REPORT OF THE BOARD OF DIRECTORS Your Directors have pleasure in presenting their Twelfth Annual Report together with the accounts for the year ended March : 2016 and other prescribed particulars Key performance indicators, operational performance and Balance Sheet summary are furnished in page no. 4 of this annual report. The Company recorded a turnover of Rs. 703.96 Crores from its steering and linkage products showing an increase of 9% over previous year. The Company achieved a turnover of Rs. 95.09 Crores from die casting business recording a marginal decrease. The Company also achieved a turnover of Rs. 30.32 Crores from its auto parts division. The total turnover of the Company was Rs. 829.37 Crores, registering an overall growth of 10% over the previous year. The Company also incurred an exceptional expenditure of Rs. 2.70 Crores towards voluntary retirement scheme. The profit before tax of the Company was Rs. 18.66 Crores, representing 2% of the turnover. Earnings per share for the year 2015-16 was Rs. 12.77 as against Rs. 11.20 in the previous year. There was no material change or commitment, affecting the financial position of the Company between the end of the financial year of the Company and the date of the report other than those disclosed in the Financial Statements. There was no change in nature of business during the year. The Company is a subsidiary of Rane Holdings Limited (RHL/ Holding company). The Company does not have any associate or joint venture. Overseas acquisition and investments In a significant move towards pursuing opportunities overseas for inorganic business growth aligned with the strategic goals, the Company acquired Precision Die Casting Inc. (PDC) in USA, engaged in the business of manufacturing high pressure aluminium die casting for automotive applications like steering and compressor related die casting components. The entire shareholding in PDC, having an enterprise value of USD 8.9 million, was acquired from its existing owners at a cost of USD 1. This investment is held by Rane (Madras) International Holdings, B.V, The Netherlands, a Wholly Owned Subsidiary of the Company ('RMIH' / 'WOS'), incorporated during the year to hold strategic overseas investments of the Company. The WOS has invested USD 2 million into the equity capital of PDC. The name of PDC was changed to Rane Precision Die Casting Inc., ('RPDC') with effect from March 24, 2016. The Company has infused USD 2.02 million into the WOS through a combination of equity and loan. The Company has also issued a limited guarantee to the tune of USD 2 million, by way of a Standby Letter of Credit (SBLC), for the term loan facilities availed by RPDC from its existing bankers. 1.2 Appropriation During the year 2015-16, the Board of Directors declared an interim dividend of 45% (i.e., Rs. 4.50 per share) on the equity shares vide resolution passed on March 10, 2016. The interim dividend was paid on March 23, 2016 to all the eligible shareholders whose name appeared in the register of members of the Company as on March 18, 2016 (being the Record Date) fixed for this purpose. In view of the interim dividend, the Board did not recommend any final dividend for the year ended March 31, 2016. Out of the profit available for appropriation of Rs. 20.46 Crores, the Directors have declared a dividend on the Cumulative Preference Shares at the rate of 6.74% per annum for the year 2015-16. After transfer of Rs. 7.72 Crores to the general reserve, Rs. 6.37 Crores has been retained as surplus in the Profit and Loss Account. 1.3 Management Discussion & Analysis Your Company is engaged in the manufacturing and marketing of auto components for transportation industry viz., steering and suspension systems, linkage products, steering gear products and aluminium alloy based high pressure die-casting products. A detailed analysis on the performance of the industry, the Company, internal control systems, risk management are discussed in the Management Discussion and Analysis report forming part of this report and annexed as 'Annexure A'. 1.4 Consolidated Financial Statements The consolidated Financial Statements of the Company are prepared based on the Financial Statements of the subsidiary companies viz., Rane (Madras) International Holdings B.V, The Netherlands, Wholly Owned Subsidiary ('RMIH' / 'WOS') and Rane Precision Die Casting Inc., USA (RPDC). In terms of Section 136 of the Companies Act, 2013 the Company has not attached the Financial Statements of the subsidiary companies. However, the salient features of financial statement of the subsidiary companies are disclosed in this annual report. The Company undertakes to make available a soft or hard copy of the financial statement of the subsidiary companies to investors, as may be required by them, seeking such information at any point of time on demand. The annual Financial Statements of the subsidiary companies have been posted in the website of the Company viz. <http://rane.co.in> and also kept open for inspection by any investor at the registered office of the Company. The consolidated financial statement presented by the Company, which form part of this annual report, include financial results of the subsidiary companies. 2. Board of Directors 2.1 Composition The composition of the Board of Directors of the Company is furnished in the Corporate Governance Report annexed to this report. The terms and conditions of appointment of Independent Directors have been disclosed on the website of the Company and available at <http://rane.co.in/pdf/investors/rml/rmltermsid.pdf> All Directors have affirmed compliance with the Code of Conduct of the Company. The Independent Directors have affirmed that they satisfy the criteria laid down under section 149(6) of the Companies Act 2013 (Act) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR). 2.2 Retirement by rotation At the ensuing Annual General Meeting (AGM), Mr. L Lakshman, Director (DIN 00012554), retires by rotation and being eligible, offers himself for re-appointment. The notice convening the AGM includes the proposal for his re-appointment as director. 