DIRECTORS’ REPORT TO THE MEMBERS Your Directors are pleased to present the Annual Report of your Company, along with Audited Financial Statements for the financial year ended 31st March, 2015. Operations The Company recorded an impressive performance during the year under review. Turnover (standalone basis) was Rs. 6799 crores; operating profit at Rs. 766 crores, was higher by 14% while profit before tax at Rs. 377 crores, grew 93% over the previous year. This performance is considered satisfactory, given the challenges of all-round low growth in the year gone by. On a consolidated basis, your Company, (including its wholly-owned subsidiary JK Tornel, Mexico) reported a turnover of Rs. 8060 crores during the year under review. Operating profit was Rs. 948 crores, an increase of 13% over the previous year while consolidated profit before tax at Rs. 486 crores, grew 49%. The Company responded to the request of the Government of Kerala and agreed to support procurement of domestic rubber at prices 20% higher than those prevailing in the market. This was done with a view to support in particular small rubber growers. The Company continued to strengthen its leadership in the truck/bus radial segment while consolidating its position in the passenger car segment. Besides, the Company reported improvements across operating parameters, cost compression and increased value-added product volumes; a softening of input costs helped the Company enhance profitability. In the export markets, the Company achieved an export turnover of Rs. 844 crores (standalone) during the year despite geopolitical turmoil in some key international markets. Expansion Project Foreseeing an increasing demand for truck/bus radialisation and an economic recovery, the Company undertook an expansion of its truck/bus and passenger line radial capacities at its all-radial Chennai plant. This Rs. 1430 crores project progressed well and is expected to be commissioned in phases during the current year. Awards Your Company received several awards for excellence in various areas, comprising the following: ¦ Asia's Most Promising Brand 2014 by World Consulting and Research Council (WCRC) ¦ Greenco Gold Company by CII-Godrej GBC ¦ Greentech Environment Award 2015 - Gold Category ¦ General Motors Quality Excellence Award 2014 for Exceptional Quality Performance ¦ International Convention on Quality Concept (ICQC) ¦ IEI Industry Excellence Award 2014 for Business Excellence and Industry Practices ¦ CII's National Award 2014 for HR Excellence Dividend Your Directors are pleased to recommend a dividend of H 1.50 per equity share of H 2 each (i.e. 75%) on the equity share capital of H 45.36 crores for the financial year ended 31st March 2015. The dividend outgo will be H 40.95 crores (inclusive of a dividend tax of H 6.93 crores). Appropriations The amount available for appropriation, including surplus from the previous year, is H 356.21 crores. The Directors Share Capital (a) Sub-division of Equity Shares In order to infuse additional liquidity in the Company's stock and attract small investors to invest, each equity share of a face value of H 10 (fully paid-up) was sub-divided into five equity shares of a face value of H 2 each (fully paid-up). For the purpose, 19th December 2014 was fixed as the record date. Consequently, 4,10,59,346 equity shares of Rs.10 each as on the record date, were sub-divided into 20,52,96,730 equity shares of Rs. 2 each. (b) Conversion of Warrants As per the terms of 43,03,350 warrants issued to the promoter group on a preferential basis, the holders of warrants exercised the option of converting the said warrants into equity shares by paying the balance 75% of the total consideration of the issue value, amounting to Rs. 37.11 crores. Accordingly, 43,03,350 warrants were converted into 2,15,16,750 equity shares of Rs. 2 each on 8th January 2015. Consequently, the issued, subscribed and paid-up equity share capital of the Company increased from Rs. 41.06 crores (comprising 20,52,96,730 equity shares of Rs. 2 each) to Rs. 45.36 crores (comprising 22,68,13,480 equity shares of Rs. 2 each). Extract of Annual Return An extract of the Annual Return as on 31st March 2015, in the prescribed form MGT 9, is attached as Annexure 'A' with this Report and forms a part of it. Related Party Transactions During the financial year ended 31st March 2015, all the contracts or arrangements or transactions entered into by the Company with the related parties were in the ordinary course of business and on an arm's length basis and were in compliance with the applicable provisions of the Companies Act, 2013 and the Listing Agreement. Further, the Company has not entered into any contract or arrangement or transaction with the related parties which could be considered material in accordance with the policy of the Company on materiality of related party transactions. In view of the above, disclosure in FORM AOC-2 is not applicable. The Related Party Transaction Policy as approved by the Board is available on the website of the Company. Particulars of Loans, Guarantees and Investments The particulars of loans, guarantees, securities and investments, covered under the provisions of Section 186 of the Companies Act, 2013, are given in the financial statements. Directors and Key Managerial Personnel With the enactment of the Companies Act, 2013, all six Independent Directors of the Company, Shri Arvind Singh Mewar, Shri Bakul Jain, Shri O.P. Khaitan, Shri Kalpataru Tripathy, Shri Vimal Bhandari and Dr. Wolfgang Holzbach were appointed by the members at the Annual General Meeting (AGM) held on 25th September 2014 