AFFLUENCE

REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS Your Directors wish to present the details of Business operations done during the year under review: a. Production: The forging production of the company during the year under reporting is 29833 MT as against 27858 MT during the preceding year, out of which 16685 MT. (PY 12965 MT.) transferred to Machining Division. During the year company has produced machined components 14410 MT. as against 10560 MT in preceding year. Company has shown a growth of 7% in forging production and 36% in machined production. b. Sales & Profitability : During the year under review, net sale of the company is Rs.374.69 crore (previous year Rs. 341.34 crore) , representing an increase of 9.77%. Company has export turnover of Rs.24.18 crore (previous year Rs.29.23 crore). c. Marketing and Market environment Company supplies to a wide customer base comprising OEMs and Tier I suppliers such as Ashok Leyland, Volvo Eicher Commercial Vehicles India Limited, Graziano Transmissions India Private Limited, JCB India Limited, Escorts Limited etc. The single largest customer accounts for about 20% of its revenue. The company has de-risked its business over the years by adding new customers and supplying more diversified products to existing customers making it more entrenched in their supplier network. The revenues are diversified across wider products and customers. d. Future Prospects including constraints affecting due to Government policies : There are increasingly opportunities arising out of the growing trend among global automotive OEMs to outsource components from manufacturer in low cost countries. As a result, the Indian forging Industry has been making significant contributions to the country’s growing export as well as in meeting the requirement of global OEMs having their manufacturing set up in India. The future looks encouraging for the forging industry in terms of expected surge in demand globally as well as domestic front. The entry of automotive MNCs in India has opened up more business opportunities.

CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO CONSERVATION OF ENERGY: 1 Energy conservation measures taken: Electric Billet Heaters installed for pre-heating of Furnace Oil prior to use it in the Furnace. Besides this continuous pusher type furnaces have been installed by the company for conservation of energy and pollution control. All the electric motors are mounted with electric control panels and automatic cut-off devices for saving of energy. 2. Additional investment and proposal for reduction of consumption of energy: Though, internal R&D, constant efforts are being made for reduction in furnace Oil and Electricity consumption. Shunt capacitors, electric control panels and voltage stabilizers have been installed for saving of energy. Impact of the above measures: The above measures have resulted in better utilization of energy inputs. 3. Total energy consumption per unit of production: Due to technicalities involved in the process it is difficult to give an exact figure for energy consumption per unit of product.

FOREIGN EXCHANGE EARNINGS AND OUT GO: Total Foreign exchange used and earned: (Rs. In Lacs) 2015-16 2014-15 a) Value of Exports 2417.97 2922.79 b) Expenditure in Foreign Currency 45.83 11.57 c) Foreign Exchange earned 2057.97 3147.76 d) Value of Import on CIF basis 3839.92 616.37

BOARD REPORT

The Members,

HAPPY FORGINGS LIMITED

Your Directors have pleasure in submitting their 37TH Annual Report of the Company together with the Audited Statements of Accounts for the year ended 31st March, 2016

1. FINANCIAL RESULTS

The Companys financial performance for the year under review along with previous years figures are given hereunder:

2. DIVIDEND

No Dividend was declared for the current financial year due to conservation of Profits by the Company.

3. TRANSFER OF UNCLAIMED DIVIDEND TO INVESTOR EDUCTION AND PROTECTION FUND

The provisions of Section 125(2) of the Companies Act, 2013 do not apply as there was no dividend declared and paid last year.

4. REVIEW OF BUSINESS OPERATIONS AND FUTURE PROSPECTS

Your Directors wish to present the details of Business operations done during the year under review:

a. Production:

The forging production of the company during the year under reporting is 29833 MT as against 27858 MT during the preceding year, out of which 16685 MT. (PY 12965 MT.) transferred to Machining Division. During the year company has produced machined components 14410 MT. as against 10560 MT in preceding year. Company has shown a growth of 7% in forging production and 36% in machined production.

b. Sales & Profitability :

During the year under review, net sale of the company is Rs.374.69 crore (previous year Rs. 341.34 crore) , representing an increase of 9.77%. Company has export turnover of Rs.24.18 crore (previous year Rs.29.23 crore).

c. Marketing and Market environment

Company supplies to a wide customer base comprising OEMs and Tier I suppliers such as Ashok Leyland, Volvo Eicher Commercial Vehicles India Limited, Graziano Transmissions India Private Limited, JCB India Limited, Escorts Limited etc. The single largest customer accounts for about 20% of its revenue.

