BOARD'S REPORT DEAR MEMBERS, Your Directors are pleased to present the 31st Annual Report together with Audited Financial Statements of the Company for the year ended 31st March 2016. Results of Operations and the state of Company's affairs Your Company achieved aggregate sales of Rs. 70,121 lakhs in 2015-16 (as against Rs. 65,725 lakhs in 2014-15).This marks a growth of 6.69% over the previous year. The year saw the introduction of "Diesel" Water Pump and new Gasoline Water Pump for the vast and growing agriculture and horticulture markets. With the introduction of Diesel Water Pump your Company now offers solutions across all major fuel categories for the Indian farmer. Gasoline Water Pump offers unmatched portability and fuel consumption thereby making the irrigation process more efficient and less time consuming. Both categories of Water Pumps have received a very positive response in the market and your company expects to further increase its presence in these categories. A detailed report on operations titled 'Management Discussion and Analysis Report' is annexed to this Report as Annexure-A and forms part thereof. 2. Dividend Your Directors recommend a dividend of Rs. 6/- per equity share of Rs. 10/- each (60%) for the year ended 31st March 2016. The total outgo on this account (including dividend tax) will be Rs. 733 lakh. 3. Transfer of Amounts to Investor Education and Protection Fund In compliance with Section 205(C) of the Companies Act, 1956/Section 125 of the Companies Act, 2013, the Company has transferred a sum of Rs. 2,73,485.00 during the financial year 2015-16 to the Investor Education and Protection Fund established by the Central Government. The said amount represents unclaimed dividend which was lying with the Company for a period of seven years from the due date of payment. 4. Environment Protection and Safety Your Company is committed towards protection and safety of environment. This is depicted in overall HONDA Philosophy "BLUE SKIES FOR OUR CHILDREN" and is adopted by your Company also. All associates strive towards controlling emissions, effluents and waste disposal arising out of manufacturing processes, product and services. A statement on environmental protection and safety, conservation of energy, technology absorption, foreign Exchange earnings and Outgo is annexed as Annexure-B and forms part of this report. 5. Extract of Annual Return Pursuant to section 92(3) of the Companies Act, 2013 ('the Act') and rule 12(1) of the Companies (Management and Administration) Rules, 2014, extract of annual return is Annexed as Annexure-C and forms part of this report. . Committees of the Board The details of composition of the Audit Committee and other Committees of the Board of Directors, brief terms of reference thereof and details of meetings held and attended by the Members during the year are provided in the Corporate Governance Report forming part hereof. 8. Managing the Risks of Fraud, Corruption and Unethical Business Practices a.) Vigil Mechanism / Whistle Blower Policy As per the provisions of Section 177(9) of the Companies Act, 2013 read with Rules thereof and Regulation 4(2)(d) (iv) of the Securities and Exchange Board of India (Listing obligations and Disclosure Requirements) Regulations, 2015, the Company is required to establish an effective Vigil Mechanism, thereby enabling all stakeholders to communicate their concerns about illegal or unethical practices. In line with the commitment of the Company to highest standards of ethical, moral and legal business conduct and its commitment to transparent approach, Vigil Mechanism/Whistle Blower Policy in the name of Business Ethics Proposal Line (BEPL) has been established. For the effective implementation of the policy, the Company has constituted a Business Ethics Committee (BEC) comprising of senior executives/directors to provide an opportunity to all Directors, Associates/ Vendors/ Customers to access BEC in good faith, in case they observe an unethical or improper practice in the Company. The detailed policy is posted on the Company's website at the weblink: <https://> www.hondasielpower.com b.) Risk Management Policy In compliance with the requirement of the Companies Act, 2013 the Company has put in place Risk Minimization and Assessment Procedures. In order to effectively and efficiently manage risk and address challenges, the Company has constituted a Risk Management Committee and also formulated a Risk Management Policy. The said policy covers the framework for management of risk, categorized under three main components i.e. business risk, service/operational risk and external risk. The Risk Management Committee has the primary responsibility of implementing the Risk Management Policy of the Company and achieving the stated objective of developing a risk intelligent culture that supports decision making and helps improve Company performance. The Company manages the risk in line with current risk management best practice. This facilitates the achievement of our objectives, operational effectiveness and efficiency, protection of people and assets, informed decision-making, and compliance with applicable laws and regulations. Composition of Risk Management Committee and Risk Management Policy of the Company may be accessed at Company's website at the link <https://www.hondasielpower.com>. 