under Section 149 of the Act for a term of five consecutive years commencing from the date of the AGM. All Independent Directors of the Company have given declarations that they meet the criteria of independence as provided in Section 149(6) of the Companies Act, 2013 and also Clause 49 of the Listing Agreements with the Stock Exchanges. Shri Vikrampati Singhania retires by rotation and, being eligible, offers himself for re-appointment at the ensuing AGM. The Board of Directors appointed Smt. Sunanda Singhania as an Additional Director of the Company pursuant to Section 161 of the Companies Act, 2013 effective 12th August 2014. The members of the Company have appointed her as a Director liable to retire by rotation at the AGM held on 25th September 2014. The Board of Directors re-appointed Shri Swaroop Chand Sethi as a Whole-time Director of the Company for a term of three years commencing 1st April 2015, subject to the approval of the members of the Company. Shri Swaroop Chand Sethi, however, resigned from the directorship of the Company from the close of business hours of 14th May 2015. The Board took note of his resignation and placed on record its deep appreciation for the valuable services rendered by Shri Sethi during his tenure of office. The Board of Directors of the Company also re-appointed Shri Arun K. Bajoria as Whole-time Director of the Company with the designation - Director & President-International Operations, for a term of three years commencing 20th January 2016, subject to the approval of members of the Company at the ensuing AGM. Further, in terms of Section 203 of the Companies Act, 2013, Dr. Raghupati Singhania, Chairman & Managing Director; Shri Bharat Hari Singhania, Managing Director; Shri Vikrampati Singhania, Dy. Managing Director; Shri S.C. Sethi, Whole-time Director; Shri Arun K. Bajoria, Director & President-International Operations; Shri Pawan Kumar Rustagi, Vice President (Legal) & Company Secretary and Shri Ashok Kumar Kinra, Finance Director were appointed as Key Managerial Personnel (KMP) of the Company on their existing terms and conditions. Out of the above, Shri S.C. Sethi has ceased to be a KMP from the close of business hours of 14th May 2015, upon his resignation from the directorship of the Company. Conservation of Energy, Etc. The details, as required under Section 134(3)(m) read with the Companies (Accounts) Rules, 2014, are annexed to this Report as Annexure 'B' and forms a part of it. Consolidated Financial Statements The Consolidated Financial Statements have been prepared by the Company in accordance with the applicable Accounting Standards. The Audited Consolidated Financial Statements, together with the Auditors' Report, form part of the Annual Report. A report on the performance and financial position of each of the subsidiaries and associates included in the Consolidated Financial Statements is presented in a separate section in this Annual Report. Please refer to AOC-1 annexed to the Financial Statements in the Annual Report. Pursuant to the provisions of Section 136 of the Act, the financial statements, the consolidated financial statements, along with relevant documents and separate audited accounts in respect of subsidiaries, are available on the website of the Company. During the financial year under review, no company has become or ceased to be your Company's subsidiary or joint venture. With the coming into effect of the Companies Act, 2013, Florence Investech Ltd. and Dwarkesh Energy Ltd. have become associates of the Company. Deposits Pursuant to the approval of members by means of a Special Resolution dated 25th September 2014, the Company has continued to accept deposits from the public, in accordance with the provisions of the Companies Act, 2013 and rules thereunder. The particulars in respect of the deposits covered under Chapter V of the said Act, for the financial year ended 31st March 2015 are - (a) Accepted during the year - Rs. 12.37 crores; (b) Remained unclaimed as at the end of the year - Rs. 1.43 crores; (c) Default in repayment of deposits or payment of interest thereon at the beginning of the year and at the end of the year - NIL and (d) Details of deposits which are not in compliance with the requirements of Chapter V of the said Act - NIL. Auditors (a) Statutory Auditors and their Report M/s Lodha & Co., Chartered Accountants, have been appointed Auditors of the Company to hold office from the conclusion of the 61st Annual General Meeting held on 25th September 2014 until the conclusion of the 64th Annual General Meeting to be held in 2017, subject to ratification of the appointment by the members at the respective AGMs to be held in the years 2015 and 2016. Accordingly, being eligible, matters relating to the appointment of the Auditors will be placed for ratification by members at the forthcoming Annual General Meeting. The observations of the Auditors in their report on Accounts and the Financial Statements, read with the relevant notes are self-explanatory. (b) Secretarial Auditor and Secretarial Audit Report Pursuant to the provisions of Section 204 of the Companies Act, 2013, the Board of Directors appointed Shri Namo Narain Agarwal, Company Secretary in Practice, as Secretarial Auditor to carry out the Secretarial Audit of the Company for the financial year 2014-15. The Report given by him for the said financial year in the prescribed format is annexed to this Report as Annexure 'C'. The Secretarial Audit Report does not contain any qualification, reservation or adverse remark. (c) Cost Auditor and Cost Audit Report The Cost Audit for the financial year ended 31st March 