The company has de-risked its business over the years by adding new customers and supplying more diversified products to existing customers making it more entrenched in their supplier network. The revenues are diversified across wider products and customers.

d. Future Prospects including constraints affecting due to Government policies :

There are increasingly opportunities arising out of the growing trend among global automotive OEMs to outsource components from manufacturer in low cost countries. As a result, the Indian forging Industry has been making significant contributions to the countrys growing export as well as in meeting the requirement of global OEMs having their manufacturing set up in India. The future looks encouraging for the forging industry in terms of expected surge in demand globally as well as domestic front. The entry of automotive MNCs in India has opened up more business opportunities.

5. MATERIAL CHANGES AND COMMITMENT IF ANY AFFECTING THE FINANCIAL POSITION OF THE COMPANY OCCURRED BETWEEN THE END OF THE FINANCIAL YEAR TO WHICH THIS FINANCIAL STATEMENTS RELATE AND THE DATE OF THE REPORT

No material changes and commitments affecting the financial position of the Company occurred between the end of the financial year to which this financial statements relate on the date of this report

6. CONSERVATION OF ENERGY, TECHNOLOGY ABSORPTION, FOREIGN EXCHANGE EARNINGS AND OUTGO

CONSERVATION OF ENERGY:

1 Energy conservation measures taken:

Electric Billet Heaters installed for pre-heating of Furnace Oil prior to use it in the Furnace. Besides this continuous pusher type furnaces have been installed by the company for conservation of energy and pollution control. All the electric motors are mounted with electric control panels and automatic cut-off devices for saving of energy.

2. Additional investment and proposal for reduction of consumption of energy:

Though, internal R&D, constant efforts are being made for reduction in furnace Oil and Electricity consumption. Shunt capacitors, electric control panels and voltage stabilizers have been installed for saving of energy.

Impact of the above measures:

The above measures have resulted in better utilization of energy inputs.

3. Total energy consumption per unit of production:

Due to technicalities involved in the process it is difficult to give an exact figure for energy consumption per unit of product.

TECHNOLOGY ABSORPTION: Not Applicable

FOREIGN EXCHANGE EARNINGS AND OUT GO:

Total Foreign exchange used and earned:

(Rs. In Lacs)

2015-16 2014-15

a) Value of Exports 2417.97 2922.79

b) Expenditure in Foreign Currency 45.83 11.57

c) Foreign Exchange earned 2057.97 3147.76

d) Value of Import on CIF basis 3839.92 616.37

7. RISK MANAGEMENT POLICY

The Statement showing the details regarding the development and implementation of Risk Management Policy of the Company is furnished in Annexure 1 and attached to this report .

8. DETAILS OF POLICY DEVELOPED AND IMPLEMENTED BY THE COMPANY ON ITS CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

The company is planning to adopt a park under ‘Go Green initiatives in Ludhiana District. The letter in this regard is forwarded to Local authorities for their approval.

Further the company is associated with Government School of Deaf and Dumb.

9. PARTICULARS OF LOANS, GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIES ACT, 2013

There was no loans, guarantees or investments made by the Company under Section 186 of the Companies Act, 2013 during the year under review and hence the said provision is not applicable.

10. PARTICULARS OF CONTRACTS OR ARRANGEMENTS MADE WITH RELATED PARTIES

No Contracts or Arrangement was made with related parties made pursuant to Section 186. .

11. COMPANYS POLICY RELATING TO DIRECTORS APPOINTMENT, PAYMENT OF REMUNERATION AND DISCHARGE OF THEIR DUTIES

The increase in remuneration Is not solely based on theCompany performance but also Includes various other factors like individualperformance, experience,skillsets, academic background, industry trends, economic situation and future growth prospects etc. All these factors are considered by Nomination and Remuneration Committee.

12. ANNUAL RETURN

The extracts of Annual Return pursuant to the provisions of Section 92 read with Rule 12 of the Companies (Management and administration ) Rules, 2015 is furnished in Annexure 2 and is attached to this Report.

13. NUMBER OF BOARD MEETINGS CONDUCTED DURING THE YEAR UNDER REVIEW

The Company had 7(Seven) Board meetings during the financial year under review.

14. DIRECTORS RESPONSIBILITY STATEMENT

In accordance with the provisions of Section 134(5) of the Companies Act, 2013 the Board hereby submit its responsibility Statement:—

(a) in the preparation of the annual accounts, the applicable accounting standards had been followed along with proper explanation 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 and of the profit and loss 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 this Act 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; and

(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

Internal financial control means the policies and procedures adopted by the Company for ensuring the orderly and efficient conduct of its business including adherence to Companys policies, the safeguarding of its assets, the prevention and detection of frauds and errors, the accuracy and completeness of the accounting records and the timely preparation of reliable financial information.

(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.

15. SUBSIDIARIES, JOINT VENTURES AND ASSOCIATE COMPANIES

The Company does not have any Subsidiary, Joint venture or Associate Company .

