DIRECTORS' REPORT To Dear Members, Your Directors are pleased to present the Twenty Sixth Annual Report on the business and operations of the Company together with the Audited Financial Statements for the year ended on March 31, 2015. Dividend Based on the Company's performance, your Directors have recommended a Dividend of Rs. 7/- per equity share of face value of Rs. 10/- each (i.e. 70%) for the financial year ended March 31, 2015, amounting to Rs. 837.36 Lacs. The Dividend payout is subject to approval of members at the ensuing Annual General Meeting of the Company. The Dividend payout for the year under review has been recommended in accordance with the Company's policy to pay sustainable dividend and to retain resources requirements for long term growth objectives of the Company to be met from internal accruals. STATUTORY DISCLOSURES AS PER PROVISIONS OF SECTION 134 OF THE COMPANIES ACT, 2013 (the ACT) 1. Extract of Annual Return Pursuant to sub section 3(a) of Section 134 and sub-section (3) of Section 92 of the Act, read with Rule 12 of the Companies (Management and Administration) Rules, 2014 an extract of Annual Return in form MGT-9 as on March 31, 2015 has been prepared and enclosed as Annexure I, which forms part of this report. 2. Number of meetings of the Board Regular meetings of the Board are held to discuss and decide on various business policies, decisions and performance of the Company. Due to business exigencies, certain business decisions are taken by the Board through resolution passed by circulation from time to time. The Board met five times in financial year 2014-15 viz., on May 28, 2014, August 9, 2014, November 10, 2014, December 5, 2014 and February 12, 2015. One separate meeting of Independent Directors was also held on December 5, 2014. Detailed information on the meetings of the Board is included in the report on Corporate Governance, which forms the part of the Annual Report. 3. Independent Directors' declaration All Independent Directors of the Company have given declaration under Section 149(7) of the Act, that they meet the criteria laid down in Section 149(6) of the Act read with Clause 49 of the Listing Agreement. 4. Directors' Appointment Criteria and Remuneration Policy etc. The Nomination & Remuneration Committee has formulated criteria for determining qualifications, positive attributes and independence of the Directors as well as Remuneration Policy for the Company as mandated under section 178(3)/(4) and Clause 49.IV.B.4 of the Listing Agreement. The above referred Policy is enclosed as Annexure II which forms part of this report. 5. Auditors & Auditor's Report (a) Statutory Auditors Pursuant to section 139 of the Companies Act, 2013, M/s Anil S. Gupta & Associates, Chartered Accountants (ICAI Firm Registration No.004061N), Statutory Auditors of the Company, were re-appointed in the previous Annual General Meeting of Company to hold office till the conclusion of 28th Annual General Meeting to be held in the calendar year 2017. However, their continuation is subject to ratification by the members at every Annual General Meeting. They have confirmed their eligibility to the effect that their continuation as Statutory Auditor, if ratified, would be within the prescribed limits under the Act and they are not disqualified for such continuation. Accordingly, the Board of Directors recommend the ratification by the members, the continuation of M/s Anil S. Gupta & Associates, Chartered Accountants, as the statutory auditors of the Company to hold office till the conclusion of 28th Annual General Meeting to be held in the calendar year 2017on such remuneration to be decided by the Board. (b) Statutory Auditor's Reports The Auditor's Reports on standalone as well as on consolidated financial statements are self-explanatory and do not call for any further comments. These Reports don't contain any qualification, reservation, adverse remarks or disclaimer. (c) Secretarial Auditor Pursuant to Section 204 of the Act, the Company had appointed M/s Ranjana Gupta & Associates, Practising Company Secretaries, Delhi as Secretarial Auditor to conduct the Secretarial Audit of the Company for the financial year 2014-15. The Company provided all assistance and facilities to the Secretarial Auditor for conducting the Audit. (d) Secretarial Audit Report Based on the Secretarial Audit, the Secretarial Auditor has furnished a report to the Company for the financial year 2014-15 which is annexed to this report as Annexure III. There is no qualification, reservation or adverse remark in the Secretarial Audit Report; hence no explanation by Directors is warranted. (e) Cost Auditor For financial year 2014-15, Cost Audit was not applicable on the Company. The Cost Audit Report for financial year 2013-14 was filed on 23/09/2014 within due date for filing. For the financial year 2015-16, Cost Audit is applicable on the Company and pursuant to section 148(3) of the Companies Act read with Rule 6(2) of Companies (Cost Records and Audit) Rules, 2014, Mr. Krishan Singh Berk, Cost Accountant (membership No. 2724) has been appointed as Cost Auditor of the Company at the Board Meeting held on 29th May, 2015. 6. Particulars of Loans, Guarantees or Investments under Section 186 Particulars of loans given, investment made, guarantees given and securities provided along with the purpose for which the loan or guarantee or security is proposed to be utilised by the recipient are provided in the standalone financial statement of the Company (Please refer to Note No. 11 to the standalone financial statement). 