BOARD’S REPORT PERFORMANCE/OPERATIONS Your Directors have pleasure in presenting the annual report of the Company, together with the audited financial statements, for the financial year ended March 31, 2016. COMPANY’S PERFORMANCE After a period of recovery in the financial year 2014-15, the Medium & Heavy Commercial Vehicle (M&HCV) segment of the Commercial Vehicle industry has registered a growth of 30% in the financial year 2015-16. Despite a subdued trend in the industrial activity, the pick-up in M&HCV sales was driven by replacement-led demand by large fleet operators, pre-buying ahead of the implementation of BS-IV emission norms and gradual improvement in the viability of fleet operators due to declining diesel prices. Your Company witnessed a 34% growth in sales (including LCV) during the financial year 2015-16, with total sales of 1,40,457 units as against 1,04,902 units during the previous financial year. Sales of M&HCV increased to 1,09,762 units with a growth of 41.3% as compared to 77,660 units during the previous financial year. The market share in M&HCV grew from 27.2% to 31.3% facilitated by optimal product mix in the growth segments, a sustained focus on meeting customer requirements and network expansion. Sales of Light Commercial Vehicle (LCV) have grown 13% to 30,695 units in 2015-16 as against 27,242 units during the previous financial year. The Power Solution Business witnessed a growth of 11% over the previous year despite tepid demand on account of improved power availability and general slowdown in industrial and agriculture sectors. Revenue from Spare Parts saw a growth of approximately 5% as compared to the previous financial year. Highlights of performance are discussed in detail in the Management Discussion and Analysis Report attached as Annexure E to this Report. DIVIDEND Your Directors are pleased to recommend a dividend of Rs. 0.95 paise per equity share of Rs. 1/- each for the financial year ended March 31, 2016. Payment of dividend is subject to the approval of shareholders at the forthcoming Annual General Meeting and would involve a cash outflow of Rs. 325.40 Crores including dividend distribution tax. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY BETWEEN THE END OF THE FINANCIAL YEAR AND THE DATE OF THE REPORT There are no material changes and commitments affecting the financial position of the Company between the end of the financial year and the date of this Report. TRANSFER TO RESERVES Your Company does not propose to transfer amounts to the general reserve out of the amount available for appropriation and an amount of Rs. 396.38 Crores is proposed to be retained in the profit and loss account. FINANCE During the year Non-Convertible Debentures (NCDs) Series AL 15 of Rs. 70 Crores, AL 17 of Rs. 200 Crores and AL 19 of Rs. 150 Crores were fully redeemed and NCD Series AL 16 of Rs. 45 Crores was partly redeemed. No fresh NCDs were issued during the year. Your Company repaid secured rupee term loan availed from Banks to the tune of Rs. 83.33 Crores before the due date during the year under review. No fresh term loans were availed during the year. During the year under review, your Company repaid ECB loan instalments that fell due, equivalent to USD 33.33 million on the due dates. No fresh ECB loans were availed during the year. As at March 31, 2016, long term borrowings stood at Rs. 2,659 Crores as against Rs. 3,325 Crores as on March 31, 2015. HUMAN RESOURCES Several key initiatives on the HR front were initiated during the financial year under review. This includes a new strategy for Talent Acquisition from campuses of key institutes aimed at better industry institute collaboration and building sustained relationships with them. Campus Ambassadors were identified as part of the process. The revamped Emerging Leaders Program saw the first batch graduate in March 2016 after completing a rigorous process and live project orientation. These Emerging Leaders would form critical part of the succession pipeline. Hays Job Evaluation, used as the metric for elevation at all senior levels, is now an integral part of the talent management process. Employee engagement gained sharper focus with initiatives such as quarterly Leadership Meet, Toastmasters Club, “You Made My Day” - (An initiative to enhance the spirit of appreciation and camaraderie), “IGNITE” - (an innovation platform to unleash the innovative thinking abilities of employees) being launched and received well across the organisation. Further, in our constant endeavour to enhance the levels of engagement and energy across the organisation, an Organisational Health Index survey, “Expressions 16”, in partnership with AON Hewitt was initiated and the results of the survey would result in action plans being put in place to address areas of improvement identified. Going forward, the financial year 2016-17 will see increased focus on - Talent Transformation through implementation of “SAP Success Factors” – a complete HRMS application suite, which would help in empowering and enabling Managers to better handle their teams. In addition, it would enhance the quality of analytics available to help in enhancing the quality of decision making with regards to people and processes throughout the employee life cycle. Employee skill and capability building across the organisation, with increased focus on new skills emerging out of new regulatory frameworks, emerging technologies and customer need would be another area of focus in the year ahead. Focus on right staffing and skilling in identified international markets would be given greater emphasis in line with the goal of spreading the organisation’s global footprint. CORPORATE GOVERNANCE Your Company is in compliance with the Corporate Governance guidelines, as laid out in the Listing Agreements/Securities Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI Listing Regulations). All the Directors and the Senior Management personnel have affirmed in writing their compliance with and adherence to the Code of Conduct adopted by the Company. The annual report of the Company contains a certificate by the Chief Executive Officer and Managing Director in terms of SEBI Listing Regulations on the compliance declarations received from the Directors and the Senior Management personnel. The Statutory Auditors of the Company have examined the requirements of Corporate Governance with reference to SEBI Listing Regulations and have certified the compliance, as required under SEBI Listing Regulations. The Certificate in this regard is attached as Annexure D to this Report. The Chief Executive Officer and Managing Director/Chief Financial Officer (CEO/CFO) certification as required under the SEBI Listing Regulations is attached as Annexure F to this Report. Related Party disclosures/transactions are detailed in Note 3.5 of the Notes to the financial statements. CONSOLIDATED FINANCIAL STATEMENTS Your Directors have pleasure in attaching the Consolidated Financial Statements pursuant to Section 129(3) of the Companies Act, 2013 (Act) and SEBI Listing Regulations and prepared in accordance with the Accounting Standards prescribed by the Institute of Chartered Accountants of India, in this regard. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES During the year, as a part of the divestment plans of the Company to sell non-core businesses, your Company sold 23,25,18,140 equity shares of Rs. 10/- each held in Ashok Leyland John Deere Construction Equipment Company Private Limited to Gulf Ashley Motor Limited, a subsidiary of the Company and thereafter the Company has infused committed capital contributions. Automotive Infotronics Limited, joint venture and Ashley Airways Limited an associate of the Company are under liquidation. A report on the performance and financial position of each of the subsidiaries, associates and joint venture companies is provided in the notes to the consolidated financial statements. Pursuant to the provisions of Section 129(3) of the Act read with Rule 5 of the Companies (Accounts) Rules, 2014, a statement containing salient features of the financial statements of the Company’s subsidiaries, Associates and Joint Ventures in Form AOC-1 is attached to the financial statements of the Company. Pursuant to the provisions of Section 136 of the Act, the financial statements of the Company, consolidated financial statements along with relevant documents and separate audited financial statements in respect of the subsidiaries are available on the website of the Company. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review, Mr. F Sahami, non-executive Director stepped down from the Board with effect from August 12, 2015. The Board wishes to place on record its appreciation for the valuable contributions made by him to the Board and the Company during his long tenure as Director. In accordance with the provisions of the Act and the Articles of Association of the Company, Mr. A K Das, Director, retires by rotation at the forthcoming Annual General Meeting and being eligible, offers himself for re-appointment. Dr. Andrew C Palmer was appointed as an Additional Director (Independent) on the Board with effect from November 4, 2015. We seek your confirmation for appointment of Dr. Andrew C Palmer as an Independent Director for a term upto five consecutive years i.e. with effect from November 4, 2015 to November 3, 2020. Pursuant to the recommendation of the Nomination and Remuneration Committee, Mr. Vinod K Dasari was re-appointed by the Board of Directors, subject to the approval of the shareholders, as the Chief Executive Officer and Managing Director (CEO & MD) of the Company for a period of five years with effect from April 1, 2016 to March 31, 2021. The resolutions seeking approval of the members for the