REPORT OF THE BOARD OF DIRECTORS Your directors take the pleasure in presenting the Eightieth Annual Report together with the accounts for the year ended 31 March, 2016. 2. Appropriation During the year 2015-16, the board of directors declared an interim dividend of 100% (i.e., Rs. 10/- per share) on the equity share capital on March 10, 2016. The interim dividend was paid on March 23, 2016 to all the eligible shareholders whose name appeared in the register of members of the Company as on March 18, 2016 (being the Record Date) fixed for this purpose. In view of the interim dividend, the Board did not recommend any final dividend for the year ended March 31, 2016. After transfer of Rs. 15.54 crores to General reserve, Rs. 17.18 crores has been retained as surplus in the Profit and Loss Account. 3. Management Discussion & Analysis Your Company holds strategic investment in subsidiaries, joint ventures and an associate company (predominant called 'Rane Group') engaged in the manufacturing and marketing of components for transportation industry and also provides management and other services to Rane group. A detailed analysis of the automotive industry, group companies' performance, internal control systems, risk management etc. are discussed in a separate section in this Annual Report under the heading 'Management Discussion & Analysis'. 4. Consolidated financial statements The following methodology as specified under applicable accounting standards have been applied in consolidating the financial results of the group companies in the consolidated financial results attached in the annual report:- (a) Subsidiary companies - each line item of income, expenditure, assets and liabilities have been consolidated one hundred percent. Minority interests have been appropriately considered. (b) Joint Venture companies - each line item of income, expenditure, assets and liabilities have been consolidated based on the percentage of share held in these companies. (c) Associate companies - share in the profit after tax based on the percentage of share held has been consolidated. The consolidated financial statements of the Company are prepared based on the audited financial statement of the subsidiary companies, joint venture companies and associate companies. In terms of Section 136 of the Companies Act, 2013 the Company has not attached the financial statements of the subsidiary companies. However, the financial information of the subsidiary companies duly audited by the auditors are disclosed in this annual report. The Company undertakes to make available soft or hard copy of the annual report and annual accounts of the subsidiary companies and the related detailed information to investors, as may be required by them, seeking such information at any point of time on demand. The annual accounts of the subsidiary companies have been posted in the website of the Company viz. <http://rane.co.in> and also kept open for inspection by any investor at the registered office of the Company and that of the respective subsidiary companies. The consolidated financial statements presented by the Company, which form part of this annual report, include financial results of its subsidiary companies. 5. Board of directors 5.1 Composition The composition of the board of directors of the Company is furnished in the Corporate Governance Report as Annexure-'E' to this report. The Company has issued a letter of appointment to all independent directors and the terms and conditions of their appointment have been disclosed on the website of the Company and available at <http://rane.co.in/pdf/investors/rhl/> rhltermsid.pdf Dr. V Sumantran has been co-opted to the board as an additional director (in the category of independent director) on May 27, 2016, as per the recommendations of Nomination and Remuneration Committee effective May 27, 2016 till the conclusion of eighty-second AGM. Notice has also been received from a member signifying the intention to propose his appointment as an independent director of the Company at the ensuing 80th AGM. Mr. Anil Kumar Nehru on attaining the age of 75 years, retired from the Board effective from the conclusion of the meeting of the board of directors held on May 27, 2016, as per the retirement policy of the Company, All the independent directors have affirmed that they satisfy the criteria laid down under section 149(6) of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR). 5.2 Retirement by rotation At the ensuing Annual General Meeting (AGM), Mr. Harish Lakshman retires by rotation and being eligible, offers himself for re-appointment. The notice convening the AGM includes the proposal for his re-appointment as director. 5.3 Board meetings A calendar of meetings is prepared and circulated in advance to the directors. During the year five (5) Board Meetings were convened and held. The details of which are given in the Corporate Governance Report. The intervening period between two consecutive meetings was less than 120 days. 5.4 Meeting of Independent Directors During the year, two (2) separate meetings of Independent Directors were held. In the said meetings, the independent directors assessed the quality, quantity and timeliness of flow of information between the management and the Board at the meeting and expressed that the current flow of information and contents were adequate for the Board to effectively perform its duties. Also in at the meeting of Independent Directors, the performance of the non-independent directors and the board as a whole was reviewed and the performance of the chairperson of the Company was reviewed taking into account the views of executive directors and non-executive directors. 