BOARD'S REPORT The Directors hereby present the 29th Annual Report together with the audited accounts of the company for the year ended 31st March 2015. DIVIDEND The Board has out of the profit available for appropriation, recommended a dividend of 20% i.e. Rs. 2/- per equity share for the financial year 2014-2015. This amount aggregates to Rs. 442/- lakhs (exclusive of tax and surcharge thereon). SHARE CAPITAL The paid up equity share capital of the company as on 31st March, 2015 was Rs. 22,11,36,250. The company has not issued any shares nor granted stock options or sweat equity during the financial year 2014-2015. TRANSFER TO GENERAL RESERVE There has been no transfer to general reserve of the company for the financial year 2014-2015. FINANCIAL PERFORMANCE The turnover of the company increased by 14% from Rs. 46,563 lakhs in the financial year 2013-2014 to Rs. 53,078 lakhs in the financial year 2014-2015. This was possible mainly because of a partial recovery of the two wheeler sector and consequent improved off take by the customers. The earnings before Interest, Tax and Depreciation (EBITDA) also increased from Rs. 6,330 lakhs in the financial year 2013-2014 to Rs. 7,839 lakhs in the financial year 2014-2015. The increase can be mainly attributed to the increase in the volume of business and the control of expenditure. Despite considerable efforts the exports reduced to Rs. 1,449 lakhs during the financial year 2014-2015 from Rs. 2,069 lakhs in the financial year 2013-2014. This can be attributed to the volatility of the global market and sluggish growth in the world market in the segments where the company operates. However the spares sales of the company during the financial year 2014-2015 was Rs. 4,089 lakhs as against that of Rs. 3,164 lakhs in the financial year 2013-2014. The Profit After Tax (PAT) for 2014-2015 was higher than that of the financial year 2013-2014 by 141%. The Company's earning per share was Rs. 8.95 during the financial year 2014-2015. The company's performance showed an increase though the expected business did not materialize in the financial year 2014-2015 due to delay in product launches by OEMs and the economic recovery not happening as fast as expected. The company's efforts at cost control continued throughout the financial year but employee costs and input costs continued to pose a challenge. The market conditions did not also facilitate the full recovery of the increased cost from the customer. Steps to increase productivity continued unabated. The company could not penetrate into the export market as expected. The company is however planning to aggressively tap the spares market in this current financial year. The company continued to update its facilities on a limited scale due to market volatility and spent Rs. 424 lakhs in capital investments in the financial year 2014-2015 as compared to Rs. 534 lakhs spent in the financial year 2013-2014. The company continued its R&D initiatives by spending Rs. 894 lakhs in the financial year 2014-2015 as against an amount of Rs. 907 lakhs spent in the previous financial year. The domestic market is expected to see a revival in the second half of 2015-2016 in view of the various policies adopted by the Government and the company is geared to take advantage of this. DIRECTORS The Board expresses its deep anguish at the passing away of Mr.S.Muthukrishnan, the Founder and Former Chairman of the company. The Board remains ever grateful to Mr.S.Muthukrishnan for guiding the company through the years and for the strong foundation he laid on the strength of which the company has been able to grow steadily over the years. The Board in its meeting held on 25th March 2015 appointed Ms Rekha Raghunathan as additional director with immediate effect. Ms Rekha Raghunathan is the company secretary and will continue to discharge her duties as such in addition to being Director. Her appointment will be confirmed at the ensuing Annual General Meeting. Appropriate resolution for the appointment has been set out in the notice convening the Annual General Meeting. The Board recommends her appointment as Director of the company. Mr Ram Ramamurthy retires by rotation at the ensuing Annual General Meeting and being eligible offers himself for reappointment. Necessary resolution for his reappointment has been set out in the Notice convening the Annual General Meeting. The Board recommends his reappointment as Director of the company. The information on Board meetings, independent directors, Board diversity, remuneration policy and familiarisation program for independent directors are mentioned in the Corporate Governance Report. Brief resume/details of Directors who are to be appointed/reappointed as mentioned herein has been furnished along with the explanatory