DIRECTORS’ REPORT Your Directors are pleased to present the Thirty Fourth Annual Report along with the Audited Accounts for the financial year ended 31st March 2016: DIVIDEND Your Directors recommend a final dividend of 20% (Rs. 0.40 per share) for the financial year 2015-16. Payment of dividend is subject to the approval of shareholders at the ensuing Annual General Meeting. During the year, the Company has already declared and paid an Interim Dividend of 20% (Rs. 0.40 per share), thereby the total dividend of 40% for the year amounts to Rs. 0.80 per share. OPERATIONS During the year, the Company recorded Net Sales of Rs. 560.70 crores as against Rs. 544.89 crores in 2014-15, an increase of about 2.90%. Profit After Tax made during the year is Rs. 31.87 crores compared with Rs. 21.94 crores in 2014-15, a substantial increase of about 45% compared with previous year. The production during the year was 73592 MT, compared to the previous year’s 71875 MT. During the year, the sales of the Company has increased marginally due to moderate improvement in Medium and Heavy Commercial Vehicle Industry. However, there was no significant increase in total sales due to slow down in the Tractor Industry during the year. OUTLOOK Indian automotive industry is showing signs of revival with moderate growth in commercial vehicle segment. OEMs are launching new models with additional functionalities and features to attract customers. Long term outlook remains positive for the automotive industry with all major global players having base in India for manufacturing, global sourcing as well as engineering. Regular product launches planned by OEMs will keep customer excitement levels and create demand and is favourable for overall industry growth. India is now a supplier of a range of high value and critical automobile components to global auto market. CONSOLIDATED FINANCIAL STATEMENTS The Company has prepared Consolidated Financial Statements of Nelcast Limited and its subsidiary NC Energy Limited as at 31st March 2016, in accordance with Accounting Standard 21 on “Consolidated Financial Statements” issued by the Institute of Chartered Accountants of India. As required by the Listing Regulations, the audited Consolidated Financial Statements are circulated with the Annual Report. SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES In terms of Section 129(3) of the Companies Act, 2013 read with Rule 5 of the Companies (Accounts) Rules, 2014, the salient features of the financial statements of subsidiary company is set out in the prescribed form AOC-1, which is annexed with this report as Annexure-B. The Company will make available the audited annual accounts and related information of its subsidiary, upon request by any of its shareholders. The annual accounts of the subsidiary company will also be kept for inspection, by any member at the Registered Office of the Company and its subsidiary company. The consolidated financial statements presented by the Company, which form part of this annual report, include financial results of its subsidiary company. QUALITY AND CUSTOMER SATISFACTION The Company adheres to the TS 16949 norms, and continuously strives to achieve world class quality by strictly adhering to the quality standards. The Company has been awarded ISO 14001 & 18001 for Environmental Management Systems. The Company has been receiving continuous support from its OEM customers like Tata Motors, Ashok Leyland, TAFE, Eicher Tractors (TMTL), Mahindra & Mahindra, Volvo-Eicher Commercial Vehicles, SAME Tractors, Escorts Tractors, Daimler India, Caterpillar, etc., from Tier I customers like Automotive Axles, American Axles, Dana, Rane Madras, Rane-TRW, ZF India, Simpson & Co., etc., and export customers like Meritor, Daimler, Dana, Comer, ZF Industries etc., The Company is closely working with all customers in terms of new product development, improvement in quality and delivery performance etc., to meet their expectations. DEPOSITS The Company has not accepted any public deposits during the year and as such, no amount on account of principal or interest on deposits from public was outstanding as at 31st March 2016. DIRECTORS AND KEY MANAGERIAL PERSONNEL Mr. P. Deepak, Director is due to retire by rotation and being eligible offers himself for re-appointment. Mr. P. Deepak, Managing Director, Mr. P. Vijaya Bhaskar Reddy, Dy. Managing Director & CFO and Mr. S.K. Sivakumar, Head - Group Finance & Company Secretary hold the office of Key Managerial Personnel. Declaration of Independent Directors The Independent Directors have fulfilled the criteria of Independence as defined under Section 149(6) of the Companies Act, 2013 and requisite declarations in terms of Section 149(7) of the Act have been received. COMPANY’S POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES The provisions of Section 178(1) relating to constitution of Nomination and Remuneration Committee are applicable to the Company and hence the Company has devised a policy relating to appointment of Directors, payment of managerial remuneration, Directors qualifications, positive attributes, independence of Directors