BOARD'S REPORT The Members, AIA Engineering Limited Ahmedabad Your Directors take pleasure in submitting the 26th Annual Report and the Audited Annual Accounts of the Company for the year ended 31st March, 2016. During the year under review, the Revenue from operations of the Company is Rs. 185,038.58 Lacs as compared to Rs. 209,402.79 Lacs in the previous Financial Year. Exports Turnover registered in the same period was Rs. 124,383.72 Lacs as against the turnover of Rs. 145,529.91 Lacs in the previous Financial Year. Standalone Operating Results: During the year under review, Company has earned a Profit Before Tax (PBT) of Rs. 76,157.53 Lacs and Profit After Tax (PAT) of Rs. 58,766.70 Lacs as compared to PBT of Rs. 57,524.36 Lacs and PAT of Rs. 41,457.19 Lacs respectively in the previous Financial year. Consolidated Operating Results: During the year under review, on a Consolidated basis, your Company (together with its Subsidiaries) has earned Revenue from Operations of Rs. 209,839.14 Lacs as compared to Rs. 218,363.69 Lacs in the previous Financial Year. Correspondingly, the Consolidated Profit After Tax (PAT) registered during the year under review is Rs. 42,422.17 Lacs (After Minority Interest) as compared to PAT (After Minority Interest) of Rs. 43,093.93 Lacs in the previous Financial Year. 2. DIVIDEND: During the Financial Year 2015-16, the Company has declared and paid on 28th March, 2016 an Interim Dividend of Rs. 8/-(400%) and Special (additional interim) Dividend of Rs. 10/-(500%) to commemorate the Silver Jubilee year of the Company aggregating to Rs. 18 per share on 94,320,370 Equity Share of the face value of Rs. 2/- each amounting to Rs. 16,977.67 Lacs for the Financial Year 2015-16. Having declared Interim dividends, your Board has not recommended a Final dividend for the Financial Year 2015-16. 3. SHARE CAPITAL: The paid up Equity Share Capital of the Company as on 31st March, 2016 is Rs. 1,886.41 Lacs. During the year under review, the Company has neither issued shares with differential voting rights nor granted stock option or sweat equity. 4. FINANCE: Cash and cash equivalents as at 31st March, 2016 were Rs. 88,765.65 Lacs. The Company continues to focus on judicious management of its Working Capital, Receivables, Inventories, all other Working Capital parameters were kept under strict check through continuous monitoring. Capital Expenditure Outlay: During the year under review, the Company has incurred an expense of Rs. 22,424.43 Lacs (including Rs. 3,780.03 Lacs of Capital work-in-progress) on Capital Expenditure. Deposits: During the year under review, the Company has neither accepted nor renewed any deposits, within the meaning of Sectiion 73 of the Companies Act, 2013. Particulars of Loans, Guarantees or Investments: During the year under review, Company has not provided any loan but it has provided a guarantee covered under the provisions of Section 186 of Companies Act, 2013. The details of the Guarantees provided and Investment made by the Company are given in the notes to the Financial Statements. Internal Control and Audit: The Company has a proper and adequate system of Internal Control commensurate with its size and the nature of its operations to ensure that all assets are safeguarded and protected against loss from un-authorized use or disposition and those transactions are authorized, recorded and reported correctly. The Board of Directors at the recommendations of the Audit Committee appointed M/s. Shah Û Shah Associates, Chartered Accountants as Internal Auditors of the Company for the Financial Year 2016-17. Internal Auditors monitor and evaluate the efficacy and adequacy of Internal Control System in the Company, its compliance with operating systems, accounting procedures, policies at all locations of the Company. Significant audit observations and corrective actions thereon are presented to the Audit Committee of the Board. Related Party Transactions: All the Related Party Transactions entered into during the financial year are on an Arm's Length basis and in the Ordinary Course of Business. There are no materially significant Related Party Transactions made by the Company with Promoters, Directors, Key Managerial Personnel (KMP) which may have a potential conflict with the interest of the Company at large. All Related Party Transactions are placed before the Audit Committee and the Board for their Approval. Prior omnibus approval of the Audit Committee is obtained on yearly basis for the transactions which are of a foreseen and repetitive nature. The transactions entered into pursuant to the omnibus approval so granted are placed before the Audit Committee and the Board of Directors for their approval on quarterly basis. The details of Related Party Transactions entered by the Company are disclosed in Form AOC-2 as per Annexure "A". The Policy on Related Party Transactions as approved by the Board of Directors is uploaded on the website of the Company viz <http://www.aiaengineering.com/finances/pdf/> POLICYONRELATEDPARTYTRANSACTIONS.pdf Credit Rating: CRISIL has reaffirmed both the Long Term and Short Term rating of the Company as CRISIL AA/Stable and CRISIL A+, respectively. Dun û Bradstreet Information India Private Limited (D û B) has evaluated the Company during January, 2016 and assigned a Dun Bradstreet Rating of 5A1, which indicates that overall status of the Company is "Strong". 