DIRECTORS' REPORT INCLUDING The Directors have pleasure in presenting their SIXTY THIRD Annual Report together with the Audited Financial Statements for the fifteen months period from January 01, 2014 to March 31, 2015. The Board of Directors of the Company at their meeting held on June 05, 2014, inter-alia, approved the change in the financial year of the Company to commence from April 01 of every year and to end on March 31 of the following year to comply with Section 2(41) of the Companies Act, 2013 ('Act'). Consequently, as a transitionary arrangement, the current annual accounts and Directors' Report of the Company are for a period of fifteen months from January 01, 2014 to March 31, 2015. Therefore, figures for the period under review are not comparable with the last financial year. 2. Dividend The Board of Directors recommend a dividend of Rs.85 per equity share for the fifteen months period ended March 31, 2015 as against a dividend of Rs.55 per equity share for the twelve months period ended December 31, 2013. This dividend is subject to the approval of the shareholders at the forthcoming Annual General Meeting. 3. Management Discussion and Analysis In order to avoid duplication between the Directors' Report and Management Discussion and Analysis, a composite summary of the performance of the Company and its various business segments is given below. 3.1 Economic Scenario 3.1.1 Global Economy The world economy did not gain the expected momentum towards global recovery. The global Gross Domestic Product (GDP) growth for 2014 was 3.3 percent, which was on similar lines to the growth in 2013. The Emerging Market economies had a moderate growth of 4.3 percent in 2014 as against 4.7 percent in 2013. (Source: IMF). Two key developments were seen during the period. The appreciation of the US Dollar against other currencies (like the Euro and the Japanese Yen) and the decline in crude oil prices by 55 percent in US Dollar value. Though global growth remained around the same levels, there was increasing divergence between economies. While the activity in the United States gained momentum, the recovery was slow in the Euro zone and Japan. China's growth was also below expectations due to falling property prices and overcapacity in many industries. Growth in other developing countries reflected not only weak external demand but also tightening of domestic policy, political uncertainties and supply-side constraints. 3.1.2 Indian Economy The Indian economy was on its way back to recovery with most of the key indicators like inflation, trade deficit and GDP showing an improvement over the corresponding figures in the previous year. Indian GDP growth for 2014 was around 5 percent under the old method which was a moderate improvement to the 4.7 percent growth witnessed in 2013 With a new Government in place, there is an increased expectation of growth revival. The sharp fall in crude oil prices has helped the Indian economy in reducing the import bill significantly. It has also given space to the Reserve Bank of India to shift its focus from containing inflation to reviving growth. However, the impact of the economic reforms is yet to be seen on the ground. Government initiatives like "Make in India" have started off well but is still to gather momentum. Passage of key reform bills will further improve the overall business prospects. Though the Reserve Bank of India cut the repo rate from 8.0 percent to 7.5 percent in the first quarter of 2015, the resultant impact on economy is yet to be realized. 3.2 Industry Structure and Development Automotive: The auto industry saw signs of revival in 2014 after a decline in 2013. Post the general elections, there has been a gradual improvement in consumer sentiments with hope of revival in the economy. The combination of factors like recuperating macros, reduced fuel prices, low inflation levels and anticipation of reduction in interest rates saw a marginal growth of 1 percent in automotive production during 2014 compared to 2013, after witnessing a de-growth of 3 percent in the first half of 2014. Indian domestic volumes reduced marginally by 1 percent in 2014 mainly due to reduction in production of Light Commercial Vehicles (LCV) and tractors. The export market grew by 11 percent due to good volume growth in three wheelers and passenger cars. Passenger car (PC) production volume grew by 1 percent in 2014. A series of new vehicles were launched by Original Equipment Manufacturers (OEM) in the passenger car market. Domestic sales of passenger cars witnessed a growth of 1 percent in 2014 and the export market grew by 5 percent. Utility vehicle production volumes grew by 2 percent mainly on account of demand from the export market. Heavy Commercial Vehicle (HCV) production volumes had a double digit increase of 12 percent in 2014 on a low base as compared to a decline of 29 percent in 2013. Some of the factors which led to the growth were weaker Indian rupees, increase in freight rates, positive business sentiments, fleet replacement demand and pick-up in infrastructure projects and mining. The production of LCVs declined by 16 percent in 2014 due to a constrained financing environment and higher inventories at financiers consequent to payment defaults, especially in sub-2 ton LCVs. The tractor industry witnessed a drop of 2 percent in 2014 because of delayed and deficient monsoons that disturbed the timely sowing of crops. The low hikes in Minimum Support Prices (MSP), decline in crop output and weakening crop prices negatively impacted farm sentiments. Three wheeler production volumes increased by 11 percent in 2014 as compared to 2013, mainly on account of growth resulting from opening of fresh permits in Maharashtra and an uptrend in export markets. The first quarter of 2015 saw a slight recovery in automobile industry due to improved market sentiments, political stability and improving macro economic environment. The PC market showed a positive growth of 8 percent on account of new model launches and good retail deals offered by OEMs. HCV market showed a positive growth of 38 percent driven by expectations of economic revival. LCV market declined by 4 percent since there was a slow down in financing small fleet operators and first time operators. But the rate of decline has reduced compared to 2014. Tractor market