6. Board and management 6.1 Board evaluation During the year, a formal process for annual evaluation of performance of Board, its committees and directors individually was carried out as per the criteria laid down by the Nomination and Remuneration Committee, pursuant to the provisions of the Companies Act, 2013 (CA 2013) and clause 49 of the listing agreement. The criteria for evaluation of board and its committees were founded on the structure, composition, board-management relationship, effectiveness in terms of roles and responsibilities and processes encompassing the information flow and functioning. The guiding standards for the assessment of performance of directors (including the independent directors) were their attendance and participation at board meetings, sharing of their relevant domain expertise, networking in other forums, their strategic inputs and demonstration towards governance compliances. For evaluation of performance of the Chairman additional aspects like institutional image building, providing guidance on strategy and performance, maintaining an effective and healthy relationship between the board and the management were taken into consideration. The evaluation was carried out through a structured methodology approved by the Nomination and Remuneration Committee after ensuring that the aspects under each of the laid down criteria are comprehensive and commensurate with the size of the board and the Company. 6.2 Familiarisation program for independent directors The familiarisation program for independent directors and details of familiarization programmes to independent directors are available at <http://rane.co.in/rhlinvestors.html> 6.3 Key Managerial Personnel Mr. L Lakshman, Executive Chairman & Managing Director, Mr. L Ganesh Vice-Chairman & Joint Managing Director, Mr. Siva Chandrasekaran, Secretary and Mr. J Ananth Chief Financial Officer hold the office of Key Managerial Personnel under the Companies Act, 2013 6.4 Remuneration policy The Nomination and Remuneration Committee has laid down a policy on appointment and remuneration of directors, Key Managerial Personnel (KMP) and Senior Management Personnel (SMP). The same is annexed herewith as 'Annexure -A'. 7. Audit 7.1 Audit Committee In terms of the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the listing agreement, the Audit Committee of the Board is constituted to act in accordance with terms of reference prescribed therein. Detailed disclosure on compositions, terms of reference and meetings of the Audit Committee are furnished in the Corporate Governance Report. 7.2 Statutory Auditors In terms of the appointment made by the shareholders as per the transition provisions of Section 139 of the Companies Act, 2013 and applicable rules made thereunder, M/s Deloitte Haskins and Sells (DHS) were appointed as Statutory Auditors for a period of two years to hold the office until the conclusion of the eightieth AGM (AGM 2016). Pursuant to the provisions of Section 139, 141 and read with Companies (Audit and Auditors) Rules, 2014 and any other applicable provisions of the Act including rules made thereunder, the Audit Committee at its meeting held on May 27, 2016 has reviewed the proposal to re-appoint DHS as statutory auditors of the Company for a second term of five consecutive years commencing from the conclusion of eightieth AGM (2016) until the conclusion of eighty-fifth AGM (2021) and recommended the same to the board for proposing it to the shareholders at the ensuing eightieth AGM. The Company has received letter from DHS consenting for the re-appointment and confirmation to the effect that their appointment, if made, would be within the limits and that they are free from any disqualification specified in section 141 of the Companies Act, 2013 and the rules made thereunder. DHS have also submitted the peer review certificate issued to them by The Institute of Chartered Accountants of India. The notice of the ensuing AGM contains necessary resolution in this regard. Members may consider appointing DHS as statutory auditors of the Company as per the provisions of the Companies Act, 2013 till the conclusion of the eightieth AGM. The statutory auditors report to the members for the year ended March 31, 2016 does not contain any qualification, reservation, adverse remark or disclaimer. 7.3 Secretarial Auditors 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 S Krishnamurthy & Co., a firm of Company Secretaries in Practice, to undertake the Secretarial Audit of the Company. The report on the Secretarial Audit carried out for the year 2015 -16 is annexed herewith as 'Annexure -B'. The secretarial audit report does not contain any qualification, reservation, adverse remark or disclaimer. 7.4 Internal Auditors The Company continues to engage M/s. Capri Assurance and Advisory Servicies, a firm of independent assurance service professionals, as Internal Auditors of the Company. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on a regular basis to improve efficiency in operations. 8. Directors' Responsibility Statement In terms of Section 134(3)(c) read with section 134(5) of the Companies Act, 2013, the directors, confirm that: i. The applicable accounting standards in the preparation of financial statements for the financial year 2015 -16 had been followed and there were no material departures; ii. selected such accounting policies and applied them consistently and made judgments and estimates that were 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 the year under review; iii. 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, preventing and detecting fraud and other irregularities; iv. they had prepared the financial statements for the financial year on a 'going concern' basis ; v. they had laid down internal financial controls to be followed by the Company and such internal financial controls were adequate and were operating effectively ; and vi. they had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively. 9. Related Party Transactions All related party transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There were no materially significant related party transactions made by the Company with Related Parties which may have potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee as also the Board for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseen and repetitive in nature. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis. The Company has put in place proper system for identification and monitoring of such transactions. The policy on Related Party Transactions and material subsidiaries as approved by the Board is uploaded on the Company's website (<http://rane.co.in/> pdf/policies/rhlrpt.pdf and rhlmsp.pdf). None of the Directors or Key Managerial Personnel or Senior Management Personnel has any material financial and commercial transactions, where they have personal interest, which may have potential conflict with interest of the Company at large. 10. Corporate Social Responsibility (CSR) The vision on Corporate Social Responsibility (CSR) is: "To be socially and environmentally responsive organization committed to improve quality of life within and outside". The CSR activities of Rane Group focus on four specific areas of (a) Education (b) Healthcare (c) Community Development (d) Environment. The CSR activities undertaken by the Company are in line with the CSR Policy and recommendations of the CSR Committee comprising of Mr L Lakshman, Mr L Ganesh and Mr Anjanikumar Choudhari as its members. The Annual Report on CSR activities carried out during the year 2015-16 is annexed as Annexure 'C'. The CSR policy of the Company is available in the Company's website (<http://www>. rane.co.in/pdf/policies/rhlcsr.pdf) 11. Fixed Deposits Your Company does not accept any deposit from public in terms of Section 73 of the Companies Act, 2013 and the rules framed thereunder. 12. Energy conservation, technology absorption and foreign exchange earnings and outgo The Company is conscious of the imperative to protect environment and the natural resources for achieving sustainable economic growth and have started several initiatives in this regard such as conservation of energy and water and eco-friendly waste management system. In view of the nature of activities of the Company, provisions of Section 134 (3)(m) read with Rule 8 of the Companies (Accounts) Rules, 2014 are not applicable to the Company. 13. Particulars of Directors, Key Managerial Personnel and Employees The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors, Key Managerial Personnel (KMP) and Employees of the Company are provided in the 'Annexure D' to this report. 14. Corporate Governance Report Your Company has complied with the corporate governance requirements as stipulated under clause 49 of the listing agreement / Regulation 34 of SEBI LODR. Detailed report on the compliance and a certificate by the Statutory Auditors forms part of this report as 'Annexure E'. 15. Other disclosures a) Details of loan, guarantees and investments under the provisions of Section 186 of the Companies Act, 2013 are given in the notes to the Financial Statements. b) The Internal control systems and adequacy are discussed in detail in the Management Discussion and Analysis annexed to the Directors Report. c) There was no significant material order passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. d) The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as 'Annexure 'F. e) The Company has established a formal vigil mechanism named 'Rane Whistle Blower Policy' for reporting improper or unethical practices or actions which are violative of the code of conduct of the Company. f) The Company believes that women should be able to do their work in a safe and respectful environment that encourages maximum productivity. The Company has zero tolerance towards sexual harassment. The Company has adopted a policy on prevention of sexual harassment of women at work place and put in place proper mechanism across the Company. There was no case reported during the year under review through this mechanism. For and on behalf of the Board L GANESH L LAKSHMAN Vice- Chairman Executive Chairman DATE : May 27, 2016 PLACE : Chennai |