BOARD'S REPORT TO THE MEMBERS The Directors have pleasure in submitting 44th Annual Report together with Audited Financial Statements of your Company for the year ended on 31 March, 2016. DIVIDEND In view of inadequate profits for the year, your Directors have decided not to recommend any dividend on equity shares of the company for the year ended 31 March, 2016. FINANCIAL PERFORMANCE The slowdown of economy on the back of recessionary trends especially in domestic tractor segment led to marginal drop in turnover for the year ended 31 March, 2016 vis a vis previous year. Further, global slowdown has led to a dip in sales to overseas customer(s). The operations of the period resulted in higher EBITDA of Rs. 33.18 crores vis a vis Rs. 23.87 crores in the previous year. This was primarily on account of higher realization of export incentives and strict control on overheads especially manpower and energy costs. During FY 2015-16, the Company has availed Corporate loan of Rs. 25.00 crores for shoring up of Net Working Capital. The Company also repaid Rs. 17.15 crores of existing borrowings to Financial Institutions and Banks. MANAGEMENT DISCUSSION AND ANALYSIS A detailed analysis of the Company's operations in terms of performance in markets, manufacturing activities, business outlook, risks and concerns forms part of the Management Discussion and Analysis, a separate section of this report. DIRECTORS' RESPONSIBILITY STATEMENT Pursuant to Section I34(3)(c) of the Companies Act, 2013, your Directors confirm 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) 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 31 March, 2016 and of the profit and loss of the Company for the period ended on that date; (c) 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) the directors had prepared the annual accounts on a going concern basis; (e) the directors 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) 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. RELATED PARTY CONTRACTS AND ARRANGEMENTS The contracts or arrangements of the Company with related parties during the period under review referred to in Section 188(1) of the Companies Act, 2013 were in ordinary course of business and on arm's length basis. During the year, the Company had not entered into any contract/ arrangement/ transaction with related parties which could be considered material in accordance with the related party transaction policy of the Company. The said policy as approved by the Board in terms of provisions of Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("the Regulations") (Clause 49 of the erstwhile Listing Agreements) is available on the website of the Company i.e. www.bharatgears.com under the link <http://bharatgears.com/documents/related-party-transactions-policy>. pdf. The prescribed form AOC-2 of the Companies (Accounts) Rules, 2014 is enclosed as Annexure -"A" to this report. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENT During the period under review, the Company has not made any loan, guarantee or investment in terms of provisions of Section 186 of the Companies Act, 2013. DIRECTORS In accordance with the provisions of the Companies Act, 1956 and the Articles of Association of your Company, Mr. W.R. Schilha, Director of the Company retire by rotation at the ensuing Annual General Meeting. Therefore, in terms of Section 149 of the Companies Act, 2013, it has been proposed to appoint Mr. W.R. Schilha as Non Executive Independent Director for a period of 5 (Five) Years up to the conclusion of the 49th Annual General Meeting (AGM) of the Company in the Calendar Year 2021 at the ensuing AGM of the Company. The Company has received notice under Section 160 of the Companies Act, 2013 from member of the Company, proposing the candidature for the office of Director for the above Director. During the year under review, the members approved the appointment of Mr. Rakesh Chopra and Mr. V.K. Pargal as Independent Directors. The brief resume of the Director proposed to be appointed is given in the notice calling the Annual General Meeting. During the year under review, Mr. Surinder P. Kanwar has been re-appointed as Chairman and Managing Director of the Company for a further period of 5(Five) years with effect from 01 October, 2015. Mr. N.J. Kamath and Dr. Ram S. Tarneja resigned from the directorship of the Company on 29 May, 2015 & 31 July, 2015 respectively. The Board expresses its sincere gratitude to Mr. N.J. Kamath and Dr. Ram S. Tarneja for their valuable contribution to the Company during their tenure. NUMBER OF MEETINGS OF THE BOARD During the financial year 2015-16, 5 (Five) Board Meetings were held on the following dates:- • 29 May, 2015; • 31 July, 2015; • 29 October, 2015; • 29 January, 2016; and • 22 March, 2016 The gap between any two meetings was not more than one hundred twenty days as mandated under the provisions of Section 173 of the Companies Act, 2013 and Regulation 17(2) of SEBI(Listing Obligations