Board’s Report Dear Shareholders, Your Directors have great pleasure to report to you at the end of another exciting year and presenting the forty fourth annual report together with the audited financial statement for the year ended March 31, 2016. 1. Socio Economic Environment The socio economic environment in India seems to indicate positivity. Economic growth for the year ending March 2016 is showing signs of improvement. Lower oil prices, lower inflation, expectation of normal monsoon, building infrastructure, enabling reduce cost of business in the country and investments made in the direction of boosting rural economy promises a better year ahead for battery industry which is predominantly dependent on rural consumption. 3. Operational Review Your Company has delivered another year of steady performance inspite of sluggish performance of organized battery industry. Organized sector recorded sales of slightly over 2.1 billion pieces which is around 99% as compared to last year. Despite of such adverse industry scenario, your Company has improved its sales amount by 3% and achieved sales of Rs. 27,794 lacs as against Rs. 26,903 lacs in previous year. The profit before tax (PBT) from ordinary activities during the year stood at Rs. 2,491 lacs which is slightly less as against Rs. 2,591 lacs registered in last financial year. In the current year, the Company could not maintain or improve the same owing to severe competition, adverse exchange rates, increase in the cost of key raw materials and sluggish market condition prevailing in battery industry. Batteries and Flashlights The overall battery industry in the organized sector is witnessing de-growth, which is mainly due to heavy inflow of inferior quality imported products dumped mainly from China at very low rates. Flashlight market has also under performed during the year 2015-16 and is at around 90% to previous year. This is mainly due to its dependence on monsoon which was sluggish during the year. In stiff conditions also your Company has established growth of around 102% over previous year. Prospects The organized battery industry is facing challenges owing to cheap imported batteries. Company is pleased to inform that steps are being taken to overcome this situation within a reasonable time frame which will present the battery industry in much brighter prospects for the years to come. 4. Dividend Keeping in view the current profitability of the Company, your Directors are pleased to recommend payment of a dividend of Rs. 7/- per equity share (@ 70% at par value of Rs. 10/- each) (previous year Rs. 7/- per equity share), subject to the approval of shareholders at the forthcoming Annual General Meeting. The dividend, when approved, will entail payment to shareholders of Rs. 525 lacs. It will be tax free income in the hands of recipients. However, the Company’s outflow towards dividend distribution tax would be to the tune of Rs. 106.88 lacs. 5. Management Discussion and Analysis A. Business Overview Zinc carbon batteries Zinc carbon sales of organized manufacturers have reported sales at around 99% as compared to previous year. However, the dry battery consumption in India is much more due to continuous import of Chinese batteries at dumped price. In this context there is a scope for organized sector to grow. Another significant factor which is affecting the sales turnover is due to the shift in consumer preference from high value D size batteries towards low priced AA / AAA size batteries. The above trend is in line with the global trend and envisaging the change in trend towards miniaturization, your Company has invested in enhancing the production capacity of AAA category. The growth in AAA category is expected to continue in the years to come and your Company is well placed to take advantage of this growing segment. Alkaline batteries At present battery industry in India is dominated by zinc carbon batteries and alkaline contributes only 4% of the total battery demand in the country. Contrary to this, in developed countries the alkaline segment dominates the total battery demand. Alkaline is a category for future growth. Realizing this, your Company is aggressively concentrating its activities towards improvement of sales in this category. The Company is pleased to report having doubled its share in this category during the year 2015-16 v/s previous year. Flashlights Flashlight market is shared equally by organized and unorganized sectors. Unorganized sector continuously launch look alike low price models. This coupled with weak monsoon has resulted into flashlight segment showing de-growth for the year 2015-16 at around 90% in the organized sector. Your Company is pleased to report achieving growth rate of 102% during the year. The Company foresees large opportunity in flashlight market owing to ever increasing demand of alternative solutions required by consumers to cope with power cuts. Rechargeable batteries Rechargeable battery market is stagnant and contributes around 1% to total battery demand. This segment is dominated by imported cheap rechargeable batteries. Your Company has successfully marked its presence in marketing and sales of “eneloop” brand of rechargeable batteries and chargers. Company intends to aggressively face the challenges from cheap imported products. Dealers and consumers appreciate the quality & superiority of our rechargeable batteries but are