Directors' Report To the Members Your Directors present their Seventy-third Annual Report together with audited financial statements of the Company for the year ended March 31, 2015. Financial Results/Performance The figures for the year under review is not comparable with the previous financial year 2013-14 due to the fact that financial year 2013-14 was for a period of six months only, suspension of work at Uttarpara Plant since 24th May, 2014 and divestment of erstwhile Chennai Car Plant effective 30th March, 2014. During the year under review, the Company's revenue was Rs.16.95 Crores compared to Rs.225.81 Crores in the previous financial year. The revenue account shows a loss of Rs.41.90 Crores after providing Rs.2.10 Crores for depreciation & amortisation expense. There was a deficit of Rs.152 Crores in the Statement of Profit and Loss in the last year. After considering adjustment of Rs.7.11 Crores on account of depreciation as per Schedule II of the Companies Act, 2013 and the results of the year under review, there is a deficit of Rs.201.01 Crores in the Statement of Profit and Loss as at the end of the year. On 29th September, 2014, the Company allotted 2,38,87,300 Equity Shares of nominal value of Rs.5/- each at a premium of Rs.4.44 per Equity Share and 20,53,00,000 10.25% Secured Non-Convertible Debenture of Rs.1 each to lenders (Banks/Financial Institutions) under Corporate Debt Restructuring (CDR) Package as approved by CDR Empowered Group at its meeting held on 28th June, 2014 towards recompense of interest amount. The shares and debentures were issued on private placement basis. With the allotment of above securities and payment of balance amount of Rs.6.40 Crores to the lenders, the Company has made full settlement of recompense of interest amount. With this settlement, the Company has exited CDR. The shareholding of the promoters has decreased from 36.52% to 32.34% on allotment of equity shares as above. As reported earlier, the Government of West Bengal (GoWB) had alleged that the Company had realized an excess sum of Rs.194.47 Crores from the sale of 314 acres of land at Hindmotor, West Bengal, in earlier years and it should refund the said amount along with interest thereon. After prolonged discussion with GoWB, the Company has settled the abovesaid demand of Government of West Bengal (GoWB) by assignment in favour of GoWB, the entire 4% non-compete fee receivable by the Company from Bengal Shriram Hitech City Pvt. Ltd. ('BSL') on account of transfer of 314 acres of land to BSL in the year 2006-07 which have been confirmed vide Memorandum dated 29th September, 2014 of GoWB. The losses during this year were due to low volumes in April and May, 2014 and voluntary retirement scheme expenses post declaration of suspension of work at Uttarpara Plant. Review of Operations As reported earlier that due to low productivity, growing indiscipline, shortage of funds and lack of demand for products, the Company was compelled to declare "Suspension of work" at its Uttarpara Plant with effect from 24th May, 2014 and the suspension of work is continuing due to no change in the situation. The Company has also declared layoff at its Pithampur Plant with effect from 4th December, 2014 due to lack of orders. The sales of automobiles during the year under review are 217 compared to 1813 during the previous financial year of six months due to suspension of work at Uttarpara Plant and lay off at Pithampur Plant. No material changes or commitments or any significant and material adverse orders or rulings passed by the regulators or Courts or Tribunals impacting the going concern status and Company's operations in future have occurred between end of the financial year of the company and date of this report. There has also been no change during the period under review in the nature of business of the Company or its subsidiary. Steps are being taken to close the business of Company's subsidiary in USA subject to necessary compliances and approvals. There are no significant material orders passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. A detailed Management Discussion & Analysis Report forms part of this report is annexed as Annexure-1. Outlook for 2015-16 The suspension of work at Company's Uttapara Plant and lay off at Company's Pithampur Plant are continuing as it is unviable to operate the two plants under present business conditions. In an effort to revive operations, the Company has been engaged in scouting for tie-ups with potential investors/strategic partners who can introduce newer product portfolios in the market and infuse capital into the Company. The Company has also approached and is pursuing with the Government of West Bengal to provide all support in its effort to revive the operations of the Company at the Uttarpara Plant. Board for Industrial and Financial Reconstruction As the accumulated losses of the Company at the end of financial year ended on 30th September, 2013 exceeded its entire net worth, the Company has made reference to the Board for Industrial and Financial Reconstruction (BIFR) under Section 15 of the Sick Industrial Companies (Special Provisions) Act, 1985. The reference has been registered by BIFR and proceedings have started. Delisting of Shares As there has been no trading in the equity shares of the Company on The Calcutta Stock Exchange Limited (CSE) for many years, the equity shares of the Company has been delisted from CSE with effect from 25th September, 2014.The delisting of shares from CSE will not affect the interest of the shareholders of the Company in any manner. Particulars of Loans, Guarantees or Investments There are no Loans, Guarantees