DIRECTORS' REPORT TO THE SHAREHOLDERS The directors have pleasure in presenting the fifty third annual report and the audited accounts for the year ended 31st March 2015. 2. DIVIDEND The board of directors (the board) at their meeting held on 4th February 2015, declared a first interim dividend of Rs.9.00 per share (180%) absorbing a sum of Rs.18.21 Cr for the year 2014-15 and the same was paid to the shareholders on 14th February 2015. The board at its meeting held on 20th March 2015, declared a second interim dividend of Rs.4 per share (80%) absorbing a sum of Rs. 8.09 Cr for the year 2014-15 and the same was paid to the shareholders on 30th March 2015. The board, at its meeting held on 8th May 2015, declared a third interim dividend of Rs. 6 per share (120%) for the year 2014-15 absorbing a sum of Rs 12.14 Cr. The same will be paid to the shareholders on or after 18th May 2015. Hence, the total amount of dividend including the third interim dividend payable, for the year ended 31st March 2015 will aggregate to Rs.19 per share (380%) on 2,02,32,085 equity shares of Rs. 5/- each The Company has set-off its dividend distribution tax payable under Section 115-O(1A) of the Income Tax Act, 1961 against the dividend distribution tax paid by one of its subsidiary companies on the dividend declared. The board does not recommend any further dividend for the year under consideration. 3. PERFORMANCE During the year 2014-15, Gross Domestic Product (GDP) registered a growth rate of 7.4% as against the 6.9% achieved in 2013-14 (Source: RBI). The Indian auto industry also has posted growth of 8.3% (Source: SIAM). During 2014, GDP estimates in US increased to 2.4% as against 2.2% in 2013 (Source: World Bank) and Europe's GDP estimates at 0.8% in 2014 as against -0.4% in 2013 (Source: World Bank). In this background, North American class 8 truck segment grew by 14% (Source: FTR), while, the sale of European medium and heavy trucks declined by 6% (Source: ACEA) 4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT I. Industry Structure and Development: Domestic Inflation has fallen significantly after hovering around 10% for several years. CPI average moved to 6.5% in FY15. (Source: CRISIL) The automotive industry, after showing promising growth in the first half of the fiscal year, slowed down considerably in the second half of the year. However, most segments registered growth over the previous year due to good performance in the first half. The segment wise sales performance is given in the following table. India is emerging as the major producer of high value, technologically advanced components and sub-systems not only to meet the domestic market requirements, but also exporting to several major OEMs all over the world. Exports Global economic growth in 2014 picked up marginally to 2.6% from 2.5% in 2013 which is lower than initially expected, continuing a pattern of disappointing outturns over the past several years. (Source: World Bank). However, economic activity in the US has gathered momentum as labour markets heal and monetary policy remains extremely accommodative. US economy grew by 2.4% in 2014 against 2.2% in 2013. (Source: World Bank). Cheaper oil is boosting real incomes and consumer sentiment, despite the projected gradual rise in interest rates. The US economy is showing signs of sustained growth with improving GDP, job market and consumer spending. However in Europe and Japan, the recovery has been sputtering as legacies of the financial crisis linger, intertwined with structural bottlenecks. Europe was largely characterized by uncertainty about the strength of economic recovery owing to concerns surrounding Russia and stability of the European Union. This was also reflected adversely in the heavy duty truck registrations. II. Business Outlook and Overview The outlook for India is for economic strengthening through higher infrastructure spending, increased fiscal devolution to states, continued reform to financial and monetary policy. The government underscored its intention to move steadily and tackle the politically difficult structural issues that have stalled investment and limited economic performance in recent years. With supportive policies, lower inflation and pickup in capital expenditure, growth is expected to edge up further to 7.8-8.0% in FY 16 (Source CRISIL). Amidst the mood of pessimism and uncertainties that engulf a number of advanced and emerging economies, India has an encouraging long term economic outlook. The Government's commitment to calibrate fiscal management and consolidation bode well for the growth prospects and the overall macroeconomic situation improvement in the future. The Indian auto component industry is expected to register a turnover of US$ 66 billion by FY 16 with the likelihood to touch US$ 115 billion by FY 21. In addition, industry exports are projected to reach US$ 12 billion by FY 16 and reach US$ 30 billion by FY 21. (Source: ACMA). The "Make in India" pitch may further boost the growth of component industry. Global growth is expected to rise to 3.0% in 2015, and average about 3.2% through 2017. (Source: World Bank). The US economic growth is expected to be around 3% in 2015, largely due to more robust private domestic demand. EU growth is unlikely to cross 1% owing to high unemployment levels. Our customers in US are key players in the heavy duty truck market and have given an indication of good order intake. Positive economic conditions (oil prices, low inflation) and poor fuel economy of aging fleet are driving order placement. The Company expects the overall demand in this region to be buoyant. III. Opportunities & Threats The Company supplies aluminium castings either as cast or in machined condition for commercial vehicles, passenger cars and two wheeler segments of the automotive industry. In the medium to long term, the projected growth of domestic auto industry, ambitious export plans