9. Directors' Responsibility Statement Pursuant to the requirement of clause (c) of sub-section (3) of Section 134 of the Companies Act, 2013, your Directors confirm that: (a) in the preparation of the annual accounts for the year ended March 31, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Companies Act, 2013, have been followed and there are no material departures from the same; (b) 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 as at March 31, 2016 and of the profit of the Company for the year ended on that date; (c) 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; (d) the Directors have prepared the annual accounts on a 'going concern' basis; (e) the Directors have laid down internal financial controls to be followed by the Company and that such internal financial controls are adequate and are operating effectively; and (f) The Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems are adequate and operating effectively. 10. Particulars of loans, guarantees or investments made under Section 186 of the Companies Act, 2013 The Company has not made any loans, guarantees or investments under Section 186 of the Companies Act, 2013 during the year under review. 11. Auditors i) Statutory Auditors M/s. B S R & Co. LLP, Chartered Accountants, (Firm Registration No. 101248W), Statutory Auditors of the Company will hold office until the conclusion of the forthcoming Annual General Meeting of the Company and are eligible for re-appointment as per Section 139 of the Companies Act, 2013. M/s. B S R & Co. LLP has expressed their willingness to get re-appointed as the Statutory Auditors of the Company and have furnished a certificate of eligibility and consent under Section 139 (1) and 141 of the Companies Act, 2013 and the rules framed there under. The Auditors have represented that they have been subjected to the 'Peer Review Process' of The Institute of Chartered Accountants of India and hold a valid Certificate. The report given by the Auditors on the financial statements of the Company forms part hereof. There has been no qualifications, reservations, adverse remarks or disclaimer by the Auditors in their report. ii) Cost Auditors In terms of the provisions of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, the Board of Directors, on the recommendation of the Audit Committee, has appointed M/s Rakesh Singh & Co., Cost Accountants as Cost Auditors of the Company for the Financial Year 201617, at a remuneration as mentioned in the Notice convening 31st Annual General Meeting, for conducting the audit of the cost records maintained by the Company, subject to the ratification of the Members on the remuneration to be paid to the Cost Auditor. A certificate from them has been received to the effect that their appointment as Cost Auditors of the Company, if made, would be in accordance with the limits specified under Section 139 and 141 of the Companies Act, 2013 Act and Rules framed thereunder. iii) Secretarial Auditor and Secretarial Audit Report The Board had appointed M/s Tanuj Vohra & Associates, Company Secretaries to carry out Secretarial Audit under the provisions of Section 204 of the Companies Act, 2013 for the financial year 2015-16. There were no qualifications, reservations or adverse remarks by Secretarial Auditors of the Company. The detailed report on the Secretarial Audit is annexed as Annexure - D to this Report. 12. Related Party Transactions All the related party transactions are entered into on arm's length basis, in the ordinary course of business and are in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Regulations. Accordingly, no transactions are being reported in Form AOC-2 in terms of Section 134 of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014. Pursuant to SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, all Related Party Transactions are approved by the Audit Committee. Omnibus approval is obtained for un-foreseen transactions. A report on the transactions, specifying the nature, value and terms and conditions of the same, done during the quarter vis-a-vis the approval granted are presented to the Audit Committee on a quarterly basis for its review. Resolution, seeking Members approval for the Material Related Party Transactions entered into prior to 2nd September, 2015 and which have continued beyond such date forms part of the Notice of the 31st Annual General Meeting and the same is recommended for your consideration and approval. Further, based on the past trend, the transactions which are likely to cross materiality threshold, as prescribed, is being placed before the Members for their approval. The Related Party Transactions Policy, as approved by the Board, may be assessed at the Company's website at the weblink: <https://www.hondasielpower.com>. 13. Details in respect of adequacy of Internal Financial Controls with reference to the Financial Statements The Company has adopted policies and procedures for ensuring the orderly and efficient conduct of its business, including adherence to Company' s policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information. Further, the testing of such controls has also been carried out independently by the Statutory Auditors for the financial year 2015-16 as mandated under the provisions of the Companies Act, 2013. In the opinion of the Board, the existing internal control framework is adequate and is commensurate to the size and nature of business of the Company. 