2014 was conducted by M/s R.J. Goel & Co., Cost Accountants, Delhi, and as required, the Cost Audit Report was duly filed with Ministry of Corporate Affairs, Government of India. The Audit of the cost accounts of the Company for the financial year ended 31st March 2015 is also being conducted by the said firm. Particulars of Remuneration Information in accordance with the provisions of Section 197 of the Companies Act, 2013 read with the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 regarding remuneration and other details is annexed to this Report. However, as per the provisions of Section 136 of the said Act, the Report and Accounts are being sent to all the members of the Company and others entitled thereto, excluding the aforesaid information. Any member interested in obtaining such particulars may write to the Company Secretary at the registered office of the Company. The said information is available for inspection at the Registered Office of the Company during working hours. Corporate Social Responsibility Your Company has been one of the foremost proponents of inclusive growth and since inception, has been continuing to undertake projects for the overall development and welfare of the society in the fields of environment, conservation of natural resources, health, education, rural development, etc. The Company has framed its Corporate Social Responsibility (CSR) Policy in accordance with the provisions of the Companies Act, 2013 and rules made thereunder. The contents of the CSR Policy are disclosed on the website of the Company. The annual report on the CSR activities undertaken by the Company during the financial year under review, in the prescribed format is annexed to this Report as Annexure 'D'. Internal Financial Controls The Company has in place adequate internal financial controls with reference to financial statements and no material reportable weakness was observed in the system. Further, the Company has in place adequate internal financial controls commensurate with the size and nature of its operations. The Company also has a robust Budgetary Control System and Management Information System (MIS) which is the backbone of the Company for ensuring that your Company's assets and interests are safeguarded. Significant and Material Orders Passed by the Regulators or Courts or Tribunals During the financial year under review, there were no significant and material orders passed by the regulators or courts or tribunals which would impact the going concern status of the Company and its future operations. CORPORATE GOVERNANCE - including details pertaining to Board Meetings, Nomination and Remuneration Policy, Performance Evaluation, Risk Management, Audit Committee and Vigil Mechanism Your Company reaffirms its commitment to the highest standards of corporate governance practices. Pursuant to Clause 49 of the Listing Agreement with the Stock Exchanges, a Management Discussion and Analysis, Corporate Governance Report and Auditor's Certificate regarding compliance of conditions of Corporate Governance are made a part of this Report as Annexure 'E'. The Corporate Governance Report which forms a part of this Report also covers the following: a) Particulars of the five Board Meetings held during the financial year under review. b) Policy on Nomination and Remuneration of Directors, Key Managerial Personnel and Senior Management including, inter alia, the criteria for the performance evaluation of Directors. c) The manner in which formal annual evaluation has been made by the Board of its own performance and that of its Committees and individual Directors. d) The details with respect to composition of Audit Committee and establishment of Vigil Mechanism. e) Details regarding Risk Management. Directors' Responsibility Statement As required under Section 134(3)(c) of the Companies Act, 2013, your Directors state that: a) in the preparation of the annual accounts, the applicable accounting standards have been followed along with proper explanation relating to material departures; b) the accounting policies have been selected and applied consistently and judgments and estimates made are reasonable and prudent so as to give a true and fair view of the state of affairs of the Company at the end of the financial year and of the profit and loss of the Company for that period; c) proper and sufficient care has been taken for the maintenance of adequate accounting records in accordance with the provisions of the said Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the annual accounts have been prepared on a going concern basis; e) the internal financial controls to be followed by the Company have been laid down and that such internal financial controls are adequate and were operating effectively; and f) the proper systems to ensure compliance with the provisions of all applicable laws have been devised and that such systems were adequate and operating effectively. Acknowledgements Your Directors wish to place on record their appreciation for the continued support and co-operation received from various State Governments including those of Rajasthan, Madhya Pradesh, Karnataka, Tamil Nadu and the Governments of India and Mexico. The Directors also thank banks, shareholders, suppliers, dealers and in particular the valued customers for their trust and patronage. Your Directors record their appreciation for the dedication and hard work put in by 'Team-JK Tyre', which has enabled the Company to continue to march ahead in these challenging times. On behalf of the Board of Directors Dr. Raghupati Singhania Chairman & Managing Director New Delhi 4th August 2015 |