DIRECTORS' REPORT Your Directors are pleased to present the 34th Annual Report on business and operations of your Company along with the audited financial statements and accounts for the year ended 31st March, 2016 Operations and Financial Overview During the year under review, your Company's turnover was at Rs. 204.78 crore as compared to Rs. 169.19 crore for the previous year reflecting a growth of 21% over the previous year, providing visibility to future revenue streams. The Profit Before Tax was at Rs. 10.94 crore vs. Rs. 2.67 crore in the previous year, The Profit After Tax was at Rs. 9.18 crore vs. Rs. 1.79 crore in the previous year reflecting a fivefold growth over previous year. The year 2015-16 was quite challenging and the improvement in the performance was mainly due to internal operational excellence, lower material costs and spur in project market business. Dividend Your Directors do not recommend any dividend considering the need to augment resources for operational purposes. Corporate Governance & Management Discussion and Analysis Report Your Company believes in sound practices of good Corporate Governance. Transparency, Accountability, and Responsibility are the fundamental guiding principles for all decisions transactions, and policy matters of the Company. A Report on Corporate Governance along with a certificate from the Statutory Auditors of the Company regarding compliance of conditions of Corporate Governance as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, forms part of this Annual Report. Further, the Management Discussion and Analysis Report for the year under review, as stipulated under Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015, is given in Annexure I to this Report. Stock Options The Nomination and Remuneration Committee of the Board of Directors of the Company, inter alia, administers and monitors the Employees' Stock Option Scheme of the Company. The Stock Option Scheme, 2014 is in compliance with Securities and Exchange Board of India (Share Based Employee Benefits) Regulations, 2014 and there have been no material changes in the said Scheme during the year under review. During the year under review 14,108 Nos. Stock Options got vested under the Employees Stock Option Scheme -2014, and were exercised immediately after vesting. Accordingly, the Company made the allotment of 14,108 Equity Shares. The Nomination and Remuneration Committee of the Board of Directors further granted 3,228 Stock Options during the year under review, comprising about 0.01% of the current paid up capital. The applicable disclosures as stipulated under the SEBI Guidelines as on 31st March, 2016 (cumulative position) with regard to the Employees' Stock Option Scheme (ESOS) are provided in Annexure II to this Report. Voting rights on the shares issued to employees under the ESOS are either exercised by them directly or through their appointed proxy. Share Capital During the year, with the allotment of 14,108 equity shares on exercising of Stock Options by employees, the total paid up equity share capital of the Company increased from 2,76,44,364 equity shares of Rs. 10/- each to 2,76,58,472/-equity shares of Rs. 10/-each. The said equity shares have been listed on the Bombay Stock Exchange Limited and they rank pari passu with the existing equity shares in all respects. Accordingly, the Paid-up Share Capital of the Company stood at Rs. 27,65,84,720 divided into 2,76,58,472 equity shares of Rs. 10/-each as on 31st March, 2016. Holding Company The promoters of the Company i.e. Mahindra and Mahindra Limited (M & M) hold 1,51,44,433 equity shares whichrepresents 54.76 percent of the total paid up capital of the Company. Your Company continues to be a subsidiary company of M &M. The Company does not have any subsidiary company. Contracts and arrangements with Related Parties During the financial year, all contracts/ arrangements/ transactions entered by the Company with related parties were in the ordinary course of business on an arm's length basis. During the year, the Company had not entered into any contract/arrangement/ transaction with related parties which could be considered material in accordance with the policy of the Company with materiality of related party transactions. All related party transactions are placed before the Audit Committee for approval wherever applicable. Prior omnibus approval is also obtained from the Audit Committee for the related party transactions which are of repetitive nature as well as the transactions which cannot be foreseen and accordingly, the required disclosures are made to the Committee on quarterly basis in terms of approval of the Committee. The Company's major related party transactions are generally with its holding and associate companies. The related party transactions are entered into based on considerations of various business exigencies, such as synergy in operations, sales transactions through tenders or otherwise. All related party transactions are negotiated on an arms-length basis, and are intended to promote the Company's interests. The Policy on materiality of related party transactions and dealing with