DIRECTORS' REPORT TO THE MEMBERS, Your Directors are pleased to present the 35th Annual Report on the business and operations together with Audited Balance Sheet and Profit & Loss Account of your Company for the year ended March 31, 2016. Dividend The Company continues to deliver progressive returns to the Shareholders. The Board of Directors recommend that Interim Dividend of 120% (Rs.12/- per Equity Share) declared on March 12, 2016 for the Financial Year 201516, be considered as Final Dividend. No further dividends are proposed/ recommended by the Board. The total amount of Dividend distributed aggregates to Rs. 135.00 Million (Including Dividend Tax). The Dividend payout ratio comes to 36.12%. A sum of Rs.37.50 Million has been transferred to the General Reserve of the Company. This reaffirms the inherent financial strength of your Company. Business Performance After a subdued growth of about 2.8% during FY16, Indian auto-component industry is likely to gain momentum and register a growth of 10% in the current fiscal FY17, with some traction in the passenger vehicle (PV) and motorcycle segments. Over the medium to long term, growth in the auto component industry is expected to be higher than the underlying automotive industry growth, given the increasing localisation by OEMs, higher component content per vehicle and rising exports from India. Over the medium term, operating margins are expected to stabilise at around 13.5%-14% level, given bottoming out of commodity prices in the current year. The implementation of the 7th Pay Commission is expected to support urban/ semi-urban segments like PV and scooter, whereas rural demand will be driven by expected above-average monsoon. In exports, robust demand for PV in North America as well as Europe is likely to offset expected decline in the M&HCV segment in those markets. Relatively better OE and exports demand, coupled with stable aftermarket demand, is likely to drive overall auto component industry growth in FY17. (ICRA reports) During the year under review, the Indian Automobile Industry recorded a production growth of 2.58% as compared to 8.68% of the corresponding period last year. The industry produced around 23.96 Million vehicles of which share of two wheelers were 79%, passenger vehicles- 14%, three wheelers- 4% and commercial vehicles- 3%. In this backdrop, during the year under review, your Company recorded a sales turnover of Rs. 12551.75 Million as against Rs.11425.59 Million in the corresponding year registering a growth of 9.86%. The profit for the year after tax recorded at Rs. 373.74 Million as compared to Rs. 165.73 Million during the previous year registering an excellent growth of 125.51%. Capacity Expansion / Modernisation of Facilities During the year under review, the Company has made investment to the tune of H 518 million towards up-gradation of its Research and Development facilities, modernization of its existing manufacturing facilities including its Bawal, Dharuhera and Chakan plants. A detailed discussion on the business performance and future outlook is provided in the Chapter on Management Discussion & Analysis Report (MDA). Vendor Development The auto industry is heavily dependent on the auto component manufacturers and thus, the quality of final automobile is replica of the quality of the product supplied by auto component manufacturers. In order to ensure the quality, it becomes essential for the auto component manufacturers that their suppliers should be technologically as well as technically sound, must have capable manufacturing facility and must be using quality management techniques at par with global standard. The Company in its continuous efforts to upgrade its Vendors has started Sadbhav initiative, wherein a supplier council was formed to work closely with them and to support them to work more efficiently. This initiative is focused towards achieving long-term cooperative effort between the company and its Vendors and to upgrade their technical, quality, delivery and cost capabilities and to foster ongoing improvements. In the auto component industry quality, cost and on-time delivery are considered as most important factors and focus on Vendor development will not only reduce cost but also ensure timely deliveries. Directors & Key Managerial Personnel In accordance with the Articles of Association of the Company and the Companies Act, 2013, Mr. Norihisa Sato and Mr. Toru Tanabe, Directors are retiring by rotation at the ensuing Annual General Meeting and being eligible, offer themselves for re-appointment. The tenure of Mr. Deepak Jain, Managing Director expired on January 31, 2016. The Board reappointed Mr. Deepak Jain as Managing Director for a further period of 5 years w.e.f. February 1, 2016, subject to the approval of the members in the ensuing Annual General Meeting. Further, the tenure of Mr. Anmol Jain, Joint Managing Director is expiring on July 31, 2016. The Board recommends to reappoint Mr. Anmol Jain as Joint Managing Director for a further period of 5 years w.e.f. August 1, 2016, subject to the approval of the members in the ensuing Annual General Meeting. Your Directors recommend the re-appointment of the above Directors at the ensuing Annual General Meeting. The Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149(6) of the Companies Act, 2013. Mr. B.S. Bhadauriya, Company Secretary of the Company since January 1, 2007 ceased to be the Company Secretary w.e.f. July 31, 2015 for taking up higher responsibilities at group level after restructuring. The Board has appointed Mr. Shwetank Tiwari as Company Secretary of the Company w.e.f. August 1, 2015. Mr. Shwetank Tiwari is a Law Graduate and an Associate Member of The Institute of Company Secretaries of India (ICSI), having about 10 years of experience and knowledge in secretarial functions. Extract of Annual Return In accordance with the requirement of Section 92 of the Companies Act, 2013 read with Rule 12 of the Companies (Management and Administration) Rules, 2014, the extract of the annual return in Form MGT 9 is annexed as Annexure Number of Board Meetings The Board of Directors met 5 (Five) times in the Financial year 2015-16. The details of the board meetings and the attendance of the Directors are provided