REPORT OF THE DIRECTORS TO THE MEMBERS Your Directors present their 30th Annual Report together with Audited Accounts for the financial year ended 31st March, 2016. Performance Review The financial year 2015-16 was the challenging year for your Company as the domestic tractor industry, which has direct linkage on the performance of your Company, registered de-growth for the second consecutive year. However, against the industry's declining trends, your Company was able to sustain its engines sale volume for the year under review by posting a sale of 64,088 units which were almost at par with last year's 64,595 units. On above engines sale volume, net operating revenue for the financial year 2015-16 reached Rs. 525.91 crores as against last year's Rs. 539.70 crores due to change in product mix. However, with its continued thrust on cost control initiatives, your Company was able to maintain its profit margins both at operating and after tax level. While Profit before tax for the year stood at Rs. 76.05 crores (previous year Rs. 77.82 crores), Profit after tax of Rs. 51.20 crores (previous year Rs. 51.84 crores) translates into Basic Earning Per Share of Rs. 41.22 (previous year Rs. 41.74). Further, the capacity enhancement project announced in January 2014 to increase the annual capacity to 1,05,000 units, has been completed during the year. With this, your Company is now geared up to meet any future upswing in the demand. Finance The fund position of the Company remained comfortable throughout the year under review and after meeting the capital expenditure and working capital requirements to support operations, the Company has generated an income of Rs. 16.09 crores (previous year Rs. 16.14 crores) on surplus funds. Dividend Your Directors are pleased to recommend an equity dividend of Rs. 15.00 per share of the face value of Rs. 10 each for the financial year ended 31st March, 2016. Further, keeping in view the Company's surplus cash position, the Board, over and above the said normal dividend, has also recommended a special dividend of Rs. 18.00 per share, taking the total dividend to Rs. 33.00 per share for the financial year 2015-16, same as in previous year. This dividend would be payable to those Members whose names shall appear in the Register of Members as on Book Closure date. The total equity dividend outgo for the financial year 2015-16, including dividend distribution tax, surcharge and education cess will absorb a sum of Rs. 49.33 crores (previous year Rs. 49.33 crores). Current Year's Review As witnessed in the fourth quarter of last fiscal, tractor industry has started showing pick up in the demand. The forecast of good monsoon for this year and government's enhanced thrust on agri sector would be positive for the tractor industry and in this backdrop, the engine business of your Company is also expected to move in tandem with the industry. B. INTERNAL FINANCIAL CONTROL SYSTEMS The Company has laid down adequate internal financial controls with reference to financial statements, commensurate with the size, scale and complexity of its operations. During the year, such controls were tested and no reportable material weakness in its operating effectiveness was observed. C. MANAGEMENT DISCUSSION AND ANALYSIS REPORT A detailed analysis of the Company's performance is discussed in the Management Discussion and Analysis Report, which forms part of this Annual Report. D. RELATED PARTY TRANSACTIONS All related party transactions that were entered during the financial year 2015-16 were in the ordinary course of the business and were on arm's length basis. There were no materially significant related party transactions made by the Company which may have a potential conflict of the interest with its Promoters, Directors, Key Managerial Personnel or other persons. All such related party transactions are placed before the Audit Committee for approval, wherever applicable. Prior omnibus approval for normal transactions is also obtained from the Audit Committee for the related party transactions which are of repetitive nature as well as for the transactions which cannot be foreseen and the same are subsequently shared with Audit Committee on regular intervals. The policy on materiality of and dealing with related party transactions as approved by the Audit Committee and the Board of Directors is uploaded on the website of the Company and the link for the same is (<http://www.swarajenterprise.com/> NCC.asp). The disclosure of related party transactions pursuant to Section 134(3)(h) of the Companies Act, 2013 in Form AOC-2 is annexed herewith as "Annexure A". E. BOARD AND COMMITTEES Directors The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Companies Act, 2013 and Regulation 16 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. In terms of Section 152 of the Companies Act, 2013, Shri Vijay Varma and Shri Rajan Wadhera shall retire by rotation at the forthcoming Annual General Meeting and being eligible, offer themselves for re-appointment. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a system has been put in place to carry out performance evaluation of the Board, its Committees and individual Directors. Criteria for performance evaluation is covered in the Corporate Governance Report. Remuneration Policy The Board has, on the recommendation of the Nomination and Remuneration Committee, framed a policy on appointment of Directors and Senior Management and their remuneration. The Remuneration Policy is covered in the Corporate Governance Report. Board Meetings and Annual General Meeting A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, five meetings of Board and four meetings of the Audit Committee were convened and held. The details are covered in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. The Independent Directors of the Company meet at least once in every financial year without the presence of Non-Independent Directors, Executive Director and any other management personnel. The meeting(s) is conducted in a manner to enable the Independent Directors to discuss matter pertaining to, inter alia, review of performance of Non-Independent Directors and the Board as a whole, assess the quality, quantity and timeliness of flow of information between the Company's management and the Board that is necessary for the Board to effectively and reasonably perform their duties. During the year, one meeting of Independent Directors was held. The 29th Annual General Meeting of the Company was held on 28th July, 2015. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, your Directors, based on representations received from the Operating Management, and after due enquiry, confirm that: a) in the preparation of Annual Accounts for the financial year ended 31st March, 2016, the applicable accounting standards have been followed; b) in the selection of accounting policies, consulted the Statutory Auditors 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 31st 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 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 irregularities; d) the Annual Accounts have been prepared on a going concern basis; e) internal financial controls to be followed by the Company have been laid down, which are adequate and operating effectively; f) proper systems have been devised to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively. Audit Committee The Audit Committee currently comprises of the following Directors viz. Shri Dileep C. Choksi (Chairman of the Committee), Dr. T.N. Kapoor, Shri S. Durgashankar and Smt. Neera Saggi. Except Shri S. Durgashankar, all the Members are Independent Directors. All the Members of the Committee possess strong accounting and financial management knowledge. The Company Secretary of the Company is the Secretary of the Committee. All the recommendations of the Audit Committee were accepted by the Board. F. CORPORATE GOVERNANCE Listing Agreement The Securities and Exchange Board of India, by replacing the earlier listing agreement, had issued SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 effective from 1st December, 2015. Accordingly, your Company has executed fresh Listing Agreements with BSE Limited and National Stock Exchange of India Limited. Corporate Governance A Report on Corporate Governance along with a Certificate from the Auditors of the Company regarding the compliance of conditions of Corporate Governance as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 forms part of the Annual Report. Vigil Mechanism / Whistle Blower Policy The Company has a vigil mechanism through Whistle Blower Policy to deal with instance of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the website of the Company. The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has put in place anti sexual harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. The policy is gender neutral. Internal complaints committee has been set up to redress complaints received, if any, regarding sexual harassment. During the year, no complaint was received. Risk Management Pursuant to the requirement of Regulation 17 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company is having Risk Management framework covering identification, evaluation and control measures to mitigate the identified business risks. G. EMPLOYEES Key Managerial Personnel (KMP) The following have been designated as the Key Managerial Personnel of the Company pursuant to Sections 2(51) and 203 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014: Shri M.N. Kaushal, Whole Time Director Shri M.S. Grewal, Company Secretary Shri Rajinder Arora, Chief Financial Officer There was no change in KMPs during the year under review. Employees' Stock Option Scheme During the year, pursuant to the Employees' Stock Option Scheme ("the Scheme") approved by the Members in the Annual General Meeting of the Company held on 28th July, 2015, the Nomination and Remuneration Committee have granted 9389 options to eligible employees which will become due for exercise in subsequent period. There was no change in the Scheme during the year. Requisite disclosure in compliance with SEBI (Share Based Employee Benefits) Regulations, 2014 is annexed as "Annexure B". Industrial Relations Industrial relations remained cordial throughout the year under review. Particulars of Employees The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company, will be provided upon request. In terms of Section 136 of the Companies Act, 2013, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars which is available for inspection by the Members at the Registered Office of the Company during business hours on working days of the Company up to the date of the ensuing Annual General Meeting. If any Member is interested in obtaining a copy thereof, such Member may write to the Company Secretary in this regard. Safety, Health and Environmental Performance Your Company is committed towards excellence in Safety, Occupational Health and Environment. This is also to ensure sustainable business growth. The Company has a well-established Safety, Occupational Health and Environmental Policy which inter alia ensures safety of public, employees, plant and equipment by ensuring compliance with all statutory rules and regulations on regular basis. Your Company also imparts training to its employees as per the predefined training calendar, carries out statutory safety audits of its facilities as per legal requirement and promotes eco-friendly activities. Showing its commitment to improve the well-being of its employees, Medical Check-ups, both curative and preventive have been organized regularly, including educating the employees on Industrial Hygiene at the work place. The Company's plant is certified under OHSAS 18001:2007 and EMS ISO 14001:2004. H. AUDITORS Statutory Auditors and