7. Contracts and Arrangements with Related Parties All contract/arrangement/transactions entered by the Company during the Financial Year 2014-15, with the related parties were on arm's length basis. During the year, Company has not entered into contract/arrangement/ transactions with related parties which could be considered material in accordance with the Company's 'Subsidiary & Related Party Transactions Policy'. The said policy is available on the Company's website (www.fiemindustries.com). During the year, Company and one of its Whole-time Directors have entered into a Contract/ arrangement, which is a related party transaction pursuant to Section 188(1), AS-18 and Clause 49 of the Listing Agreement. The particulars of the transaction are disclosed in Form AOC-2 as Annexure Further, kindly refer to Note no 45 of the Standalone Financial Statements of the Company for details on all related party transactions. 8. State of the Company's affairs / Business Review The financial year 2014-15 was another successful year, where despite a challenging economic environment; business of the Company grew well, ahead of Industry. The macro business environment continued to remain muted during the previous year, however economy is now slowly improving because of industry friendly and growth oriented policies of the Govt. Amid all these developments, your Company delivered healthy results. Company achieved a net turnover of Rs.819.50 Crore in comparison to Rs. 714.11 Crores in previous financial year. Company has also been able to increase the Profit after tax from Rs. 37.40 Crore in 2013-14 to Rs. 42.26 Crore in 2014-15. One important development during the year was Company's winning of LED Bulb tender from EESL for 7.74 lac LED Bulbs, which was completed by the Company in last quarter of FY 2014-15. The Operational Performance of the Company has remained among best in the Industry with an EBIDTA margin of 12.52%. The management has clear vision and mission as how to competitively differentiate by defining the right values proposition for the customer and maintain excellence in all parameters of operations, whether Quality, Cost, Design, Development, Delivery and overall Management systems. 9. Transfer to Reserves Your Company has transferred Rs. 425.00 Lacs to the general reserve from the profits of the Company. 10. Material changes and commitment affecting financial position of the Company / Change in the Nature of the Business There are no material changes and commitments, affecting the financial position of the Company which has occurred after the close of financial year till the date of this Report. However, there are two important developments on LED front. One is the awarding of tender by EESL (Energy Efficiency Services Ltd) to Company for LED Street Lights in Delhi under South Delhi Municipal Corporation. The value of contract is Rs. 99.79 Crores. Second tender by EESL is for supply 70,00,000 LED 9W Bulbs at the rate of Rs. 72.40 per Bulb (total value Rs. 50.68 Crore). Both these orders are to be completed during current year. 11. Conservation of Energy, Technology Absorption and Foreign Exchange Earnings and Outgo Details of Energy Conservation, Technology Absorption, Research and Development and Foreign Exchange Earnings and outgo as required under Section 134(3)(m) of the Act read with Rule 8(3) of Companies (Accounts) Rules, 2014 are given in Annexure V to this Report. 12. Risk Management During the year, your Directors has re-visited the terms of reference of the Audit Committee by adding various issues related to risk management and the name of the Committee has been changed to Audit & Risk Management Committee and Committee also entrusted with the responsibility to assist the Board in risk management framework and implementation of adequate risk management mechanism. A Risk Management Policy was framed and implemented by the Company. A brief about the risk management of the Company is also given in the Management Discussion and Analysis Report. 13. Corporate Social Responsibility (CSR) Your Company being a responsible corporate citizen has been taking initiatives for society at large under Corporate Social Responsibility provisions prescribed under the Companies Act, 2013. Financial Year 201415, being first financial year for the Company to implement its CSR programme as per section 135 of the Act in a more structured way, hence during the year company used its resources to lay down the basic frame work for undertaking the CSR activities in accordance with the provisions of the Act, including finalizing the CSR Policy, constituting committee for undertaking CSR activities, identifying the CSR projects which meet the Company's policy and statutory requirements. The Company has set up a dedicated trust, namely Fiem Foundation for undertaking CSR programmes and has contributed Rs.75,33,000/- in the corpus of trust for implementation of CSR programme as per Schedule VII read with Companies (Corporate Social Responsibility Policy) Rules, 2014. Company whole-heartedly supported the CSR provisions and remained compliant with the requirement of Section 135 which mandated CSR spent equal to 2% of average profits for the last three