DIRECTORS' REPORT Dear Members, Board of Directors of your company has great pleasure in presenting to you their 36th Annual Report and the audited statement of accounts for the year ended March 31, 2016. DIVIDEND The Company has paid an Interim Dividend of 25% ( Rs. 2.50 per Equity Share) to the shareholders on February 22, 2016. The Board of Directors has recommended a Final Dividend of 125% 12.50 per equity share) to the Equity shareholders. Thus, the aggregate dividend for the year works out to 150% 15/- per Equity share). The said dividend, if approved by the members, would involve a total cash outflow of Rs. 1159.37 lakhs (inclusive of Interim Dividend and Dividend Distribution Tax thereon) for the FY 2015-16 and result in a payout of 70% of the current profit (Previous year 76%). TRANSFER TO GENERAL RESERVE The Company proposes to transfer Rs. 165.30 lakhs to the general reserve out of the amount available for appropriation. SHARE CAPITAL The paid up Equity Share Capital as on 31st March, 2016 was Rs. 642.16 lakhs. During the year under review, the Company has not issued any shares. OPERATIONS The bus segment has maintained its dominance in contributing to your Company's revenue and profit. Proportion of bus division's revenue in total revenue of the Company clocked 85% during the year under review. Large portion of our workforce is operating in the bus segment at Goa. Operations at the pressings division though under pressure improved appreciably by 11% as compared to last year. Your Company's Product Sale for the financial year 2015-16 crossed the key milestone of Rs. 417 crores, reflecting a growth of 5.55% over the previous financial year. The Company's profit before tax during the financial 2015-16 year was at Rs. 25.45 crores as against Rs. 23.61 crores in the preceding financial year. Net profit after tax stood at Rs. 16.53 crores as compared to Rs. 15.26 crores in the preceding financial year. During FY 2015-16, your Company sold highest number of buses (4,960 numbers), so far sold in any of previous financial years. Your Company also achieved the landmark of 52,657 buses sold from FY 1989-90 to 2015-16. Bus Body Segment Revenue from Bus Segment increased by 5% at Rs. 352.61 crores in FY 2015-16, as compared Rs. 336.93 crores in the preceding financial year. In FY 2015-16, 4,960 buses were sold as compared to 4,591 buses in preceding financial year which is an increase of 369 buses. This is the highest number of buses manufactured so far in any of the previous financial year. Out of the 4,960 buses sold during the financial year 2015-16, 2,647 buses were for Export Application which was lower by 7%, as compared to the preceding financial year. The major factor in reduction of Export Application buses was reduced demand from Middle East caused by the economic slowdown as a result of drop in Oil Prices. While the overall demand for buses in the country was similar to that witnessed in the previous year whereas Company able to maintain volume growth by increasing share of business in Direct Customer Orders by In-house Marketing efforts and Entry into new bus segment for TML by introduction of new models during the financial year 2015-16. Pressings Segment Sheet metal business is in sync with the automobile industry and is dependent on the progress of the same. The segment is necessarily capital incentive which is presently having over capacity with respect to current industry demand. With a marginal improvement in the industry, Sheet Metal business also improved during the financial year 2015-16. Revenue (exclusive of miscellaneous income) from this segment has shown increase from Rs. 57.97 crores (2014-15), to Rs. 64.30 crores with a growth of 11% in the given financial year. This segment looks more promising with new orders received from Tata Motors-Dharwad and Tata Cummins- Phaltan and Jamshedpur, which will help in increasing the Sheet Metal Division's capacity utilization in the financial year 2016-17. Share of pressings business in the overall revenue of the company has increased marginally from 14.68% in FY 2014-15 to 15.42% in FY 2015-16. HUMAN RESOURCE As a result of ongoing endeavour of rationalising and rightsizing the workforce, the employee cost remain 10% of sale revenue beside increase in salaries & wage and overall strength of permanent employees came down to 572 as on 31st March 2016 against 576 on 31st March 2015. CORPORATE SOCIAL RESPONSIBILIT The key focus areas of the ACGL's CSR program are women empowerment, support of the differently abled, education, public health and environment. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. Brief outline of the CSR Policy: In ACGL, Corporate Social Responsibility (CSR) philosophy revolves around engagements in socially relevant activities for the under-privileged sections of the society. The Company believes in inclusive growth to facilitate creation of a value-based and empowered society through continuous and purposeful engagement of society around. Our commitment to CSR is focused on initiatives that make a constructive contribution to the community and encourage sustainable development. A policy on CSR has been formulated by the Corporate Social Responsibility Committee (CSR Committee) and adopted by the Board of Directors. The contents of this policy are available on the website of the Company. Your Company is committed to allocate at least 2% of its average Net Profits made during the three immediately preceding financial years calculated in accordance with the provisions of the Act and the Rules made there under towards Corporate Social Responsibility projects. The Company would undertake one or more of the activities