DIRECTORS' REPORT Your Directors have pleasure in presenting their Twenty Third Annual Report on the business and operations of your Company and the audited Statement of Accounts for the year ended 31st March 2016. 2. Performance During the current year of operations, your company has registered revenue of Rs. 4,044.82 million at consolidated level, a decrease of about 17% compared to the previous financial year. Your company posted Profit after Taxes of Rs. 262.61 million with a decrease of 39% over the previous financial year. At standalone level, a revenue of Rs.3,316.69 million, an increase of about 5% compared to the previous financial year. Your company posted Profit after Taxes of Rs.324.07 million with an increase of 1% over the previous financial year. Subsidiary During the 9th year of operations, Centum Rakon India Private Limited has registered revenue of Rs.821.90 million and incurred a loss of Rs.8.70 million. Statement containing salient features of the financial statement of subsidiary is attached herewith as Annexure - I. 3. Dividend During the year, your company has declared first interim dividend of Re. 1 per share and also declared second interim dividend of Rs. 2 per share totaling to Rs. 3 per share for the year 2015-16. The total dividend payout was Rs. 37.98 million for the year. 4. Consolidated Financial Statements and subsidiary The Consolidated Financial statements have been prepared by the Company in accordance with the applicable Accounting standards issued by the Institute of Chartered Accountants of India and the same together with the Auditor's Report thereon is provided in the Annual Report. The annual accounts of the subsidiary and related detailed information will be kept at the Registered Office of the Company, and will be available to investors seeking information at any time. The Company has adopted a Policy for determining Material Subsidiaries in terms of Regulation 46 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The Policy, as approved by the Board, is available on the Investor page at Company's website centumelectronics.com 5. Risk Management Your Company has a robust Risk Management policy. Your Company regularly assess the risks and ensures that the risk mitigation plans are in place 6. Internal Control Systems and their adequacy The Company has an Internal Control System, commensurate with the size, scale and complexity of its operations. The Company has appointed Ernst and Young LLP., as its Internal auditor. The Audit Committee defines the scope and areas of internal audit. The Internal auditor audits the areas recommended by the committee every year. The audit observations and corrective actions thereon are being presented to the Audit Committee of the Board. Based on the report of Internal auditor, process owners undertake corrective action in their respective areas and thereby strengthen the controls. During the year, the internal audit was done on the areas recommended and no material weakness observed. 7. Directors and Key Managerial Personnel The changes that had occurred in the composition of the Board of Directors are given below: In accordance with the provisions of Section 149 & 161 of the Companies Act, 2013, Mr.Thiruvengadam P was appointed as Additional Director w.e.f. February 8, 2016 and will hold office until the conclusion of the ensuing Annual General Meeting, and being eligible offer himself for appointment as an Independent director. In the opinion of the Board, he fulfills the conditions of independence as specified in the Act and the Rules made there under and is independent of the management.The Appointment of the aforesaid director has been included as an item in the notice convening the ensuing Annual General Meeting. Except the above, no other Director or Key Managerial Person has been appointed or has retired or resigned during the year. Further, all the Independent Directors have given declarations that they meet the criteria of independence as laid down under Section 149 (6) of the Act and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. a. Annual evaluation of Board, its Committees and Individual Directors: The Board of Directors has carried out an annual evaluation of its own performance, its Committees and invididual Directors pursuant to the requirements of the Act and the Listing Regulations. Further, Independent directors have reviewed the performance of the Board, its Chairman and Non-Executive Directors and other items as stipulated under the listing regulations. b. Remuneration Policy The Board has, on the recommendation of the Nomination & Remuneration Committee framed a policy for selection and appointment of Directors, Senior Management and their remuneration. The Nomination and Remuneration Policy is attached to this report as Annexure II. c. Meetings A calendar of Meetings is prepared and circulated in advance to the Directors. During the year, five meetings of the Board of directors and four meetings of the Audit Committee were convened and held. The details of which are given in the Corporate Governance Report. The Intervening gap between the meetings was within the period prescribed under the Companies Act, 2013. 8. Directors Responsibility Statement Pursuant to Section 134(3)(c) of the Companies Act, 2013, your Directors confirm: i. that in the preparation of annual accounts for the year ended March 31, 2016, the applicable Accounting Standards have been followed along with the proper explanations relating to material departures; ii. that such accounting policies as mentioned in Note 1 of the Notes to the Financial Statements have been adopted and applied 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 March 31, 2016 and of the profit of the Company for year ended on that date; iii. that proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the company and for preventing and detecting fraud and other irregularities; iv. that the annual financial statements have been prepared on a going concern basis. v. that proper internal financial controls were in place and that the financial controls were adequate and operating effectively. vi. that systems to ensure compliance with the provisions of all applicable laws were in place were adequate and operating effectively. 9. Contracts and Arrangements with Related Parties All related party transactions that were entered into during the financial year were in the ordinary course of business and were at an arm's length basis. There were no materially significant related party transactions made by the company during the year with Promoters, Directors, Key Managerial Personnel or other designated persons which may have a potential conflict with the interest of the company at large. All the related party transactions were placed before the Audit Committee and also the Board for approval. Prior omnibus approval of the Audit Committee is being obtained for the transactions which are of a foreseen and repetitive nature in terms of Regulation 23(3)(a) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The company has framed a policy on dealing with the related party transactions and the same is available on the company website. Your directors draw attention of the members to Note 33 to financial statement which sets out the related party disclosures. 