14. Corporate Social Responsibility initiatives In compliance with Section 135 of the Companies Act, 2013 read with the Companies (Corporate Social Responsibility Policy) Rules 2014, the Company has established Corporate Social Responsibility (CSR) Committee and statutory disclosures with respect to the CSR Committee and an Annual Report on CSR Activities forms part of this Report as Annexure-E. The CSR Policy may be accessed on the Company's website at the link <https://www.hondasielpower.com>. 15. Policy on Remuneration to be paid to Directors, Key Managerial Personnel (KMP) and other employees and criteria for appointment of Directors Your Company has in place Remuneration Policy for Directors, KMP and all other employees of the Company and Criteria for Appointment of Directors. The policies were adopted in line with the requirements of the Companies Act, 2013 and the erstwhile Clause 49 of the Listing Agreement with the Stock Exchanges. The policies inter-alia requires the Directors to be of high integrity with relevant expertise and experience so as to have a diverse Board. The Policies further lay down the positive attributes/ criteria which the Nomination and Remuneration Committee should keep in mind while recommending the candidature for the appointment as Director. Policy on Remuneration to be paid to Directors, Key Managerial Personnel (KMP) and other employees and criteria for appointment of Directors is annexed to this Report at Annexure-F. Criteria of Independence The Nomination and Remuneration Committee assesses the independence of Directors at the time of appointment / re-appointment pursuant to the criteria laid down by the Company in line with the requirements of the Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Determination of independence is being re-assessed when any new interests or relationships are disclosed by a Director. 16. Declaration by independent directors The Board of your Company consists of Dr. Dharam Vir Kapur, Mr. Ravi Vira Gupta, Mr. Manoj Arora and Ms. Alka Marezban Bharucha as Independent Directors. These Directors have confirmed that they fulfil all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the Rules thereunder. 17. Directors and Key Managerial Personnel (KMP) i) Cessation a) Mr. O.P. Khaitan (DIN 00027798), an Independent Director on the Board of the Company, due to demise ceased to be Director of the Company with effect from December 06,2015. The Board expresses its deep sorrow on the sad demise of Mr. O.P. Khaitan. b) Mr. Shinya Inamura (DIN 06851565), Non-Executive/ Non-Independent Director of the Company, due to his preoccupation with some other long term assignment, resigned from the Board with effect from February 01, 2016. The Board wishes to place on record its appreciation for the valuable contribution made by the above Directors, during their tenure, to the working of the Company. ii) Retirement by Rotation In accordance with the provisions of the Companies Act, 2013 and applicable Regulations issued by the Securities & Exchange Board of India, Mr. Hiroyoshi Sugimizu (DIN 06848213), Director of the Company, will retire by rotation at the forthcoming Annual General Meeting ('AGM') of the Company and being eligible, offers himselffor re-appointment. The Board recommends his re-appointment. Brief resume of Mr. Hiroyoshi Sugimizu, nature of his expertise in specific functional area and the name of the Companies in which he holds the Directorship and the Chairmanship/Membership of the Committees of the Board, as stipulated under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, are given in the Notice convening the Annual General Meeting. Necessary resolution for the re-appointment of the aforesaid Director has been included in the Notice convening the Annual General Meeting. As per the confirmations received from Mr. Sugimizu, he is not disqualified for being appointed as Director as specified in Section 164(2) (a) and (b) of the Companies Act, 2013. iii) Payment of remuneration - The revised remuneration to be paid to Mr. Yoshifumi Iida as President & CEO of the Company has been approved by the Board of Directors on February 10, 2016, subsequent to the recommendation of the Nomination and Remuneration Committee on February 10, 2016. Your Board recommends the revised remuneration of Mr. Yoshifumi Iida for your approval. - The revised remuneration of Mr. Vinay Mittal from 01.04.2016 to 31.03.2017 (both days inclusive) has been approved by the Board of Directors on May 20, 2016, subsequent to the recommendation of the Nomination and Remuneration Committee at its Meeting held on May 20, 2016. Your Board recommends the approval of revised remuneration of Mr. Vinay Mittal. Proposal for the same is being put up for your approval. 18. Directors' Evaluation In accordance with the framework approved by the Nomination and Remuneration Committee, the Board of Directors, in its Meeting held on May 20, 2016, undertook the evaluation of its own performance, its Committees and all the individual Directors. The review concluded by affirming that the Board as a whole as well as all of its Members, individually and the Committees of the Board continued to display commitment to good governance, ensuring a constant improvement of processes and procedures. It was further acknowledged that every individual Member and Committee of the Board contribute its best in the overall growth of the organization. 19. Explanations or comments on qualifications, reservations or adverse remarks or disclaimers made by the Auditors in their reports. There were no qualifications, reservations or adverse remarks made by the Auditors in their respective reports. 