showed a decline of 32 percent caused by factors such as reduced Kharif crop production and lower MSP for crops reducing the disposable income of farmers. Non-Automotive: The Power Tools industry is largely dependent on the prospects of the construction and infrastructure sectors, which witnessed a muted growth of 4 percent. The Security Technology industry grew marginally by about 2.5 percent in 2014 over the previous year. This was mainly due to tough market conditions, delay in execution in large scale projects in the public sector domain and tight credit situation. Packaging industry grew by around 8 percent in 2014. The growth was facilitated due to labour availability constraints and increased secondary packaging requirements. The trend towards premium bag styles and aseptic packaging was on a rise. Biscuits and snack foods were the biggest market segments for packaging industry. Renewable Energy sector and Solar PV industry in specific gained impetus with the revised target of the National Solar Mission to 100,000 MW by 2022. The Government also supported faster execution of projects through the verdict on the non-applicability of anti-dumping duties for imports from some countries which include USA and China. The installations in India grew by nearly 850 MW in 2014 crossing the installed base to over 3000 MW. 3.3 Business and segment wise performance The overall performance of the Company was satisfactory with a growth of 10.3 percent on an annualized basis. The growth driver was the automotive segment which posted an annualized growth of 11.1 percent. The non-automotive business grew by 4.8 percent on an annualized basis. Both domestic and export sales witnessed an annualized increase of over 10 percent largely on account of rise in sales of diesel products. The Company predominantly operates in manufacturing and trading of automotive products which constitutes 88 percent of total sales. The Company also has its presence in non-automotive areas (comprising of Industrial Technology, Consumer Goods and Energy and Building Technology) having a share of 12 percent. Hence, the primary segment of the Company is classified as 'Automotive and Non-automotive' while the Revenue from various geographical location of customers (domestic and export) is classified as the secondary segment. 3.3.1 Primary Segment The share of automotive products increased from 87 percent in the previous year to 88 percent for the fifteen months period ended March 31, 2015. Automotive The automotive segment registered an annualized growth in sales by 11.1 percent and stood at Mio INR 102,979. The Diesel Systems business increased by 13.8 percent on an annualized basis. The increase was led by higher sales volume of new generation Common Rail Systems (CRS) and distributor pumps. The Diesel Systems business will continue to ride heavily on new generation CRS for future growth in majority of vehicle segments. The conventional products like in-line pumps & nozzles continued with steady demand. The Company pursued segment specific "local for local" approach with strong focus on total cost of ownership, resulting in competitive advantage to improve market share. It also engaged in CO2 reduction measures with efficiency improvement packages on products in line with the expected BS IV emission norms in the near future and eventually BS V and BS VI. The Automotive Aftermarket division fared moderately in a sluggish business environment during the period under review. The division registered an annualized growth of 3.0 percent. The muted growth is due to competitive pricing in some of the product classes and the tight money market. The year also saw an increase in product portfolio in filtration, lighting, braking, auto electrical, diagnostic scanners and test benches. The Company has increased its market presence by adding 300 new distributors. The Bosch service network continues to be the largest independent service network in India. The Starter Motors and Generators business witnessed annualized growth of 5.5 percent. Growth was driven by the increased volumes of New Baseline starter motors and generators. The Gasoline business grew annualized by 52.2 percent, mainly on account of increased market share in the domestic passenger car market. Share of domestic and export sales in total sale of automotive segment remained constant as in previous year. In the automotive segment, 87 percent of the sales were derived from domestic market. The share of export sales to the total sales of the segment was 13 percent during the period under review. Non-Automotive Industrial Technology (Packaging Technology and Industrial Equipment): The Industrial Technology segment declined by 6.4 percent on an annualized basis. The decline was mainly due to lower order intakes and one time orders in 2013. Packaging Technology The Packaging Technology division annualized growth remained constant. Newly developed products have been well received in the market and encourage future development activities. Industrial Equipment The Industrial Equipment division reported an annualized decline of 12.2 percent due to onetime orders in 2013 (which would not be repeated) and decline in domestic sales. Consumer Goods (Power Tools): The Power Tools business increased at an annualized growth of 9.0 percent despite tight market sentiments. This growth was supported by e-commerce and modern retail channels, focusing on the urban and home user segments. It also gained momentum through the industrial and institutional segment as well as from emerging product lines of lawn and garden, measuring tools and the Dremel multi-tool systems.The period under review witnessed new campaigns, product launches and brand stores. The premium retail store concept - Bosch System Specialist (BSS) - has created a niche in the market with its positioning as a total solutions provider for Power Tools while giving customers a delightful shopping experience. Energy and Building Technology (Security Technology, Bosch Energy & Building Solutions and Thermo technology): The Energy and Building Technology segment witnessed a marginal decline of 0.2 percent on an annualized basis. Security Technology The Security Technology business declined by 1.2 percent due to general slowdown in the market and delays in implementation of infrastructure projects. Projects