which relate to schedule VII of the Act as its projects for CSR activities. Composition of the Committee: As per Section 135 (1) of the Companies Act,2013, the Company has constituted a Corporate Social Responsibility Committee. Mr S V Salgaocar resigned from the Board of the Company w. e. f. 29.10.2015. The composition of the Committee as on date is as under: Mr S V Salgaocar Chairman (upto 29.10.2015) Mr Shrinivas V Dempo Chairman (w.e.f. 29.10.2015) Mr P F X D'Lima Member Mr Steven Pinto Member Dr Vaijayanti Pandit Member Mr O V Ajay Member The Annual Report on CSR activities for FY 2015-16 is annexed as "Annexure A". CORPORATE GOVERNANCE Pursuant to Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR) and SEBI circular dated October 13, 2015 a fresh Listing Agreement has been executed by the Company with Bombay Stock Exchange Limited within the prescribed time limit. A separate section on Corporate Governance forming part of the Directors' Report and Auditors' certificate regarding compliance of conditions of Corporate Governance have been included in the Annual Report. FINANCE Borrowings of the company in the form of Cash Credits as at end March, 2016 stood at Rs. 290.34 lakhs (previous year Rs. 352.83 lakhs). Cash and bank balance stood at Rs. 178.39 lakhs (previous year Rs. 167.25 lakhs). DIRECTORS AND KEY MANAGERIAL PERSONNEL Appointment and Retirement of Directors: During the year, Mr S V Salgaocar Independent Director and Chairman of the Company resigned from the services of the Company effective October 29, 2015. The Directors wish to place on record their deepest appreciation of the tremendous contribution of Mr Salgaocar in the success achieved by the Company during his long tenure as a Director and Chairman of the Company. Mr Shrinivas Dempo has been appointed as Additional (Independent) Director on the Board of the Company effective September 12, 2015. He has been appointed as the Chairman of the Company effective October 29, 2015. Pursuant to the provisions of Section 161 of the Act and the Articles of Association of the Company, Mr Dempo vacates office and is eligible for re-appointment. Members are requested to refer to Item No.5 of the Notice of the Annual General Meeting for details. All Independent Directors of the Company have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Act and Regulation 16 (1) (b) of the Listing Regulations. In the opinion of the Board, they fulfill the conditions of independence as specified in the Act and the Rules made there under and are independent of the management. In accordance with the provisions of Section 152 of the Act and the Articles of Association of the Company, Mr R Ramakrishnan retires by rotation and is eligible for re-appointment. Members are requested to refer to Item No.3 of the Notice of the Annual General Meeting for details. Governance Guidelines: The Company has adopted Governance Guidelines on Board Effectiveness. The Governance Guidelines cover aspects related to composition and role of the Board, Chairman and Directors, Board diversity, definition of independence, Director Term, Retirement Age and Committees of the Board. It also covers aspects relating to nomination, appointment, induction and development of Directors, Director Remuneration, Subsidiary oversight, Code of Conduct, Board Effectiveness Review and Mandates of Board Committees. Procedure for Nomination and Appointment of Directors: The Nomination and Remuneration Committee is responsible for developing competency requirements for the Board based on the industry and strategy of the Company. Board composition analysis reflects in-depth understanding of the Company, including its strategies, environment, operations, financial condition and compliance requirements. The Nomination and Remuneration Committee conducts a gap analysis to refresh the Board on a periodic basis, including each time a Director's appointment or re-appointment is required. The Committee is also responsible for reviewing and vetting the CVs of potential candidates vis-a-vis the required competencies and meeting potential candidates, prior to making recommendations of their nomination to the Board. At the time of appointment, specific requirements for the position, including expert knowledge expected, is communicated to the appointee. Criteria for Determining Qualifications, Positive Attributes and Independence of a Director: The Nomination and Remuneration Committee has formulated the criteria for determining qualifications, positive attributes and independence of Directors in terms of provisions of Section 178 (3) of the Act and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Independence: In accordance with the above criteria, a Director will be considered as an 'Independent Director' if he/she meets with the criteria for 'Independent Director' as laid down in the Act and Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015. Qualifications: A transparent Board nomination process is in place that encourages diversity of thought, experience, knowledge, perspective, age and gender. It is also ensured that the Board has an appropriate blend of functional and industry expertise. While recommending the appointment of a Director, the Nomination and Remuneration Committee considers the manner in which the function and domain expertise of the individual will contribute to the overall skill-domain mix of the Board. Positive Attributes: In addition to the duties as prescribed under the Act, the Directors on the Board of the Company are also expected to demonstrate high standards of ethical behavior, strong interpersonal and communication skills and soundness of judgment. Independent Directors are also expected to abide by the 'Code for Independent Directors' as outlined in Schedule IV to the Act. Annual Evaluation of Board Performance and Performance of its Committees and of Directors: Pursuant to the applicable provisions of the Act and the Listing Regulations, the Board has carried out an annual evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees. The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board, its Committees and Directors. The Board's functioning was evaluated on various aspects, including inter alia degree of fulfillment of key responsibilities, Board structure and composition, establishment and delineation of responsibilities to various Committees, effectiveness of Board processes, information and functioning. Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/support to the management outside Board/ Committee Meetings. In addition, the Chairman was also evaluated on key aspects of his role, including setting the strategic agenda of the Board, encouraging active engagement by all Board members and motivating and providing guidance to the Managing Director/CEO/Whole Time Director. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board, its Committees and of the Directors. The Chairman of the Board provided feedback to the Directors on an individual basis, as appropriate. Significant highlights, learning and action points with respect to the evaluation were presented to the Board. Remuneration Policy The Company has adopted a Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to the provisions of the Act and Listing Regulations. The philosophy for remuneration of Directors, Key Managerial Personnel and all other employees of the Company is based on the commitment of fostering a culture of leadership with trust. The Remuneration Policy of the Company is aligned to this philosophy. The Nomination and Remuneration Committee has considered the following factors while formulating the Policy: i) The level and composition of remuneration is reasonable and sufficient to attract, retain and motivate Directors of the quality required to run the Company successfully; ii) Relationship of remuneration to performance is clear and meets appropriate performance benchmarks; and iii) Remuneration to Directors, Key Managerial Personnel and Senior Management involves a balance between fixed and incentive pay reflecting short and long-term performance objectives appropriate to the working of the Company and its goals. It is affirmed that the remuneration paid to Directors, Key Managerial Personnel and all other employees is as per the Remuneration Policy of the Company. Details of the Remuneration Policy are also provided in the Corporate Governance Report. Board and Committee Meetings The Meetings dates are circulated in advance to the Directors. During the year, seven Board Meetings and four Audit Committee Meetings were convened and held. There have been no instances during the year when recommendations of the Audit Committee were not accepted by the Board. Details of the composition of the Board and its Committees and of the Meetings held and attendance of the Directors at such Meetings, are provided in the Corporate Governance Report. The intervening gap between the Meetings was within the period prescribed under the Act and the Listing Regulations. DEPOSITS FROM PUBLIC The Company has not accepted any deposits from public and as such, no amount on account of principal or interest on deposits from public was outstanding as on the date of the balance sheet. (This does not include advances against supply of spare parts and scrap not appropriated against supply of goods or provision of services within a period of 365 days from the date of acceptance of such advance- Kindly Refer section V of the MGT 9). PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The particulars of loans/guarantees/investments have been disclosed in the financial statements. The said loans/guarantees/investments are within the limits stipulated in the Section 186 (2) of the Companies Act, 2013. PARTICULARS OF EMPLOYEES AND REMUNERATION: The information required under Section 197 (12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as "Annexure B". The information required under Rule 5 (2) and (3) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is provided in the Annexure forming part of the Report. In terms of the first proviso to Section 136 of the Act, the Report and Accounts are being sent to the Shareholders excluding the aforesaid Annexure. Any Shareholder interested in obtaining the same may write to the Company Secretary at the Registered Office of the Company. Except CEO & Executive Director, none of the employees is getting covered in the aforesaid provisions. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS/ OUTGOINGS: The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134 (3) (m) of the Act read with Rule 8 of The Companies (Accounts) Rules, 2014, is annexed as "Annexure C". (1) Statutory Auditors M/s Deloitte Haskins & Sells LLP - Firm Registration No 117366W/W-100018 (DHS) who are the Statutory Auditors of the Company hold office until the ensuing Annual General Meeting. It is proposed to re-appoint them to examine and audit the accounts of the Company for the financial year 2016-17. M/s Deloitte Haskins & Sells LLP have, under Section 139(1) of the Companies Act, 2013, furnished a certificate of their eligibility for re-appointment. Members are requested to consider the re-appointment of DHS and authorize the Board of Directors to fix their remuneration. (2) Cost Audit Cost audit for the financial year 2015-16 is not applicable to the Company. (3) 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 