10. Auditors a. Statutory auditors M/s. BSR & Co. LLP (formerly known as M/s. BSR & Co.,), Chartered Accountants, Statutory Auditors of the company will retire at the forthcoming annual general meeting and are eligible for re-appointment. The retiring auditors have furnished a certificate of their eligibility under Sec 139 of the Companies Act, 2013 and the Rules framed thereunder for the reappointment as Auditors of the company. Also as required under Regulation 33(1)(d) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the auditors have confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. b. Secretarial audit The Board has appointed Ms. Aarthi G Krishna, Practicing Company Secretary, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year ended March 31, 2016 is annexed herewith as Annexure III to this report. 11. Awards and recognitions Your company has received the below awards during the year under review: i. Cost out Award from GE ii. EHS Excellence Award received from GE iii. 'Electronics Man of the year award 2014-15' received by Mr. Apparao V Mallavarapu, Chairman and Managing Director, from ELCINA-EFY iv. 'High growth electronic hardware exporter award' for the year 2014 - 15 from the STPI (Software Technology Park of India). v. Listed in the Forbes Asia's 200 Best Under Billion List. 12. Corporate Governance Pursuant to Regulation 27 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the company has complied with the requirements. The Certificate on compliance of Corporate Governance requirements, issued by the Statutory Auditors is annexed to the Report of Corporate Governance.The Report on Corporate Governance is attached herewith as Annexure IV. 13. Conservation of Energy, Technology absorption, Research & Development and Foreign Exchange Earnings and Outgo. The particulars prescribed under subsection (3) (m) of Section 134 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, are given in the annexure - V attached to this report. 14. Particulars of Employees The information pursuant to Section 197 of the Companies Act, 2013, read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, in respect of employees of the company, will be provided upon request. However, as per the provisions of Section 136 of the Act, the Report and Accounts are being sent to the Members and others entitled thereto, excluding the information on employees' particulars. The same is available for inspection by the Members at the Registered Office of the company during business hours on working days of the Company 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 in this regard. 15. Particulars of Loans, Guarantees and Investments The details of the investments made by the Company are in Note 10 of the audited financial statements. The Company has made an investment amounting to Rs. 13.26 Million during the year within the meaning of Section 186. 16. Corporate Social Responsibility As part of its initiatives under "Corporate Social Responsibility (CSR), the Company has funded many projects that aid and improve education, literacy and healthcare for children. It has also funded and participated in projects that support and aid children with disabilities. These projects are largely in accordance with Schedule VII of the Companies Act, 2013. The Annual Report on CSR activities is annexed herewith as "Annexure - VI". 17. Details of establishment of Vigil Mechanism The Company has a Vigil mechanism to deal with the instances of fraud and mismanagement, if any. The details of the Policy is explained in the Corporate Governance Report and also posted on the website of the company. During the year under review, there are no such instances to report. 18. Prevention, Prohibition and Redressal of sexual harassment at work place The Company has zero tolerance for sexual harassment at workplace and has formulated a Policy on Prevention, Prohibitionand Redressal of Sexual Harassment at the Workplace, in line with the provisions of the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules there under. The Policy aims to provide protection to employees at the workplace and prevent and redress complaints of sexual harassment and for matters connected or incidental thereto, with the objective of providing a safe working environment, where employees feel secure. The Company has also constituted an Internal Complaints Committee, to inquire into complaints of sexual harassment and recommend appropriate action. The Company has not received any complaint of sexual harassment during the financial year 2015-16. 19. Extract of Annual Return The details forming part of the extract of the Annual Return in form MGT 9 is annexed herewith as 'Annexure - VII. 20. Management Discussion and Analysis In compliance with the requirements of the listing agreement, a detailed Management Discussion and Analysis Report giving details of the company's business and operating results is given in Annexure - VIII attached to this report. 21. Employee Stock Option Plan As a measure of rewarding the employees, your company had introduced an Employee Stock Option Plan (ESOP) during year 2007 & 2013. The particulars prescribed under Guideline 12.1 of the SEBI (Employee Stock Option scheme and Employee Stock Purchase Scheme) Guidelines, 1999 are given in the Annexure - IX attached to this report. 22. General Your Directors state that no disclosure or reporting is required in respect of the following items as there were no transactions on these items during the year under review: a. Details relating to deposits covered under Chapter V of the Companies Act, 2013. b. Issue of equity shares with differential rights as to dividend, voting or otherwise. c. Issue of shares (including sweat equity shares) to employees of the company under any scheme save and except ESOP referred to in this report. d. There is no remuneration received by the Managing Director from the subsidiary company. e. No significant or material orders were passed by the regulators or courts or tribunals which impact the going concern status and the company's operations in future. 23. Acknowledgements Your Directors thank the customers for their continued patronage and the investors, bankers and vendors for their continued support. Your Directors acknowledge and thank the invaluable contributions of all the employees, who have demonstrated their skill, teamwork and commitment through their competence, hard work, cooperation and support. Your Directors would also like to place on record the support received from, the Electronic Hardware Technology Park, the Customs and Excise Departments, the Reserve Bank of India, the Department of Industries and Commerce, Karnataka, the Karnataka Udyog Mitra and all the other Central and State Governmental agencies. By order of the Board For Centum Electronics Limited Apparao V Mallavarapu Chairman & Managing Director S. Krishnan Director Place: Bangalore Date: 27 May, 2016 |