DIRECTORS’ REPORT TO THE MEMBERS OF EICHER MOTORS LIMITED The Directors have pleasure in presenting the Thirty Fourth Annual Report along with the Audited Financial Statements of your Company for the financial period/year ended March 31, 2016 CHANGE IN FINANCIAL YEAR Pursuant to the provisions of Section 2(41) of the Companies Act, 2013, the financial year of every Company shall end on March 31 every year. The Company followed "January-December" as its financial year. The Board of Directors in its meeting held on February 13, 2015 decided to align the financial year of the Company with the requirements of Companies Act, 2013. Therefore the financial year under review commenced on January 1, 2015 and ended on March 31, 2016, being a period of 15 months. CHANGE IN THE NATURE OF BUSINESS, IF ANY During the financial year, the Company has altered the object clause of its Memorandum of Association by incorporating therein; a) business of dealing in all types of garments, merchandise, clothing accessories, sports apparel, protective gear, footwear and leather articles, motorcycle attachments and accessories, protective accessories including helmets. b) business of running and operating restaurants, cafeterias, pubs, breweries, driver and mechanic training centers and to organize tours, events, let out motorcycles and other related activities. Approval of shareholders was obtained through postal ballot for above amendment in the object clause of the Memorandum of Association. MATERIAL CHANGES AND COMMITMENTS AFFECTING THE FINANCIAL POSITION OF THE COMPANY THAT HAVE OCCURRED AFTER MARCH 31, 2016 TILL THE DATE OF THIS REPORT There are no material changes or commitments affecting the financial position of the Company which have occurred after March 31, 2016 till the date of this report. DIVIDEND The Board of Directors in its meeting held on March 12, 2016 had approved payment of interim dividend of Rs. 100/- per Equity Share (@ 1000%) on 2,71,61,183 Equity Shares of the Company of face value of Rs. 10/- each fully paid-up aggregating to Rs. 271,61,18,300/- out of the profits for the financial year 2015-2016. Interim dividend was paid to the shareholders as per their shareholding in the Company as on March 23, 2016 (Record Date) The total dividend appropriation for the financial year is Rs. 2,71,61,18,300/-, as against Rs. 1,35,53,64,150/- in the previous financial year. AMOUNTS TRANSFERRED TO RESERVES A sum of Rs. 122.98 crores being 10% of the Profit after Tax of the Financial Year has been transferred to the General Reserve of the Company. BRIEF DESCRIPTION OF THE STATE OF COMPANY’S AFFAIRS/ BUSINESS PERFORMANCE Your Company’s Royal Enfield unit continues to grow significantly. It sold 6,00,944 motorcycles in the financial year 2015-16 (15 months), 98.6% more when compared to 2014 (12 months) sales of 3,02,592. Out of 6,00,944 motorcycles sold in 2015-16 (15 months), 11,653 were exported, a growth of 87.3% over previous year volume of 6,221 motorcycles in 2014 (12 months). Revenue from operations (net) for 2015-16 (15 months) year was Rs. 6,188.03 crores, 104.1% growth over previous year (Rs. 3031.22 crores for 12 months). Net Sales of spare parts, gears and services increased to Rs. 487.49 crores in 2015-16 (15 months) from Rs. 229.31 crores in the previous year (12 months), registering a growth of 112.6%. Maximizing operating leverage is a key focus in your Company. This enabled your Company to grow profits faster than net sales from operations. Your Company’s profit before depreciation, interest and Tax was Rs. 1,730.48 crores in 2015-16 (15 months), a growth of 135.9% over Rs. 733.56 crores recorded in 2014 (12 months) MARKET AND FUTURE PROSPECTS Please refer to Management Discussion & Analysis Report which forms part of the Annual Report. ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO Information on conservation of energy, technology absorption, foreign exchange earnings and out go, as required to be given pursuant to provisions of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014 is provided under Annexure-1. DISCLOSURE REGARDING ISSUE OF SWEAT EQUITY SHARES AND EQUITY SHARES WITH DIFFERENTIAL RIGHTS The Company has not issued any Sweat Equity Shares or Equity Shares with Differential Rights during the financial year. CHANGES IN SHARE CAPITAL & EICHER EMPLOYEE STOCK OPTION PLAN 2006 The paid up Equity Share Capital of the Company as on March 31, 2016 was Rs. 27,16,11,830/-. During the year under review, the Company has issued 56,400 Equity Shares of face value of Rs. 10 each pursuant to its Employees Stock Option Plan. The Statement giving complete details as at March 31, 2016 under SEBI Regulations form part of the Directors’ Report. Further, details of options granted and exercised is included at Note 2(iii) in the notes to accounts forming part of financial statements. DEPOSITS The Company has not accepted any deposits from the public/members under Section 73 of the Act read with Companies (Acceptance of Deposits) Rules, 2014 during the financial year. The Company has not renewed / accepted fixed deposits after May 29, 2009. There are no deposits that remain unclaimed. BOARD OF DIRECTORS During the financial year, the Company had appointed Mr Srinivasan Sandilya, Mr Priya