5. HUMAN RESOURCE: The Company gives utmost importance to its Human Resources and believes that employee involvement is crucial to sustaining growth. Our Human Resource policy, therefore, promotes employee engagement at all levels. Organization structure design, role profiles and goal setting exercise are periodically reviewed and strengthened to inculcate a performance oriented culture in the organization, and afford adequate growth opportunities within the organization. Behavioral training programmes and motivational seminars are regularly organized to keep employees motivated and involved. The employees are also encouraged to participate in sporting events inside and outside the Company to foster team spirit. As a result of all these initiatives, we are able to sustain and strengthen employee's bond with the Company which has resulted in very low attrition rates for many years. 6. MATERIAL CHANGES, TRANSACTIONS ANDCOMMITMENTS: There have been no material changes and commitments affecting the financial position of the Company since the close of financial year i.e. since 31st March, 2016. Further, it is hereby confirmed that there has been no change in the nature of business of the Company. 7. BUSINESS PROSPECTS: Future growth prospects of the Company will rely on making further inroads in mining industry worldwide. The growth prospects are primarily emanating out of the large annual replacement market in this industry, primarily in four major metal ore types, viz., Iron, Platinum, Gold and Copper. The company is now focusing on certain strategic drivers in the Mining Segment over and above the cost reduction due to much lower wear rates owing to High Chrome, viz. improved process efficiencies, reduction in the cost of other consumables (other than high-chrome grinding media), significantly reduced environment hazards and consequentially improved environmental benefits, etc. for providing comprehensive solution to the mining industry. This has helped your company in creating a unique positioning which augurs well for the consistent and steady growth in this industry over medium to long term. Reliance on multiple ores means that declining fortunes of one commodity will not significantly impact your Company's growth prospects. During last few years, we have steadily increased our presence in the major mining groups across the globe with a stronger focus on major mining centers like North America, Latin America, Australia, Africa, and the Far East Asia, etc. The Company has fairly aggressive growth plans so as to capitalize upon the available opportunity in the mining segment and the vision is to emerge as the leading global solution provider in this segment. While the current focus of the Company in mining segment is outside India, your Company also has a major share of the domestic mining demand and shall be able to capture incremental demand as and when the same arises. In as much as the cement segment is concerned, the near term prospects continue to remain flat, although in India it seems that the average capacity utilization levels of cement companies have started to go up. It is also expected that with the government taking lot of initiatives on the infrastructure segment, more particularly the road construction and port infrastructure, it might provide much needed stimulus to the overall construction and industrial segments and it is hoped that from the current fiscal year onwards the positive impact of this stimulus should start coming in. As and when India's cement production will go up your company will be an immediate beneficiary in terms of incremental production going to service the additional requirement. On the global front, while most of the key markets like North America, Latin America, Western and Eastern Europe, Africa, etc. continue to remain sluggish, there are certain specific markets in Asia, Africa and South America, which continue to add capacity or have increased capacity utilization. In China, the Company currently maintains a limited presence by marketing specific products. On the whole, in near term, your company continues to believe that the overall production and sales will remain flat in this segment. In the Utility sector (thermal power plants), which is more prominent in the domestic market, your Company continues to enjoy a niche position. The Company will strive to maintain a steady growth rate in this particular segment matching with the rate at which the sector grows. 8. FUTURE EXPANSION: The Company's effective capacity reached 340,000 Metric Tonnes after successful commission of Kerala GIDC brownfield expansion project during the year 2015-16. We are on track for the purpose of implementing second phase of capital expenditure plan at GIDC Kerala involving augmentation of the total capacity by further 100,000 MT, which is expected to be commissioned by October 2017, which will take the total installed capacity to 440,000 MT. The incremental Capex required to be incurred for the second phase is estimated around Rs. 350 crores (from April, 2016) and the same will be funded entirely from internal cash accruals. 