successfully executed in 2014 included conference systems for two state assemblies, video systems for a huge steel plant and fire detection systems for a leading residential apartment project. Trend-setting products in various verticals were introduced in the market and were well received. Bosch Energy & Building Solutions Though the division had a good initial breakthrough with scalable solutions into the energy efficiency sector having acquired new customers, the overall performance witnessed a decline of 4.6 percent on an annualized basis. The Energy business developed an extensive network of channel partners for future growth and worked to consolidate its position as a major Engineering, Procurement and Construction (EPC) player in India. Thermo technology Thermo technology continued its impressive growth albeit low base of 2013 and grew by 27 percent on an annualized basis. The overall market share for Solar Thermal Systems (STS) in 2014 increased by 2 percent in terms of revenue. The division focused on customization of products for domestic market and developing an extensive network of channel partners and dealers. The Non-Automotive segment was predominantly driven by domestic sales with a share of 93 percent while exports contributed 7 percent. 3.3.2 Secondary Segment Domestic sales of the Company registered annualized growth of 10.3 percent. However, the share of domestic sales of total sales remained the same at 88 percent. The annualized export sales of the Company increased by 10.6 percent and the bulk of exports was to Germany, China and Brazil. 3.4 Financial Performance and Condition Sale of Products The annualized sale of products grew by 10.3 percent over the previous year and stood at Mio INR 117,414 as against sales of Mio INR 85,151 in 2013. Sale of services Sale of services registered an annualized growth of 18.9 percent with a total of Mio INR 2,000. Other operating revenue Other operating revenue registered an annualized growth of 7.7 percent and stood at Mio INR 1,441. Other income Other income increased by an annualized growth of 28.3 percent over the previous year. The annualized income from interest, including non-trade investments and deposits in banks, increased by 17.2 percent and stood at Mio INR 3,474. This constituted 61.5 percent of other income. Income from profit on sale of investments registered an annualized increase of 80.2 percent and stood at Mio INR 1,545. Dividend from long-term investments increased to Mio INR 66 from Mio INR 57 in 2013. Cost of materials consumed The cost of materials consumed as a percentage of sales for the fifteen months period ended March 31, 2015 reduced to 55.0 percent as against 56.0 percent for the year ended December 31, 2013. There is a decrease in cost because of localization projects implemented during the year. Personnel cost Personnel cost as a percentage of sales was 14.2 as against 13.8 percent in 2013. The marginal increase was mainly on account of increase in employee retiral cost owing to decline in discounting rates. The wage settlement concluded in various plants and other employee welfare expenditures also contributed to the increase. The Company continues to focus on rationalizing its work force while sustaining productivity and competence. Depreciation and amortization The depreciation charge for the period under review is Mio INR 5,484 as against a charge of Mio INR 3,842 in 2013 mainly due to higher asset base. The PAT for the fifteen months period ended March 31, 2015 is Mio INR 13,377 as compared to PAT of Mio INR 8,847 in 2013. This has registered a growth of 21.0 percent on an annualized basis. Earnings per Share (EPS) The EPS (Basic and Diluted) of the Company for the fifteen months period ended March 31, 2015 increased by 21 percent on an annualized basis to INR 426 per share as against INR 282 per share for the previous year. Share capital At present the Company has only one class of shares: Equity Shares with a face value of INR 10 each. Authorized share capital is Mio INR 381 divided into 38,051,460 shares of INR 10 each. Issued, subscribed and fully paid-up capital as on March 31, 2015 was 31,398,900 shares of INR 10 each. Reserves and Surplus - Profit and Loss account The balance retained in general reserves and profit & loss account as on March 31, 2015 is Mio INR 71,222 which includes retained profit for the fifteen months period of Mio INR 10,165 after considering a proposed dividend of INR 85 per share. Shareholders' fund The total shareholders fund increased to Mio INR 73,470 as on March 31, 2015 from Mio INR 62,943 as compared to the previous year. Fixed assets - capital expenditure The gross fixed asset value as on March 31, 2015 was Mio INR 47,908 (tangible: Mio INR 47,841 and intangible Mio INR 67) as compared to Mio INR 43,086 (tangible: Mio INR 43,019 and intangible Mio INR 67) as on December 31, 2013. The Company incurred a capital expenditure of Mio INR 5,030 during the period under review in addition to Mio INR 5,113 spent in 2013. Major investments were made towards development of manufacturing facility in Bidadi and Gangaikondan and for capacity increase of existing products at other locations. Investments The surplus funds of the Company that are not required for immediate use are invested mainly in tax effective and low risk bearing instruments. The total investment (excluding investment property) as on March 31, 2015 amounted to Mio INR 27,498 as against Mio INR 21,489 for the previous year. Working capital Inventories Inventory as on March 31, 2015 increased by 6.5 percent to Mio INR 12,762 from Mio INR 11,978 as on December 31, 2013 reflecting higher volumes. Trade receivables Trade receivables as on March 31, 2015 amounted to Mio INR 11,877 as against Mio INR 10,561 on December 31, 2013. There was a considerable improvement in credit management processes with primary focus on tighter monitoring mechanisms and improved evaluation of credit worthiness of customer. Cash and Bank balances The total cash and bank balances as on March 31, 2015 were Mio INR 18,960 (including Cash and Cash Equivalent of Mio INR 1,304) as compared to Mio INR 14,415 (including Cash and Cash Equivalent of Mio INR 1,539) as at the end of the previous year. 3.5 Human Resource Development and Industrial Relations 3.5.1 Human Resource Development It has been a year