years. In terms of the provisions of Section 135 of the Companies Act, 2013 (Act) your Company has constituted a CSR Committee and the Composition of the CSR Committee has been disclosed in the Corporate Governance Report forming part of the Annual Report. The Company also adopted CSR Policy which is available on its website www.fiemindustries.com. Corporate Social Responsibility Report, pursuant to clause (o) of Subsection (3) of Section 134 of the Act and Rule 9 of the Companies (Corporate Social Responsibility Policy) Rules, 2014 forms part of the Directors' Report and enclosed as Annexure VI. 14. Board Evaluation Pursuant to the provisions of the Companies Act, 2013 and Clause 49 of the Listing Agreement, the Board has carried out the annual performance evaluation of its own performance, the performance evaluation of each individual directors as well as the evaluation of the working of its various Committees. Structured questionnaires were prepared after taking into consideration inputs received from the Directors, covering various aspects of the Board's functioning. A separate exercise was carried out to evaluate the performance of individual Directors including the Chairman of the Board. The performance evaluation of the Independent Directors was carried out by the entire Board. The performance evaluation of the Chairman and the Non Independent Directors was carried out by the Independent Directors. The Directors expressed their satisfaction with the evaluation process. Nomination & Remuneration Committee supported the entire process in terms of provisions of the Act. 15. Performance and Financial position of Subsidiary and Joint venture company a) Fiem Industries Japan Co., Ltd. (wholly-owned subsidiary): The Company was set-up in Japan as an extended arm of the Company for liaison with Japanese customers like Honda, Suzuki and Yamaha etc., support in Designing, R&D and new business development. While the parent Company (Fiem) is getting full support in above areas, the financials of the subsidiary are at very small levels. The financial performance of the Company was as under: b) Centro Ricerche FIEM HorustecH S.r.l. (Joint venture in Italy): The Company was set-up in Italy as a 50:50 JV with Horustech Lighting of Italy, which is Designing Company. The purpose of setting-up of JV was to strengthen R&D and Designing capabilities of the Company. The JV is working with this objective. The financial performance of the JV Company was as under: 16. Directors' Responsibility Statement Your Directors state that: a) in the preparation of the annual accounts for the year ended March 31, 2015, the applicable accounting standards have been followed along with proper explanation relating to material departures, if any; 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 as at end of financial year ended March 31, 2015 and of the profit and loss 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 financial statements 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 efficiently; and f) the Directors have devised proper systems to ensure compliance with the provisions of all applicable laws and such systems are adequate and operating effectively. 17. OTHER STATUTORY DISCLOSURES AS REQUIRED UNDER RULE 8(5) OF THE COMPANIES (ACCOUNTS) RULES, 2014 i. Financial summary/ highlights are already mentioned in the beginning of the report. ii. Change in Directors and Key Managerial Personnel: • The Board of Directors, at its meeting held on August 1, 2015, upon recommendation from the Nomination & Remuneration Committee, re-appointed Mr. J.K. Jain (DIN: 00013356) as Managing Director of the Company, w.e.f. August 7, 2015 to hold the office for a period of five years, subject to the approval of shareholders at the ensuing Annual General Meeting of the Company. • The Board of Directors, on August 1, 2015, upon recommendation from the Nomination & Remuneration Committee, also re-appointed Mr. Rahul Jain (DIN: 00013566) as Whole-time Director of the Company for a period of five years w.e.f. October 1, 2015, subject to the Approval of shareholders at the ensuing Annual General Meeting of the Company. • Pursuant to provisions of Section 152 of the Companies Act, 2013 and in accordance with provisions of Articles of Association of the Company, Mrs. Seema Jain (DIN: 00013523) and Ms. Aanchal Jain (DIN: 00013350), Directors of the Company liable to retire by rotation and being eligible have offered themselves for re-appointment and they are not disqualified under Section 164(2) of the Companies Act, 2013. • Shri Padur Narayana Viswanathan was appointed as Independent Director w.e.f. 9th August, 2014. He passed away in December, 2014. The Board places on record its deep appreciation for the valuable contribution made by him during his short stint as Director of the Company. As per the provisions of the Act read with the Articles of Association of the Company, and on the recommendation of the Nomination & Remuneration Committee, Board in their meeting held on February 12, 2015 had appointed Mr. Mohan Bir Sahni as an Independent Director in place of Late P.N. Viswanathan to fill the casual vacancy arose due to his death. • The details of Directors being recommended for appointment/ re-appointment as required under Clause 49 of the Listing Agreement are contained in the Notice convening the ensuing Annual General Meeting of the