2.3 Board Meetings A calendar of meetings is prepared and circulated in advance to the Directors. During the year, Six (6) Board Meetings were convened and held, the details of which are given in the Corporate Governance Report. The intervening period between two consecutive meetings was less than 120 days. 2.4 Meeting of Independent Directors During the year, two separate meetings of Independent Directors were held. In the said meetings, the Independent Directors assessed the quality, quantity and timeliness of flow of information between the management and the Board at the meeting and expressed that the current flow of information and contents were adequate for the Board to effectively perform its duties. Also in the meeting of Independent Directors, the performance of the Non-Independent Directors and the Board as a whole was reviewed and the performance of the chairperson of the Company was reviewed taking into account the views of other Non-Executive Directors. 3. Board and Management 3.1 Board evaluation During the year, a formal process for annual evaluation of performance of Board, its committees and Directors individually was carried out as per the criteria laid down by the Nomination and Remuneration Committee, pursuant to the provisions of the Companies Act, 2013 (CA 2013) and clause 49 of the listing agreement as applicable at that time. The criteria for evaluation of Board and its committees were founded on the structure, composition, Board-management relationship, effectiveness in terms of roles and responsibilities and processes encompassing the information flow and functioning. The guiding standards for the assessment of performance of Directors (including the Independent Directors) are their attendance and participation at Board meetings, sharing of their relevant domain expertise, networking in other forums, their strategic inputs and demonstration towards governance compliances. For evaluation of performance of the Chairman additional aspects like institutional image building, providing guidance on strategy and performance, maintaining an effective and healthy relationship between the Board and the management were taken into consideration. The evaluation was carried out through a structured methodology approved by the Nomination and Remuneration Committee after ensuring that the aspects under each of the laid down criteria are comprehensive and commensurate with the size of the Board and the Company. 3.2 Familiarisation program for Independent Directors The familiarisation program for Independent Directors and details of familiarisation programmes to Independent Directors are available at <http://rane>. co.in/ranemadras/rmlinvestors.html 3.3 Key Managerial Personnel Mr. S Parthasarathy, Chief Executive Officer (CEO), Ms. J Radha, Chief Financial Officer (CFO) and Ms. S Subha Shree, Secretary, hold the office of Key Managerial Personnel, respectively within the meaning of Section 2(51) of the Companies Act, 2013. 3.4 Remuneration policy The Nomination and Remuneration Committee has laid down a policy on appointment and remuneration of Directors, Key Managerial Personnel (KMP) and Senior Management Personnel (SMP). The same is annexed herewith as 'Annexure - B'. Audit Audit Committee In terms of the provisions of Section 177 of the Companies Act, 2013 and Clause 49 of the listing agreement / SEBI LODR, the Audit Committee of the Board acts in accordance with terms of reference prescribed therein. Detailed disclosure on compositions, terms of reference and meetings of the Audit Committee are furnished in the Corporate Governance Report. Statutory Auditors M/s. Deloitte Haskins & Sells (DHS) were appointed as Statutory Auditors at the tenth Annual General Meeting (AGM) held on July 31, 2014, for a period of three years i.e., until the conclusion of the thirteenth AGM. Their appointment is however, subject to ratification by members at every AGM. The Company has received a letter from DHS to the effect that ratification of their appointment for 2016-17, would be within the prescribed limits and that they do not suffer from any disqualification under Section 141 of the Companies Act, 2013 and the rules made thereunder. DHS have also submitted the peer review certificate issued to them by The Institute of Chartered Accountants of India. The statutory auditors report to the members for the year ended March 31, 2016 does not contain any qualification, reservation, adverse remark or disclaimer. 4.3 Cost Audit Cost audit is not applicable to the Company as per the threshold limits prescribed under Companies (Cost Records and Audit) Rules, 2014. Therefore, the Board did not appoint cost auditor to conduct cost audit for the year 2015-16. 4.4 Secretarial Auditors Pursuant to the provisions of Section 204 of the Companies Act, 2013 and the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, the Company has appointed M/s. S Krishnamurthy & Co., a firm of Company Secretaries in practice, to undertake the Secretarial Audit of the Company pursuant to Section 204 of the Companies Act, 2013 and the rules made thereunder. The report on the Secretarial Audit carried out for the year 2015-16 is annexed herewith as 'Annexure C'. The secretarial audit report does not contain any qualification, reservation, adverse remark or disclaimer 4.5 Internal Auditors The Company continues to engage M/s. Capri Assurance and Advisory Servicies, a firm of independent assurance service professionals, as Internal Auditors of the Company. Their scope of work includes review of processes for safeguarding the assets of the Company, review of operational efficiency, effectiveness of systems and processes, and assessing the internal control strengths in all areas. Internal Auditors findings are discussed with the process owners and suitable corrective actions taken as per the directions of Audit Committee on a regular basis to improve efficiency in operations. 