appointment of Mr. A K Das, Dr. Andrew C Palmer, Directors and re-appointment of Mr. Vinod K Dasari, CEO & MD have been incorporated in the Notice of the Annual General Meeting of the Company along with brief details about them. The Independent Directors of the Company have submitted a declaration under Section 149(7) of the Act 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. The terms and conditions of appointment of the Independent Directors are placed on the website of the Company http://www. ashokleyland.com/companies-act-2013-compliance. The Company has also disclosed the Directors’ familiarisation programme on its website http://www.ashokleyland.com/sites/ default/files/Familiarisation_programme_for_Independent_ Directors-update_Mar2016.pdf. During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company, other than the sitting fees, commission and reimbursement of expenses incurred by them for the purpose of attending meetings of the Company. Pursuant to the provisions of Section 203 of the Act, the Key Managerial Personnel of the Company are - Mr. Vinod K Dasari, CEO & MD, Mr. Gopal Mahadevan, Chief Financial Officer and Mr. N Ramanathan, Company Secretary. There has been no change in the Key Managerial Personnel during the year. AUDITORS M S Krishnaswami & Rajan, Chartered Accountants (Firm Registration No. 01554S) and Deloitte Haskins & Sells LLP, Chartered Accountants, (Firm Registration No. 117366W/ W-100018) Joint Statutory Auditors, retire at the conclusion of this Annual General Meeting and are eligible for appointment. They have confirmed their eligibility to the effect that their appointment, if made, would be within the prescribed limits under the Act and that they are not disqualified for appointment. The Audit Committee and the Board of Directors have recommended the appointment of the Joint Statutory Auditors for the financial year 2016-17. The necessary resolution is being placed before the shareholders for approval. The Auditors’ report to the shareholders on the standalone financials for the year ended March 31, 2016 does not contain any qualification, observation or adverse comment. The Auditors’ report to the shareholders on the consolidated financials for the year ended March 31, 2016 (paragraph 7) contains a qualification as given below: The Holding Company has consolidated the financial statements/ financial information for the year ended March 31, 2016 of three joint venture companies, which are unaudited and pending approval by the Board of Directors of the respective companies - Refer Note 3.15 to the consolidated financial statements. We are informed that these financial statements are as received from the respective companies, and reflect total assets (net) of Rs. 55,125.45 Lakhs, total liabilities (net) of Rs. 95,020.47 Lakhs, total revenue (net) of Rs. 17,272.56 Lakhs and total expenditure (net) of Rs. 101,307.78 Lakhs, as considered in the consolidated financial statements. In our opinion and to the best of our information and according to the explanations given to us, except for the unaudited financial statements/financial information of the companies, in respect of which we are unable to express any opinion, the aforesaid consolidated financial statements give the information required by the Act in the manner so required and give a true and fair view in conformity with the accounting principles generally accepted in India, of the consolidated state of affairs of the Group, its associates and jointly controlled entities as at March 31, 2016, and their consolidated profit and their consolidated cash flows for the year ended on that date. Board’s Response: The consolidated results of the Company for the year include unaudited financials of three joint venture companies, as received, reflecting total assets (net) of Rs. 55,125.45 Lakhs, total Liabilities (net) of Rs. 95,020.47 Lakhs, total revenue (net) of Rs. 17,272.56 Lakhs and total expenditure (net) of Rs. 101,307.78 Lakhs. The said financials are pending approval by the Board of Directors of these companies. As the Company is required to submit its consolidated results within 60 days from the end of the financial year to the Stock Exchange, it has considered the said financials, as received from the joint venture companies for the purpose of such consolidation. COST AUDITORS Pursuant to the provisions of Section 148(3) of the Act the Board of Directors had appointed Geeyes & Co., (Firm Registration No.: 00044), as Cost Auditors of the Company, for conducting the audit of cost records for the financial year ended March 31, 2016. The audit is in progress and report will be filed with the Ministry of Corporate Affairs within the prescribed period. A proposal for ratification of remuneration of the Cost Auditors for the financial year 2015-16 is placed before the shareholders for ratification/ approval. SECRETARIAL AUDITOR Pursuant