statement in the Notice convening the Annual General Meeting. DIRECTORS' RESPONSIBILITY STATEMENT In terms of section 134(3) (c) read with section 134(5) of the Companies Act, 2013 the directors to the best of their knowledge and belief and according to information and explanation obtained by them, confirm that, (a) In the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to any material departures; (b) Such accounting policies have been selected and applied consistently and such 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 the end of the financial year 31st March 2015 and of the profit of the company for the year ended 31st March 2015 (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 accounts have been prepared on a "going concern" basis. (e) Proper internal financial controls to be followed by the company have been laid down and such internal financial controls were adequate and were operating effectively. (f) proper systems to ensure compliance with the provisions of all applicable laws have been devised and such systems were adequate and were operating efficiently. AUDIT COMMITTEE The audit committee confirms to the requirements of Section 177 of the Companies Act, 2013 and clause 49 of the listing agreement. Mr. S.Natarajan, Dr. M.S. Ananth, Dr.V.Sumantran and Mr. Jayakar Krishnamurthy are the members of the Audit Committee. Dr.V. Sumantran was appointed as member of the audit committee on 11.08.2014. Mr. S.Natarajan continues as Chairman of the Audit committee. The committee met four times during the year. Detailed disclosure on the terms of reference and meetings are mentioned in the corporate governance report. STATUTORY AUDITORS M/s G Balu Associates were appointed statutory auditors of the company at the previous Annual General Meeting for the year 2014-2015. The statutory auditors of the company M/s. G Balu Associates, Chartered Accountants, Chennai, will retire at the conclusion of the ensuing Annual General Meeting and being eligible for reappointment, offer themselves for reappointment. The company proposes to reappoint them as statutory auditors for the financial year 2015-2016. The necessary resolutions in this regard will be passed at the ensuing Annual General Meeting. The company has received a certificate from the auditors to the effect that their reappointment if made will be in accordance with the provisions of the Companies Act, 2013. The auditors have also confirmed that they hold a Peer Review Certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The emphasis of matter specified in the statutory audit report has been explained in Note No 31 to the notes on accounts. Regarding the observation in the Statutory Auditor's report on managerial remuneration, it is informed that the excess remuneration paid to Mr. Jayakar Krishnamurthy for the year 2013-2014 amounting Rs. 75.52 lakhs has been refunded to the company subsequent to adoption of accounts by the Board and as regards the remuneration for the current financial year, 2015-2016, an application for approval has been made to the Central Government and the resolution has been included in the Notice to the ensuing Annual General Meeting for shareholders approval. SECRETARIAL AUDITOR 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 M/s.P.Sriram & Associates, a firm of practicing company secretaries as secretarial auditor of the company to undertake secretarial audit of the company. The report of the secretarial auditor is given in Annexure I. It does not contain any qualification, reservation, adverse remark or disclaimer. INTERNAL AUDITORS The company has appointed M/s.P.Chandrasekhar, Chartered Accountants, as internal auditors of the company. Their scope has been discussed and approved by the audit committee. It includes among other things review of the operational efficiency, effectiveness of systems and controls in existence and a review of the processes to safeguard the assets of the company. The auditors also have to assess the strength of the internal control in all areas. The internal auditor's findings are discussed with the concerned stakeholders and corrective remedial action are taken on a regular basis in consultation with the audit committee. The internal auditors were present at all audit committee meetings. COST AUDITOR In the Board meeting held on 16.05.2013, the cost auditor was appointed for the financial years 2013-2014 and 2014-2015. Cost Audit was conducted for 2013-2014. However, under section 148 of the Companies Act, 2013, as per the new cost audit rules applicable to specified categories of industries, the company was not covered for 2014-2015. Hence there was no cost audit for 2014-2015. However vide MCA notification dated 31.12.2014, cost audit was made applicable to industries with specific CETA headings