Mr Shivram Bhat, a Practicing Company Secretary - Membership no. 10454 to undertake the Secretarial Audit of the Company for FY 2015-16. The Report of the Secretarial Auditor is annexed herewith as "Annexure D". The Statutory Auditors' Report and the Secretarial Audit Report for the financial year ended March 31, 2016 do not contain any qualification, reservation, adverse remark or disclaimer. THE EXTRACT OF THE ANNUAL RETURN FILED WITH MCA Pursuant to Section 92 (3) of the Act and Rule 12 (1) of The Companies (Management and Administration) Rules, 2014, the extract of Annual Return in form MGT.9 is annexed as "Annexure E". POLICY ON PREVENTION, PROHIBITION AND REDRESSAL OF SEXUAL HARASSMENT AT WORKPLACE The Company has zero tolerance for sexual harassment at workplace and has adopted a Policy on Prevention, Prohibition and Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules made thereunder. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, known as the Prevention of Sexual Harassment (POSH) Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The Company has not received any complaint of sexual harassment during the financial year 2015-16. VIGIL MECHANISM / WHISTLE BLOWER POLICY The Company has a whistle blower policy to deal with instances of fraud and mismanagement, if any. The details of this Policy are explained in the Corporate Governance Report and also posted on the website of the Company. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS No significant material orders have been passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company and its future operations. However, Members attention is drawn to the Statement on Contingent Liability, forming part of the Financial Statement. DIRECTORS' RESPONSIBILITY STATEMENT Based on the framework of internal financial controls and compliance systems established and maintained by the Company, work performed by the internal, statutory, and secretarial auditors and external consultant including audit of internal financial controls over financial reporting by the statutory auditors and the reviews performed by Management and the relevant Board Committees, including the Audit Committee, the Board is of the opinion that the Company's internal financial controls were adequate and effective during the financial year 2015-16. Accordingly, pursuant to Section 134(5) of the Companies Act, 2013, the Board of Directors, to the best of their knowledge and ability, confirm that: i) In the preparation of the annual accounts, the applicable accounting standards have been followed and that there are no material departures; ii) 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; iii) They have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv) They have prepared the annual accounts on a going concern basis; v) They have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; vi) They have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. RELATED PARTY TRANSACTIONS All Related Party Transactions that were entered into during the financial year were in compliance with the applicable provisions of the Companies Act, 2013 ('the Act') and the Listing Regulations (erstwhile Listing Agreement entered into with the Stock Exchange) [LODR]. Tata Motors Limited (TML) is a "Related Party" of the Company under Listing Regulations. The transactions with TML exceed the materiality threshold as prescribed under regulation 23 of LODR. The Members, at their 35th Annual General Meeting held on July 31, 2015 have accorded their approval to the Board of Directors to enter into such material contracts/arrangements/transactions with Tata Motors Limited. All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is put in place for the transactions which are repetitive in nature. A statement of all Related Party Transactions is placed before the Audit Committee for its review on a quarterly basis, specifying the nature, value and terms and conditions of the transactions. The Company has adopted a Related Party Transactions Policy. The Policy, as approved by the Board, is uploaded on the Company's website at the web link: <http://www.acglgoa.com>. Details of the transactions with Related Parties are provided in the accompanying financial statements. There were no transactions during the year which would require to be reported in Form AOC 2. RISK MANAGEMENT The Board has laid down a clear Risk Policy to identify potential business risks and install effective mitigation processes to protect Company's assets and business risks. Risk Assessment and minimization plan are reviewed by the Risk Management Committee of the Board on a periodic basis. MANAGEMENT DISCUSSION AND ANALYSIS The Management Discussion and Analysis Report as required under Listing Regulations, is provided as an Annexure to this Report. ACKNOWLEDGEMENT Your Directors would like to place on record their sincere appreciation for the support and assistance extended by the Company's suppliers, bankers and business associates. Your Directors are thankful to the esteemed shareholders for their continued support and the confidence reposed in the Company and its Management. The Directors wish to place on record their appreciation for the support and guidance provided by its parent company, Tata Motors. The Directors place on record their sincere thanks for the help and support received from Government of Goa and related Government and semi- Government agencies. Your Directors acknowledge the unstinted service rendered by the employees of the Company at all levels towards its overall success. On behalf of the Board of Directors Shrinivas Dempo Chairman Date : July 2, 2016 Place : Panaji, Goa |