to provisions of Section 204 of the Act, read with Rule 9 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, your Company engaged the services of Ms. B Chandra (CP No. 7859), Company Secretary in Practice, Chennai to conduct the Secretarial Audit of the Company for the financial year ended March 31, 2016. The Secretarial Audit Report for the financial year ended March 31, 2016 in Form No. MR-3 is attached as Annexure H to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. EXTRACT OF THE ANNUAL RETURN Pursuant to the provisions of Section 92(3) of the Act an extract of Annual Return in Form MGT - 9 as on March 31, 2016 is attached as Annexure G to this Report. OTHER LAWS As per the requirement of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, your Company has constituted an Internal Complaints Committee (ICC). During the year under review, there were no cases received/filed pursuant to the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. BOARD MEETINGS HELD DURING THE YEAR During the year, six meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report which is attached as Annexure C to this Report. DIRECTORS’ RESPONSIBILITY STATEMENT Pursuant to the provisions of Section 134(5) of the Act the Board of Directors, to the best of their knowledge and ability, confirm that: a) in the preparation of the annual financial statements for the year ended March 31, 2016, the applicable Accounting Standards had been followed along with proper explanation relating to material departures; b) for the financial year ended March 31, 2016, such accounting policies as mentioned in the Notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made 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 financial year ended March 31, 2016; c) that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act 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) that proper internal financial controls were followed by the Company and that such internal financial controls are adequate and were operating effectively; f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. REMUNERATION POLICY OF THE COMPANY The objective of the Remuneration Policy is to attract, motivate and retain qualified and expert individuals that the Company needs in order to achieve its strategic and operational objectives, whilst acknowledging the societal context around remuneration and recognising the interests of Company’s stakeholders. The Company’s policy on directors’ appointment and remuneration and other matters provided in Section 178(3) of the Act has been disclosed in the Corporate Governance report, which forms part of the Board’s Report. PARTICULARS OF EMPLOYEES Disclosure pertaining to the remuneration and other details as required under Section 197(12) of the Act, and the Rules framed thereunder is enclosed as Annexure B to the Board’s Report. ASHOK LEYLAND EMPLOYEE STOCK OPTION PLAN 2016 Your Company believes that equity based compensation schemes are an effective tool to reward the employees (including Directors) in the growth of the Company, to create an employee ownership, to attract new talents, to retain the key resources in the organisation and for the benefit of the present and future employees of the Company. In view of the above, the Board of Directors of your Company has approved the formulation and implementation of Ashok Leyland Employee Stock Option Plan 2016 (AL ESOP 2016) at their meeting held on May 25, 2016. Resolution seeking approval of the members for AL ESOP 2016, have been incorporated in the Notice of the AGM. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS UNDER SECTION 186 OF THE COMPANIES ACT, 2013 The particulars of loans, guarantees and investments under Section 186 of the Act read with the Companies (Meetings of Board and its Powers) Rules, 2014, for the financial year 2015-16 are given in Note 3.5 (f) of the Notes to the financial statements. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES The Audit Committee and the Board of Directors have approved the Related Party Transactions Policy and the same has been hosted on the Company’s website http://www.ashokleyland.com/ sites/default/files/Ashok_Leyland_Limited-Policy_on_Related_ Party_Transactions.pdf. The Policy intends to ensure that proper reporting, approval and disclosure processes are in place for all transactions between the Company and Related Parties. There were no materially significant transactions with Related Parties during the financial year 2015-16 which were in conflict with the interest of the Company. Suitable disclosures as required under AS-18 have been made in Note 3.5(d) of the Notes to the financial statements. Details of transactions with related parties are given in Form AOC - 2 which is attached as Annexure I. RISK MANAGEMENT POLICY Your Company has a robust Risk Management policy. The Company through a Steering Committee oversees the Risk Management process including risk identification, impact assessment, effective implementation of the mitigation plans and risk reporting. Your Company has an established Enterprise Risk Management (ERM) function that engages with all the business verticals for risk assessment and ensures that the risk mitigation plans are in place and validates its status regularly. The details of Risk Management as practiced by the Company are provided as part of Management Discussion and Analysis Report attached as Annexure E to this Report. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES The brief outline of the Corporate Social Responsibility (CSR) Policy of the Company and the initiatives undertaken by the Company on CSR activities during the year are set out in Annexure J of this report in the format prescribed in the Companies (Corporate Social Responsibility Policy) Rules, 2014. The policy is available on the website of the Company. PERFORMANCE EVALUATION OF THE BOARD, ITS COMMITTEES AND DIRECTORS Pursuant to the provisions of the Act and SEBI Listing Regulations, Independent Directors at their meeting held during the year without the participation of the Non-Independent Directors and Management, considered/evaluated the performance of the Board of Directors, the Chairman and other Non-Independent Directors. The Board has undergone a formal review which comprised Board effectiveness survey, 360 degree and review of materials. This was delivered by an external specialist and resulted in a full Board effectiveness report and Directors’ feedback. This is further supported by the Chairman’s Annual Director Performance Review. The Board subsequently evaluated its own performance, the working of its Committees and Independent Directors without participation of the relevant Director(s). The criteria for performance evaluation have been detailed in the Corporate Governance Report which is attached as Annexure C to this Report. VIGIL MECHANISM/WHISTLE BLOWER POLICY Pursuant to the provisions of Section 177(9) of the Act read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement/SEBI Listing Regulations, the Board of Directors had approved the Policy on Vigil Mechanism/Whistle Blower and the same was hosted on the website of the Company. This Policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your Company hereby affirms that no Director/employee has been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. Brief details about the policy are provided in the Corporate Governance Report attached as Annexure C to this Report. DEPOSITS Your Company has not accepted any deposit within the meaning of provisions of Chapter V of the Act read with the Companies (Acceptance of Deposits) Rules, 2014 for the year ended March 31, 2016. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The Company has a proper and adequate internal control system to ensure that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorised and recorded. Information provided to management is reliable and timely and statutory obligations are adhered to. Details of the same are provided in the Management Discussion and Analysis Report attached as Annexure E to this Report. The Company has an established Internal Financial Control framework including internal controls over financial reporting, operating controls and anti-fraud framework. The framework is reviewed regularly by the management and tested by internal audit team and presented to the Audit Committee. Based on the periodical testing, the framework is strengthened, from time to time, to ensure adequacy and effectiveness of Internal Financial Controls. RESEARCH AND DEVELOPMENT, CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO Your Company continues to focus on Research and Development activities with specific reference to emission conformance, fuel efficiency, vehicular performance and enhancement of safety, aesthetics and ride comfort. Further development of the engine range and cabin is also a key result area. Expenditure incurred by way of capital and revenue on these activities is shown separately. Information as required under Section 134(3)(m) of the Act read with Rule 8 (3) of the Companies (Accounts) Rules, 2014, relating to Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo are furnished in Annexure A to this Report. ACKNOWLEDGEMENT The Directors wish to express their appreciation for the continued co-operation of the Central and State Governments, bankers, financial institutions, customers, dealers and suppliers and also the valuable assistance and advice received from the joint venture partners, Hinduja Automotive Limited, the Hinduja Group and all the shareholders. The Directors also wish to thank all the employees for their contribution, support and continued commitment throughout the year. On behalf of the Board of Directors Dheeraj G Hinduja Chairman Mumbai May 25, 2016 |