of the Indian OEMs are likely to benefit the Company. In view of stringent emission norms and fuel economy regulations, the thrust for light-weighting is bound to increase leading to higher content of aluminum in all vehicle types. This will provide for increased growth opportunities, since the Company is already a preferred source for aluminum castings to major OEM's in India and abroad. The Company has developed magnesium die castings and has completed tests and trials. The responses from prospective customers are encouraging. Magnesium being lighter in weight than aluminum is expected to find several applications for light-weighting in the years to come. Our country is emerging as one of the major manufacturing hubs because of availability of well-educated engineers and managers, skilled workforce and good supply base. The Company is well placed to leverage these emerging opportunities in India and abroad. Several Indian die casting companies and OEMs are either setting up new capacities or expanding existing capacities resulting in increased competition and consequent price pressure which could affect the margins. Intense competition makes it extremely difficult to seek price increases to compensate the effects of inflation. However, the Company's supply contracts provide for periodic price adjustments indexed to the international prices of aluminum and this should offer some protection against volatility of commodity prices. IV. Risks and concerns
Economy There are possible risks on the horizon, both external and domestic. Spillovers from weak global growth and potential global financial market volatility could be disruptive. On the domestic side, weakness in rural economy appears to persist owing to nominal growth in crop prices, unseasonal rains, stagnating rural wages and declined Rabi output. Three developments in global economy are likely to shape the outlook for developing countries. • The beginning of rate hikes in the US, leading to modestly tighter global financing condition; • Commodity prices, which have fallen on expanding supply and concerns about global growth, are expected to remain soft; and • Anemic recovery in Europe and Japan which together account for a third of global imports will continue to weigh on global trade growth. Overall, downside risks still persist, reflecting global headwinds and geopolitical uncertainty. Industry specific The Company caters to the requirements of the automotive industry. The revenue of the Company is derived from Medium & Heavy Commercial Vehicles (50%), followed by Car Industry (30%) and two wheeler industry (20%). The Indian commercial vehicle Industry has strong correlation with the agricultural growth, infrastructure development and the mining industry and is cyclical. The Company's presence in all the segments of auto industry will largely mitigate the segment specific risks. Competition has increased significantly in the Indian market due to entry of new players and expansion plans of existing ones. The Company is aware of the increasing competition and has been taking customer focussed measures to remain competitive in the market place. As no major economic recovery in China is expected, International prices of aluminum is expected to remain at levels witnessed in FY 15. Crude prices are expected to marginally increase from the current levels. Sourcing While the Company continues to pursue cost reduction initiatives, increase in price of input materials could impact the Company's profitability when they are not compensated by customers. Forex With significant exports, import of raw materials and capital goods and foreign currency liabilities, the Company is always exposed to currency fluctuations. Since Q4 of FY15, Indian rupee has appreciated against the Euro causing a reduction in the realization on Euro based exports. However, the Company has a well-defined forex hedging policy to mitigate the risks. Contractual The stipulation and requirements of the automobile industry demands high quality products. Robust quality management systems meeting international standards like TS 16948 are in place to ensure excellent product quality. However, appropriate recall and product liability insurance in line with standard industry practice have been taken. Just-in-time delivery is another important contractual obligation. Robust quality and project management systems are in place to avoid delay in deliveries due to quality issues or project implementation. Capacity utilization The Company adds capacity to meet the projected demand of customers. The Company closely monitors the progress of customer projects/ volumes and appropriately deploys the assets to minimize the twin risks of under-utilization and delay in capacity addition. Risk Management Policy The board has established a Risk Management Policy which formalizes the Company's approach to overview and manage material business risks. The policy is implemented through a top down and bottom up approach identifying, assessing, monitoring and managing key risks across the Company's business units. Risks and effectiveness of their management are internally reviewed and reported regularly to the board. The management has reported to the board that the Company's risk management and internal compliance and control system are operating efficiently and effectively in all material respects. The board is satisfied that there are adequate systems and procedures in place to identify, assess, monitor and manage risks. The audit committee of directors also reviews reports by members of the management team and recommends suitable action. Risk Mitigation Policy has been approved by the board. V. Internal control systems and their adequacy The Company has a proper and adequate internal control system to ensure that all the assets of the Company are safeguarded and protected against any loss and that all the transactions are properly authorized and