9. SUBSIDIARY COMPANIES: In accordance with the Accounting Standard AS-21 on Consolidated Financial Statements as provided under the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the audited Consolidated Financial Statements are provided in the Annual Report, which show the financial resources, assets, liabilities, income, profits and other details of the Company and its subsidiaries as a single entity as per Annexure "B". The Company will make available the Annual Accounts of the Subsidiary Companies and the related detailed information to any member of the Company who may be interested in obtaining the same. The annual accounts of the Subsidiary Companies will also be kept open for inspection at the Registered Office of the Company and that of the respective Subsidiary Companies. The Consolidated Financial Statements presented by the Company include financial results of its Subsidiary Companies. The Annual Accounts of the Subsidiary Companies and the related detailed information will be made available to the members of the Company seeking such information at any point of time. 10. INSURANCE: The Company has taken adequate insurance coverage of all its assets and Inventories against various types of risks viz. fire, floods, earthquake, cyclone, etc. 11. INDUSTRIAL RELATIONS (IR): The Company continues to maintain harmonious industrial relation. We periodically review our HR policies and procedures to aid and improve the living standards of our employees, and to keep them motivated and involved with the larger interests of the organization. The Company has systems and procedures in place to hear and resolve employee's grievances in a timely manner, and provides avenues to its employees for their all-round development on professional and personal levels. All these measures aid employee satisfaction and involvement, resulting in good Industrial Relations. 12. CORPORATE GOVERNANCE: In line with the Company's commitment to good Corporate Governance Practices, your Company has complied with all the mandatory provisions of Corporate Governance as prescribed in Regulations 17 to 27 of the SEBI Listing Regulations. A separate report on Corporate Governance and Practicing Company Secretary's Certificate thereon is included as a part of the Annual Report. 13. MANAGEMENTS DISCUSSION AND ANALYSIS (MDA): MDA covering details of Operations, International Markets, Research and Development, Opportunities and Threats etc. for the year under review is given as a separate statement, which forms part of this Annual Report. 14. RISK MANAGEMENT: In compliance with the provisions of Regulation 21 of SEBI Listing Regulations, the Board of Directors has constituted a Risk Management Committee. The details of Committee and its terms of reference are set out in the Corporate Governance Report forming part of the Board's Report. The Company has a robust Risk Management framework to identify, evaluate business risks and opportunities. Corporate Risk Evaluation and Management is an ongoing process within the Organization. The Company has a well-defined Risk Management framework to identify, monitor and minimizing/mitigating risks. The Risk Management framework has been developed and approved by the senior management in accordance with the business strategy. The key elements of the framework include: • Risk Structure; • Risk Portfolio; • Risk Measuring a Monitoring and • Risk Optimizing. The implementation of the framework is supported through criteria for Risk assessment, Risk forms û MIS. The objectives and scope of Risk Management Committee broadly comprises of: • Oversight of risk management performed by the executive management; • Reviewing the Corporate Risk Management Policy and framework within the local legal requirements and SEBI Listing Regulations; • Reviewing risks and evaluate treatment including initiating mitigation actions and ownerships as per a predefined cycle; • Defining framework for identification, assessment, monitoring, mitigation and reporting of risks. 15. POLICES: (a) Vigil Mechanism / Whistle Blower Policy: The Company has adopted a Vigil Mechanism/Whistle Blower Policy through which the Company encourages employees bring to the attention of senior management including Audit and Risk Management Committee, any unethical behavior and improper practice and wrongful conduct taking place in the Company. The brief details of such vigil mechanism forms part of the Corporate Governance Report. (b) Policy on Protection of Women against Sexual Harassment at Workplace: In line with the Sexual Harassment of Women at workplace (Prevention, Prohibition and Redressal) Act, 2013 and Rules made thereunder, the Company has adopted a policy for the same. The brief details of the said policy and complaints received, if any, forms part of the Corporate Governance Report. (c) Code of Conduct to Regulate, Monitor and Report Trading by Insiders: In pursuance to the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 and the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 ("SEBI Listing Regulations"), the Company adopted the Code of Conduct to regulate, monitor and report trading by the Employees, insider and connected person(s) in order to protect the Investor's Interest. The details of the said Code of Conduct forms part of the Corporate Governance Report. 