of transformation and continuous employee engagement for the Company. Under a global project titled Bosch Human Resources System (BHS 3.0), the Company along with other Bosch legal entities is now operating the HR service function under one common roof from Bengaluru. In the long run, this will help the Company to standardize its processes while bringing in efficiencies. Employer branding efforts continued with target universities through events like INSCRIBE 2014 and internships that attract Gen-Y, who form almost 45 percent of the Managerial & Superintending Staff of the Company. The Company's continued efforts to foster and drive the younger generation towards future leadership was yet again recognised at the National Competition for Young Managers 2014 conducted by the All India Management Association (AIMA). The teams from the Company bagged the National Level Winners, 2nd runner-up and Best Young Manager trophies for the year 2014. The Company continued to develop high potential managers through Management Development Programs (MDP) and international assignments, etc. As on March 31, 2015, around 100 employees were deputed on international assignments. The Bosch Diversity initiative under the HR umbrella organized events such as Diversity Day, Women's Day and Social Engagement Day that were focused towards communicating the core message that "Diversity is our Advantage". 3.5.2 Industrial Relations The Industrial Relations at all Plants and establishments remained generally cordial. However, there were two occasions which led to disruption in production. First, the prolonged strike at the Bengaluru Plant by the workmen in mid September which continued till early December. The strike was mainly on introduction of International Industrial Engineering (IE) standards for improving productivity. This was resolved by the Management with a fair and firm approach. The IE and other settlement objectives have been fully achieved. Secondly, a lock-out was declared against the Labour Union and Workmen of the Jaipur Plant in the first week of April 2015 who had been indulging in an illegal "go-slow" action. The decision to declare lock-out by the Company was taken in the interests of its customers and considering overall adverse impact of "go-slow" action on the industry. The lock-out was subsequently lifted in cooperation with the government authorities. Adequate steps were taken to fulfill customer requirements during the strike period. The long term wage settlement was concluded successfully in Nashik, Bengaluru & Naganathapura plants. Negotiations continue with the Union at the Jaipur Plant for an amicable settlement. 3.6 Internal Audit and Internal Control System The Company has an effective and reliable internal control system commensurate with the size of its operations. The internal controls are aligned with Bosch Global standards and processes while also adhering to local statutory requirements. The efficacy of the internal checks and control systems are validated by self-audits and verified by Internal as well as Statutory Auditors. The Audit Committee of the Board reviews the internal audit plan, adequacy and effectiveness of the internal control system, significant audit observations and monitors the sustainability of remedial measures. 3.7 Opportunities and Threats The future transition to newer emission norms (BSIV / BSV / BSVI) in line with global standards will drive the need for cleaner engines and sustainable technologies. The Company with its strong technological base is well positioned to meet this demand. There is a growing expectation for an end-to-end solution as opposed to individual components by the auto sector. The Company being a global auto player is in a position to leverage its technologies to transform itself from a parts supplier to complete solution provider. As regards the non-automotive segment, the Company's presence across multiple businesses (industrial technology, consumer goods and energy and building technology) enables synergies for taping the existing and prospective customer base with integrated solutions. The demand in the automotive sector may slowdown in case of slackness in the implementation of infrastructure projects. Apart from the intensified competition which puts pressure on sales prices, increasing input costs may affect the profitability of the Company. The market linked external factors (macro economic) are the biggest threat to the business in general, apart from the key risks that are identified below. 3.8 Risks and Concerns The Company follows a specific, defined Risk Management process that is integrated with operations for identification, categorization and prioritization of various risks such as operational, financial and strategic business risks. Across the organization, there are teams responsible for the aforesaid process and reporting risks to senior management. The Risk Management Committee, headed by Mr. Soumitra Bhattacharya, Joint Managing Director & CFO, reviews the effectiveness of the process at regular intervals. Major risks foreseen: 1. Competition: The Company operates in a highly competitive environment and some customers have started adopting de-risking strategies to maintain more than one source for a product. Further, more competitors have entered the market with new or similar products. Spurious parts and cheap imitations continue to put pressure on existing market shares, primarily for Automotive Aftermarket and Power Tools. The new core team, along with respective business unit teams, does competitor analysis to discuss competitors' strategies and related insights. 2. Industrial Relations (IR): IR related risks continue at a high level. Risk continues till wage settlement is completed at the remaining locations. This includes possible risks arising from stoppage of production and the uncertain result of settlement negotiations leading to unpredictable cost structure. IR related issues continue to be dealt in a fair and firm manner and are monitored closely. 3. Indian Monsoon: The unseasonal or inadequate monsoon can result in negative impact on market sentiments, vehicle sales and usage, especially the tractor segment. The Company is regularly scanning market reports and taking appropriate action to combat lower demand. 