recorded. Information provided to management is reliable and timely and statutory obligations are adhered to. Internal Financial Controls The Company has an established Internal Financial Control framework including internal controls over financial reporting, operating controls and anti-fraud framework. The framework is reviewed regularly by the management and tested by internal audit team and presented to the audit committee of directors. Based on periodical testing, the framework is strengthened, from time to time, to ensure adequacy and effectiveness of Internal Financial Controls. VI. Operations Review A. Manufacturing The Company has been using Total Quality Management (TQM) as the foundation of its management. The Company implemented the best practices like Total Productivity Management (TPM) and Lean Manufacturing in its manufacturing facilities. It also has in place best-in-class practices for safety, pollution control, work environment, water and energy conservation. Continuous improvement projects are implemented to improve the product quality and productivity in all the manufacturing locations. The Company's journey of achieving manufacturing excellence was recognized and rewarded by the following customers during FY 15. • Cummins : Superior quality award • Hyundai : "4+ Star" quality rating • Visteon : Appreciation for VAVE in new product development. B. Quality Achieving customer delight by consistently providing products of excellent quality is the prime motto of the Company. This is achieved through state of art technology, training, effective quality system, continuous improvement and total employee involvement. Poka-yokes, process audits, use of statistical tools for process optimization and online process controls also contribute towards improving and achieving consistency in product quality. The quality system is certified for ISO/ TS 16949 requirements. TQM is a way of life in the Company. 100% employee involvement has been successfully achieved for the 15th consecutive year. Employees have completed 641 projects by applying statistical tools through Quality Control Circles (QCC) in 2014-15. The average number of suggestions implemented per employee in 2014-15 was 47. C. Cost Management Cost management is a continuous journey and the Company manages the same through deployment of costs across all departments. A cross functional team is working on projects focussed on reducing process scrap and operational efficiency. TPM and lean initiatives are deployed Company-wide to achieve reduction in manufacturing cost. D. Information Technology The Company uses ERP system that integrates all business processes across the Company. Suppliers and customers are also integrated into the system for better planning and execution. During the year, several dashboards were added to improve the productivity, quality and reduce the cost of operations. Projects were also implemented to further enhance the Information Security. VII. Human Resource Development The Company considers employees as vital and most valuable assets. Human Resource Development (HRD) is aligned to business needs to enhance business performance and results. HRD is practiced through an overall HRD framework with its constituents as Resourcing, Employee engagement, Performance & compensation management, Competency based development, Career & succession planning and Organization development. Each of these constituents has a structured approach and process to deliver. The Company focuses on attracting the best talent and enjoys a good brand image across leading educational institutions and industry. Collaborative education program has been initiated with a couple of premier institutes as a long term strategy of the Company to develop role-ready engineers with company-specific knowledge at the entry level. The Company also blends successfully mid-career recruitment with internally grown talent. Career development workshops are conducted to identify high potential employees. Employees with high potential for growth will be groomed and prepared for taking up higher responsibilities in the Company. A reward and recognition system is in place to motivate and also provide fast track growth for the high potential employees. Our engineers and executives are sponsored for advanced study / training programmes offered by both Indian and Foreign Institutions for developing competencies in the area of new technology and modern management practices. Industry experts are also hired for coaching our engineers and executives. Leadership development continues to be one of our key initiatives. Customised management development programs have been developed with reputed educational institutions to hone the leadership skills of the senior executives. The Company conducts a structured survey on employee satisfaction every year and identifies improvement areas to work on. An excellent industrial relations environment continues to prevail at all the manufacturing units of the Company. As of 31st March 2015, the Company had 2,284 employees on its rolls. VIII. Environment & Safety The Company is fully committed to the ultimate goal of employee safety. Safety management is integrated with the overall Environment, Health and Safety (EHS). The Company has been certified under Integrated Management System (IMS) combining ISO 14000 and OHSAS 18001 systems and procedures. Cautionary statement Statements in the management discussion and analysis report describing the Company's objectives, projections, estimates and expectations may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company's operations include, among others, economic conditions affecting demand/supply and price conditions in the domestic and overseas market in which the Company operates, changes in the Government regulations, tax laws and other statutes and incidental factors. 