related party transactions as approved by the Board may be accessed on the Company's website at the link: <http://www.epcmahindra.com/pdf/EPC_Policy_on_Related> Party_ Transactions.pdf The related party transactions have been set out in the Note No. 30 to the financial statement. Risk Management During the year, your Company has a well-defined risk management framework in place. The risk management framework works at various levels across the enterprise. These levels form the strategic defence cover of the Company's risk management. The Company has a robust organisational structure for managing and reporting on risks. Your Company has constituted a Risk Management Committee under the chairmanship of Mr. Nikhilesh Panchal and Mr. Ashok Sharma and Mr. Anand Daga being other members. The Committee has been entrusted with the responsibility to assist the Board in (a) overseeing and approving the Company's enterprise wide risk management framework; and (b) overseeing that all the risks that the organization faces such as strategic, financial, credit, market, liquidity, security, property, IT, legal, regulatory, reputational and other risks have been identified and assessed and there is an adequate risk management infrastructure in place capable of addressing those risks. The Risk Management Policy was reviewed and recommended by the Risk Management Committee and approved by the Board of Directors. The Company manages, monitors and reports on the principal risks and uncertainties that can impact its ability to achieve its strategic objectives, risk mitigation measures and internal controls and processes. Industrial Relations The industrial relations continue to be peaceful and cordial at all levels. The Directors wish to place on record their sincere appreciation of the Company's employees at all levels. The Company's consistent growth is made possible by their hard work solidarity, co-operation and support. The Management Discussion and Analysis Report gives an overview of the developments in Human Resources/Industrial Relations during the year. Safety, Health and Environmental Performance Your Company's commitment towards safety, health and environment is being continuously enhanced and your Company encourages involvement of all its employees in activities related to safety, including promotion of safety standards. During the year under review, no major accidents occurred. The Safety Committee regularly reviews the adherence of safety norms. Some of the programmes undertaken by the Company such as the behaviour based safety training, Knowledge based fire extinguisher training, and fire fighting training and safety awareness have resulted in the reduction of number of accidents. Various health checkup programmes for employees were regularly undertaken by the Company during the year. Requirements relating to various environmental legislations and environment protection have been duly complied by your Company. Directors and Key Managerial Personnel Pursuant to the provisions of Section 149 of the Companies Act, 2013, the Non independent Director Ms. Sangeeta Prasad would retire and, being eligible, has offered herself for reappointment. The Board of Directors on 21st March, 2016 elevated Mr. Ashok Sharma as Managing Director of the Company with effect from 21st March, 2016 for the remaining period of his appointment i.e. till 30th September, 2017 on a consolidated remuneration of Rs. 24,00,000/- (Rupees Twenty Four lacs only) per annum. Mr. Ashok Sharma is also receiving a remuneration from the holding Company M/s. Mahindra and Mahindra Limited. In terms of the provisions of Section 149 of the Companies Act, 2013 and other applicable provisions, if any, the Shareholders have appointed Mr. Vinayak Patil, Mr. Nikhilesh Panchal and Mr. Anand Daga as Independent Directors of the Company for a period of 5 years in the Annual General Meeting held on 31st July, 2014, who are not liable to retire by rotation. The Company has received declarations from all the Independent Directors of the Company confirming that they meet the criteria of independence as prescribed both under the Act and as per the provisions of Section 149(6) of the Companies Act, 2013. During the year under review, the Company has appointed Mr. Sanjeev Mohoni as Chief Executive Officer of the Company with effect from 1st June, 2015 to look after overall operations of the Company. The information required pursuant to Section 197(12) read with Rule 5 (1) of The Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of ratio of remuneration of a director to the median remuneration of the employees of the Company for the financial year is given in the Annexure III to this Report. The Company has devised a Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors which include criteria for performance evaluation of the non-executive directors and executive director. The statement indicating the manner in which formal annual evaluation of the Directors, the Board and Board level committees are given in detail in the report on Corporate Governance, which forms part of this Annual Report. The Company had on the basis of the Policy for performance