5. Directors' responsibility statement In terms of Section 134(3)(c) read with section 134(5) of the Companies Act, 2013, the Directors, confirm: i. that in the preparation of the Financial Statements for the financial year 2015-16, the applicable accounting standards had been followed and there were no material departures; ii. that they had selected such accounting policies and applied them consistently and made judgements 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 they had 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, preventing and detecting fraud and other irregularities; iv. that they had prepared the Financial Statements for the financial year on a 'going concern' basis ; v. that they had laid down internal financial controls to be followed by the Company and such internal financial controls were adequate and were operating effectively ; and vi. that they had devised proper systems to ensure compliance with the provisions of all applicable laws and such systems were adequate and operating effectively. 6. Related Party Transactions All Related Party Transactions that were entered into during the financial year were on an arm's length basis and were in the ordinary course of business. There are no materially significant Related Party Transactions made by the Company with Related Parties which may have potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee for approval. Prior omnibus approval of the Audit Committee is obtained for the transactions which are foreseen and repetitive in nature. The transactions entered into pursuant to the omnibus approval so granted are reviewed by the Audit Committee on a quarterly basis. The Company has put in place proper system for identification and monitoring of such transactions. The policy on Related Party Transactions as approved by the Board is uploaded on the Company's website (<http://rane.co.in/pdf/policies/rmlrpt.pdf>). None of the Directors or Key Managerial Personnel or Senior Management Personnel has any material, financial and commercial transactions, where they have personal interest, which may have potential conflict with interest of the Company at large. 7. Corporate Social Responsibility (CSR) The vision on Corporate Social Responsibility (CSR) is: "To be a socially and environmentally responsive organization committed to improve quality of life within and outside". The CSR activities of Rane Group focus on four specific areas of: (a) Education (b) Healthcare (c) Community Development and (d) Environment. The CSR activities undertaken by the Company are in line with the CSR Policy and recommendations of the CSR Committee comprising of Mr. L Lakshman, Committee Chairman, Mr. L Ganesh, Director and Ms. Anita Ramachandran, an Independent Director, as its members. The Annual Report on CSR activities carried out during the year 2015-16 is annexed as 'Annexure D'. The CSR policy of the Company is available in the Company's website (<http://www.rane>. co.in/pdf/policies/rmlcsr.pdf) 8. Fixed Deposits The deposit outstanding as on March 31, 2016 amounted to Rs. 1.25 Crores. All deposits that matured during the year were repaid. The Company has not defaulted in repayment of any fixed deposits or any interest thereon. The Company had discontinued accepting or renewing the fixed deposits with effect from April 1, 2014 and has not accepted deposits falling within the ambit of Chapter V, Section 73 of the Companies Act, 2013. Based on the application made by the Company in terms of Section 74 (2), Company Law Board (CLB) vide its order dated September 16, 2015 has allowed the Company to repay the deposits on their respective maturity dates in accordance with the terms of acceptance of such deposits or March 31, 2017, whichever is earlier. 9. Energy conservation, technology absorption and foreign exchange earnings and outgo The information on conservation of energy, technology absorption and foreign exchange earnings and outgo stipulated under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014 is annexed herewith as 'Annexure E'. 10. Particulars of Directors, Key Managerial Personnel and Employees The information required pursuant to Section 197 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 in respect of Directors, Key Managerial Personnel (KMP) and Employees of the Company are provided in the Annual Report is annexed herewith as 'Annexure F'. 11. Corporate Governance Report Your Company has complied with the corporate governance requirements as stipulated under clause 49 of the listing agreement / Regulation 34 of SEBI LODR. Detailed report on the compliance and a certificate by the Statutory Auditors forms part of this report as 'Annexure G'. 12. Other disclosures Details of loan, guarantees and investments under Chennai the provisions of Section 186 of the Companies 20 May 201 Act, 2013 are given in the notes to the Financial Statements. b) The Internal control systems and adequacy are discussed in detail in the Management Discussion and Analysis annexed to the Directors Report. c) There was no significant / material order passed by the Regulators / Courts which would impact the going concern status of the Company and its future operations. d) The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as 'Annexure H'. e) The Company has established a formal vigil mechanism named 'Rane Whistle Blower Policy' for reporting improper or unethical practices or actions which are violative of the code of conduct of the Company. f) The Company believes that women should be able to do their work in a safe and respectful environment that encourages maximum productivity. The Company has a zero tolerance towards sexual harassment. The Company has adopted a policy on prevention of sexual harassment of women at work place and put in place proper mechanism across the Company. There was no case reported during the year under review through this mechanism. For and on behalf of the Board Harish Lakshman Director L Ganesh Chairman Place : Chennai Date : 20 May 2016 |