DIRECTORS' REPORT Dear Stakeholders, Your Directors submit the 31st Annual Report of the company along with the Audited financial Statements for the financial year ended March 31, 2015. PERFORMANCE REVIEW: The turnover increased by 6%, and the Profit before Interest and Taxes increased by 1% compared to the previous year. The Earnings per Share increased from Rs. 0.39 in the previous year to Rs 0.63 in the year under report. The offtakes in the component division had come down due to a severe fall in the Commercial Vehicles and Tractors last year. There has been a fall in the Job Work Charges, the General Purpose machinery division could hold on to a respectable sale although it was Higher than the previous year. The SPM division performed much better than the previous years due to some major projects being undertaken by the OEMs. Though the market conditions were not significantly great, the OEMs still went ahead and completed their projects thereby ensuring that the machines on order with us were lifted. FUTURE OUTLOOK The current market conditions are slow at the moment and there has been a sizeable shrinkage in the general business. However, your directors we are pleased to inform you that we will be able to sail through this year 1) We are comfortable on our Special Purpose Machinery Order book and we are more or less booked for the entire year. These are project orders from the OEs which could be for their Greenfield or expansion projects and they will go ahead and execute these projects regardless of the temporary market conditions. 2) The CNC machines division is also expected to maintain the performance as we have had a breakthrough in the Russian market and have already successfully delivered a few machines. There are repeat orders from Russia which should help offset reduction in regular order flows. The company is exploring other new overseas markets to shore up export revenues. 3) On the component division front, we have already made a significant investment in new machining lines in the Pune plant. These lines are expected to commence production in the last quarter of this year and thereby add to our revenues. With slowdown reaching unprecedented levels, there is a turnaround due now and the government is expected to announce some measures to provide the momentum to the overall growth in the general economic activity which the Directors are hopeful would help further in the current year. DIVIDEND Your Directors are pleased to recommend for approval of the Members a dividend of 5% on equity shares of the company for the financial year 2014-15, amounting to Rs 0.50/- per equity share. The dividend on the equity shares, if declared as above, would involve an outflow of Rs.7,022,034/- towards dividend and Rs. 14,29,521/- towards dividend tax, resulting in a total outflow of Rs. 84,51,555/-. TRANSFER TO GENERAL RESERVE The Company does not propose to transfer any amount to General Reserve. DIRECTORS Mr. M. Krishna Swamy, Director of the company retires by rotation at the ensuing Annual General Meeting, and being eligible offer themselves for re-appointment. The following Directors are proposed to be appointed / re-appointed as Directors of the company under Companies act 2013 1. Mullapudi Lokeswararao - Managing Director 2. Bollineni Kishore Babu - Whole time director 3. Mullapudi Srinivas - Whole time director 4. Mullapudi Srikrishna - Whole time director The detailed profile of the above directors are given at Notice calling the Annual General Meeting. All Independent Directors have given declaration that they meet the criteria of independence as laid under section 149(6) of the Companies Act 2013 and clause 49 of the Listing Agreement. As required by clause 49 of the Listing Agreement with the Stock Exchanges, the information on the particulars of the Directors seeking re-appointment was given in the notice to the AGM. AUDITORS Statutory Auditors At the Annual General Meeting(AGM) held on September 30, 2014, M/s. Brahmayya & Co, Chartered Accountants, were appointed as Statutory Auditor of the Company to hold office till the conclusion of the Annual General Meeting to be held in the calendar year 2017. In terms of the first proviso to Section 139 of the Companies Act, 2013, the appointment of the auditor shall be placed for ratification at every Annual General Meeting. Accordingly, the appointment of M/s. Brahmayya & Co, Chartered Accountants, as statutory auditors of the Company, is placed for ratification by the shareholders. In this regard, the Company has received a certificate from the auditors to the effect that if they are reappointed, it would be in accordance with the provisions of Section 141 of the Companies Act, 2013. Cost Auditors: The Board has appointed M/s. DZR&Co, Cost Accountants for conducting the audit of cost records of the Company for various segments for the financial year 2015-16 as recommended by the Audit Committee. As required under section 148 and Rule 14 of the Companies (Audit and Auditors) Rules, 2014 a resolution is being placed at the ensuing AGM for ratification of remuneration payable to said Cost Auditors. Secretarial Auditors: M/s. S Chidambaram, Practicing Company Secretaries, was appointed to conduct the Secretarial Audit of the Company for the financial year 2014-15, as required under Section 204 of the Companies Act, 2013 and Rule 9 there-under. The secretarial audit report for FY 2014-15 forms part of this Report as Annexure- C. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE OUTGO Information required under section 134(3)(m) of the Companies Act, 2013 read with Rule 8 of the Companies (Accounts) Rules, 2014, is enclosed herewith as Annexure - A DEVELOPEMNT AND IMPLEMENTATION OF A RISK MANAGEMENT POLICY The Company has been addressing various risks impacting the company policy of the company on risk management is provided elsewhere in this Annual Report in Management Discussion and Analysis. The Company has developed and implemented a risk management policy for the company including identification therein of elements of risk, which in the opinion of the Board may threaten the existence of the company. NOMINATION AND REMUENRATION POLICY On the recommendation of the Nomination and Remuneration Committee the Board of Directors has formulated a policy of the Company on directors' appointment and remuneration, including criteria for determining qualifications, positive attributes, independence of a director and other matters and to frame proper systems for identification, appointment of Directors & KMPs, Payment of Remuneration to them and Evaluation of their performance. FORMAL ANNUAL EVALUATION MADE BY THE BOARD OF ITS OWN PERFORMANCE AND OF ITS COMMITTEES AND INDIVIDUAL DIRECTORS As required under the provisions of Schedule IV of the Companies Act, 2013 the performance evaluation of independent directors has been done by the entire Board of Directors, excluding the director being evaluated. The evaluation of all the directors and the Board as a whole was conducted based on the criteria and framework adopted by the Board. The Board approved the evaluation results as collated by the nomination and remuneration committee. None of the independent directors are due for re-appointment LISTING: The equity shares of the Company are listed with Bombay Stock Exchange Limited (BSE), and National Stock Exchange of India Limited (NSE). There are no arrears on account of payment of listing fees to the said Stock Exchanges DIRECTORS RESPONSIBILITY STATEMENT Pursuant to Section 134 (5) of the Companies Act, 2013 Your Directors' confirm that: In preparation of annual accounts for the financial year ended 31st March, 2015 the applicable Accounting Standards have been followed along with proper explanation relating to material departures; 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 true and fair view of the state of affairs of the Company at the end of the financial year ended 31st March, 2015 and of the profit and loss of the Company for the financial year; The Directors have taken proper and sufficient care for their maintenance of adequate accounting records in accordance with the provisions of the Companies Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; i. The Directors had prepared the annual accounts on a 'going concern' basis; ii. The directors had laid down internal financial controls to be followed by the company and that such internal financial controls are adequate and were operating effectively; and iii. The directors had devised proper systems to ensure compliance with the provisions of all applicable laws and that such systems were adequate and operating effectively. OTHER DISCLOSURES: Board Meetings During the year under review, five Board Meetings were held on 30th May, 2014; 14th August, 2014; 14th November, 2014 and 14th February, 2015 and 04th March 2015. Committees of Board Your company has the following committees namely: 1. Audit Committee 2. Nomination and Remuneration Committee 3. Stakeholders Relationship Committee The constitution of all the committees are as per the Companies Act, 2013 and Listing Agreement with Stock Exchanges. The details of the Constitution are mentioned in Corporate Governance Report, which forms part of this Annual Report. Corporate Governance Report Your Company has complied with the requirements of Clause 49 of the Listing Agreement entered with the Stock Exchanges and provisions of the Companies Act, 2013, Report on Corporate Governance including Auditor's Certificate on compliance with the code of Corporate Governance. Management Discussion and Analysis A brief note on the Management discussion and analysis for the year is enclosed as Annexure B to this report Vigil Mechanism: In pursuant to the provisions of section 177 of the Companies Act, 2013 and Clause 49 of the Listing Agreement a Vigil Mechanism for directors and employees to report genuine concerns has been established. SUBSIDIARY COMPANY: The company does not have any Subsidiary company either in India or abroad. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS: Details of the Loans, guarantees and investments covered under Section 186 of the Companies Act, 2013 are given in the notes to the financial statements pertaining to the year under review. PUBLIC DEPOSITS: The Company has not accepted any deposits from the public. RELATED PARTY TRANSACTIONS: Related party transactions entered during the financial year under review are disclosed in Note No.27 of the Financial Statements of the Company for the financial year ended 31st March, 2015. These transactions entered were at an arm's length basis and in the ordinary course of business. There were no materially significant related party transactions with the Company's Promoters, Directors, Management or their relatives, which could have had a potential conflict with the interests of the Company. The Company has not entered into any related party transactions covered under Section 188(1) of the Companies ACKNOWLEDGEMENTS Your Directors wish to place on record their appreciation for the support and co-operation extended by the Shareholders, Bankers, Financial Institutions, Government Authorities, Stock Exchanges, Customers, Suppliers and other associates. Your Directors also wish to place on record their appreciation for the enthusiastic support received from the team of dedicated employees in the activities of your Company. On behalf of the Board For Lokesh Machines Limited B Kishore Babu (Executive Director) M Lokeswara Rao (Managing Director) |