Auditors' Report M/s Davinder S. Jaaj & Company, Chartered Accountants, Statutory Auditors of the Company, hold office till the conclusion of the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. They have expressed their willingness to act as Auditors of the Company, if appointed, and have further confirmed that the said appointment, if made, would be within the prescribed limits under Section 141(3)(g) of the Companies Act, 2013 and that they are not disqualified for re-appointment. The Members are requested to appoint Auditors and fix their remuneration. The Audit Report issued by the Auditors of the Company forms part of the Annual Report and does not contain any qualification, reservation or adverse remark. Secretarial Auditors Pursuant to Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s A. Arora & Co., Company Secretaries in practice (CP No. 993) to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit is annexed herewith as "Annexure C". The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Cost Auditors Pursuant to Section 148(3) of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of Directors on the recommendation of Audit Committee has appointed M/s V. Kumar & Associates, Cost Accountants, as the Cost Auditors of the Company for the financial year ending on 31st March, 2017. M/s V. Kumar & Associates have confirmed that their appointment, if approved, will be within the limits of Section 141(3)(g) of the Companies Act, 2013 and have also certified that they are free from disqualification specified under Section 141(3) of the Companies Act, 2013. The Audit Committee has also received a certificate from the Cost Auditors certifying their independence and arms length relationship with the Company. I. CORPORATE SOCIAL RESPONSIBILITY AND RELATED MATTERS Corporate Social Responsibility Keeping with Company's core value of Good Corporate Citizenship, your Company is committed to its social responsibility by taking various initiatives which would benefit the society at large. As a major CSR initiative, your Company had adopted two nearby villages under Swaraj Swachh Bharat Integrated Sanitation Programme and provided community toilets and waste collection/management system. In addition, the Company has also upgraded infrastructure of the Govt. Schools located in these villages and the said initiatives are well appreciated by the local residents. In short span of last eight months, there is a noticeable improvement in these villages in the areas of Company's focus. Further, your Company has made significant contribution towards girl education, tree plantation at various locations, organizing medical camps, celebration of festivals with under privileged, public awareness camps for road safety and pollution etc. The Company has also contributed Rs. 60.00 lacs to the Prime Minister National Relief Fund. Further, in compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, the Company has constituted Corporate Social Responsibility (CSR) Committee comprises Shri Sudhir Mankad (Chairman) and S/Shri Vijay Varma, Rajan Wadhera and M.N. Kaushal as other members. The Annual Report on CSR activities is annexed herewith as "Annexure D". Sustainability Initiative Your Company is conscious of its responsibility towards preservation of natural resources and continuously taking various initiatives to reduce the consumption of electricity and water. Energy Conservation, Technology Absorption and Foreign Exchange Earnings and Outgo Particulars in respect of the above activities stipulated under Section 134(3)(m) of the Companies Act, 2013, read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as "Annexure E". Share Capital The Issued and Paid-up Share Capital of the Company remained unchanged during the year and stood at Rs.12.42 crores at the end of the financial year 2015-16. Extract of Annual Return The details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith as "Annexure F". Particulars of Loans, Guarantees and Investments During the year under review, the Company has not extended any loans, given guarantees or provided securities and made investment pursuant to Section 186 of the Companies Act, 2013. Deposits The Company has not accepted deposit from the public falling within the ambit of Section 73 of the Companies Act, 2013 and the Companies (Acceptance of Deposits) Rules, 2014. The Company has not made any loans / advances and investment in its own shares, associates, etc. during the year. General The Whole Time Director is not receiving any commission from the Company. However, he has been granted Stock Options of the Company which will become due for exercise in the subsequent period. The Company has no holding / subsidiary company. Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions / events happened on these items during the year under review: 1. issue of equity shares with differential voting rights or sweat equity. 2. significant or material orders passed by the Regulators / Courts / Tribunal which impact the going concern status of the Company and its future operations. 3. voting rights which are not directly exercised by the employees in respect of shares for the subscription / purchase for which loan was given by the Company (as there is no scheme pursuant to which such person can beneficially hold shares as envisaged under Section 67(3)(c) of the Companies Act, 2013). 4. fraud reporting by the auditors. ACKNOWLEDGEMENTS Your Directors take this opportunity to acknowledge the contributions of all the stakeholders and are grateful for the cooperation of various Government Authorities, excellent support received from the Shareholders, Banks and other Business Associates. The Directors also recognise and appreciate the hard work and efforts put in by all the employees and their continued contribution to the Company. FOR AND ON BEHALF OF THE BOARD (SUDHIR MANKAD) Chairman Place : Mumbai Date : 26th April, 2016 |