attracted by huge margins and low offer rates of imported rechargeable batteries. B. Industry Structure and Development Organized battery industry has marginally gone down in the financial year 2015-16. It also indicates changes in the buying preferences of the consumer. “D Size” continues to de-grow. De-growth in “AA” Economy segment and double digit growth in “AAA” segment has opened up challenges to be faced in the year 2016-17. As a result of consumer shift towards miniaturization, “AAA” segment has played a very positive role in maintaining sales of the industry and is expected to grow further. Company is pleased to announce that having enhanced its production capabilities with successful commissioning of new “AAA” production line, it is well placed to take advantage in this growing segment. Marketing and Distribution Your Company has been continuously making efforts not only to strengthen its distribution network but simultaneously also concentrating on improving the productivity of each and every members of its sales team through training and educative programs. To support productivity enhancement the Company has also undertaken various brand building activities in rural as well as urban markets such as wall paintings, sun sheds, dealer boards and advertisement in bus panels etc. The Company also continued its basic activity i.e. “DISHA” which helped in improving the visibility of Panasonic batteries at shop fronts. C. Opportunities and threats Opportunities Presently, per capita consumption of batteries in India is quite low as compared to other developed countries. It indicates potential for higher future growth. Battery is the cheapest source of portable power and its consumption is always expected to grow as it also is an item of recurring use. Changing usage patterns, arrival of new appliances, shift towards miniaturization of appliances, growing income levels and changing life style promises growth especially in AA/AAA batteries. Threats Import of huge quantity of low performance cheap Chinese batteries poses a big threat to the organized sector of the Industry. It not only poses more pressure on the pricing of economy range of batteries but also augments price competition giving lower operating margins which leaves less scope for research and development. D. Risks & Concerns Continuous upward trend in raw material cost and devaluation of rupee are a matter of concern for the Indian economy including battery industry. E. Outlook The current trend of battery usage pattern in India is gradually moving in line with global trend. It is a positive sign and first step towards moving up with the global per capita consumption which at present is much higher than the per capita consumption in India. F. Internal Financial Controls The Company has an adequate system of internal control to ensure compliance with policies and procedures. The internal audit is done by an independent firm of Chartered Accountants. Internal audits are regularly carried out to review the internal control systems. The internal audit reports along with recommendations contained therein are reviewed by the Audit Committee of the Board. G. Development in Human Resource and Industrial Relation Your Directors wish to place on record their appreciation to all its employees for their sustained efforts and valuable contribution. Your Company works on the principle of “People before Product”, which enables cordial relationship amongst the employees. The total employee strength of the Company as on March 31, 2016 stood at 836. H. Research & Development The goal of our Company is to supply high quality products to our valued customers. Need of customers is changing frequently as per the usage pattern of gadgets. If additional features of environment friendly products with high quality & safety features are available, it would lead to higher level of customer satisfaction and consumer delight. Keeping the above objective in view, the research and development activities were focused towards manufacturing of best quality products with low manufacturing cost, incorporating additional features of safety of appliances and offering environment friendly products. As a part of continual improvement, your Company, during the year, has taken lead in eliminating heavy metal i.e. “Lead” (Pb) from dry battery for which efforts during past several years have been made under the guidance of the Panasonic Corporation, Japan. The above is the joint effort made by your Company under the guidance of Panasonic Corporation to manufacture lead free batteries despite the lead levels being permissible as per the Indian regulation. As a result of the above initiative, effective from August 2016 onwards, your Company will be the only Company in India manufacturing the lead free dry battery. You would be happy to know that at present, yours is the only Company in India to manufacture complete range of eco-friendly products. Your Company is planning to create awareness amongst employees and business partners etc. by way of special training programs and conferences with the sales channels to take advantage of this exclusive initiative in the market place. Your Company is also committed to be “No. 1 Green Innovative Company in India” by supplying eco-friendly products adopting global vision philosophy of Panasonic Corporation. During the year, your Company has enhanced the manufacturing capacity of