4. Economic conditions: The economy continues to be affected by the delay in policy reforms and decision making as well as high interest rates and moderate GDP growth that affect the growth and profitability of the Company. 5. Credit and default: Prevailing liquidity tightness and subdued end customer demand could lead to rise in receivables. However, the Company is closely monitoring these risks and is continuously taking suitable steps. Risk mitigation measures: Following are some of the measures or initiatives taken up by the Management to mitigate risks other than those mentioned above: a) Enhance local engineering, development and testing capabilities to further drive the "develop locally for the local market" concept. b) Implement cost reduction through budgetary control of operating expenses. c) Focus on high growth segments so as to reduce over dependency on conventional segments. d) Retain and motivate talent by focused employee development programs. e) Process improvement projects in both manufacturing and administration areas to sustain growth for the future so as to increase business competence. 3.9 Outlook Global growth is forecasted to be around 3.5 percent in 2015. Growth prospects are uneven across major economies. In advanced economies, growth is projected to strengthen in 2015, but in emerging market and developing economies it is expected to be weaker. Key leading indicators like IIP (Index of Industrial Production) and the HSBC Purchasing Managers Index have shown an uptrend but are moderating recently for India. The unseasonal rains in the country may have adverse impact on the agricultural sector and this could revive inflationary pressures. Though the fall in oil prices may benefit India, the increasing currency volatility is a matter of concern. The recent Union Budget has prioritized economic growth over fiscal consolidation. The outcome is dependent on the Indian Government being able to implement its key reform initiatives and succeed in clearing the bottlenecks in infrastructure and energy-intensive projects. The Company expects a moderate growth in the automotive industry in 2015 with positive growth in commercial vehicles and passenger cars supported by improved market sentiments, pickup in economic indicators, low base and pent-up demand, new model launches, relatively low fuel prices and political stability. A reduction is likely to be seen in tractors. The weak consumer demand and suppressed liquidity in the market also placed additional pressure on the Company's non-automotive businesses. The Company has plans to expand market share, revamp the distribution strategy and develop the retail channel in the Power Tools segment. The Company remains optimistic about the future growth prospects of the country and will continue to invest to meet the demands of the market. 4. Key Manufacturing Facilities 4.1 Bengaluru (Karnataka) The Bengaluru Plant, established in 1953, is a pioneer in diesel system products catering to both domestic and export customers. The Plant achieved a milestone of 1 millionth Common Rail production in March 2014. In line with the strategic focus to be fit for the future, various initiatives such as manpower restructuring, cost reduction and productivity improvement, etc. were undertaken during the year. 4.2 Nashik (Maharashtra) The main products manufactured at Nashik Plant are Nozzles, Nozzle Holder Assemblies and the Common Rail Diesel Injection system. The Plant faced a huge challenge mainly on account of steep drop in customer demand. This led to pressure on cost competitiveness and profitability. This was countered by various measures such as closures, break to temporary workmen, inventory reduction, focus on localization, etc. As an eco-friendly measure, a 68 kWp solar powered generator for generating electricity in the administrative block of the Plant was installed. This is expected to bring down the carbon footprint by approximately 94 tons of CO2 per year. 4.3 Jaipur (Rajasthan) The Jaipur Plant mainly produces Distributor (VE) Mechanical and Electronic Diesel Control Pumps which are used in light and heavy commercial vehicles, sports and multi-utility vehicles and tractors. The Plant witnessed 7 percent increase in the volumes as compared to 2013 owing to good export orders and local demand. The year also witnessed a significant reduction in the field complaints, resulting in enhanced customer confidence. 4.4 Naganathapura (Karnataka) The Naganathapura Plant completed 25 years of operations in 2014. The Plant was able to sustain its growth despite a weak domestic market and uncertain export markets. Improvement in plant productivity and lean concepts enabled both Starter Motors and Generators and the Spark Plug businesses to remain competitive. 4.5 Verna (Goa) During the period under review, the Verna Plant completed two years in its new state-of-the-art manufacturing facility. In line with the business strategy the plant transformed from being a single equipment seller to complete line solution seller. The plant is gearing up to cater to markets beyond geographical boundaries. 4.6 Kumbalgodu (Karnataka) The Solar Thermal Collector production facility made a steady progress in 2014, almost doubling production compared to the previous year in a very competitive market. New product variants such as the Evacuated Tube Collector were successfully introduced. 4.7 New Facilities The year 2014 saw the setting up of three new facilities at Bidadi (for Diesel Systems), Gangaikondan (for Gasoline Systems) and Chennai (for Power Tools). A brief overview of these facilities is given below: 4.7.1 Bidadi (Karnataka) With the addition of new products in the upcoming years and restriction on expanding the existing facility at the Bengaluru Plant, identifying a new location to supplement the existing facility was the need of the hour. The Bidadi Plant is located in the Bidadi Industrial area at a distance of 35 kms from Bengaluru and has a super builtup area of approximately 38,000 sq. meters. While one assembly line for Common Rail has been commissioned, full-fledged operation is expected by 2017-18. 