and Disclosure Requirements) Regulations, 2015 (erstwhile Clause 49 of the Listing Agreements). INDEPENDENT DIRECTORS In terms of provisions of Section 149(7) of the Companies Act, 2013, all the Independent Directors of the Company have furnished a declaration to the Compliance Officer of the Company at the meeting of the Board of Directors held on 24 May, 2016 stating that they fulfill the criteria of Independent Director as prescribed under Section 149(6) of the Companies Act, 2013 and are not being disqualified to act as an Independent Director. In terms of the Regulation 25(7) of the Regulations (Clause 49 of the erstwhile Listing Agreements), the Company has adopted a familiarization programme for the Independent Directors to familiarize them with working of the Company, nature of the industry in which the Company operates, business model of the Company, their roles, rights, responsibilities, and other relevant details. The details of familiarization programme during the Financial Year 2015-16 are available on the official website of the Company i.e. www.bharatgears.com under the link <http://bharatgears.com/documents/details-of-familarisation->programme-for independent-directors-FYI5-l6.pdf. POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION In terms of provisions of Section 178 of the Companies Act, 2013 read with Regulation 19 of the Regulations (Clause 49 of the erstwhile Listing Agreements), a policy relating to remuneration for the Directors, Key Managerial Personnel and other employees has been adopted by the Board of Directors of the Company in pursuance of its formulation and recommendation by the Nomination and Remuneration Committee thereby analyzing the criteria for determining qualifications, positive attributes and independence of a Director. The said policy is annexed as Annexure-"B" to this report and is also available on the website of the Company i.e. www.bharatgears.com under the link <http://bharatgears.com/documents/nomination-and-remuneration->policy-bgl.pdf. EVALUATION PROCESS The Board of Directors of the Company has established a framework for the evaluation of its own performance and that of its committees and individual Directors of the Company in consultation with the engaged consultant and fixed certain parameters covering the evaluation of the Chairman, Executive Directors and Independent Directors on the basis of which the evaluation is being carried on annual basis in terms of provisions of the Companies Act, 2013 and the Regulations. During the year under review, the Board of Directors, at its meeting held on 22 March, 2016 has carried out the evaluation of its own performance and that of its committees and Independent Directors of the Company and the Independent Directors in their separate meeting held on even date have evaluated the performance of the Chairman and Non-Independent Directors of the Company respectively in accordance with the framework approved by the Board. KEY MANAGERIAL PERSONNEL The following Directors/Officials of the Company have been designated as Key Managerial Personnel (KMP) of the Company by the Board of Directors in terms of provisions of Section 203 of the Companies Act, 2013 and the Regulations (Clause 49 of the erstwhile Listing Agreements): 1. Mr. Surinder P. Kanwar, Chairman & Managing Director 2. Mr. Sameer Kanwar, Joint Managing Director 3. Mr. Milind Pujari, Chief Financial Officer 4. Mr. Prashant Khattry, Head (Legal) & Company Secretary No Key Managerial Personnel (KMP) of the Company has resigned during the financial year ended 31 March, 2016. DISCLOSURES UNDER THE COMPANIES (APPOINTMENT & REMUNERATION OF MANAGERIAL PERSONNEL) RULES, 2014 Details pertaining to remuneration 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 are enclosed as Annexure-"C" to this report. PARTICULARS OF EMPLOYEES Information regarding employees in accordance with the provisions of Rule 5(2) and Rule 5(3) of the Companies (Appointment & Remuneration of Managerial Personnel) Rules, 2014 is given in Annexure-"D" to this Report. RISK MANAGEMENT A robust and integrated enterprise risk management framework is in existence under which the common prevailing risks in the Company are identified, the risks so identified are reviewed on periodic basis by the Audit Committee and the management's actions to mitigate the risk exposure in a timely manner are assessed. A risk management policy under the above said enterprise risk management framework as approved by the Board has been adopted by the Company and being reviewed on yearly basis. CORPORATE SOCIAL RESPONSIBILITY In terms of provisions of Section 135 of the Companies Act, 2013, the Corporate Social Responsibility Committee ("CSR Committee") is in existence to monitor the Corporate Social Responsibility Policy of the Company as approved by the Board and the said policy is available on website of the Company i.e. www.bharatgears.com The CSR Committee comprises of Mr. Surinder P. Kanwar, Mr. Sameer