evaluation of Independent Directors, Board, Committees and other individual Directors, followed a process of evaluation by the Board for its own performance and that of its Committees and individual Directors. The details of programmes for familiarisation of Independent Directors with the Company, their roles, rights, responsibilities in the Company, nature of the industry in which the Company operates, business model of the Company and related matters are put up on the website of the Company. The following policies of the Company are attached herewith marked as Annexure IV and Annexure V: a) Policy on Appointment of Directors and Senior Management and Succession Planning for Orderly Succession to the Board and the Senior Management. b) Policy for Remuneration of the Directors, Key Managerial Personnel and other employees. Directors' Responsibility Statement Pursuant to Section 134(5) (e) of the Companies Act, 2013, your Directors, based on the representations received from the Operating Management, and after due enquiry, state that: a) in the preparation of the annual accounts for the year ended 31st March, 2016, the applicable accounting standards read with requirements set out under Schedule III to the Act, 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 judgements 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 31st March, 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 Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) t he 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. Corporate Social Responsibility Committee The Corporate Social Responsibility Committee (CSR Committee) has formulated and recommended to the Board, a Corporate Social Responsibility Policy (CSR Policy) indicating the activities to be undertaken by the Company, which has been approved by the Board. The CSR Policy may be accessed on the Company's website at the link: <http://www.epcmahindra.com/pdf/EPC_CSR_> Policy. pdf The key philosophy of all CSR initiatives of the Company is guided by three core commitments of Scale, Impact and Sustainability. The Company has identified few focus areas of engagement which are as under: • Rural Transformation: Creating sustainable livelihood solutions, addressing poverty, hunger and malnutrition. • Health: Affordable solutions for healthcare through improved access, awareness and health seeking behaviour. • Education: Access to quality education, training and skill enhancement. • Environment: Environmental sustainability, ecological balance, conservation of natural resources. • Disaster Response: Managing and responding to disaster. During the year under review, your Company initiated few projects such as E-learning Portal to a school in the rural area, girl child education, pure drinking water, medical equipment for old age and disabled persons, medical check up camps, tree plantation etc. These projects were mainly implemented directly through employee participation. During the year under review, the Company has spent Rs. 11.17 lacs which is around 2% of the average net profits of last three financial years on CSR activities. The Annual Report on CSR activities is annexed herewith marked as Annexure VI. Internal Complaints Committee During the year under review, no complaints were reported to/ resolved by the Committee for the year ended 31st March, 2016 in accordance with the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. Vigil Mechanism/Whistle Blower policy In order to ensure that the activities of the Company and its employees are conducted in a fair and transparent manner by adoption of highest standards of professionalism, honesty, integrity and ethical behaviour, the Company has adopted a vigil mechanism policy. This policy is explained in the Report on Corporate Governance and also posted on the website of Company. Auditors The Auditors, Messrs. Deloitte Haskins & Sells, Chartered Accountants, Baroda holds office until the conclusion of the ensuing Annual General Meeting. The Auditors are eligible for reappointment under Section 139(1) of the Companies Act, 2013 and have furnished a certificate to this effect. In accordance with the provisions of Section 139(2) of the Companies Act, 2013, first term of five years of the Auditors is being completed in the ensuing Annual General Meeting. The Directors recommend their reappointment as Auditors of the Company for a period of five years i.e. till the conclusion of the Annual General Meeting to be held in July, 2021. Cost Auditors The Company had filed the Cost Audit Report as per the Companies (Cost Accounting Records) Rules, 2011 prescribed under Section 148(6) of Companies Act, 2013 and Rule 6(6) of the Companies (Cost Records and Audit) Rules, 2014 pertaining to the financial year 2014-15 before the due date of filing. Pursuant to Section 148 of the Companies Act, 2013, the Board of Directors, on the recommendation of the Audit Committee appointed M/s Shilpa & Company, Cost Accountants, as the Cost Auditors of the Company for the financial year 2016-17. M/s Shilpa & Company have confirmed that their appointment, is within the limits of Section 139 of the Companies Act, 2013 and have