Brat, Mr M J Subbaiah, Mr Prateek Jalan and Ms Manvi Sinha as Independent Directors of the Company pursuant to section 149 of the Companies Act, 2013 and Clause 49 of the erstwhile Listing Agreement for a term of five year each, not liable to retire by rotation. In accordance with Section 149(7) of the Act, each Independent Director has given a written declaration to the Company that he/she meets the criteria of independence as laid down under Section 149(6) of the Act and Clause 49 of the Listing Agreement/ Regulation 16(1) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Board of Directors in its meeting held on April 27, 2016 has, subject to the approval of the shareholders and approval of the central government, re-appointed Mr Siddhartha Lal as Managing Director of the Company for a further period of 5 years effective from May 1, 2016. Mr Siddhartha Lal shall be liable to retire by rotation pursuant to the provisions of Section 152 of the Companies Act, 2013. The proposal for re-appointment of Mr Siddhartha Lal and the terms and conditions of his reappointment including remuneration are set out in the notice convening the 34th Annual General Meeting. COMPANY’S POLICY ON DIRECTORS’ APPOINTMENT AND REMUNERATION Company’s Hiring & Employment Policy: A number of factors are considered towards selecting candidates at the Board level which include: Ability to contribute to strategic thinking; Proficiency in Governance norms, policies and mechanisms at the Board level; Relevant cross industry/functional experience, educational background, skills and experience; Wherever relevant, independence of Directors in terms of applicable regulations. It is expected that the Individual Board members are willing to learn the business of the company and to devote the necessary time and effort to be well-informed. With respect to core competencies and personal reputation, our practices ensure through the selection process that all Directors: Exhibit integrity and accountability; Exercise informed judgment; Are financially literate; Are mature and confident individuals; Operate with high performance standards. Removal of Directors Under extreme circumstances and in highly unusual situations it may become necessary to remove a member from the Board of Directors. Reasons for doing so, may relate to any of the following (indicative; other than as provided under the Companies Act 2013): i. Breach of confidentiality in anyway; ii. Failure to meet obligatory procedures in the disclosure of conflict of interest; iii. Failure to fulfil the fiduciary duties of a Director for the Company; iv. Acting in any other manner which is against the interests of the company. Company’s Remuneration Policy: The Company’s Compensation Strategy defines the values underlying compensation philosophy for its employees. Compensation is a critical piece of overall human-resources strategy and more broadly refers to all forms of financial returns and tangible benefits employees receive as a part of their employment relationship. The Remuneration/Compensation Policy of the Company is designed to attract, motivate and retain manpower. This Policy applies to directors and senior management including its Key Managerial Personnel (KMP) and other employees of the Company. The compensation strategy revolves around getting the "most suited talent in the market". Policy: The remuneration of the Managing Director, Executive Director, Key Managerial Personnel (KMPs) and other employees of the Company is based on a policy framed by the Nomination and Remuneration committee based on criteria such as industry benchmarks, the Company’s performance vis-à-vis the industry, responsibilities and performance assessment. The Company pays remuneration by way of salary, perquisites and allowances (fixed component), incentive remuneration and/or commission (variable components). Loans/ advances may be extended to employees below the executive level subject to approval of Human Resources department. Additionally, in the event of exigencies arising due to calamities, the Company may provide financial assistance to any affected employee by way of extending interest free loan in an amount not exceeding his/her two months’ gross salary. Remuneration by way of commission to the Non Executive Directors is decided by the Board of Directors. The Members have approved the payment of remuneration by way of commission to the non Executive Directors of the Company, of a sum not exceeding 1% per annum of the net profits of the Company, calculated in accordance with the provisions of the Act. Remuneration of KMPs and employees largely consists of basic remuneration, perquisites, allowances and performance incentives. The components of remuneration vary for different employee levels and are governed by industry patterns, qualifications and experience of the employee and his/her responsibility areas, employee performance assessment etc. ANNUAL EVALUATION OF BOARD, COMMITTEES AND INDIVIDUAL DIRECTORS During the financial year, formal annual evaluation of the Board, its committees and individual Directors was carried out pursuant to the Board Performance Evaluation Policy of the Company. The performance of the Board and committees was evaluated after seeking inputs from all