and Investments made under the provisions of Section 186 of the Companies Act, 2013 during the year under review. Details of Loans, Guarantees and Investments as at the year end are given in the notes to the Financial Statements. Related Party Transactions There are no contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013. The details of other transactions entered into with the Related Parties are given in the note -39 to the Financial Statements. Deposits Your Company has not accepted any deposit within the meaning of Section 73 of the Companies Act, 2013 and the Rules made thereunder and therefore, no amount of principal or interest was outstanding as on the date of Balance Sheet. Corporate Social Responsibility Initiatives In view of the continuing losses, the Company is not in a position to make any expenditure under Corporate Social Responsibility as per the provisions of Companies Act, 2013. Risks and Concerns and its Management The Company is exposed to external risks such as overall demand fluctuations in the market segment in which it operates, reduction in relative market share for its products due to the impact of competition as well as internal risks such as limited product range, variations in operational efficiency and cost structure. The Company is also exposed to financial risks in the form of interest rate variations. In order to identify and mitigate risks, the Company has constituted a Corporate Risk Management Committee. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. The Company has a Corporate Risk Management Charter to identify the nature and magnitude of risk associated with the Company and to take steps for mitigating the impact of such risks. The Corporate Risk Management Committee continuously identify and prioritize the risks associated with the functioning of the Company, lays down mitigation plan for identified risks with assigning responsibilities and adequately monitoring and managing the same. These are reviewed periodically and placed before the Board. Industrial Relations As reported earlier, the Company has declared "Suspension of Work" at its Uttarpara Plant in Hooghly District of West Bengal with effect from 24th May, 2014. Since then, the Company has separated 262 officers of the Company. Further 899 staff and technician grade employees have been separated through Voluntary Retirement Scheme by giving a lump sum amount on such early retirement. At Pithampur Plant, all officers have been separated and the eight staff and technician grade employees have been laid off with effect from 4th December, 2014. The general industrial relations situation at both the plants is very sensitive but being managed. The number of employees as on 31st March, 2015 is 1336. Extract of Annual Return The extract of the Annual Return in form MGT 9 is annexed herewith as Annexure-2. Meetings of the Board and Audit Committee During the year, eight Board Meetings and six Audit Committee Meetings were convened and held. The intervening gap between the Meetings was within the period prescribed under the Companies Act, 2013. The Audit Committee comprises Independent Directors namely Smt. Mou Mukherjee (Chairperson), Shri Raj Kamal Johri and Shri Sanjay Basu and Shri A. Sankaranarayanan as other member. All the recommendations made by the Audit Committee were accepted by Board. Further details regarding Board Meetings and Audit Committee are given in the Corporate Governance Report which forms part of the Board's Report. Corporate Governance The Company continues to remain committed to high standards of corporate governance. The report on corporate governance as per the requirement of the listing agreement with stock exchanges forms part of this report is annexed as Annexure-3. The Company has complied with all the requirements of corporate governance. The certificate from the Auditors of the Company confirming compliance to the conditions of the corporate governance requirements is also annexed. Directors' Responsibility Statement In terms of the requirement of Section 134 of the Companies Act, 2013, Directors' Responsibility Statement is annexed as Annexure-4 to this report. Information on Remuneration Information as per the provisions of Section 197(12) of the Companies Act, 2013 read with Rule 5(1), 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure-5 and Annexure-6 to this report. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo Additional information relating to conservation of energy, technology absorption, foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 is annexed as Annexure-7 to this report. Internal Financial Controls Systems The Company has comprehensive and adequate internal financial controls system for all major processes including financial statements to ensure reliability of reporting. The system also helps management to have timely data/feedback on various operational parameters for effective review. It also ensures proper safeguarding of assets across the Company and its economical use. The internal financial controls system of the Company is commensurate with the size, scale and complexity of its operations. The systems and controls are periodically reviewed and modified based on the requirement. The Company has an internal audit function, which is empowered to examine the adequacy and compliance with policies, plans and statutory requirements. It is also responsible for assessing and improving the effectiveness of risk management, control and governance process. The scope of Internal Audit is well defined and documented and the audit committee reviews the observations of the Internal Audit critically. The composition and working