and other related matters as provided under Section 178(3) of the Companies Act, 2013. The said policy is posted in the website of the Company. DIRECTORS’ RESPONSIBILITY STATEMENT Your Directors hereby make the following statement in terms of Section 134(3)(c) and 134(5) of the Companies Act, 2013 with respect to Directors’ Responsibility. We confirm that: a) in preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanations relating to material departures; b) the Directors had 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 ended 31st March 2016 and of the profit of the Company for that period; c) the Directors had taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Companies Act, 2013, for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities; d) the Directors had prepared the annual accounts on a going concern basis; e) 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; f) 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. CORPORATE GOVERNANCE The Company has been pro-active in following the principles and practices of good Corporate Governance. The Company has taken adequate steps to ensure that the conditions of Corporate Governance as stipulated in the Listing Regulations entered with the Stock Exchanges are complied within letter and spirit. A certificate issued by the Auditors of the Company regarding compliance of conditions of Corporate Governance is also annexed. The matters relating to Corporate Governance as per the Listing Regulations are attached to this report. A management discussion and analysis report as required by the Listing Regulations is also annexed which forms part of this report. RELATED PARTY TRANSACTIONS All transactions entered by the Company with related parties were in the ordinary course of the business and at Arm’s Length basis. There are no materially significant related party transactions made by the Company with Promoters, Key Managerial Personnel or other designated persons which may have potential conflict with interest of the Company at large. The details of the transactions with related parties are given in the financial statements. The Related Party Transaction Policy is posted in the website of the Company. BOARD MEETINGS During the year, five meetings of the Board of Directors were held. The details of the meetings are furnished in the Corporate Governance Report which is attached to this report. VIGIL MECHANISM/ WHISTLE BLOWER POLICY The Company has adopted a Whistle Blower Policy, to provide a formal mechanism to the Directors and Employees to report their concerns about unethical behavior, actual or suspected fraud or violation of the Company’s Code of Conduct or ethics policy. The Policy provides for adequate safeguards against victimization of employees who avail of the mechanism and also provides for direct access to the Chairman of the Audit Committee. It is affirmed that no personnel of the Company has been denied access to the Audit Committee. REMUNERATION POLICY The Company has adopted a Remuneration Policy for the Directors, Key Managerial Personnel and other employees, pursuant to the provisions of the Act and as per the Listing Regulations. The said policy is posted in the website of the Company. PARTICULARS OF EMPLOYEES AND REMUNERATION AND RELATED DISCLOSURES 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 employees of the Company, will be provided upon request. In terms of Section 136 of the Act, the reports and accounts are being sent to the members and others entitled thereto, excluding the information on employees’ particulars which is available for inspection by the members at the Registered Office of the Company during business hours on working days of the Company up to the date of ensuing Annual General Meeting. In terms of the provisions of Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, a statement showing the names and other particulars of the employees drawing remuneration in excess of the limits set out in the said Rules are provided in the Annexure forming part of the Annual Report. Disclosures pertaining to remuneration and other details as required under Section 197 of the Companies Act, 2013 read with Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014 are provided in the Annexure forming part of the Annual Report. Having regard to the provisions of Section 136(1) read with its relevant provisions of the Companies Act, 2013, the Annual Report excluding the aforesaid information is being sent to the members of the Company. The said information is available for inspection at the Registered Office of the Company during working hours and any member interested in obtaining such information may write to the Company Secretary and the same will be furnished without any fee and free of cost. AUDITORS At the Thirty Third Annual General Meeting of the Company, M/s. REDDY A V & CO, Chartered Accountants were appointed as Statutory Auditors of the Company to hold office till the conclusion of Thirty Fifth Annual General Meeting of the Company to be held in the year 2017. In terms of Section 139 of the Companies Act, 2013, the appointment of the auditors shall be placed