the Directors on the basis of the criteria such as Board/ committee constitutions, frequency of meetings, effectiveness of processes etc. The performance of individual Directors (including Independent Directors) was evaluated by the Board and Nomination & Remuneration committee (excluding the Director being evaluated) after seeking inputs from all Directors on the basis of the criteria such as thought contribution, business insights and applied knowledge. A separate meeting of Independent Directors was also held to review the performance of Managing Director, performance of the Board as a whole and performance of the Chairperson of the Company, taking into account the views of Executive Directors and Non-Executive Directors. MEETINGS OF BOARD OF DIRECTORS Six (6) meetings of the Board of Directors of the Company were conducted during the financial year. The details of board/committee/shareholders meetings are provided under the Corporate Governance Report which forms part of the Annual Report. DETAIL OF LOANS, GUARANTEES AND INVESTMENTS U/S 186 OF THE ACT The detail of loans, guarantees and investments made by the Company during the year which are covered under section 186 of the Act is provided under Annexure - 2 PARTICULARS OF RELATED PARTY TRANSACTIONS All contracts/ arrangements/ transactions entered by the Company during the financial year with related parties were on an arm’s length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement/ SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Related Party Transactions were placed before the Audit Committee for its prior approval. There were no materially significant Related Party Transactions made by the Company with Promoters, Directors, Key Managerial Personnel or other designated persons, subsidiaries and associate Companies which may have a potential conflict with the interest of the Company. There are no transactions that are required to be reported in Form AOC-2 hence said form does not form part of this report. However, the details of the transactions with Related Party are provided in the Company’s financial statements in accordance with the Accounting Standards. The Company has a Policy on materiality of and dealing with Related Party Transactions, as approved by the Board, which is available at its website www.eichermotors.com. REPORT ON PERFORMANCE AND FINANCIAL POSITION OF SUBSIDIARIES, ASSOCIATES AND JOINT VENTURE COMPANIES Pursuant to the provisions of Section 129(3) of the Act, a statement containing performance & salient features of the financial statements of Company’s subsidiaries, associate and join venture Companies in Form AOC-1 is attached as Annexure-3. DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY’S OPERATIONS IN FUTURE There are no significant material orders passed by the Regulators or Courts or Tribunal which would impact the going concern status of the Company and its future operations. However, Members attention is drawn to the statement on contingent liabilities, commitments in the notes forming part of the Financial Statements. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THE FINANCIAL STATEMENTS Details of internal financial controls and its adequacy are included in the Management Discussion and Analysis Report, which forms part of the Annual Report. DETAILS OF ESTABLISHMENT OF VIGIL MECHANISM The Company has formulated a Whistle Blower Policy to establish a vigil mechanism for Directors and employees of the Company to report concerns about unethical behavior, actual or suspected fraud or violation of the Company’s code of conduct or ethics policy. The Whistle Blower Policy is available on the website of the Company. CORPORATE SOCIAL RESPONSIBILITY The Company has constituted a Corporate Social Responsibility Committee and has framed a Corporate Social Responsibility Policy and identified Healthcare, Children’s education, Road safety and Environmental sustainability as some of the key areas. The Company will continue to support social projects that are consistent with the policy. CONSOLIDATED FINANCIAL STATEMENTS In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements read with the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015, the Consolidated Audited Financial Statements and Consolidated Cash Flow Statement for the year ended March 31, 2016 are provided in the Annual Report. A statement containing the salient features of the financial statements of each of the subsidiary and joint venture in the prescribed Form AOC-1 is annexed (Annexure-3). Pursuant to Section 136 of the Act, the financial statements of the subsidiary and joint venture companies are kept for inspection by the shareholders at the Registered Office of the Company. The Company shall provide free of cost, the copy of the financial statements of its subsidiary and joint venture companies to the shareholders upon their request. The statements are also available on the website of the Company www. eichermotors.com. The consolidated net profit of the Company and its subsidiaries amounted to Rs. 1,277.88 crores for the financial year as compared to Rs. 615.36 crores for the previous year. STATUTORY AUDITORS AND AUDITORS’ REPORT M/s Deloitte Haskins & Sells, Chartered Accountants, (Firm Registration Number: 