of the audit committee forms part of the Corporate Governance Report. Auditors At the Seventy-second Annual General Meeting of the Company held on 25th September, 2014, M/S Ray & Ray, Chartered Accountants (FRN 301072E) have been appointed as Statutory Auditors of the Company to hold office for a term of five years from the conclusion of Seventy-second Annual General Meeting of the Company till the conclusion of the Seventy-seventh Annual General Meeting (subject to ratification by shareholders at every Annual General Meeting). The Company has received consent from M/s Ray & Ray, Chartered Accountants, Auditors of the Company and confirmation regarding their eligibility to continue as Statutory Auditors of the Company. Your Directors request you to ratify the appointment of M/s Ray & Ray, Chartered Accountants (FRN 301072E) as Statutory Auditors of the Company at the ensuing Seventy-third Annual General Meeting and to fix their remuneration. The report by Auditors is self- explanatory. Further in view of suspension of work and lay off at plants and preparation of accounts on going concern basis, the Auditors have made some observations under "Emphasis of Matter" appearing in the Auditors' Report which the management has responded in Note-47 and Note-50 to the audited financial statements for the year ended 31st March, 2015. Cost Auditors The Company was not required to appoint Cost Auditors for the financial year 2014-15 under the provisions of Section 148 of the Companies Act, 2013 and rules made thereunder. The Company has filed cost audit report for the financial year 2013-14 (six month period) on 25th September, 2014. Secretarial Audit 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 Messrs A. K. Labh & Co., a firm of Company Secretaries in Practice (CP No.- 3238) to undertake the Secretarial Audit of the Company. The Report of the Secretarial Audit Report is annexed herewith as Annexure-8. There are no qualifications or observations or remarks made by Secretarial Auditor in his report. Subsidiary The Company has only one subsidiary Hindustan Motors Limited, USA. Hindustan Motors Limited, USA was mainly engaged in the business of providing engineering services in automotive and other industrial sectors in USA. The subsidiary has not done any business since 2009-10. Steps are being taken to close the business of Company's subsidiary in USA subject to necessary compliances and approvals. As per Rule 6 of the Companies (Accounts) Rules, 2014 the Company is exempted from making Consolidated Financial Statements taking into account the financial statements of its only foreign subsidiary Hindustan Motors Limited, USA. However as required salient features of financial statements of Hindustan Motors Limited, USA has been disclosed in Annexure-9 to this report. Declaration by Independent Directors Shri Raj Kamal Johri, Shri Sanjay Basu and Smt Mou Mukherjee are Independent Directors on the Board of your Company. In the opinion of the Board and as confirmed by these Directors, they fulfil the conditions specified in Section 149 of the Companies Act, 2013 and the Rules made thereunder about their status as Independent Directors of the Company. Directors Shri Kranti Sinha and Shri Pradip Kumar Khaitan resigned as Directors of the Company with effect from 9th May, 2014 and 29th May, 2014 respectively. The Board places on record its high appreciation for the valuable services rendered by Shri Kranti Sinha and Shri Pradip Kumar Khaitan during their tenure as Directors of your Company. The nomination of Shri Gautam Dutta as Director of the Company was withdrawn by IDBI Bank Limited with effect from 25th October, 2014. The Board places on record its high appreciation for the valuable services rendered by Shri Gautam Dutta during his tenure as Director of your Company. Shri Uttam Bose resigned as Managing Director of the Company with effect from the close of business hours on 9th May, 2014. The Board places on record its high appreciation for the valuable services rendered by Shri Uttam Bose during his tenure as Managing Director of the Company. Shri Uttam Bose was appointed as an Additional Director of the Company with effect from 10th May, 2014. Shri Uttam Bose was appointed as Director of the Company liable to retire by rotation at the Annual General Meeting held on 25th September, 2014. Shri Sanjay Basu and Shri Raj Kamal Johri were appointed as Independent Directors of the Company at the Annual General Meeting held on 25th September, 2014 till the conclusion of Seventy-seventh Annual General Meeting of the Company. Smt Mou Mukherjee was appointed as an Additional Director (Woman Director) with effect from 30th March, 2015. Smt Mou Mukherjee was also appointed as Independent Director for a period of five consecutive years with effect from 30th March, 2015 subject to approval of shareholders. Smt Mou Mukherjee holds the office up to the date of the ensuing Annual General Meeting and is eligible for appointment as Independent Director of the Company. At the ensuing Annual General Meeting, Shri A. Sankaranarayanan, Director of the Company, retires by rotation and being eligible offers himself for re-appointment. Information about the Directors proposed to be appointed/reappointed as stipulated under Clause 49 of Listing Agreement with the Stock Exchanges in India, are provided in the Report on Corporate Governance forming part of this Report. Key Managerial Personnel Shri Yogesh Goenka, the Chief Financial Officer and Company Secretary resigned from the services of the Company with effect from the close of business hours on 9th May, 2014. Shri Moloy Chowdhury has been appointed as Manager of the Company