DIRECTORS' REPORT The Directors have pleasure in presenting the 31st Annual Report of the Company, together with the financial statements, for the year ended 31st March, 2015. CORPORATE OVERVIEW Pitti Laminations Limited (PLL) is one of the largest manufacturers of special purpose laminations for all types of rotating electrical machinery. The Company's products have application in industrial motors, alternators, hydro-electric and thermal power generators, wind power generators, DC machines, railway traction motors, pumps, medical diagnostic equipment and aeronautic wing control motors. PLL has a fully integrated manufacturing facility to cater to specific customer requirements and providing end-to-end solutions at one location. The Company has a state of the art tool room for the manufacture of dies, jigs, fixtures and press tools. It also has a modern press shop with high speed presses, coil feeds, CNC notching and machine shop for assembly and finished machining of lamination housings as a ready to use product OPERATING RESULTS AND BUSINESS OPERATIONS During the year, the Company achieved an operational revenue of Rs. 341 crores. Pitti Laminations recorded volume sales of 21,414 MT against 15,055 MT in the previous year registering a growth of 42.24%. This robust growth was due to improvement in both exports and domestic sales. With the increase in domestic and export sales during the year the company achieved total revenue of Rs. 342.74 crores as against Rs. 249.79 crores in the previous year recording a growth of 37.21%. Domestic sales contributed Rs. 175.31 crores as against Rs. 144.96 crores of previous year with an increase of 20.93%. Export sales were Rs. 165.73 crores as against Rs. 102.97 crores with an increase of 60.95%. Sale of stator frames declined to 294 nos as against 501 nos over the previous year. EBITDA (including forex) was Rs. 42.16 crores, an increase of 64.64% as compared to the same period last year. Profit before tax during the year was Rs. 15.12 crores as against Rs. 6.77 crores in the previous year, an increase of 123.33% over the last year. The company earned a net profit of Rs. 9.33 crores as against Rs. 4.21 crores in the previous year. Highlights of performance are discussed in the Management Discussion and Analysis Report, which forms part of this report. The net worth of the company as on 31st March, 2015 stands at Rs.117.25 crores as against Rs. 111.57 crores as on 31st March, 2014. LIQUIDITY As of 31st March 2015, the Company had a cash and cash equivalents of Rs. 15.29 crores, net worth of Rs. 117.25 crores and net debt of Rs. 121.13 crores. SHARE CAPITAL The paid-up equity share capital as on 31st March, 2015 was Rs. 13.49 crores. During the period under review, the company has sub-divided the face value of equity share from Rs. 10/- to Rs. 5/- each. DEMATERIALISATION As on 31st March, 2015, around 97.1% of the shares of the Company have been dematerialized. Your Directors would request all the members who have not yet converted their holdings into dematerialized form, to do so thereby facilitating trading of their shares. As per SEBI guidelines it is now mandatory that the shares of a company are in dematerialized form for trading. DIVIDEND The Board of Directors had declared an interim dividend of Rs. 0.75 per share (7.5%) on the face value of Rs. 10/- each on the equity shares of the company on 28th January, 2015. The Directors are pleased to recommend a final dividend of Rs. 0.625p per share (12.5%) on the face value of Rs. 5/- each on the equity shares of the company, subject to the approval of shareholders. If the final dividend, as recommended above, is declared by the Members at the Annual General Meeting, the total outflow towards dividend on equity shares for the year would be Rs. 3.24 crores (including dividend tax). TRANSFER TO RESERVES The company proposes to transfer Rs. 0.60 crores to General Reserves out of the amount available for appropriations and an amount of Rs. 8.73 crores is proposed to be retained in the profit and loss account. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO 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 an Annexure to this report. HUMAN RESOURCES DEVELOPMENT The Company has continuously adopted structures that help attract best external talent and promote internal talent to higher roles and responsibilities. Your Company's people centric focus providing an open work environment fostering continuous improvement and development helped several employees realize their career aspirations during the year. The Company strives to create a performance-driven environment where innovation is encouraged, performance is recognised and employees are motivated to realise their potential. The core of the Company's Human Resource (HR) strategy is influencing change, building culture and capabilities. Pitti Laminations lays greater emphasis on continuously evolving and aligning with the changing business requirements. This focus enables them to respond better to the needs of their customers and gain strategic advantage over its competitors. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, Independent Directors at their meeting without the participation of the Non-Independent Directors and Management, considered / evaluated the Board's performance, performance of the Chairman and other Non-independent Directors. The Board's functioning was evaluated on various aspects, including inter alia degree of fulfilment 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 management. 