in the Corporate Governance Report. Directors Responsibility Statement As required under Section 134(5) of the Companies Act, 2013 the Directors state: (i) that in the preparation of the Annual Accounts for the Financial Year ended 31st March, 2016, the applicable Accounting Standards have been followed along with proper explanation relating to material departures in the Auditor Report and Notes to Accounts; (ii) that the Directors 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 and loss of the company for that period; (iii) that the Directors have 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; (iv) that the Directors have prepared the Annual Accounts on a "going concern" basis. (v) that 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. (vi) that 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. Remuneration Policy The Company follows a policy on remuneration of Directors and Senior Management Employees. The Policy is approved by the Nomination & Remuneration Committee and the Board. The Remuneration Policy is stated in the Corporate Governance Report. Fixed Deposits During the year under review, the Company has not accepted any Deposit under Section 73 of the Companies Act, 2013 read with the Companies (Acceptance of Deposits) Rules, 2014. Auditors Statutory Auditors The members in their meeting held on August 22, 2014 had appointed M/s S.R. Batliboi & Co. LLP, Chartered Accountants, as Statutory Auditors of the Company for a period of 3 consecutive years in terms of the provisions of Section 139 of the Companies Act, 2013 read with the Companies (Audit and Auditors) Rules, 2014, to hold the office of auditors till the conclusion of the fourth consecutive Annual General Meeting of the Company to be held in the year 2017, subject to ratification by the Members at every Annual General Meeting. Your Directors recommend for ratification of their appointment in the ensuing Annual General Meeting. During the year, all the recommendations of the Audit Committee were accepted by the Board. Hence, there is no need for disclosure of the same in this Report. Cost Auditors The Board has re-appointed M/s Jitender, Navneet & Co. as the Cost Auditors of the Company in accordance with Section 148 and other applicable provisions, if any, of the Companies Act, 2013, for the audit of the cost accounts of the Company for the Financial Year 2015-16. Secretarial Auditor Pursuant to the provisions of Section 204 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed Mr. Maneesh Gupta, Practising Company Secretary as the Secretarial Auditor of the Company to undertake the Secretarial Audit for the financial year 2015-16. The Report of the Secretarial Audit is annexed herewith as Annexure - B. Particulars of Loans, Guarantees and Investments The particulars of loans, guarantees and investments covered under the provisions of Section 186 of Companies Act, 2013 are given in the Notes to financial statements. Consolidated Financial Statements The company has Consolidated the Financials Statements of its Associate Company SL Lumax Limited with its financials first time in accordance with the provisions of Companies Act, 2013. The Consolidated Financial Statements of the Company are prepared in accordance with the Accounting Standards, Companies Act, 2013, SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and all other applicable laws for the time being in force and the same forms part of this Annual Report. The Audited Financial Statements, including the Consolidated Financial Statements and related information are available on the website of the Company i.e. www.lumaxindustries.com These documents shall also be available for inspection by any shareholder at the registered office of the Company. Related Party Transaction and Policy In accordance with the provisions of the Companies Act, 2013 and SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 the company has formulated a policy on Related Party Transactions, which is available on the Company's website at <http://www>. lumaxindustries.com/pdf/related-party-transaction- policy. pdf. All Related Party Transactions, which are foreseen and repetitive in nature, are placed before the Audit Committee on a yearly basis for obtaining prior omnibus approval of the committee. The transactions entered into pursuant to the omnibus approval are placed before the Audit Committee for review and approval. All Related Party Transactions are subjected to independent review by a reputed accounting firm to establish compliance with the provisions of Companies Act, 2013 and Listing Regulations. All related party transactions entered during the financial year were in the ordinary course of business and on arm's length basis. There have been no material related party transactions undertaken by the Company during the year. Accordingly, no transactions are being reported in Form No. AOC-2 in terms of Section 134 of the Companies Act, 2013. Vigil Mechanism The Company has established a vigil mechanism named Whistle Blower Policy, for directors, employees and business associates to report to the management, concerns about unethical behaviour, actual or suspected fraud or violation of the Company's code of conduct or ethics policy, in accordance with the provisions of Companies Act, 2013 and SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015. The mechanism provides for adequate safeguards against unfair treatment of whistle blower who wishes to raise a concern and also provides for direct access to the Chairman of the Audit committee in appropriate/ exceptional cases. The Whistle Blower Policy is uploaded on the website of the Company. Material Changes and Commitments No other material changes and commitments affecting the Financial position of the Company have occurred between April 1, 2016 and the date on which this Report has been signed. Information on Conservation of energy, Technology absorption, Foreign exchange earnings and Outgo Disclosure of information regarding Conservation of Energy, Research & Development, Technology Absorption and Foreign Exchange Earning and Outgo etc. under Section 134(3)(m) of the Companies Act, 2013 read with the Companies (Accounts) Rules, 2014, is annexed separately as Annexure - C. Risk Management