5. DIRECTORS' RESPONSIBILITY STATEMENT In accordance with the provisions of Section 134(3)(c) read with 134(5) of the Act 2013, with respect to Directors' Responsibility Statement, it is hereby stated - i. that in the preparation of annual accounts for the financial year ended 31st March 2015, the applicable Accounting Standards had been followed and that there were no material departures; ii. that the directors had 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. that the directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; iv. that the directors had prepared the accounts for the financial year ended 31st March 2015 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; and vi. 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. 6. CORPORATE SOCIAL RESPONSIBILITY (CSR) CSR activities have already been textured into the Company's value system through Srinivasan Services Trust (SST), established by the group companies in 1996 with the vision of building self-reliant rural community. SST, the CSR arm of the Company, with the vision of building self-reliant rural communities, was established in 1996. Over 19 years of service, SST has played a pivotal role in changing lives of people in many villages in rural India by creating self-reliant communities that are models of sustainable development. The Company is therefore eligible to spend on their ongoing projects / programs, falling within the CSR activities specified under the Act 2013, as mandated by the Ministry of Corporate Affairs (MCA) for carrying out the CSR activities and also projects undertaken by other non-profitable organizations having a track record of more than the prescribed years in undertaking similar projects and programmes. The CSR Committee of directors of the Company formulated and recommended a Corporate Social Responsibility policy in terms of Section 135 of the Act 2013 along with a list of projects / programmes to be undertaken for CSR spending in accordance with the Companies (Corporate Social Responsibility Policy) Rules, 2014. Based on the recommendation of the CSR Committee, the board has approved the projects / programs carried out as CSR activities by the following non-profitable organizations having a track record of more than the prescribed years in undertaking similar programmes / projects, for CSR spending not less than 2% of average net profits, made during the immediately preceding three financial years, for the current financial year 2014-2015. As required under Section 135 of the Act 2013 read with Rule 8 of the Companies (Corporate Social Responsibility Policy) Rules, 2014, the annual report on CSR activities containing the particulars of the projects / programmes approved and recommended by CSR Committee and approved by the board are given by way of Annexure IV attached to this Report Sundaram - Clayton (USA) Limited Sundaram-Clayton (USA) Limited, a wholly subsidiary of the Company is engaged in the business of providing Professional Employer Organization ("PEO") services to the employees of the Company. The Company earned a revenue of USD 6,598 and net income after adjustment of expenses amounted to USD 263 for the year ended 31st March 2015. TVS Motor Company Limited (TVSM) TVS Motor Company Limited (TVSM), a listed company, is engaged in the business of manufacture of two and three wheelers. During the year, TVSM achieved a turnover of Rs. 10130.83 Cr and earned a profit after tax of Rs. 347.83 Cr during the year 2014-15. TVSM declared first interim dividend of Re.0.75 per share (75%) for the year 2014-15 absorbing a sum of Rs. 41.95 Cr including dividend distribution tax. It also declared a second interim dividend of Rs.1.15 per share (115%) for the year 2014-15 absorbing a sum of Rs.65.56 Cr including dividend distribution tax. Hence, the total amount of dividend including the second interim dividend for the year ended 31st March 2015 will aggregate to Rs.1.90 per share (190%) on 47,50,87,114 equity shares of Re.1/- each. Sundaram Auto Components Limited (SACL) During the year, SACL, a wholly owned subsidiary of TVSM, has achieved a turnover of Rs.415 Cr in Plastics component business and earned a profit after tax of Rs.25.32 Cr. SACL was awarded the best supplier "System Rating" by Visteon CCS for the year 2014-15. During the year, SACL secured new businesses for manufacture of exterior painted parts and assemblies, safety critical air bag cover parts, interior assemblies and Heating, Ventilating and Air-Conditioning (HVAC) parts. During the year, SACL productionized 140 new parts for various customers. SACL on 28th January, 2015, declared an interim dividend of Rs.3.50 per share (35%) for the year 2014-15 absorbing a sum of Rs.485.10 lakhs including dividend distribution tax. SACL on 23rd April, 2015 recommended a final dividend of Rs.2.50 per share (25%) for the year 2014-15, for approval of shareholders, absorbing a sum of Rs.346.49 lakhs including dividend distribution tax. Hence, the total amount of dividend including the final dividend recommended, for the year ended 31st March, 2015 will aggregate to Rs.6 per share (60%) on 1,15,50,000 equity shares of Rs.10/- each absorbing a sum of Rs.831.59 lakhs including dividend distribution tax. TVS Housing Limited (TVSH) & Emerald Haven Realty Limited (EHRL) TVSH, a wholly owned subsidiary of TVSM, and EHRL an associate of TVSM, in terms of the arrangement entered into between them launched Phase I of development at its land at Nedungundram, Chennai and is successfully nearing completion. Similarly, Phase II of the development at Nedungundram (Project Green Hills - Villas) successfully launched during the year. PT.TVS Motor Company Indonesia (PT TVS) During the year, motorcycle industry in Indonesia declined by 3%. The decline was more pronounced in the last quarter of the financial year when the industry plunged by 17% due to weak consumer sentiments arising out of poor commodity prices and the credit squeeze on hire purchase. The scooter category grew