also certified that they are free from any disqualification specified under Sections 141 (3) and 148 (5) of the Companies Act, 2013. The Audit Committee has also received a Certificate from the Cost Auditor certifying their independence and arm's length relationship with the Company. The Directors recommend the remuneration payable to the Cost Auditors of the Company for the year 2016-17. The approval from Shareholders for the remuneration payable to the Cost Auditors is being sought at the ensuing Annual General Meeting. Secretarial Auditors Pursuant to provisions of Section 204 of the Companies Act, 2013, the Board has appointed Mr. Sachin Bhagwat, Practising Company Secretary, to conduct Secretarial Audit for the financial year 2015-16. The Secretarial Audit Report for the financial year ended on 31st March, 2016 is annexed as Annexure VII to this Report. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. Public Deposits & Loans/Advances During the year, the Company did not accept any fixed deposit. There were unclaimed/unpaid deposits and unclaimed/unpaid interest warrants outstanding as on 31st March, 2016 amounting to Rs. 0.91 lacs. Your Company has neither made any loans or advances nor did any guarantees or securities provide which are required to be disclosed in the Annual Accounts of the Company. Uses & Application of Funds raised under Rights Issue In the year 2012, the Company had allotted 1,03,58,199 equity shares at a price of Rs. 40 per share (including a premium of Rs. 30/- per share) resulting in total issue size of Rs. 41.43 crores under the Rights Issue. The uses and application of funds raised under Rights Issue are given in Note No. 27.6 to the Financial Statement. The Uses and Application of funds under Rights Issue are monitored regularly by the Audit Committee. Energy Conservation and Technology Absorption and Foreign Exchange Earnings and Outgo The particulars relating to energy conservation, technology absorption, foreign exchange earnings and outgo as required to be disclosed under sub-section(3) (m) of Section 134 of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 are provided in Annexure VIII to this Report. DISCLOSURES: Audit Committee The Audit Committee comprises Independent Directors namely M/s. Vinayak Patil (Chairman), S Durgashankar and Anand Daga as other members. All the recommendations made by the Audit Committee were accepted by the Board. CSR Committee The CSR Committee comprises M/s. Ashok Sharma (Chairman), S Durgashankar and Vinayak Patil as other members. Nomination and Remuneration Committee The Nomination and Remuneration Committee comprises Directors namely M/s. Anand Daga (Chairman), S Durgashankar and Vinayak Patil as other members. Meetings of the Board Five meetings of the Board of Directors were held during the year. For further details, please refer the Report on Corporate Governance of this Annual Report. Extract of Annual Return Pursuant to Sub-section 3(a) of Section 134 and Sub-section 3 of Section 92 of the Companies Act, 2013, read with Rule 12(1) of the Companies (Management and Administration) Rules 2014, the extracts of Annual Return of the Company as at 31st March, 2016 is annexed herewith as Annexure IX to this Report. Statement of deviation(s) or variation (s) During the year under review, there were no deviations of funds reported to the Audit Committee in respect of the funds raised in the year 2012, under Rights Issue. 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: 1. Details relating to deposits covered under Chapter V of the Companies Act, 2013. 2. Issue of equity shares with differential rights as to dividend, voting or otherwise. 3. Issue of shares (including sweat equity shares) to employees of the Company under any scheme save and except ESOS referred to in this Report. 4. There were no material changes and commitments, if any, affecting the financial position of the Company which have occurred between the end of the financial year and the date of this Report. 5. No significant or material orders were passed by the Regulators or Courts or Tribunals which impact the going concern status and Company's operations in future. 6. There were no frauds reported by auditors (including Secretarial and Cost auditor) to the Audit Committee or Board and also not reported to the Central Government. Particulars of Employees The Company had one employee who was in receipt of remuneration of not less than Rs. 60,00,000 during the year ended 31st March, 2016 or not less than Rs. 5,00,000 per month during any part of the year. Disclosures with respect to the remuneration of Directors, KMPs and employees as required under Section 197 of the Companies Act, 2013 read with Rule 5(1)(2) and (3) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure III to this Report. Acknowledgements Your Directors take this opportunity to place on record their sincere appreciation for the co-operation and continued support received from customers, vendors, suppliers, bankers, business associates and shareholders. For and On behalf of the Board Vinayak Patil Director Ashok Sharma Managing Director Place : Mumbai Dated : 27th May, 2016 |