Company. • Mr. J.K. Jain, Chairman & Managing Director; Mr. O. P. Gupta, Chief Financial Officer and Mr. Arvind K. Chauhan, Company Secretary are the Key Managerial Personnel of the Company within the meaning of section 203 of the Act. They were already in office before the commencement of the Act. During the year, their position as Key Managerial Personnel has been formalised by noting in the Board meeting. • None of the Key Managerial Personnel has resigned or appointed during the year under review. iii. There is only one subsidiary and one joint venture of the Company and there was no change during the year about numbers of subsidiary or Joint Venture Company. iv. Details relating to Deposits: The Company has not accepted any Deposit within the meaning of the Companies (Acceptance of Deposit) Rules, 1975 or Chapter V of the Companies Act, 2013 and as such no details are required to be furnished. v. No significant and material orders were passed by any Regulators or court or tribunals impacting the going concern status and company's operations in future. vi. Details in respect of adequacy of internal financial controls with reference to the Financial Statement: The Company has in place adequate internal financial controls, which are commensurate to size and operations of the Company. During the year, no area of concern, continuing failure or major weakness was observed. vii. Other disclosures required under provisions of Companies Act, 2013 and Listing Agreement, as may be applicable: • As per provisions of Section 177(8) of the Act, composition of the Audit & Risk Management Committee has been disclosed under Corporate Governance Report. The Board, during the year under review, had accepted all the recommendation made to it by the Audit & Risk Management Committee. • Establishment of vigil mechanism as per provision of Section 177(10) of the Act: During the year the Company has instituted a vigil mechanism namely, 'Whistle Blower Policy'. The details of the same are reported under Corporate Governance Report; • Disclosure regarding remuneration of Directors and employees as required under Section 197(12) of the Act read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are given in Annexure VII & Annexure VIII. • Disclosure as required under Section 62(1) (b) of the Act read with Sub-rule 9 of Rule 12 of the Companies (Share and Capital Debentures) Rules, 2014, are not applicable, as during the year no shares were issued under- ESOS / ESOP or under sweat equity scheme. • Disclosure as required under Section 43(a) (ii) of the Act read with Sub-rule 4 of Rule 4 of the Companies (Share and Capital Debentures) Rules, 2014, are not applicable as during the year no equity shares with differential rights as to dividend, voting or otherwise were issued. • There are no public issue / preferential allotment proceeds pending to be utilised during the year, hence information required under Clause 43 of the Listing Agreement are not applicable. CORPORATE GOVERNANCE REPORT & MANAGEMENT DISCUSSION AND ANALYSIS REPORT Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, Management Discussion and Analysis Report, Report on Corporate Governance, Certificate on Corporate Governance, issued by Practising Company Secretary and the declaration by the Chairman and Managing Director regarding affirmation for compliance with the Company's Code of Conduct form part of the Annual Report. CONSOLIDATED FINANCIAL STATEMENTS In accordance with the Companies Act, 2013 ("the Act") and Accounting Standard (AS) - 21 on Consolidated financial statement and Accounting Standard (AS) -27 on Financial reporting of interest in Joint Ventures, the audited consolidated financial statement is provided in the Annual Report. The accounts of wholly owned subsidiary company 'Fiem Industries Japan Co., Ltd.' and 50:50 JV Company 'Centro Ricerche Fiem Horustech S.r.l' are consolidated with the accounts of the Company. The policy of determining material subsidiary as approved, may be accessed on the Company's website (www.fiemindustries.com). DISCLOSURE UNDER THE SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION AND REDRESSAL) ACT, 2013 Your Company has in place a formal policy for prevention of sexual harassment of its women employees in line with "The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. During the year under review, there was no complaint filed under Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013. ACKNOWLEDGEMENT Your Directors wish to place on record their sincere appreciation to all the employees for their dedication and commitment. The hard work and unstinting efforts of the employees have enabled the Company to sustain and further consolidate its position in the industry. Your Company continues to occupy a place of respect among its stakeholders and all valued OEM customers. Your Directors would like to express their sincere appreciation for assistance and co-operation received from the vendors and stakeholders including banks, Central and State Government authorities. It will be the Company's endeavour to build and nurture these strong relations with its stakeholders. The Board deeply acknowledges the trust and confidence placed by customers and all shareholders. For and on behalf of the Board of Fiem Industries Limited -Sd- J.K. Jain Chairman & Managing Director (DIN: 00013356) Place : Rai, Sonepat (HR.) Date : 01.08.2015 |