by 6% triggered by new product launches to end the year with a share of 70%. The sports motorcycle category and bebek category declined by 10% and 25% respectively. PT TVS, a wholly owned subsidiary of TVSM, introduced two variants of 125cc sports motorcycle designed for specific customer segment during the later part of the year. During 2014-15, PT TVS sold 23,300 vehicles as against 19,200 vehicles sold during 2013-14, thereby registering a growth of 21%. While the domestic sales remained flat, exports grew by 40%. PT TVS continued its focus on exports and exported more than 14,000 units to ASEAN, Middle East and African countries. During 2014-15, the loss at EBITDA level was marginally lower at USD 8 Mn compared to loss of USD 9 Mn recorded during 2013-14. During 2015-16, PT TVS plans to launch a new 200cc sports motorcycle and a new variant of its 110cc Dazz scooter with fuel injection system. During the year under review, TVSM has made an additional investment of USD 4 Mn in 4,00,000 ordinary shares of USD 10 each (Rs.24.92 Cr) in PT TVS, to meet its fund requirements. TVS Motor Company (Europe) B.V & TVS Motor (Singapore) Pte. Ltd TVSM had earlier incorporated both these entities as its wholly owned subsidiaries, with a view to serve as special purpose vehicles (SPVs) for making and protecting its investments made in the overseas operations of PT TVS. Considering the change in the evaluation, TVSM has now initiated steps to voluntarily wind up TVSM Europe, subject to such regulatory approvals / consents as may be required, both under Indian / Foreign laws. The other overseas entity viz TVS Motor Singapore Pte. Ltd will continue to hold the investment in PT TVS. During the year under review, TVSM has made an additional investment of Rs. 2.01 Cr in the ordinary shares of TVS Motor Singapore Pte. Ltd and the shares were allotted in April 2015. Sundaram Business Development Consulting (Shanghai) Company Limited (SBDC) SBDC, a wholly owned subsidiary of TVSM was initially established to explore options of sourcing, local assembly of two wheeler etc., in China for TVSM. After a complete review of the proposed activities through SBDC by TVSM, it was advised that local manufacturing operations may not be required in China. Hence, the board of TVSM has decided to retain the "Representative office" in China but to close down the operations of SBDC. Associates of the Company TVS Training and Services Limited (TVS TSL) TVS TSL, an associate of the Company, is engaged in the business of establishing, managing and administering educational and vocational institutions. During the year, TVS TSL earned an income of Rs. 8.42 Cr and loss after adjustment of expenses was Rs. 0.27 Cr. Sundram Non-Conventional Energy Systems Limited (SNES) SNES, an associate of the Company, is engaged in the business of generation of power. During the year, it has earned Rs. 2.99 Cr and the profit after tax was Rs. 1.49 Cr. Financial position of all subsidiaries and associate companies are provided as part of consolidated financial statements in Form AOC-1 in the manner required under Section 129 read with the Companies (Accounts) Rules, 2014, of the Act 2013. 8. CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements of the Company are prepared in accordance with the provisions of Section 129 of the Act, 2013 read with the Companies (Accounts) Rules, 2014 and the Listing Agreement with the Stock Exchanges along with a separate statement containing the salient features of the financial performance of subsidiaries / associates. The audited financial statements in respect of each of its subsidiary companies will be made available to the shareholders, on receipt of a request from any shareholder of the Company and it has also been placed on the website of the Company. This will also be available for inspection by the shareholders at the registered office during the business hours. 9. DIRECTORS & KEY MANAGERIAL PERSONNEL Independent Directors (IDs) During the year, M/s. Vice Admiral P J Jacob (Retd.), V Subramanian, S Santhanakrishnan, Suresh Kumar Sharma, R Vijayaraghavan and Kamlesh Gandhi , were appointed as IDs for the first term of five consecutive years from the conclusion of the fifty-second Annual General Meeting and to receive remuneration by way of fees, reimbursement of expenses for participation in the meetings of the board and / or committees and profit related commission in terms of applicable provisions of the Act 2013 within the overall limit approved by the shareholders vide their resolution passed 21st August 2014, at the annual general meeting as determined by the board from time to time in terms of Section 197 and 198 and any other applicable provisions of the Act 2013. On appointment, each ID has acknowledged the terms of appointment as set out in their letter of appointment. The appointment letter covers, inter alia, the terms of appointment, duties, remuneration and expenses, rights of access to information, other directorships, dealing in Company's shares, disclosure of Director's interests, insurance and indemnity. The IDs are provided with copies of the Company's policies and charters of various committees of the board. All IDs have declared that they met all the criteria of independence as provided under Section 149(6) of the Act 2013 and Clause 49 of the Listing Agreement. The detailed terms of appointment of IDs are disclosed on the Company's website with following link <http://> www.sundaramclayton.com/Web%20files/Terms%20of%20IDs.pdf Separate meeting of Independent Directors (IDs) The IDs were fully kept informed of the Company's activities in all its spheres. During the year under review, a separate meeting of IDs was held on 20th March, 2015 and the IDs reviewed the performance of: i) non-IDs viz., M/s. Venu Srinivasan, chairman and managing director, Dr Lakshmi Venu and Sudarshan Venu, joint managing directors, K Mahesh, T K Balaji and Gopal