4.7.2 Gangaikondan (Tamil Nadu) This manufacturing unit is set up at State Industries Promotion Corporation of Tamil Nadu (SIPCOT) Gangaikondan, Tamil Nadu. It will facilitate the Company's Gasoline Systems business to further localize manufacturing and increase cost-competitiveness. Prior to the setting up of this new manufacturing facility, the Gasoline Systems division shared the Company's Naganathapura manufacturing facility for its local production. This facility will produce powertrain sensors, fuel delivery modules and air management components for automotive and two-wheeler systems. 4.7.3 Chennai (Tamil Nadu) The Company has set up a new Power Tools manufacturing plant approximately 37 km from Chennai at Oragadam, Tamil Nadu. The Plant will cater to the requirements of new products for the Indian market and aims to be a low cost location in Asia Pacific region. Commercial production at the Chennai Plant is expected to commence in later half of 2015. 5. Information Technology (IT) As part of customer focused initiatives, System to System communication has been enabled for select global OEMs from specific supplying locations. For Indian OEMs, SIAM-ACMA initiatives are being pursued. In an effort to empower the field representatives in Automotive Aftermarket, a new CRM software has been implemented in October 2014 to reap the benefits of advancement in IT and communication fields. Bosch ERP systems have been enabled for the new manufacturing locations at Bidadi and Gangaikondan, providing end to end business operations. 6. Change Initiatives 6.1 Continuous Improvement Process (CIP) The "System CIP" concept is being widely used in the direct areas. The maturity level of "System CIP" in the direct areas has been on the rise. Extending of "System CIP" concept to indirect areas has been started. The existing Self Assessment Methodology of CIP activities have been modified to incorporate "System CIP" and other simplifications and the new assessment methodology is planned across all units by the end of 2015. CIP in indirect areas is gaining momentum with increasing focus on savings through CIP activities in indirect functions. 6.2 Bosch Production System (BPS) The BPS Maturity Assessment methodology is being used for improving the maturity level of BPS implementation in the plants. "System CIP" is playing an important role for strengthening BPS implementation. Manufacturing lines are further improved using BPS tools before moving these lines to new manufacturing locations. Bosch Connect is being used for quick and easy interaction amongst plants. This platform is aimed at worldwide communication of best practices of BPS and also for finding solutions to existing issues through knowledge sharing and experience from like cases. 7. Business Excellence The Diesel Systems business division has adopted the European Foundation for Quality Management (EFQM) model for Business Excellence at its manufacturing locations in Bengaluru, Nashik and Jaipur from 2004. 'Living Business Excellence' is one of the key strategic themes and is included in the Vision and Mission statements of this division as 'Business Excellence at work'. Strategic measures/ targets are developed, deployed and reviewed across plants and connected corporate functions through a structured strategy management process. Key performance indicators are measured to enable the achievement of required business results. 8. Awards and Recognition During the period under review, the Company won several awards as recognition for its commitment to excellence. Few such awards are: - Fortune India's third annual survey of the country's most admired companies ranked the Company number one in the Auto Components sector. - The Company received the Export Excellence Award 2014 for "Best Manufacturer Exporter" from the Federation of Karnataka Chambers of Commerce & Industry (FKCCI) - The Innovation award from Mahindra & Mahindra - Auto and Farm sector for its "Innovation Driven Approach" by introducing 'Innovative, Overall Cost Effective & Field Fuel Efficient A-Pump System for Arjun 605 DI BSIIIA Tractors >50HP category'. - The Intersolar Award 2014 for the Best Solar Project in the Industrial and Commercial category for the 1 MW first-of-its-kind solar project on a water lagoon for the Maruti Suzuki Manesar plant. 9. Corporate Social Responsibility (CSR) Policy and Initiatives The Board of Directors have constituted a CSR Committee comprising of Mr. Prasad Chandran, Independent Director, Mr. Bhaskar Bhat, Independent Director, Dr. Steffen Berns, Managing Director and Mr. Soumitra Bhattacharya, Joint Managing Director as its members. Mr. Prasad Chandran, is the Chairman of the Committee. The CSR Committee oversees the Company's CSR initiatives under the overall supervision and guidance of the Board of Directors. For details of the CSR initiatives and activities of the Company please refer Principle 8 of the Business Responsibility Report and Annual Report on CSR Activities enclosed as Annexure 'B' to the Directors' Report. 10. Subsidiary Companies As the aggregate assets and income of MICO Trading Pvt. Ltd., as on March 31, 2015 are not material, no consolidated financial statements under Accounting Standard 21 "Consolidated Financial Statements" as notified under Section 211(3C) of the Companies Act, 1956, has been prepared. As required under Section 212 of the Companies Act, 1956, annexed hereto are the Audited Statement of Accounts, the Report of the Board of Directors and Auditors' Report for the fifteen months period ended March 31, 2015 of MICO Trading Pvt. Ltd. A separate statement containing the salient features of the financial statement of subsidiary, associates and joint ventures under the prescribed format has also been enclosed with the Directors' Report of the Company as per the requirements of Section 129 of Companies Act, 2013 as Annexure 'E'. 11. Directors Mr. Franz Hauber (DIN : 06485529) was appointed as an Alternate Director to Mr. Peter Tyroller with effect from January 01, 2014. Mr. Hauber ceased to be a Director of the Company with effect from the close of business hours on February 28, 2015. The Board of Directors places on record their deep appreciation for the contribution and services rendered by Mr. Franz Hauber during his tenure as Director of the Company. Dr. Andreas Wolf, Executive Vice President was appoined as an Alternate Director to Mr. Peter Tyroller with effect from March 01, 2015. Consequent to his appointment as an Alternate Director, Board appointed him as Whole-time Director for a period of four years with effect from March 01, 2015. Brief profile of Dr. Andreas Wolf forms part of the Explanatory Statement of the Notice dated May 29, 2015, convening the 63rd Annual General Meeting of the Company. 