Policy The Company has adopted an enterprise risk management policy and established a risk management framework with an objective of timely identification, mitigation and control of the risks, which may threaten the existence of the Company, in accordance with the provisions of Companies Act, 2013 and SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015. The Company has also constituted a Risk Management Committee to review the risk trend, exposure, potential impact and their mitigation plans and periodically the key risks are also discussed at the Audit Committee. Corporate Social Responsibility (CSR) Policy and Initiatives Your Company believes that corporate social responsibility programs reflect the human side of corporates, and the management's personal commitments to contribute to the community and society of which they are a part. A well-managed CSR program creates social and environmental value, while supporting a company's key stakeholders. Your Company's Corporate Social Responsibility (CSR) programs has been planned with focused approach of community participation. The key focus areas of your Company are education, promotion of girl chid and the healthcare of disadvantaged section of the society. The company's focus areas are largely covered under Schedule VII of the Companies Act, 2013. During the year, the Company has added one more school under its education initiative, besides continuing its support to the existing schools by way of providing financial support in terms of fees of girl children, E-learning centre, contributing towards infrastructure and other facilities for students in the school. Under its healthcare initiatives, the Company is focusing on preventive healthcare by continuously organising health check-up camps, lending financial support to hospitals for juvenile diabetes, cataract operations and partnering in special drives organised by various agencies for this cause. The Company has constituted a CSR Committee of the Board and also developed & implemented a CSR Policyin accordance with the provisions of Companies Act, 2013. The Committee monitors and oversees various CSR initiatives and activities of the Company. A detailed Report on Corporate Social Responsibility is annexed herewith as Annexure-D. Performance Evaluation of Board, Committee and Directors The Board is committed to transparency in determining its performance, committees and in assessing the performance of members. During the year, the Board with the assistance of Nomination and Remuneration Committee has completed the evaluation exercise, which includes the evaluation of the Board as a whole, committees and Directors, as per the internally designed evaluation process approved by the Board. The evaluation tested key areas of the board's work including strategy, business performance, risk and governance processes. The need to balance its monitoring activities with discussion on strategic matters was recognized and ought to be continually borne in mind. The evaluation considers the balance of skills, experience, independence and knowledge of the Company and the Board, its overall diversity, and analysis of the Board and its Directors' functioning. The feedback of the evaluation exercise was collated and discussed with the Board and an action plan to further improve the effectiveness of Board and committees is put in place. Management Discussion & Analysis Report Pursuant to the provisions of Regulation 34 of the SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015, Management Discussion & Analysis Report is annexed as part of this report separately as Annexure - E. Significant and Material Orders Passed by the Regulators or Courts There are no significant and material orders passed by the Regulators / Courts / Tribunals, which would impact the going concern status of the Company and its future operations. Internal Financial Control The Company has a comprehensive internal control system in place for ensuring reliability of financial reporting, orderly and efficient conduct of business, compliance with policies, procedures, safeguarding of assets and economical and efficient use of resources. Appropriate review and control mechanisms are built in place to ensure that such control systems are adequate and are operating effectively. The monitoring and reporting of finance systems is supported by a web-based system SAP, which helps in obtaining accurate and complete accounting records and timely preparation of reliable financial disclosures. Corporate Governance The report on Corporate Governance together with the Auditor's Certificate regarding the Compliance of conditions of Corporate Governance as stipulated in SEBI (Listing Obligations And Disclosure Requirements) Regulations, 2015 is annexed and forms part of this Annual Report as Annexure - F. Particulars of Employees Information on Particulars of Employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 forms an integral part of this report as Annexure-G. The information required pursuant to Section 197 of the Companies Act, 2013 read with Rules 5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of your Company is available for inspection by the members at the registered office of the Company during business hours on working days up to the date of ensuing Annual General Meeting. If any member is interested in obtaining a copy thereof, such member may write to the Company Secretary, whereupon a copy would be sent. Acknowledgement We are confident that our actions will develop a robust business model, which will help the company deliver solid results in the years to come. Your Directors wish to place on record their sincere thanks to all its highly valued customers, its Technical and Financial Collaborator-M/s Stanley Electric Co. Ltd., Japan, all other business partners, all the shareholders, financial institutions, banks, vendors and various Government agencies for their continued support and patronage. The Board would also like to acknowledge the tireless efforts of its associates and employees across all levels for their wholehearted dedication and contribution for the growth of the Company. For and on behalf of the Board of Directors D.K. Jain Chairman DIN: 00085848 Place : New Delhi Dated : May 12, 2016 |