Srinivasan, directors; and ii) the board as a whole. They reviewed the performance of Chairman after taking into account the views of executive and non-executive directors. They also assessed the quality, quantity and timeliness of flow of information between the Company's Management and the board that are necessary for the board to effectively and reasonably perform their duties. All the IDs were present at the meeting. Woman director In terms of Section 149 of the Act 2013 read with the Companies (Appointment and Qualification of Directors) Rules, 2014 and Clause 49 of the Listing Agreement, the Company is required to have a woman director on its board. Dr Lakshmi Venu, joint managing director is already on the board of the Company from 22nd March, 2010 and hence, the Company fulfills the requirement of Section 149 of the Act 2013. Non-executive and non-independent directors (NE-Non IDs) In terms of the provisions of sub-section (6) read with explanation to Section 152 of the Act 2013 two-thirds of the total number of directors i.e., excluding IDs, are liable to retire by rotation and out of which, one-third are liable to retire by rotation at every annual general meeting. Mr K Mahesh, director, and Mr Sudarshan Venu, Joint Managing Director who are liable to retire by rotation, at the AGM, and being eligible, offer themselves for re-appointment. Executive directors During the year, the board, at its meeting held on 11th September, 2014, based on the recommendation of the NRC, re-designated Dr Lakshmi Venu as joint managing director considering her increased role and responsibility in the management of the Company, subject to the approval of the shareholders at the AGM. The other terms and conditions of her appointment and remuneration, as earlier approved by the board as well as by the shareholders of the Company on 30th September 2011 and 21st August 2014 would remain unchanged. During the year, the board, at its meeting held on 11th September, 2014, on the recommendation of the NRC, appointed Mr Sudarshan Venu, as JMD since he was actively involved in all spheres of the management of the Company and handling wider responsibilities for exploring new business opportunities - both in India and abroad subject to the approval of the shareholders at the AGM. The terms and conditions of appointment and remuneration as approved by the board is subject to the approval of the shareholders at the AGM. Both the NRC and the board observed that the proposed appointment of Mr Sudarshan Venu as JMD also satisfies the requirements of the provisions of sub-section (3) of Section 196 of the Act 2013 and also part I of Schedule V of the Act 2013, dealing with the eligibility for appointment of managing directors. Mr Sudarshan Venu as JMD of both the subsidiary company, namely TVS Motor Company Limited (TVSM) and the Company, would be entitled to draw remuneration from one or both the companies, provided that the total remuneration drawn from both the companies does not exceed the higher maximum limit admissible from any one of the companies. Brief resume of directors The brief resume of the directors proposed to be appointed and reappointed and other relevant information have been furnished in the Notice of AGM. Appropriate resolutions for their appointment / re-appointment are being placed for approval of the shareholders at the AGM. The directors, therefore, recommend their appointment / re-appointment as directors of the Company. Key Managerial Personnel (KMPs) At the board meetings held on 8th May 2014 and 11th September 2014, Mr Venu Srinivasan, CMD, Dr Lakshmi Venu, JMD, Mr Sudarshan Venu JMD, Mr C N Prasad, President & Chief Executive Officer, Mr V N Venkatanathan, Chief Financial Officer and Mr R Raja Prakash, Company Secretary were designated as 'Key Managerial Personnel' of the Company in compliance with the requirement of Section 203 of the Act 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014. Nomination and Remuneration Policy The Nomination and Remuneration Committee of Directors (NRC) reviews the composition of the board, to ensure that there is an appropriate mix of abilities, experience and diversity to serve the interests of all shareholders and the Company. During the year, in accordance with the requirements under Section 178 of the Act 2013 and Clause 49 of Listing Agreement, the NRC formulated a Nomination and Remuneration Policy to govern the terms of nomination / appointment and remuneration of (i) Directors, (ii) Key Managerial Personnel (KMPs) and (iii) Senior Management Personnel (SMPs) of the Company. The same was approved by the board at its meeting held on 24th September 2014. The NRC also reviews succession planning of both SMPs and board. The Company's approach in recent years is to have a greater component of performance linked remuneration for SMPs. The process of appointing a director / KMPs / SMPs is, that when a vacancy arises, or is expected, the NRC will identify, ascertain the integrity, qualification, appropriate expertise and experience, having regard to the skills that the candidate will bring to the board / company, and the balance of skills added to that of which the existing members hold. The NRC will review the profile of persons and the most suitable person is either recommended for appointment by the board or is recommended to shareholders for their election. The NRC has discretion to decide whether qualification, expertise and experience possessed by a person are sufficient / satisfactory for the concerned position. The NRC will ensure that any person(s) who is / are appointed or continues in the employment of the Company as its executive chairman, managing director, whole-time director shall comply with the conditions as laid out under Part I of Schedule V to the Act 2013. The NRC will ensure that any appointment of a person as an independent director of the Company will be made in accordance with