20. Deposits The Company has not accepted any deposits from the public/ members under Section 73 of the Companies Act, 2013 read with Companies (Acceptance of Deposits) Rules, 2014 during the year. 21. Buy Back of Securities The Company has not bought back any of its securities during the year under review. 22. Sweat Equity The Company has not issued any Sweat Equity shares during the year under review. 23. Bonus Shares No bonus shares were issued during the year under review. 24. Employees Stock Option Scheme The Company has not provided any Stock Option Scheme during the year under review. 25. Significant and material orders passed by the regulators During the year under review, no significant and material orders were passed by the regulators or courts or tribunals impacting the going concern status and Company's operations. 26. Corporate Governance The Company is committed to maintain the highest standards of Corporate Governance and adhere to the same. The new Companies Act, 2013 and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 have strengthened the governance regime in the country. Your Company is in compliance with the governance requirements provided under the new law and had proactively adopted many provisions of the new law, ahead of time. A separate section on Corporate Governance is annexed to this report as Annexure - G. In line with the requirements of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, your Company has adopted policies on Determination of Materiality of Information/Events and Preservation of Documents and Archival. These policies are available on the website of the Company at www.hondasielpower.com A certificate from a Practicing Company Secretary on compliance with the conditions of Corporate Governance as stipulated under aforementioned Regulations is annexed as Annexure-J. 27. Sexual harassment of women at workplace The Company has zero tolerance towards sexual harassment at the workplace and to this end, has adopted a policy in line with the provisions of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and the Rules thereunder. All employees (permanent, contractual, temporary, trainees) are covered under the said policy. An Internal Complaints Committee has also been set up to redress complaints received on sexual harassment. During the financial year under review, the Company has not received any complaints of sexual harassment from any of the women employees of the Company. 28. Code of Conduct and Ethics The Board of the Company has adopted a Code of Conduct and Ethics for the Directors and Senior Executives of the Company. The object of the Code is to conduct the Company's business ethically and with responsibility, integrity, fairness, transparency and honesty. The Code sets out a broad policy for one's conduct in dealing with the Company, fellow Directors and Employees and in the environment in which the Company operates. The Code is available on the Company's Corporate website (www.hondasielpower.com A declaration signed by President & CEO of the Company with regard to the compliance with the Code by the Members of the Board and Senior Executives is annexed as Annexure - H and forms part hereof. 29. Familiarization programmes for Board Members The Board members are provided with necessary documents, reports and internal policies to enable them to familiarize with the Company's procedures and practices. Periodic presentations are made at the Board and Board Committee Meetings on business and performance updates of the Company. The details of such familiarization programmes for Independent Directors are posted on the website of the Company and can be accessed at the link <https://www.hondasielpower.com>. 30. Particulars of Employees Particulars of employees and the ratio of the remuneration of each director to the median employee's remuneration and other details in terms of Section 197 of the Companies Act, 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are annexed as Annexure-K. Particulars of employees U/S 197 (12) read with Rule 5(2) of the Companies (Appointment & remunaration of Managerial Personnel) Rules, 2014, forms part of this report. However, in terms of Section 136(1) of the Companies Act, 2013, the Report and Financial Statements are being sent to the members and others entitled thereto, excluding this statement. The Annexure is available for inspection by the Members at the Registered Office of the Company during working hours on working days for a period of 21 days before the ensuing Annual General Meeting. However, a copy of the Statement shall be made available to any member on demand. 31. Material changes and commitments affecting the financial position of the Company after 31st March 2016. There were no material changes and commitments affecting the financial position of the Company after 31st March 2016. Acknowledgements Your Directors wish to thank and acknowledge with gratitude the co-operation, assistance and support received from the Central Government, State Government of Uttar Pradesh, Company's Bankers, Shareholders, Dealers, Vendors, Indian and Japanese Promoters of the Company and other Business Associates in the management of affairs of the Company. The Directors also wish to place on record their sincere appreciation and gratitude towards the contribution made by every employee of the Company. On behalf of the Board, for Honda Siel Power Products Ltd. Siddharth Shriram Chairman Date : May 20, 2016 Place ; New Delhi |