16. DIRECTORS AND KEY MANAGERIAL PERSONNEL: (a) Board of Directors: The Board of Directors of the Company is led by the Independent - Non Executive Chairman and comprises eight other Directors as on 31st March, 2016, including one Managing Director, one Whole-Time Director, three Independent Directors and three Non-Executive Directors(other than Independent Directors). All the Independent Directors of the Company have furnished declarations that they meet the criteria of Independence as prescribed under the Companies Act, 2013 and SEBI Listing Regulations. Dr. S. Srikumar (DIN-01025579), Non-Independent Non-Executive Director and Mr. Yashwant M. Patel (DIN -02103312), Whole-Time Director of the Company retires by rotation at the ensuing Annual General Meeting and being eligible, offered themselves for re-appointment. The Term of Mr. Bhadresh K. Shah (DIN-00058177) as Managing Director will come to an end on 30th September, 2016. The Board, therefore, recommends his re-appointment as Managing Director for a further period of 5(Five) Years w.e.f. 1st October, 2016. The Nomination and Remuneration Committee recommended to the Board for the re-appointment of Mr. Bhadresh K. Shah as Managing Director and the Board has re-appointed him as the Managing Director subject to the approval of members of the Company at the ensuing 26th Annual General Meeting. As required under SEBI Listing Regulations amended from time to time, the information on the particulars of the Directors proposed for appointment/re-appointment have been given in the Notice of the Annual General Meeting. (b) Meetings: During the year under review, Five Board Meetings and Four Audit Committee meetings were convened and held. The details of composition Audit Committee is as under:- Mr. Rajendra S. Shah, Chairman Mr. Sanjay Shailesh Majmudar, Member Mr. Bhadresh K. Shah, Member Mr. Rajan Ramkrishna Harivallabhdas, Member All recommendations made by the Audit Committee during the year were accepted by the Board. The details of Composition of other Committees and dates of the meetings are given in the Corporate Governance Report. The intervening gap between the meetings was within the period prescribed under the Companies Act, 2013 and SEBI Listing Regulations. (c) Committees of the Board of Directors: In compliance with the requirement of applicable laws and as part of the best governance practice, the Company has following Committees of the Board as on 31st March, 2016 (i) Audit Committee (ii) Stakeholders' Relationship Committee (iii) Nomination and Remuneration Committee (iv) Corporate Social Responsibility Committee (v) Risk Management Committee The details with respect to the aforesaid Committees forms part of the Corporate Governance Report. (d) Board Evaluation: Pursuant to the provisions of the Companies Act, 2013 and SEBI Listing Regulations, the Board has carried out an Annual Performance evaluation of its own performance, the Directors individually as well as the evaluation of the working of its Committees. The manner in which the evaluation has been carried out has been explained in the Corporate Governance Report. (e) Whole-Time Key Managerial Personnel: There is no change in whole-time Key Managerial Personnel during the year under review. (f) Familiarization Program for Independent Director: The Independent Directors have been updated with their roles, rights and responsibilities in the Company by specifying them in their appointment letter alongwith necessary documents, reports and internal policies to enable them to familiarize with the Company's procedures and practices. The Company has through presentations at regular intervals, familiarized and updated the Independent Directors with the strategy, operations and functions of the Company and Engineering Industry as a whole. Site visits to various plant locations are organized for the Directors to enable them to understand the operations 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 <http://www.aiaengineering.com/finances/pdf/> familiarizationprogramme.pdf (g) Remuneration Policy: The Board has, on the recommendation of the Nomination û Remuneration Committee, framed a policy for selection and appointment of Directors, Senior Management Personnel and their remuneration. The Remuneration Policy is stated in the Corporate Governance Report which is a part of the Board's Report. (h) Directors' Responsibility Statement: To the best of their knowledge and belief and according to the information and explanations obtained by them, your Directors make the following statements in terms of Clause (c) of Sub-Section (3) of Section 134 of the Companies Act, 2013, which states 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 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 at the end of the financial year and of the profit of the Company for that period; (c) the Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of this Act 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 were operating effectively; and (f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. 