the provisions of Section 149 read with Schedule IV of the Act 2013 along with any other applicable provisions and Clause 49 of the Listing Agreement. Criteria for performance evaluation, disclosures on the remuneration of directors, criteria of making payments to non-executive directors have been disclosed as part of Corporate Governance Report attached herewith. Evaluation of the board, committees and directors In terms of Section 134 of the Act 2013 and the Corporate Governance requirements as prescribed under Clause 49 of the Listing Agreement, the board reviewed and evaluated its own performance from the perspectives of Company Performance, Strategy and Implementation, Risk Management, Corporate ethics, based on the evaluation criteria laid down by the NRC. The board discussed and assessed its own composition, size, mix of skills and experience, its meeting sequence, effectiveness of discussion, decision making, follow up action, quality of information and the performance and reporting by the Committees viz., Audit Committee, Nomination and Remuneration Committee (NRC), Stakeholders Relationship Committee (SRC) and Corporate Social Responsibility Committee (CSR). The board upon evaluation concluded that it is well balanced in terms of diversity of experience encompassing all the activities of the Company. The Company endeavours to have a diverse board representing a range of experience at policy-making levels in business and technology, and in areas that are relevant to the Company's global activities. The performance of individual directors including all Independent directors assessed against a range of criteria such as contribution to the development of business strategy and performance of the Company, understanding the major risks affecting the Company, clear direction to the management and contribution to the board cohesion. The performance evaluation has been done by the entire board of directors, except the director concerned being evaluated. The board noted that all directors have understood the opportunities and risks to the Company's strategy and are supportive of the direction articulated by the management team towards consistent improvement. The board also noted that corporate responsibility, ethics and compliance are taken seriously, and there is a good balance between the core values of the Company and the interests of stakeholders. The board satisfied with the Company's performance in all fronts viz., new product development, operations, sales and marketing, finance management, international business, employee relations and compliance with statutory / regulatory requirements and finally concluded that the board operates effectively and is closely aligned to the culture of the business. The performance of each committee was evaluated by the board after seeking inputs from its members on the basis of the criteria such as matters assessed against terms of reference, time spent by the committees in considering matters, quality of information received, work of each committee, overall effectiveness and decision making and compliance with the corporate governance requirements and concluded that all the committees continued to function effectively, with full participation by all its members and the members of executive management of the Company. The board reviewed each committee's terms of reference to ensure that the Company's existing practices remain appropriate. Recommendations from each committee are considered and approved by the board prior to implementation. Number of board meetings held The number of board meetings held during the financial year 2014-15 is provided as part of Corporate Governance Report prepared in terms of Clause 49 of the Listing Agreement. 10. AUDITORS Statutory Auditors The Company, in terms of Section 139 (1) and (2) of the Act 2013 is required to appoint a statutory auditor for a term of five consecutive years i.e., till the conclusion of sixth annual general meeting and ratify their appointment, during the period, in every annual general meeting, till the sixth such meeting by way of passing of an ordinary resolution. However, the period, for which any firm has held office as auditor prior to the commencement of the Act 2013 will be taken into account for calculating the period of five consecutive years, as per the fourth proviso to Section 139(2) of the Act 2013 read with Rule 6(3) of the Companies (Audit and Auditors) Rules, 2014, In view of these requirements, M/s. Sundaram & Srinivasan, Chartered Accountants, Chennai, who has been the statutory auditors of the Company for a period of more than 10 years, were appointed as statutory auditors of the Company for the transitional period of three consecutive years at the annual general meeting held on 21st August 2014, subject to the approval and ratification by the shareholders at each annual general meeting during the transitional period. The Company has obtained necessary certificate under Section 141 of the Act 2013 conveying their eligibility for the above appointment. The audit committee and the board reviewed their eligibility criteria, as laid down under Section 141 of the Act 2013 and recommended the ratification of the re-appointment for second year from the conclusion of the ensuing AGM till the conclusion of the next annual general meeting as auditors of the Company. The notes on financial statements referred to in the Auditors' Report are self explanatory and do not call for any further comments. The Auditors' Report does not contain any qualification, reservation or adverse remarks. Cost Auditor The board, subject to the approval of the Central Government, has re-appointed Mr A N Raman, Cost Accountant holding Certificate of practice No. 5359 allotted by The Institute of Cost Accountants of India, as a Cost Auditor for conducting Cost Audit for the financial year 2015-16, in terms of the Companies (Cost Records and Audit) Amendment Rules, 