R03/ AAA battery by introduction of new manufacturing line, to meet the growing segment. During the year, several activities were undertaken to improve product quality without increasing cost and process losses by use of statistical methods like QC seven tools, Q.C. Circle and Kaizen activities. This will lead to enhancement in the confidence level of the employees, suppliers, business associates and customers. You will be glad to know that, during the year, your Company introduced the highest performance grade of product in R20 paste type “Panasonic Gold” in attractive packaging with the objective to provide “Value for Money” to our valued customers. Further, during the year under review, your Company improved the recycle rate as per the guidelines of collaborator for the waste generated out of manufacturing process. Your Company also carried out various environmental activities like tree plantation, training and awareness to employees to conserve natural resources. 6. Corporate Governance As per requirement of SEBI (LODR) Regulations, 2015, a separate section on corporate governance practices followed by the Company, together with a certificate from the Company’s Auditors confirming compliance, forms an integral part of this Report. 7. Extract of Annual Return The details forming part of the extract of the Annual Return in MGT 9 Form annexed herewith. (Ref. “Annexure-A”) 8. Board Meetings Schedules of Board and Committee meetings are prepared and circulated in advance to the Directors. During the year, four Board Meetings and four Audit Committee meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. 9. Directors’ Responsibility Statement To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Section 134(3)(c) of the Companies Act, 2013. (a) that in the preparation of the annual accounts for the year ended March 31, 2016 the applicable accounting standards have been followed along with proper explanation relating to material departures; if any; (b) that the directors had 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 as at March 31, 2016 and of the profit and loss of the Company for the year ended on that date; (c) that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013 for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; (d) that the directors had prepared the annual accounts on a going concern basis; (e) that the directors, in the case of a listed Company, had laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and were operating effectively; and (f) that the directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 10. Declaration by Independent Directors The Company had received declarations from all Independent Directors that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013 and requirements of SEBI (LODR) Regulations, 2015. 11. Nomination & Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The details of the remuneration policy are stated in the Corporate Governance Report. 12. Auditor’s Report No qualifications or adverse remarks have been made either by Statutory Auditors in their report or by Company Secretary in practice in his Secretarial Audit Report. 13. Related Party Transactions All related party transactions that were entered into during the financial year were on an arm’s length basis and majority of those transactions were in the ordinary course of business. There are no materially significant related party transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the Company at large. All related party transactions were placed before the Audit Committee and also the Board for approval. Prior omnibus approval of the Audit Committee was obtained for the transactions which were of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted were reviewed and a statement giving details of all related party transactions was placed before the Audit Committee and the Board of Directors for their approval on a quarterly basis. The policy on related party transactions as approved by the Board is uploaded on the Company’s website. None of the Directors has any pecuniary relationships or transactions vis-à-vis the Company. The particulars of contracts or arrangements with related parties given in “AOC 2” Form annexed herewith. (Ref. “Annexure-B”) 14. Conservation of Energy, Technology Absorption, Foreign Exchange Earnings and Outgo The details of conservation of energy, technology absorption, foreign exchange earnings and outgo are annexed herewith. (Ref. “Annexure-C”) 15. Corporate Social Responsibility During the year under review, as part of its initiatives under Corporate Social Responsibility (CSR), the Company has expanded its activities and participated in the projects in the areas of eradication of hunger, pure drinking water, health, hygiene, sanitation, medical to specially abled people and education undertaken by various NGOs and Trusts. These projects are in accordance with Schedule VII of the Companies Act, 2013. The annual report on CSR activities is annexed herewith. (Ref. “Annexure-D”) 16. Disclosure under the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 The Company has been employing about 20 women employees in various cadres within the factory premises. The Company has in place an anti-harassment policy in line with the requirements of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Internal Complaint Committee has been setup to redress complaints which are monitored by the presiding officer working at senior level who directly reports to the Chairman & Managing Director. All female employees are covered under the policy. There was no complaint received from any employee during the financial year 2015-16 and hence, no complaint is outstanding as on March 31, 2016 for redressal. 