered into by the Company with Related Parties have been done at arm's length and are in the ordinary course of business. Hence, no particulars are being provided in Form AOC-2. Related Party disclosures as per the Accounting Standard 18 have been provided in Note 30 to the Financial Statements. 10. STATE OF COMPANY'S AFFAIRS: Discussion on state of the Company's affairs has been covered in the Management Discussion and Analysis Report. 11. AMOUNTS PROPOSED TO BE CARRIED TO RESERVES: Particulars of the amounts proposed to be carried to reserves have been covered as part of the financial performance of the Company. 12. MATERIAL CHANGES AND COMMITMENTS BETWEEN THE DATE OF THE BALANCE SHEET AND THE DATE OF REPORT: There have been 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 and the date of this Report. 13. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO: A. Conservation of Energy and Technology Absorption: The Company has no particulars to report regarding conservation of energy and technology absorption as required under Section 134 (3) (m) of the Companies Act, 2013, read with Rules there under. 14. RISK MANAGEMENT POLICY: The Company has in place a mechanism to identify, assess, monitor and mitigate various risks to key business objectives. Major risks identified are systematically addressed through mitigating actions on a continuing basis. These are discussed at the meetings of the Audit Committee and the Board of Directors of the Company. 15. CORPORATE SOCIAL RESPONSIBILITY (CSR): The Company has constituted a Corporate Social Responsibility (CSR) Committee in accordance with Section 135 of the Companies Act, 2013. The details about CSR Policy and initiatives taken by the Company during the year is annexed as 'Annexure IV to this Report. 16. BOARD EVALUATION: Pursuant to the provisions of the Companies Act, 2013 and Regulation 17 (10) of the Regulations, the Board has carried out performance evaluation of its own performance and that of its committees and individual Directors. 18. CHANGE IN THE NATURE OF BUSINESS, IF ANY: During the Financial Year under review, there has been no change in the nature of business. 20. DIRECTORS AND KEY MANAGERIAL PERSONNEL RESIGNED DURING THE YEAR2015-16: None. 21. DIRECTORS PROPOSED TO BE APPOINTED / RE-APPOINTED AT THE ENSUING ANNUAL GENERAL MEETING: The Board of Directors, in its meeting held on 24 May 2016, co-opted Mr. Mahesh R. Chhabria, as an Additional Independent Director, as recommended by the Nomination and Remuneration Committee of the Company. He holds office of Director up to the date of ensuing Annual General Meeting of the Company. Mr. Anil N. Alawani, retires by rotation at the ensuing Annual General Meeting and being eligible, offers himself for re-appointment. The brief resumes and other details relating to the Directors who are proposed to be appointed / re-appointed, as required to be disclosed under Regulation 36 (3) of the Regulations, forms part of the Statement annexed to the Notice of the Annual General Meeting. 22. NAMES OF THE COMPANIES WHICH HAVE BECOME OR CEASED TO BE ITS SUBSIDIARIES, JOINT VENTURES OR ASSOCIATE COMPANIES DURING THE YEAR: None. 23. DETAILS RELATING TO DEPOSITS, COVERED UNDER CHAPTER V OF THE COMPANIES ACT, 2013: None. 24. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE: To the best of our knowledge, the Company has not received any such orders from the Regulators, Courts or Tribunals during the year, which may impact the Going Concern Status or the Company's operation in future. 25. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROL WITH REFERENCE TO THE FINANCIAL STATEMENTS: The Company has developed a strong two-tier internal control framework comprising entity level controls and process level controls. The entity level controls of the Company include elements such as defined Code of Conduct, Whistle Blower Policy / Vigil Mechanism, rigorous management review and MIS and strong internal audit mechanism. The process level controls have been ensured by implementing appropriate checks and balances to ensure adherence to Company policies and procedures, efficiency in operations and also reduce the risk of frauds. Regular management oversight and rigorous periodic testing of internal controls makes the internal controls environment strong at the Company. The Audit Committee along with the Management oversees results of the internal audit and reviews implementation on a regular basis. 26. COMPOSITION OF AUDIT COMMITTEE: The composition of the Audit Committee has been reported in the Corporate Governance Report annexed to this Report. VI. INFORMATION FORMING PART OF THE DIRECTORS' REPORT PURSUANT TO RULE 5 OF THE COMPANIES (APPOINTMENT AND REMUENRATION OF MANAGERIAL PERSONNEL) RULES, 2014: The relevant information pursuant to Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed herewith as'Annexure V to this Report. VII. VIGIL MECHANISM: The Board of Directors has adopted the Whistle Blower Policy / Vigil Mechanism ('the Policy'). This has provided a mechanism for directors and employees of the Company and other persons dealing with the Company to report genuine concerns including but not limited to unethical behavior, actual or suspected fraud or violation of the Company's Code of Conduct for Board of Directors and Senior Management ('the Code') or ethics policy or any other instance to the Chairman of the Audit Committee of the Board of Directors of the Company. The policy has been uploaded on the website of the Company, viz., www.kil.net.in VIII. PREVENTION OF SEXUAL HARASSMENT POLICY: The Company has formulated and implemented the Policy for Prevention of Sexual Harassment at work place. This would, inter alia, provide a mechanism for the resolution, settlements or prosecution of acts or instances of sexual harassment at work place and to ensure that all employees are treated with respect and dignity. There were no complaints / cases filed / pending with the Company during the year. IX. CASH FLOW: A Cash Flow Statement for the year ended 31 March 2016, is attached to the Balance Sheet as a part of the Financial Statements. X. CORPORATE GOVERNANCE: In terms of Regulation 34 of the Regulations, a Report on the Corporate Governance along with Compliance Certificate issued by Statutory Auditors of the Company is attached and forms part of the Annual Report. ACKNOWLEDGEMENTS: Your Directors would like to place on record their appreciation of the contribution made and support provided to the Company by the shareholders, employees and bankers, during the year under report. For and on behalf of the Board of Directors ATULC. KIRLOSKAR CHAIRMAN DIN 00007387 Place : Pune: date : 24 May 2016 |