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. Significant highlights, learning and action points with respect to the evaluation were presented to the Board. DIRECTORS AND KEY MANAGERIAL PERSONNEL During the year under review, Shri Kanti Kumar R Podar, Independent Director resigned from the Directorship with effect from 03rd November, 2014. Pursuant to section 167 of the Companies Act, 2013, the Directorship of Shri Arun Garodia was ceased with effect from 30th March, 2015. Shri TSSN Murthy, Independent Director and Chairman of Audit Committee passed away on 27th January, 2015. Shri S Thiagarajan, was inducted into the Board on 24th April, 2015 as an Additional Director and he shall hold office upto the date of ensuing Annual General Meeting (AGM). Shri G. Narayana Rao, Director resigned from the Directorship with effect from 10th August, 2015. In compliance of section 149, read with schedule IV of the Act, the appointment of Shri S Thiagarajan as Independent Director is being placed before the members in the AGM for approval. Members are required to refer notice of AGM and explanatory statement for details of the qualification and experience of the Director. All the Independent Directors have given declarations that they meet the criteria of independence as laid down under 149(6) of the Act and Clause 49 of the Listing Agreement entered into with the Stock Exchanges. In the opinion of the Board they fulfil the conditions of independence as specified in the Act and the Rules made thereunder and are independent of the management. No Key Managerial Person has been appointed or has retired or resigned during the year. In accordance with the provisions of Section 152 of the Companies Act, 2013, Shri Y B Sahgal retires by rotation and is eligible for re-appointment. AUDITORS a. Statutory Auditors In accordance with section 139 and other provisions of the Companies Act, 2013 read with Companies (Audit & Auditors) Rules, 2014, members at the Annual General Meeting held on 22nd September, 2014 have appointed M/s.Laxminiwas & Co as the statutory auditors of the Company till the completion of 33rd AGM to be held in the year 2017, subject to ratification at every AGM. Members are requested to consider the re-appointment of M/s.Laxminiwas & Co as statutory auditors and authorise the Board of Directors to fix their remuneration. b. Cost Auditors M/s. Sagar & Associates, Cost Accountants have been appointed as the cost auditor for the financial year 2015-16. c. Secretarial Auditor Pursuant to the provisions of section 204 of the Act and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Board of Directors of the Company had appointed M/s. K Swamy & Co, Practising Company Secretaries to undertake the Secretarial Audit of the Company for the year ended 31st March, 2015. The Secretarial Audit Report is provided as an Annexure to this report. The Auditors' Report and the Secretarial Audit Report for the financial year ended 31st March, 2015 do not contain any qualification, reservation, adverse remark or disclaimer. PARTICULARS OF EMPLOYEES AND REMUNERATION In terms of the provisions of section 197(12) of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is annexed as an Annexure. 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. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS The Company has made an investment during the year by acquiring 1,23,30,000 preference shares in Pitti Castings Pvt Ltd (PCPL) at Rs. 10/- per share, aggregating to Rs. 12.33 crores. The investment was made against the unsecured loan issued by the company to PCPL. During the year under review, the company has given an unsecured loan of Rs. 7.15 crores to PCPL. The company has not given any guarantees or provided any security during the year. DEPOSITS During the year under review, your company did not accept any deposits within the meaning of provisions of chapter V - Acceptance of Deposits by Companies of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. RISK MANAGEMENT The Risk Management is overseen by the Audit Committee of the Company on a continuous basis. The Committee oversees Company's process and policies for determining risk tolerance and review management's measurement and comparison of overall risk tolerance to established levels. Major risks identified by the businesses and functions are systematically addressed through mitigating actions on a continuous basis. For details, please refer to the Management Discussion and Analysis report which form part of the Board Report. RELATED PARTY TRANSACTIONS All related party transactions that were entered into during the financial year were on an arm's length basis, in the ordinary course of business and were in compliance with the applicable provisions of the Companies Act, 2013 ('the Act') and the Listing Agreement. There were no materially significant related party transactions made by the company during the year that would have required shareholder approval under clause 49 of the Listing Agreement. All related party transactions are placed before the Audit Committee for approval. A statement of all related party transaction is placed before the Audit Committee for its review on a quarterly basis, specifying the nature and value 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 www.pitti.in Details of the transactions with related parties are provided in the accompanying financial statements. PECUNIARY RELATIONSHIP OR TRANSACTIONS OF NON-EXECUTIVE DIRECTORS During the year, the Non-Executive Directors of the Company had no pecuniary relationship or transactions with the Company. 