17. AUDITORS: Statutory Auditors: Since, the Company's Auditors M/s. Talati û Talati, Chartered Accountants, Ahmedabad (who holds office of Auditors for more than 10 years at the time of commencement of the Companies Act, 2013) has already been appointed as Statutory Auditors of the Company for two years, they can be appointed as Statutory Auditors of the Company to hold the office for another one year from the ensuing Annual General Meeting of the Company. They will hold office for one year from the conclusion of the ensuing Annual General Meeting till the conclusion of the 27th Annual General Meeting. The Audit Committee and the Board of Directors recommend their re-appointment as Statutory Auditors of your Company. The Company has received a letter to the effect that their re-appointment, if made, would be within the prescribed limit under Section 139 (1) of the Companies Act, 2013 and that they are not disqualified for re-appointment within the meaning of Section 141 of the said Act and rules framed thereunder. As required under SEBI Listing Regulations, the Auditors have also confirmed that they hold a valid certificate issued by the Peer Review Board of the Institute of Chartered Accountants of India. The Board has duly reviewed the Statutory Auditors' Report for the financial year ended 31st March, 2016. There were no qualifications / observations in the Report. Cost Auditors: Pursuant to Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules 2014, the cost accounting records maintained by the Company are required to be audited by Cost Accountant. On the recommendations of the Audit Committee, the Board of Directors of the Company have appointed M/s. Kiran J. Mehta û Co., Cost Accountants, Ahmedabad as the Cost Auditors of the Company to audit the cost accounting records of the Company for the financial year 2015-16. The Cost Auditors has filed the cost audit report for the financial year ended 31st March, 2015 within the stipulated time frame. The Board of Directors on the recommendation of the Audit Committee has appointed M/s Kiran J. Mehta û Co., Cost Accountants, Ahmedabad as the Cost Auditors of the Company to audit the cost accounting records of the Company for the financial year 2016-17. As required under the Companies Act, 2013, the remuneration payable to the Cost Auditors is required to be placed before the members of the Company for their ratification at the ensuing Annual General Meeting. Accordingly, a resolution seeking members' ratification of the remuneration payable to M/s. Kiran J. Mehta û Co., Cost Accountants, Ahmedabad is included in the Notice convening the 26th Annual General Meeting. 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, Tushar Vora û Associates, Company Secretaries FCS-3459, CP No. 1745), Ahmedabad to conduct a Secretarial Audit of the Company's secretarial and related records for the year ended 31st March, 2016. The Report on the Secretarial Audit for the year ended 31st March, 2016 is annexed herewith as Annexure "C" to this Board's Report. There were no qualification/observations in the report. 18. PARTICULARS OF ENERGY CONSERVATION, TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO: The additional information regarding 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 to this report. 19. CONSOLIDATED FINANCIAL STATEMENTS: The Consolidated Financial Statements of the Company prepared in accordance with relevant Accounting Standards (AS) viz. AS-21, AS-23 and AS-27 issued by the Institute of Chartered Accountants of India form part of this Annual Report. 20. EXTRACT OF ANNUAL RETURN: The details forming part of the extract of the Annual Return in form MGT-9 is annexed herewith as Annexure "D". 21. CORPORATE SOCIAL RESPONSIBILITY (CSR): As per the provisions of Section 135 of the Companies Act, 2013 and rules made thereunder, the amount required to be spent on CSR activities during the year under review, is Rs. 824.01 Lacs and the Company has spent Rs. 495.76 Lacs during the financial year ended 31st March, 2016. The shortfall in the spending during the year under report is intended to be utilized in a phased manner in future, upon identification of suitable projects within the Company's CSR Policy. The requisite details of CSR activities pursuant to Section 135 of the Companies Act, 2013 and as per Annexure attached to the Companies (Corporate Social Responsibility Policy) Rules, 2014 are annexed as Annexure 'E'. The composition and other details of the CSR Committee are included in the Corporate Governance Report which form part of Board's Report. 22. PARTICULAURS OF EMPLOYEES: The information required pursuant to Section 197 of Companies Act, 2013 read with Rule 5 of the Companies (Appointment û Remuneration of Managerial Personnel) Rules, 2014 in respect of employees of the Company are annexed as Annexure 'F'. 23. ENVIRONMENT, HEALTH AND SAFETY: The Company is committed to health and safety of its employees, contractors and visitors. We are compliant with all EHS Regulations stipulated under the Water (Prevention and Control of Pollution) Act, The Air (Prevention and Control of Pollution) Act, The Environment Protection Act, The Factories Act and Rules made thereunder. Our mandate is to go beyond compliance standards and we have made a considerable improvement in this direction. 24. ACKNOWLEDGEMENT: Your Directors would like to express their appreciation for the assistance and co-operation received from the Company's customers, vendors, bankers, auditors, investors and Government bodies during the year under review. Your Directors place on record their appreciation of the contributions made by employees at all levels. Your Company's consistent growth was made possible by their hard work, solidarity, co-operation and support. For and on behalf of the Board, Rajendra S. Shah Chairman (DIN-00061922) Place : Ahmedabad Date : 25th May, 2016 |