designated as Chief Executive Officer with effect from 10th May, 2014 for a period of two years. The appointment and remuneration of Shri Moloy Chowdhury has been approved by shareholders at the Annual General Meeting held on 25th September, 2014 and also by Central Government. Shri Tarun Kumar Kabra has been appointed as Company Secretary with effect from 10th May, 2014. Mr. Kabra is also Compliance Officer of the Company with effect from 10th May, 2014. Shri Aniruddha Sarkar had been appointed as Chief Financial Officer of the Company designated as Chief Financial Officer and Head of Legal with effect from 10th May, 2014. He resigned from the services of the Company with effect from the close of business hours on 30th October, 2014. Shri Bhikam Chand Mishra has been appointed as Chief Financial Officer of the Company with effect from 11th November, 2014 for a period of two years. Policy on Appointment of Director and Remuneration The Nomination and Remuneration Committee identifies and ascertains the integrity, qualification, expertise, skills, knowledge and experience of the person for appointment as Director and Key Managerial Personnel. The appointment of a Director as recommended by the Nomination and Remuneration Committee requires approval of the Board. The remuneration / compensation / commission etc. to the Directors and Key Managerial Personnel is proposed by the Nomination and Remuneration Committee in compliance with requirements of the Companies Act and recommended to the Board for it's approval. Approval of Shareholders is obtained, if required. The Directors receive remuneration by way of fees for attending meetings of the Board or committees thereof At the time of appointing an Independent Director, a formal letter of appointment is given to the candidate, which inter-alia, explains the role, functions, duties and responsibilities expected of the person as an Independent Director of the Company. The Independent Director is also explained in detail the compliance required from him under the Companies Act, 2013 and other relevant regulations. The independence of Director is decided as per provisions of the Companies Act, 2013. The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for remuneration of Directors, Key Managerial Personnel and Senior Management. The said Remuneration Policy is annexed as Annexure-10 to this report. Board Evaluation The Board of Directors evaluated the annual performance of the Board as a whole, its Committees and the Directors individually in accordance with the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement in the following manner:- i.Structured evaluation forms, as recommended by the Nomination and Remuneration Committee, after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning such as adequacy of the composition of the Board and its Committees, Board culture, execution and performance of specific duties, obligations and governance, for evaluation of the performance of the Board, its Committees and each Director were provided to all the members of the Board. ii.The members of the Board were requested to evaluate by filling the evaluation forms and the duly filled in evaluation forms were required to be sent to the Company Secretary in a sealed envelope or personally submitted to the Chairman at the concerned meeting. iii.Based on the individual evaluation of the Directors, the Board initiated a detailed discussion at the concerned meeting on the performance of the Board/Committee/Individual Director and formulated a final collective evaluation of the Board. The Board also provided an individual feedback to the concerned Director on areas of improvement if any. A separate meeting of Independent Directors was held on 31st December, 2014 to evaluate the performance evaluation of the Chairman of the meeting of Board of Directors (as there is no Chairman of the Board), the Non-Independent Directors, the Board and flow of information from management. Vigil Mechanism / Whistle Blower Policy As per Section 177(9) of the Companies Act, 2013 read with Rule 7 of Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Equity Listing Agreement, the Company has established an effective vigil mechanism named Whistle Blower Policy ("the Policy") with a view to provide a mechanism for Directors and Employees of the Company inter alia to raise genuine concerns of any violations of legal or regulatory requirements, incorrect or misrepresentation of any financial statements and reports, etc. The Company encourages its employees to use the mechanism and has made provision for direct access to the Chairman of the Audit Committee in appropriate and exceptional cases. Adequate safeguards against victimization of the persons who use such mechanism are provided in the policy. The policy is posted on the website of the Company www.hindmotor.com . Disclosure under The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has in place a policy for prevention of sexual harassment in accordance with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. All employees (permanent, contractual, temporary, trainees) are covered under this policy. The Company did not receive any complaint during the year 2014-15. Appreciation Your Directors acknowledge and thank the Company's customers, shareholders, dealers, vendors, state government authorities, business associates, banks and financial institutions for the support extended to the Company. Your Directors also record their appreciation for the commitment and dedication of the employees of your Company. For and on behalf of the Board of Directors Uttam Bose Director A. Sankaranarayanan Director Kolkata 25th May, 2015 |