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 Clause 49 of the Listing Agreement. 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. BOARD MEETINGS HELD DURING THE YEAR During the year, five meetings of the Board of Directors were held. 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 Agreement. CORPORATE SOCIAL RESPONSIBILITY (CSR) The Company understands and lays emphasis on operating and growing its business in a socially responsible way. The Company's vision is to grow its business, whilst reducing the environmental impact of its operations and increasing its positive social impact. Pitti Laminations believes that along with sustained economic performance, environmental and social stewardship is critical for holistic growth of business. Pursuant to section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules, 2014, your Company at the Board meeting held on 28th January, 2015 approved a policy on CSR and the policy was hosted on the website of the company. As part of CSR initiatives, your company during the financial year 2014-15 has amongst other activities, undertaken projects in areas of promoting education, preventive health care, literature and cultural activities. These projects are in accordance with schedule VII of the Companies Act, 2013. In compliance with its CSR policy, the Company, spent Rs. 41.48 lacs on various CSR activities during the year. The report on CSR activities is attached as an annexure to this report. VIGIL MECHANISM / WHISTLE BLOWER POLICY Pursuant to section 177(9) of the Companies Act, 2013 read with Rule 7 of the Companies (Meetings of Board and its Powers) Rules, 2014 and Clause 49 of the Listing Agreement, the Board of Directors had approved the policy on Vigil mechanism / whistle blower and the same was hosted on the website of the Company. The policy inter-alia provides a direct access to the Chairman of the Audit Committee. Your company hereby affirms that no Director / employee have been denied access to the Chairman of the Audit Committee and that no complaints were received during the year. FAMILIARIZATION PROGRAM FOR INDEPENDENT DIRECTORS The Company has practice of conducting familiarization program of the independent directors as detailed in clause 2(h) of the Corporate Governance Report which forms part of the Annual Report. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS There are no significant and material orders passed by the Regulators or Courts or Tribunals which would impact the going concern status of the Company. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY Details of the same are provided in the Management Discussion and Analysis Report attached as Annexure to this Report. CREDIT RATING During the year under review, Credit Analysis and Research Limited (CARE) has affirmed the CARE A- (Single A Minus) rating for long term facilities and CARE A2+ (A Two Plus) rating for short term bank facilities of your Company. EXTRACT OF ANNUAL RETURN 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. MANAGEMENT DISCUSSION AND ANALYSIS AND CORPORATE GOVERNANCE The Management Discussion and Analysis Report and the Report on Corporate Governance, as required under clause 49 of the Listing Agreement, forms part of the Annual Report. DIRECTORS' RESPONSIBILITY STATEMENT To the best of our knowledge and belief and according to the information and explanations obtained by us, your Directors make the following statements in terms of section 134(3)(c) of the Companies Act, 2013. a) In the preparation of the annual financial statements for the year ended 31st March, 2015, the applicable Accounting Standards had been followed along with proper explanation relating to material departures. b) For the financial year ended 31st March, 2015 such accounting policies as mentioned in the notes to the financial statements have been applied consistently and judgments and estimates that are reasonable and prudent have been made so as to give a true and fair view of the state of affairs of the company and of the profit and loss of the company for the year ended 31st March, 2015. 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) The annual financial statements have been prepared on a going concern basis. e) That proper internal financial control were followed by the company and that such internal financial controls are adequate and were operating effectively. f) That proper system to ensure compliance with the provisions of all applicable laws was in place and that such systems were adequate and operating effectively. ACKNOWLEDGEMENT Your Directors wish to thank all the employees for their contribution, support and continued co-operation throughout the year The Directors would also like to thank for the support and co-operation your Company has been receiving from its suppliers, business partners and others associated with the Company. Your Company looks upon them as partners in its progress and has shared with them the rewards of growth. It will be the Company's endeavour to build and nurture strong links with the trade based on mutuality of benefits, respect for and cooperation with each other, consistent with consumer interests. The Board also wish to express their appreciation for the continued co-operation of the Central and State Governments, Bankers, Financial Institutions, Customers and other stakeholders. on behalf of the Board of Directors Sharad B Pitti Chairman & Managing Director Date: 10th August, 2015 Place: Hyderabad |