17. Board Evaluation Pursuant to the provisions of schedule IV of the Companies Act, 2013 and SEBI (LODR) Regulations, 2015, a structured questionnaire was prepared after taking into consideration the various aspects of the Board’s functioning, composition of the Board and its committees. The Board has carried out an annual performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its committees. The Board of Directors expressed their satisfaction with the evaluation process. 18. Directors As per succession planning, the present term of Mr. S. K. Khurana as Chairman & Managing Director is getting expired on September 30, 2016 and members had already re-designated him as an Executive Chairman w.e.f. October 01, 2016. In accordance with the succession planning of Mr. S. K. Khurana, the Board and Members had already appointed Mr. Mikio Morikawa as Joint Managing Director w.e.f. July 01, 2015 subject to approval of Central Government. It was also decided to elevate Mr. Morikawa as Managing Director w.e.f. October 01, 2016. But due to non-availability of employment visa, his approval as Joint Managing Director has been rejected by the Central Government and the Board had to re-designate him as Non-executive Director of the Company w.e.f. January 28, 2016. The Board had, on the recommendation of the Nomination & Remuneration Committee, again appointed Mr. Morikawa as Managing Director w.e.f. October 01, 2016. As per the provisions of the Companies Act, 2013, Mr. Morikawa, currently being the Non-executive Director, retires by rotation and being eligible offers himself for re-appointment. Mr. M. Shigeta had resigned from the Board w.e.f. January 29, 2016. The Board had placed on record its appreciation for the valuable contribution provided by Mr. Shigeta during his tenure as Director of the Company. The Board had, to fill up the vacancy caused by the resignation of Mr. Shigeta, appointed Mr. Chiaki Kidani as additional Director w.e.f. February 11, 2016. As required by SEBI (LODR) Regulations, 2015, the relevant details in respect of the Directors proposed to be appointed / re-appointed are set out in the Corporate Governance Report forming part of the Board’s Report. The Directors recommend all the resolutions placed before the Members relating to appointment of Directors for their approval. 19. Statutory Auditors The Company’s Auditors, M/s. K. C. Mehta & Co., Chartered Accountants, Vadodara, have already been appointed for a term of three years subject to ratification by shareholders at every Annual General Meeting. They have confirmed their eligibility under Section 141 of the Companies Act, 2013 and the Rules framed thereunder for reappointment as Auditors of the Company. As required under SEBI (LODR) Regulations, 2015, the auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. 20. Cost Auditors Pursuant to Section 148 of the Companies Act, 2013 read with The Companies (Cost Records and Audit) Amendment Rules, 2014, the cost audit records maintained by the Company in respect of its activity is required to be audited. Your Directors had, on the recommendation of the Audit Committee, appointed M/s. Diwanji & Co. to audit the cost accounts of the Company for the FY 2016-17 on a remuneration of Rs.1,25,000/-. As required under the Companies Act, 2013, the remuneration payable to the cost auditor is required to be placed before the Members in a general meeting for their ratification. Accordingly, a Resolution seeking Member’s ratification for the remuneration payable to M/s. Diwanji & Co. Cost Auditors is included at Item No. 5 of the Notice convening the Annual General Meeting. 21. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 and The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. J. J. Gandhi & Co., a firm of Company Secretaries in practice to undertake the Secretarial Audit of the Company. The Secretarial Audit Report is annexed herewith. (Ref. “Annexure-E”) 22. Subsidiaries Your Company does not have any subsidiary / subsidiaries within the meaning of the Companies Act, 2013. 23. Deposits The Company has not accepted any fixed deposits and accordingly no amount was outstanding as on the date of the Balance Sheet. 24. Disclosure under Rule 5 of Companies (Appointment & Remuneration) Rules, 2014 Disclosures required under Section 197 of the Companies Act, 2013 read with rule 5 of Companies (Appointment & Remuneration) Rules, 2014 have been annexed herewith. (Ref. “Annexure-F”) 25. Significant and Material Orders passed by the Regulators or Courts 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. 26. Acknowledgment Your Directors have pleasure to acknowledge the continued and wholehearted support received from all its trade partners, valued customers and vendors. Directors also place on record sincere appreciation of the commitment and enthusiasm of all its employees. Directors also place on record sincere gratitude and deep appreciation to our promoters “Panasonic Corporation, Japan” and to all our valued stakeholders. For and on behalf of the Board S. K. Khurana Chairman & Managing Director Vadodara, May 24, 2016 |