Kanwar, Mr. Rakesh Chopra and Mr. S.G. Awasthi. During the Financial Year 2015-16, the provisions of Section 135 of the Companies Act, 2013 were not applicable on the Company since the Company does not fall under the conditions necessary for complying with CSR provisions. Hence, nil amount required to be spent during the year. AUDIT COMMITTEE The Audit Committee comprises of Mr. Rakesh Chopra, Mr. V.K. Pargal and Mr. S. G. Awasthi. During the year under review, Mr. N.J. Kamath (the erstwhile member of Committee) and Dr. Ram S. Tarneja (the erstwhile Chairman of Committee) ceased to be a member and the chairman of the Committee respectively due to their resignation with effect from 29 May, 2015 and 31 July, 2015 respectively. Mr. S.G. Awasthi, inducted as a member of the Committee on 31 July, 2015 and Mr. Rakesh Chopra (the erstwhile member of Committee) designated as the Chairman of the Committee on 31 July, 2015, accordingly the Audit Committee had been reconstituted. INTERNAL COMPLAINTS COMMITTEE FOR PREVENTION OF SEXUAL HARASSMENT Pursuant to Section 21 of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 read with Rule 14 of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Rules, 2013, the Company has constituted Internal Complaints Committee (ICC) at all its Units (i.e. Faridabad, Mumbra and Lonand) where any grievance of sexual harassment at workplace can be reported. The Company has also adopted a policy on Prevention of Sexual Harassment at workplace. The objective of the policy is to provide its women employees, a workplace, free from harassment/discrimination and every employee is treated with dignity and respect. The said policy is available on the website of the Company i.e. www.bharatgears.com under the link <http://bharatgears.com/documents/policy-for-prevention->of-sexual-harassment.pdf. During the year under review, ICC of all units of the Company has not received any complaint pertaining to sexual harassment of women at workplace. SUBSIDIARIES/JOINT VENTURES/ASSOCIATE COMPANIES During the year under review, no Company has become or ceased to be subsidiary, joint venture or associate of the Company. DEPOSITS During the year under review, the Company did not accept any deposits. However, in terms of provisions of Section 205C of the Companies Act, 1956, the Unclaimed Final Dividend pertaining to the Financial Year 2007-08 amount aggregating to Rs. 1,80,825.00 (Rupees One Lac Eighty Thousand Eight Hundred Twenty Five only) had been transferred to the "Investor Education and Protection Fund" established by the Central Government. Further, the Unclaimed Final Dividend for the Financial Year 2008-09 is proposed to be transferred to the "Investor Education and Protection Fund" on 29 August, 2016 upon the completion of seven years from the date of transfer of said Dividend into the Unclaimed Dividend Account. AUDITORS The Statutory Auditors, M/s Deloitte Haskins & Sells, Ahmedabad (ICAI Registration No. II7365W) Chartered Accountants (DHS), had been appointed as Statutory Auditors of the Company in the 42nd Annual General Meeting held on 0I August, 20I4 for a period of 3 (Three) years in terms of provisions of Section I39 of the Companies Act, 20I3 to hold office from the 42nd AGM to the third consecutive Annual General Meeting from the 42nd AGM in the calendar year 20I7 (subject to ratification by the members at every Annual General Meeting). Therefore, the consent of members for ratification of appointment of Statutory Auditors to hold office from the ensuing Annual General Meeting of the Company till the next Annual General Meeting of the Company in calendar year 20I7 is being sought in the ensuing Annual General Meeting. REPORT ON FINANCIAL STATEMENTS The report of M/s Deloitte Haskins & Sells, Ahmedabad (ICAI Registration No. II7365W) Chartered Accountants (DHS), the Statutory Auditors of the Company on the financial statements of the Company for the year ended 31 March, 2016 is annexed to the financial statements in terms of provisions of Section I34(2) of the Companies Act, 20I3. The observations of the Auditors in their report are self-explanatory and/or explained suitably in the Notes forming part of the Financial Statements. The report of the Statutory Auditors does not contain any qualification, reservation or adverse remark which needs any explanation or comment of the Board. SECRETARIAL AUDIT The Board has appointed M/s AGB & Associates, Practicing Company Secretaries as Secretarial Auditor for the Financial Year 20I5-I6 in terms of provisions of Section 204 of the Companies Act, 20I3. The Secretarial Audit Report of the Company for the financial year ended 3I March, 20I6 in the prescribed form MR-3 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 is enclosed as Annexure-"E" to this report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark which needs any explanation or comment of the Board. INTERNAL FINANCIAL CONTROLS AND THEIR ADEQUACY Bharat Gears has a proper and