13. Key Managerial Personnel The following are the Key Managerial Personnel of the Company as on the date of this Report: Dr. Steffen Berns (Managing Director) Mr. Soumitra Bhattacharya (Joint Managing Director & Chief Financial Officer) Dr. Andreas Wolf (Whole-time Director) Mr. S. Karthik (Company Secretary) 14. Remuneration Policy During the period under review, the Board of Directors on recommendation of the Nomination and Remuneration Committee approved "Nomination and Remuneration Policy for Directors and Senior Management." The Policy, inter-alia, provides for criteria and qualifications for appointment of Director, Key Managerial Personnel and Senior Management, Board diversity, remuneration to directors, key managerial personnel, etc. The policy is enclosed as Annexure 'F' to this Report. The policy can also be accessed at www.boschindia.com under the "Shareholder Information" section. 15. Independent Directors The Board has an optimum combination of Independent and Non-Independent Directors. In line with the requirements of the Listing Agreement and Companies Act, 2013, half of the Board comprises of Independent Directors. The following are the Independent Directors of the Company as on the date of this Report: 1. Mr. Bernhard Steinruecke 2. Mrs. Renu S Karnad 3. Mr. Prasad Chandran 4. Mr. Bhaskar Bhat 16. Declaration as to Independence The Independent Directors have given a declaration to the Company that they meet the criteria of independence as per section 149(6) of the Act. 17. Familiarization programme for Independent Directors During the year under review, a separate training session for independent directors was organized by the Company. The session covered roles, responsibilities, rights, liabilities and other duties imposed on the independent directors under the new Companies Act, 2013 and the Listing Agreement. It also involved a brief overview on the vital provisions of the relevant latest statutory regulations. The independent directors are apprised at Board meetings on important developments in various business divisions of the Company. They are also updated on important changes in the regulatory framework and business environment having an impact on the Company. The aforementioned details have also been uploaded on the website of the Company at www.boschindia.com under the "Shareholder Information" section. 18. Performance Evaluation of Directors Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out the annual performance evaluation of the Board as a whole, the Directors individually as well as the working of the Board and its Committees. A structured questionnaire was circulated to the Board members in this connection. The feedback from the Directors was summarized and ideas for further improving effectiveness of the Board processes, etc. were discussed. 19. Particulars of Employees The information required pursuant to section 217 (2A)of the Companies Act, 1956 in respect of employees of the Company will be provided upon request. In terms of section 136 of the Act / 219(1) (b) (iv) of Companies Act, 1956, the Reports 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 any working day. Any Member, if interested in obtaining a copy thereof, may write to the secretarial department in this regard. 20. Corporate Governance A report on Corporate Governance approved by the Board of Directors of the Company and a certificate from the Practicing Company Secretary forms part of this Annual Report. The Company has fully complied with the Corporate Governance practices specified under the Listing Agreement. A Code of Conduct for Directors and Senior Management, Code of Conduct for Prevention of Insider Trading, Whistle Blower Policy, Rules and Regulations of Service Conduct for Managerial and Superintending Staff and Code of Business Conduct effectively support the Corporate Governance processes. 21. Risk Management The Company has a well defined Risk Management Policy. The policy has been developed after taking cognizance of the relevant statutory guidelines, Bosch Guidelines on risk management, empirical evidences, stakeholder feedback, forecast and expert judgment. The policy, inter-alia, provides for the following: 1. Risk Management framework; 2. In-built pro-active processes within the Risk Management Manual for reporting, evaluating and resolving risks; 3. Identifying and assessing risks associated with various business decisions before the materialization of the risks and making informed decisions at all levels of the organization in relation to the Company's capacity to accept certain risks in business ventures; 4. Ensuring protection of shareholder's value through the establishment of integrated Risk Management Framework for identifying, assessing, mitigating, monitoring, evaluating and reporting all risks; 5. Strengthening Risk Management through constant learning and improvement; 6. Adoption and implementation of risk mitigation measures such that they are effective in achieving long-term goals of sustainability by becoming embedded in the business processes and culture of the Company; 7. Regularly review Risk Tolerance levels of the Company as they may vary with change in Company's strategy; and 8. Ensuring sustainable business growth with stability. In the opinion of the Board, there are no elements of risks that may threaten the existence of the Company. 22. Whistle Blower Policy The Company has a Whistle Blower Policy which provides a vigil mechanism for dealing with instances of fraud and mismanagement. Details of the Whistle Blower Policy have been mentioned in the Corporate Governance Report. The Whistle Blower Policy has also been uploaded on the website of the Company at www.boschindia.com under the "Shareholder Information" section. 