which include chapter no: 84 under "other machinery". Since most of the company's products are cleared under CETA 8409, the company is now covered under cost audit for 2015-2016, as per CETA heading. Mr.V.Kalyanaraman was appointed as Cost Auditor for 2015-2016 at a remuneration of Rs. 5,00,000/- p.a subject to his remuneration being approved by the shareholders at the ensuing Annual General Meeting. Mr. V Kalyanaraman, has sent his consent letter for appointment as Cost Auditor for 2015-2016. SUBSIDIARY COMPANIES The company has two wholly owned subsidiaries. Ucal Polymer Industries Limited (UPIL) - UPIL continues to perform better by satisfactorily meeting all the inhouse requirements of plastic and rubber components of UCAL Fuel Systems Limited(UFSL). The turnover for the financial year 2014-2015 was Rs. 3,292 lakhs compared to that of Rs. 2,598 lakhs in the financial year 2013-2014. The net profit after tax was higher at Rs. 369 lakhs in the financial year 2014-2015 thereby recording an increase of 49% as against Rs. 248 lakhs in the financial year 2013-2014. This has been achieved mainly due to the transfer of business from other vendors to the subsidiary company and due to improved efficiency of operations of the subsidiary. A dividend of 20% has been declared by UPIL. Expanding its customer profile beyond UFSL continues to be a priority and the company is proceeding cautiously on this front. Attempts to diversify its product portfolio as regards UFSL also continues and the company is likely to increase its business with UFSL in the current financial year. Amtec Precision Products Inc, USA (Amtec) - The turnover of Amtec was Rs. 20,539 lakhs during the financial year 2014-2015 up from Rs. 17,561 lakhs in the financial year 2013-2014 thereby recording an increase of 17% in rupee terms. In US dollar terms, the turnover was $ 33.48 million during financial year 2014-2015 compared to $ 30.68 million in the financial year 2013-2014 showing an increase of 9%. Amtec has earned a Net profit after tax of Rs. 107 lakhs during the financial year 2014-2015. With the US economy showing signs of recovery , the prospects of Amtec are picking up. This is evident in the results of the financial year 2014-2015. Amtec expects a better performance in the current financial year due to more remunerative new orders flowing in. A financial restructuring is being planned to ensure that Amtec is placed on a firmer footing. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements for the year ended 31st March 2015 of the company and its subsidiaries together with the auditor's report thereon is enclosed. The statement pursuant to subsection (3) of Section 129 of the Companies Act, 2013 read with Rule 5 of Companies (Accounts) Rules, 2014 in the prescribed form AOC-1 relating to the subsidiary companies is given in Annexure II. The consolidated results of the company and its subsidiaries show that a net profit after tax of Rs. 2,455 lakhs has been achieved during the financial year 2014-2015 as against that of Rs. 685 lakhs in the financial year 2013-2014. Collectively the company and its subsidiaries have fared better but less than expected due to various factors like economic situation, customer variations, market volatility and rising input costs. In terms of section 136 of the Companies Act, 2013 the company has not attached the financial statements of the subsidiary companies. However the financial information of the subsidiary companies are disclosed in the annual report. The annual accounts, reports and other documents of the subsidiary companies will be available for inspection during business hours, by any shareholder of the company at the registered office of the company and also at the registered office of the concerned subsidiary and has also been posted in the website of the company www.ucalfuel.com . The annual accounts, reports and other documents of the subsidiary companies will be despatched to the shareholders upon receipt of a request from them. CORPORATE SOCIAL RESPONSIBILITY (CSR) The company has undertaken CSR activities in the field of education, sanitation, health, sports and preservation of culture and heritage through implementation agencies. These projects are in accordance with Schedule VII of the Companies Act, 2013. The vision is "to be a responsible corporate citizen by contributing to the well being of the society at large keeping in mind the national vision of ensuring a healthy, educated and a poverty free India and to protect the culture and heritage of this great ancient land". The constitution of the CSR committee, and the other details are mentioned in the corporate governance report. The annual report of the CSR activities carried out during the financial year 2014-2015 is given in Annexure III. PUBLIC DEPOSITS The company has not accepted any deposits from the public during the financial year 2014-2015 within the meaning of Section 73 of the Companies Act, 2013 read with Companies (Acceptance of deposits) Rules 2014 and there is no outstanding amount on account of principal or interest as on date. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE Information required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules 2014, on energy conservation, technology absorption, foreign exchange earnings and outgo, is given in Annexure IV. EXTRACT OF ANNUAL RETURN An extract of Annual Return in form MGT - 9 is given in Annexure V and forms part of this report PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 The company has not given loans, guarantees nor made any investments during the financial year under consideration under Section 186 of the Companies Act, 2013. MATERIAL CHANGES AND COMMITMENTS There were no material changes and commitments in the operations of the company 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 the Board's report. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES The company did not enter into any material transaction with any related party during the financial year 2014-2015 as per Section 188 of Companies Act, 2013. All transactions entered into with related parties were on arms length basis and in the ordinary course of business. Form AOC-2 as required under Section 134 (3) (h) of the Companies Act, 2013 read with Rule 8(2) of the Companies (Accounts) Rules 2014 is given in Annexure VI. CHANGE IN NATURE OF BUSINESS There was no change in the nature of business of the company during the year under review. REGULATORY/COURT ORDERS During the year 2014-2015 no significant and material orders were passed by the courts, regulators or tribunals affecting the going concern status of the company and its future operations. DELISTING OF SHARES FROM MADRAS STOCK EXCHANGE In furtherance to the company's application for voluntary delisting of equity shares from Madras stock exchange, the exchange on 13.02.2015 informed that the equity shares of the company have been delisted from their exchange with effect from that date. PARTICULARS OF EMPLOYEES Mr.Jayakar Krishnamurthy-Chairman and Managing Director, Mr.Ram Ramamurthy Whole time Director, Ms.Rekha Raghunathan-Director and Company Secretary and Mr N.Gnanasambandan-Chief Financial officer hold the office of key managerial personnel. The Information required pursuant to Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 in respect of directors, key managerial personnel and employees are given in Annexure VII. INDUSTRIAL RELATIONS During the year cordial and healthy relations were maintained with all sections / levels of employees. There were no cases reported of any sexual harassment. WHISTLE BLOWER POLICY The Company has a whistle blower policy to deal with instances of fraud and mismanagement. The details are explained in the Corporate Governance Report and are also posted in the company's website www.ucalfuel.com . RISK MANAGEMENT Key business risks are identified and reviewed on a regular basis. The details of the strategy development committee formed to strategise on ways to mitigate the risk is given in Corporate Governance Report. PREVENTION OF INSIDER TRADING The company has framed a code of conduct for prevention of insider trading based on SEBI (prohibition of insider trading) Regulations, 2015. This code is applicable to all the board members/employees/officers of the company. This ensures prevention of dealing with shares by people who have access to unpublished price sensitive information. CORPORATE GOVERNANCE The Company adheres to all the requirements of the code of corporate governance as stipulated in clause 49 of the listing agreement with the stock exchanges as well as to the standards set by the Securities and Exchange Board of India. A report on corporate governance along with certification of the chairman and managing director and the chief financial officer is attached in Annexure - VIII. Certificate from the auditors of the company regarding compliance of the conditions of corporate governance as stipulated by clause 49 of the listing agreement is given in Annexure IX. The Management Discussion and Analysis Report is attached in Annexure X. ACKNOWLEDGEMENT The Board acknowledges with appreciation and gratitude the co-operation, assistance and support of all its employees, customers, bankers, vendors, suppliers and governmental agencies. The Board is particularly grateful to the shareholders for continuing to support the company and for continuing to repose their confidence in the company. For and on behalf of the Board JAYAKAR KRISHNAMURTHY CHAIRMAN AND MANAGING DIRECTOR Place: Chennai Date: 28.08.2015 |