adequate system of internal financial controls which includes the policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company's policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. During the year, such controls were tested and no material weakness in the design or operations were observed. COST AUDIT During the year under review, the Company had not been mandatorily required to get its Cost Records audited in terms of provisions of Section I48 of the Companies Act, 20I3 read with Companies (Cost Records and Audit) Amendment Rules, 20I4 notified by the Ministry of Corporate Affairs (MCA) on 3I December, 20I4, as the Industry under which the Company falls has been exempted from the Cost Audit under the said rules. CORPORATE GOVERNANCE The Company is committed to maintain the quality standards of Corporate Governance. The Report on Corporate Governance as stipulated under Clause 49 of the Listing Agreements/Schedule V(C) of the Regulations forms part of this Report. The requisite Certificate of Compliance from Statutory Auditors, M/s Deloitte Haskins & Sells, confirming compliance with the conditions of Corporate Governance, is attached to this Report. VIGIL MECHANISM In terms of provisions of Section I77 of the Companies Act, 20I3, the Company has established an effective mechanism called Vigil Mechanism (Whistle Blower Mechanism). The mechanism under the policy has been appropriately communicated within the organisation. The purpose of this policy is to provide a framework to promote responsible whistle blowing by employees or by any other person who avails such mechanism. It protects employees or any other person who avails such mechanism wishing to raise a concern about serious irregularities, unethical behavior, actual or suspected fraud within the Company by reporting the same to the Audit Committee. Protected disclosure can be made by the whistle blower in a closed and secured envelope or sent through e-mail to the Compliance Officer. During the year under review, no employee was denied access to the Audit Committee. The policy on vigil mechanism is available on the website of the Company i.e. www.bharatgears.com under the link <http://bharatgears>. com/documents/policy-on-vigil-mechanism.pdf. RECONCILIATION OF SHARE CAPITAL AUDIT As per the directive of the Securities and Exchange Board of India (SEBI), the Reconciliation of Share Capital Audit is undertaken by a firm of Practicing Company Secretaries on quarterly basis. The audit is aimed at reconciliation of total shares held in CDSL, NSDL and in physical form with the admitted, issued and listed capital of the Company. The Reconciliation of Share Capital Audit Reports as submitted by the Auditor on quarterly basis was forwarded to the BSE Limited, Mumbai and the National Stock Exchange of India Limited, Mumbai, where the original shares of the Company are listed. LISTING OF SHARES The Equity Shares of the Company are listed on the BSE Limited, Mumbai and National Stock Exchange of India Limited, Mumbai. Pursuant to the notification of the regulations, your Company has entered into new Listing Agreement with the aforesaid Stock Exchanges respectively on I0 February, 20I6 as mandated under the said Regulations. DISCLOSURES UNDER SECTION 134 OF THE COMPANIES ACT, 2013 Except as disclosed elsewhere in the Annual Report, there have been no material changes and commitments, which can affect the financial position of the Company between the end of financial year and the date of this report. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS & OUTGO The information in accordance with the provisions of Section I34(3)(m) of the Companies Act, 20I3 read with the Rule 8 of the Companies (Accounts) Rules, 20I4 is given in Annexure-"F" to this Report. EXTRACT OF ANNUAL RETURN In terms of provisions of Section 92(3) of the Companies Act, 20I3 read with Rule I2 of the Companies (Management and Administration) Rules, 20I4, the extract of the Annual Return of the Company in Form MGT-9 of the Companies (Management and Administration) Rules, 20I4 is enclosed as Annexure-"G" to this report. COURT/TRIBUNAL ORDERS There were no instances of any significant and material orders passed by the regulators or courts or tribunals impacting the going concern status and company's operations in future. INDUSTRIAL RELATIONS During the year under review, industrial relations in the Company continued to be cordial and peaceful. ACKNOWLEDGEMENTS The Board of Directors thanks the shareholders for their continued support and they would like to place on record their appreciation for the dedicated services rendered by the Employees at all levels. The Directors wish to convey their gratitude to the Financial Institutions, Bankers, Customers, Suppliers and Collaborators for the assistance and confidence reposed by them in the Company. For and on behalf of the Board of Directors Surinder P. Kanwar Chairman and Managing Director DIN: 00033524 Place: Mumbai Dated: 24 May, 2016 |