015125N) were reappointed as Statutory Auditors of the Company in the 33rd (Thirty Third) Annual General Meeting of the Company for a period of three years i.e. until the conclusion of the 36th (Thirty Sixth) Annual General Meeting, subject to ratification of their appointment at every Annual General Meeting by the shareholders. The Board proposes ratification of appointment of M/s Deloitte Haskins & Sells as Statutory Auditors of the Company for approval of the shareholders in the ensuing Annual General Meeting M/s Deloitte Haskins & Sells have furnished a certificate to the effect that the ratification of their appointment would be in accordance with the provisions of Sections 139 and 141 of the Act. As required under the SEBI (Listing Obligations and Disclosure Requirements) 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. The Auditors’ Report is annexed hereto and forms part of the Annual Report. The Auditors’ report does not contain any qualifications, reservations or adverse remarks. SECRETARIAL AUDITORS AND THEIR REPORT The Board has appointed M/s. RDA & Associates, Company Secretaries, to conduct Secretarial Audit for the financial year ended March 31, 2016. The Secretarial Audit Report as required under Section 204 of the Act is annexed herewith marked as Annexure-5 to this Report. The Secretarial Auditors’ report does not contain any qualifications, reservations or adverse remarks. COST AUDITORS Mr V Kalyanraman, a qualified Cost Accountant, is appointed as the cost auditor to carry out audit of the cost records of the Company for the year 2015-16 pertaining to manufacture of engines and parts thereof. CORPORATE GOVERNANCE AND MANAGEMENT DISCUSSION & ANALYSIS REPORT As per SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, a Management Discussion and Analysis report is part of the Annual Report. A report on Corporate Governance together with the Auditors’ Certificate regarding the compliance of conditions of Corporate Governance is part of the Annual Report. BUSINESS RESPONSIBILITY REPORT The Business Responsibility Report for the financial year, as stipulated under Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 is part of the Annual Report. EXTRACT OF ANNUAL RETURN Pursuant to the provisions of section 92(3) of the Act, the details forming part of the extract of the Annual Return in Form MGT-9 is annexed herewith as Annexure-6. 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 Financial Statements for the year ended 31st March 2016, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; b) that such accounting policies as mentioned in Note 1 of the Notes to the Financial Statements have been selected and applied consistently and judgement and estimates have been made that are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company as at 31st March, 2016 and of the profit of the Company for the year ended on that date; c) that proper and sufficient care has been taken 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 annual Financial Statements have been prepared on a going concern basis; e) that proper internal financial controls to be followed by the Company have been laid down and that the financial controls are adequate and were operating effectively; and f) that proper systems have been devised to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. PARTICULARS OF EMPLOYEES Disclosures as required under Section 197(12) of the Companies Act, 2013 read with Rule 5(1) of the companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 The statement containing particulars of employees who were in receipt of remuneration of not less than Rs. 60 lakhs during the year or Rs. 5 lakhs per month during any part of the said year as required under Section 197(12) of the Act read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is provided under Annexure-7. RISK MANAGEMENT Necessary information is provided under Management Discussion and Analysis Report which forms part of the Annual Report. SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 The Company has zero tolerance towards sexual harassment at the workplace and towards this end, has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. All employees (permanent, contractual, temporary, trainees) are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment. During the financial year under review, the Company has not received any complaints of sexual harassment from any employees of the Company. ACKNOWLEDGEMENT We thank our customers, business associates and bankers for their continued support during the financial year. We wish to convey our deep appreciation to the dealers of the Company for their achievements in the area of sales and service, and to suppliers/ vendors for their valuable support. We also place on record our sincere appreciation for the enthusiasm and commitment of Company’s employees for the growth of the Company and look forward to their continued involvement and support. For and on behalf of the Board S. Sandilya Chairman DIN 00037542 Siddhartha Lal Managing Director DIN00037645 Place: Gurgaon Date: May 5, 2016 CIN: L34102DL1982PLC129877 Regd. Off: 3rd Floor-Select Citywalk A-3 District Centre, Saket New Delhi – 110017 Website: www.eichermotors.com, E-mail: investors@eicher.in |