16. DEPOSITS

The Company has neither accepted nor renewed any deposits during the year under review.

17. DIRECTORS

S. Narinder Singh Juneja and Mr Nitin Agarwal, who retires at this Annual General Meeting and being eligible offer themselves for reappointment.. Mrs. Megha Garg was appointed as additional director on 7th December , 2015.

Further Due to some pre occupancies Smt. Suman Garg and Mr. Ashish Garg, assigned their resignations on 01st Octoberer, 2015 and Sh. Paritosh Kumar Garg, resigned on 02nd December, 2015.

Sh. Ashish Garg and Smt. Suman Garg were appointed as Additional Directors on 02nd December. 2016 after the recommendations of Nomination and Remuneration Committee and Sh. Paritosh Kumar Garg was appointed as additional director on 11th February, 2016

Further, Mr. Ashish Garg, Mrs. Megha Garg and Smt. Suman Garg are proposed to be Whole Time Directors and Mr. Paritosh Kumar Garg as Managing Director in the ensuing Annual General Meeting.

18. DECLARATION OF INDEPENDENT DIRECTORS

The Independent Directors have submitted their disclosures to the Board that they fulfill all the requirements as stipulated in Section 149(6) of the Companies Act, 2013 so as to qualify themselves to be appointed as Independent Directors under the provisions of the Companies Act, 2013 and the relevant rules.

19. AUDITORS

I. STATUTORY AUDITORS

M/s GUPTA SHARMA & ASSOCIATES, Chartered Accountants, Ludhiana were appointed as Statutory Auditors for a period of three (3).years in the Annual General Meeting held on 30th September, 2015 Their continuance of appointment and payment of remuneration are to be confirmed and approved in the ensuing Annual General Meeting. The Company has received a certificate from the above 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.

The notes on the Financial Statement referred in the auditors report are self explanatory and do not call for any further comments. The Auditors report does not contain any qualification, reservations or adverse remarks.

II. SECRETARIAL AUDITORS

Mrs. Ravinder Khurana, Practicing Company Secretary was appointed as the Secretarial Auditors of the Company for the F.Y. 2015-2016. The Secretarial Audit Report for the Financial year is annexed herewith. There is no qualifications, reservation or adverse remark in the secretarial audit report.

III. COST AUDITORS

M/s Rajan Sabharwal & Associates were appointed as the Cost Auditors of the Company for the Financial year 2015-2016 in the Board meeting dated 29th June, 2015 and reappointment was made for the financial year 2016-17 in the Board Meeting dated 3rd June, 2016

20. DISCLOSURE OF COMPOSITION OF AUDIT COMMITTEE AND PROVIDING VIGIL MECHANISM

The Audit Committee consists of the following members a. SH. VIKAS GIYA b. SH. SURESH CHANDER GARG c. SH. ASHISH GARG

The above composition of the Audit Committee consists of independent Directors viz., Mr Vikas Giya and Mr Suresh Chander Garg. who form the majority.

The Company has established a vigil mechanism to hear about the genuine concerns expressed by the employees and other Directors. The Company has also provided adequate safeguards against victimization of employees and Directors who express their concerns. The Company has also provided direct access to the chairman of the Audit Committee on reporting issues concerning the interests of co employees and the Company.

21. SHARES

a. BUY BACK OF SECURITIES

The Company has not bought back any of its securities during the year under review.

b . SWEAT EQUITY

The Company has not issued any Sweat Equity Shares during the year under review.

c. BONUS SHARES

No Bonus Shares were issued during the year under review.

d. EMPLOYEES STOCK OPTION PLAN

The Company has not provided any Stock Option Scheme to the employees.

Further, 43128 Equity Shares were allotted towards Right issue of shares.

22. DISCLOSURES UNDER SEXUAL HARASSMENT OF WOMEN AT WORKPLACE (PREVENTION, PROHIBITION & REDRESSAL) ACT, 2013

No Such case occurred within the company during the financial year 2015-2016.

23 ACKNOWLEDGEMENTS

Your Directors place on record their sincere thanks to employees, bankers, business associates, consultants, and various Government Authorities for their continued support extended to your Companies activities during the year under review. Your Directors also acknowledges gratefully the shareholders of the company for their support and confidence reposed on your Company.

FOR AND ON BEHALF OF THE BOARD OF DIRECTORS

Director Director

Date: Place:

FORM NO. AOC -2

(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) of the Companies (Accounts) Rules, 2014.

Form for Disclosure of particulars of contracts/arrangements entered into by the company with related parties referred to in sub section (1) of section 188 of the Companies Act, 2013 including certain arms length transaction under third proviso thereto.

Details of contracts or arrangements or transactions not at Arms length basis.

Details of contracts or arrangements or transactions at Arms length basis.