for ratification at every Annual General Meeting. Accordingly the appointment of M/s. REDDY A V & CO as Statutory Auditors of the Company is placed for ratification by the shareholders. The Company has received a letter from M/s. REDDY A V & CO stating that their reappointment as Statutory Auditors, if made, would be in accordance with Section 139 read with Section 141 of the Companies Act, 2013. SECRETARIAL AUDITOR The Company has appointed M/s. L.D. Reddy & Co., Practicing Company Secretaries to conduct Secretarial Audit for the year 2015-16. The Secretarial Audit Report for the financial year ended 31st March 2016 is annexed with this report in Annexure-D. COST AUDITORS As per Section 148 and other applicable provisions, if any, of the Companies Act, 2013, read with Companies (Audit & Auditors) Rules, 2014, the Board of Directors of your Company has appointed M/s. Jayaram & Associates, Cost Accountants as the Cost Auditors of the Company for the year 2016-17 on the recommendations made by the Audit Committee. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY The details are provided in the Management Discussion and Analysis Report attached to this report. The Internal Auditors reviews the efficiency and effectiveness of the systems and procedures. The Audit Committee approves and reviews the internal audit plan for the year. EXTRACT OF ANNUAL RETURN The details forming part of the extract of the Annual Return in form MGT-9 is annexed with this report in Annexure-E. INDUSTRIAL RELATIONS The employee relations have remained cordial throughout the year and industrial harmony was maintained. Measures for the safety, training and development of the employees continued to receive top priority. The Directors wish to place on record their appreciation of the valuable contribution made by the employees of the Company at all levels towards the performance and growth of the Company. RISK MANAGEMENT POLICY The Company has an adequate Risk Management Policy commensurate with its size and operations. Risk Management is an essential element in achieving business goals and deriving benefits from market opportunities. The Risk Management includes identifying types of risks and its assessment, risk handling, monitoring and reporting. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013 The Company has not given any loans or guarantees covered under the provisions of Section 186 of the Companies Act, 2013. The details of the investments made by Company are given in the financial statements. CORPORATE SOCIAL RESPONSIBILITIES (CSR) The CSR Policy of the Company and details about the initiatives taken by the Company on CSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules, 2014 have been disclosed as part of this report in Annexure-C. Further details of composition of the Corporate Social Responsibility Committee and other details are provided in the Corporate Governance Report which forms part of this report. BOARD EVALUATION Pursuant to the provisions of the Companies Act, 2013 and under Regulation 25 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Board has carried out an evaluation of its own performance, performance of the Directors as well as the evaluation of the working of its Committees. The Nomination and Remuneration Committee has defined the evaluation criteria, procedure and time schedule for the Performance Evaluation process for the Board, its Committees and Directors. Directors were evaluated on aspects such as attendance and contribution at Board/ Committee Meetings and guidance/ support to the management outside Board/ Committee Meetings. Areas on which the Committees of the Board were assessed included degree of fulfillment of key responsibilities, adequacy of Committee composition and effectiveness of meetings. The performance evaluation of the Independent Directors was carried out by the entire Board, excluding the Director being evaluated. The performance evaluation of Non Independent Directors was carried out by the Independent Directors who also reviewed the performance of the Board as a whole. The Nomination and Remuneration Committee also reviewed the performance of the Board, its Committees and of the Directors. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, RESEARCH AND DEVELOPMENT, FOREIGN EXCHANGE EARNINGS AND OUTGO The information pertaining to conservation of energy, technology absorption, research and development, foreign exchange earnings and outgo as required under Section 134(3)(m) of the Companies Act, 2013 read with Rule 8(3) of the Companies (Accounts) Rules, 2014 is given in the Annexure-A forming part of this Report. ACKNOWLEDGEMENTS The Directors place on record their sincere appreciation for the dedicated efforts of the employees and co-operation of associates, suppliers and customers. We also express our sincere thanks to Company’s Bankers namely State Bank of India, Standard Chartered Bank, The Hongkong and Shanghai Banking Corporation Ltd., Kotak Mahindra Bank Ltd. and HDFC Bank Ltd. for their trust and continued support. For and on behalf of the Board D. Sesha Reddy Chairman Place: Chennai Date : 24th May 2016 |