23. Business Responsibility Pursuant to Clause 55 of the Listing Agreement, listed companies are required to submit Business Responsibility Report as part of their annual report, covering the principles enunciated in the said clause. Accordingly, a report on Business Responsibility forms part of this Annual Report. All Related Party Transactions entered during the period January 01, 2014 to March 31, 2015 were in ordinary course of business and on an arm's length basis. No materially significant transactions were entered between the Company and its Promoters, Directors, Key Managerial Personnel etc. which may have a potential conflict with the interest of the Company at large. There were no material related party transactions pursuant to the provisions of section 188 of the Act. Prior approval of the Audit Committee is obtained for all foreseeable related party transactions on a quarterly basis. Details of all related party transaction entered on the basis of the aforementioned approval are placed before the Audit Committee on quarterly basis for their review. The Company has also formulated a "Related Party Transaction Policy" specifying the manner for dealing with transactions with related parties. The same has also been uploaded on the website of the Company www.boschindia.com under the "Shareholder Information" section. 25. Energy Conservation, Technology Absorption, Foreign Exchange Earnings & Outgo The report in respect of conservation of energy, technology absorption, foreign exchange earnings and outgo, as required under section 217 (1)(e) of the Companies Act, 1956 is enclosed as Annexure 'A' to this Report. 26. Auditors Company's Auditors M/s. Price Waterhouse & Co. Bangalore LLP (Membership No. 007567S/S-200012) retire at the forthcoming Annual General Meeting and are eligible for appointment. They have confirmed to the Company that they are eligible to be appointed as Auditors in terms of Sections 139 & 141 of the Companies Act, 2013 and Rules framed there under. 27. Cost Audit & Cost Auditors Pursuant to General Circular no. 15/2011 dated 11.04.2011 and order dated 06.11.2012 issued by Ministry of Corporate Affairs (MCA) under section 233B(1) of the Companies Act, 1956, M/s.Rao, Murthy & Associates, Cost Accountants, Bengaluru (Regn. No.000065, PAN: AAAFR8892D) were appointed as Cost Auditors for the period January 01, 2014 to March 31, 2015. The due date of filing of the cost audit report is September 28, 2015 in terms of erstwhile Companies (Cost Audit) Report Rules, 2011. Cost Audit report for the year 2013 was filed on June 27, 2014. Pursuant to section 148 of the Act read with Companies (Cost Records and Audit) Rules, 2014 (as amended), the Board of Directors on recommendation of the Audit Committee appointed M/s. Rao, Murthy & Associates, Cost Accountants, Bengaluru as Cost Auditors to audit the cost accounts of the Company for the financial year 201516. As per the requirements of the Companies Act, 2013, remuneration payable to the Cost Auditors is required to be ratified by the shareholders at the General Meeting. Accordingly, resolution ratifying the remuneration payable to M/s. Rao, Murthy & Associates is included in the Notice dated May 29, 2015, convening the Annual General Meeting of the Company. 28. Secretarial Audit The Company appointed Mr. Sachin Bhagwat, Practicing Company Secretary, to conduct Secretarial Audit particularly with reference to compliance with Companies Act, 1956/2013, Listing Agreement and relevant SEBI Regulations for the financial year 2014-15. The report of the Secretarial Audit is enclosed as Annexure 'C' to this report. 29. Directors' Responsibility Statement Pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors report that: a. in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation relating to material departures; b. they have selected such accounting policies 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 at the end of the financial year and of the profit of the Company for that period; c. proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of this Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d. they have prepared the annual accounts on a going concern basis; e. proper internal financial controls are in place and that such internal financial controls are adequate and are operating effectively; and f. systems to ensure compliance with the provisions of all applicable laws were in place and that such systems were adequate and operating effectively. 30. Details of Loans, Guarantee and Investments Details of Loans made during the period under review pursuant to section 186 (4) are enclosed as Annexure 'D' to this report. 31. Deposits During the period January 01, 2014 to March 31, 2015, there were no deposits as per the provisions of Companies Act, 2013. 32. Material Changes and Commitments There were no material changes and commitments between the end of the period under review and the date of this report which could have an impact on the Company's operation in the future or its status as a "going concern". 33. Significant and Material Orders passed by the Regulators or Courts There are no significant or material orders passed by the Regulators/Courts which would impact the going concern status of the Company and its future operations. 34. Acknowledgements The Directors express their gratitude to the various Central and State Government Departments for their continued cooperation extended to the Company. The Directors also thank all customers, dealers, suppliers, banks, members and business partners for the excellent support received from them. The Directors would also like to acknowledge the exceptional contribution and commitment from the employees of the Company during the period under review. 35. Disclaimer The Ministry of Corporate Affairs vide its Circular No. 08/2014 dated April 04, 2014 clarified that the financial statements and documents required to be attached thereto, in respect of financial year commencing prior to April 01, 2014 shall continue to be governed by the provisions of Companies Act, 1956, schedules and rules made thereunder. Though the financial statements and the Auditors' Report have been prepared as per the provisions of Companies Act, 1956, the Company has to the extent possible provided the information in the Board's Report as per the provisions of Companies Act, 2013. 36. Cautionary Statement Statements in the Board's Report and the Management Discussion & Analysis describing the Company's objective, expectations or forecasts may be forward - looking within the meaning of applicable laws and regulations. Actual results may differ materially from those expressed in the statement. For and on behalf of the Board of Directors V. K. Viswanathan Chairman Date: May 29, 2015 |