2014. The Company has also received necessary certificate under Section 141 of the Act 2013 from him conveying his eligibility. A sum of Rs.3 lakhs has been fixed by the board, as remuneration in addition to reimbursement of service tax, travelling and out-of-pocket expenses payable to him and is also required to be ratified by the members, at the ensuing AGM as per Section 148(3) of the Act 2013. The Company does not require to carry out Cost Audit for the year 2014-15 and thereby filing of Cost Audit Report does not arise. As required under the Cost (Cost Accounting Records) Rules, 2011, the Company has filed the Cost Audit Report for the year 2013-14 in XBRL format along with Cost Compliance Report. Secretarial Auditors As required under Section 204 of the Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014, the Company is required to appoint a Secretarial Auditor for auditing secretarial and related records of the Company. Accordingly, Ms B Chandra, Practising Company Secretary, Chennai, was appointed as Secretarial Auditors for carrying out the secretarial audit for the financial year 2014-15. As required by Section 204 of the Act, 2013, the Secretarial Audit Report for the year 2014-15, given by Ms B Chandra, Practising Company Secretary, Chennai for auditing the secretarial and related records is attached to this report. The Secretarial Audit Report does not contain any qualification, reservation or other remarks. 11. CORPORATE GOVERNANCE The Company has been practicing the principles of good corporate governance over the years and lays strong emphasis on transparency, accountability and integrity. A separate section on Corporate Governance and a certificate from the statutory auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Clause 49 of the Listing Agreement(s) with the Stock Exchange(s) form part of this Annual Report. The Chief Executive Officer and the Chief Financial Officer of the Company have certified to the board on financial statements and other matters in accordance with the Clause 49 (IX) of the Listing Agreement pertaining to CEO/CFO certification for the financial year ended 31st March 2015. 12. POLICY ON VIGIL MECHANISM The board at its meeting held on 24th September 2014, adopted a Policy on Vigil Mechanism in accordance with the provisions of the Act 2013 and as per the revised Clause 49 of the Listing Agreement, which provides a formal mechanism for all directors, employees and other stakeholders of the Company, to report to the management their genuine concerns or grievances about unethical behaviour, actual or suspected fraud and any violation of the Company's Code of Business Conduct or Ethics policy. The Policy also provides a direct access to the Chairperson of the Audit Committee to make protective disclosures to the management about grievances or violation of the Company's Code of Business Conduct and Ethics. The Policy is disclosed on the Company's website with the following link <http://www.sundaramclayton.com/Web%20files/Investors/> Whistle%20Blower%20Policy.pdf. 13. PUBLIC DEPOSITS The Company has not accepted any deposit from the public within the meaning of Chapter V of the Act 2013, for the year ended 31st March 2015. 14. DISCLOSURES Information on conservation of energy, technology absorption, foreign exchange etc: Information on conservation of energy, technology absorption and foreign exchange earnings and outgo are given in Annexure I to this report, in terms of the requirements of Section 134(3)(m) of the Act 2013 read with the Companies (Accounts) Rules 2014; Annual Return: Extract of Annual Return in the prescribed form is given as Annexure II to this report, in terms of the requirement of Section 134(3)(a) of Act 2013 read with the Companies (Accounts) Rules, 2014. Employee's remuneration: Details of employees receiving the remuneration in excess of the limits prescribed under Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as a statement and given in Annexure III. In terms of first proviso to Section 136(1) of the Act 2013 the Annual Report, excluding the aforesaid annexure is being sent to the shareholders of the Company. The annexure is available for inspection at the Registered Office of the Company during business hours and any shareholder interested in obtaining a copy of the said annexure may write to the Company Secretary at the Registered Office of the Company. Comparative analysis of remuneration paid A comparative analysis of remuneration paid to directors and employees with the Company's performance is given as Annexure V to this report. Details of related party transactions There were no material related party transactions under Section 188 of the Act 2013 read with the Companies (Meetings of Board and its Powers) Rules, 2014. Details of loans / guarantees / investments made During the year under review, the Company had not granted any loans or guarantees covered under Section 186 of the Act 2013. Please refer note No. IX to Notes on accounts for the financial year 2014-15, for details of investments made by the Company. Other laws During the year under review, there were no cases filed pursuant to the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act 2013. 15. ACKNOWLEDGEMENT The directors gratefully acknowledge the continued support and cooperation received from the promoters of the Company, viz., T V Sundram Iyengar & Sons Private Limited, Southern Roadways Limited, Sundaram Industries Private Limited and Sundaram Finance Limited. The directors thank the vehicle manufacturers, vendors and bankers for their continued support and assistance. The directors wish to place on record their appreciation of the continued excellent work done by all the employees of the Company during the year. The directors specially thank the shareholders for their continued faith in the Company. For and on behalf of the board VENU SRINIVASAN Chairman Date : 8th May 2015 Place Chennai |