Dear Members Your Directors have pleasure in presenting the Sixteenth Annual Report (Boards' Report) together with the audited Financial Statements of the Company for the year ended March 31, 2015. Review of Operations Even as the market sentiments seemed surcharged with the installation of the new government, no tangible change was witnessed in the business environment during Fiscal 2015. The much expected kick start of investments and consequent industrial growth resulting in an improvement in order book was belied. The capital goods industry was subdued belying expectations of a recovery. The core sector of power, cement, steel, oil & gas was sluggish resulting in virtually no expansion in these sectors affecting order flows to the capital goods sector. The world economy continued to be slow and did not instill confidence. In these challenging circumstances, your Company increased its revenue from operations by Rs. 3,756 lakhs in Fiscal 2015- a rise of about 9.77% on the back of a moderate growth of 18% in orders. Net sales from manufacturing business at Rs. 35,609.12 Lakhs, increased by Rs. 4,773.06 Lakhs, a growth of 15.48% in Fiscal 2015, contributing 84.39% of our Total Income in Fiscal 2015, as compared to 80.22% in Fiscal 2014. Net sales from our Project Business at Rs. 4,867.40 Lakhs increased by Rs. 284.55 Lakhs, a subdued growth of 6.21% in Fiscal 2015 contributing 11.54% of our Total Income as compared to 11.92% in Fiscal 2014. Exports and deemed exports contributed 66% of Revenue as compared to about 49% in the previous year which reflects our continuing focus on growing our overseas markets. Steam generators contributed 46% of the turnover followed by Hydro generators at 27%. Considering the dismal state of the domestic market, overseas markets have assumed great significance in growing the Companies business year on year and the initiatives undertaken by the Company in the last 3-4 years in seeding these markets are yielding good results encouraging us to enlarge our presence in select markets overseas. Earnings Before interest, tax, depreciation & amortization (EBITDA) lower by 14.10% at Rs. 5,472.94 Lakhs as compared to Rs. 6,370.93 Lakhs in the previous year due to lower realizations on account on Euro & JPY devaluation. The Profit after tax decreased by Rs. 1,702 lakhs to Rs. 1,696.29 Lakhs as compared to Rs. 3,398.85 Lakhs, a decrease of 50% over previous year mainly due to a higher depreciation and amortization charge of Rs. 2,800.60 lakhs an increase of Rs. 1,340.66 Lakhs or 91.83% over previous year due to increased capitalization of fixed assets, change in the useful life of the asset as prescribed under the Companies Act, 2013 ("Act") and amortization of technical know as per accounting policy of the Company. The pending orders as of March 31, 2015 are Rs. 40,651.20 lakhs comprising of both manufacturing (Rs. 33,937.50 lakhs) and project business (Rs. 6,713.70 lakhs). The net worth of the Company stands at Rs. 49,128.13 lakhs with the accretion of Rs. 484.89 lakhs to total reserves during the year. No material changes & commitments affecting the financial position of the Company have occurred between the end of the financial year of the Company to which these financial statements relate and the date of this report. The Directors have recommended a dividend of Rs. 2.645 per equity share (an increase of 15%) for the year ended March 31, 2015 as against Rs. 2.30 per equity share for the year ended March 31, 2014. This Dividend is subject to approval of the shareholders at the forth coming Annual General Meeting. The dividends will entail a payout of Rs. 1,059.13 lakhs including dividend distribution tax of Rs. 179.99 lakhs. Management Discussion & Analysis Pursuant to clause 49 of the listing agreement with the stock exchanges, the Management Discussion & Analysis report covering operations, performance & outlook of the Company is annexed as Annexure 9 to the Boards' Report. Corporate Governance Report A separate report on Corporate Governance is included in the Annual Report as Annexure 10 to the Boards' Report. The certificate from a Practicing Company Secretary, regarding the compliance of conditions on Corporate Governance as stipulated in Clause 49 of the Listing Agreement with Stock Exchanges forms part of the said Report. Note on Board evaluation, Board Diversity Policy, Training of independent directors -familiarization of directors, Policy on directors' appointment and remuneration, Whistle Blower policy / Vigil mechanism, Nomination & Remuneration policy form part of the Corporate Governance report (Annexure 10). Subsidiaries As on March 31, 2015, the Company has 3 wholly owned subsidiaries - DF Power Systems Private Limited (an Indian Subsidiary), TD Power Systems (USA) Inc., in the United States of America and TD Power Systems Japan Limited, in Japan. In accordance with Section 129(3) of the Companies Act, 2013, read with Rule 8 of Companies (Accounts) Rules, 2014, the Company has prepared its consolidated financial statement including all the said Subsidiaries which is forming part of this Report. Further, a statement containing the salient features of the financial statement of the said subsidiaries in Form AOC-1 is appended as Annexure 2 to the Boards' Report. In accordance with Section 136 of the Companies Act, 2013, the audited financial statements, including the consolidated financial statements and related information of the Company and audited accounts of each of its subsidiaries, are available on our website www.tdps.co.in <http://www.tdps.co.in>. These documents will also be available for inspection during business hours at our registered office in Bengaluru, India. A review of the operations of the subsidiaries as follows Indian Subsidiary During the year ended March 31, 2015, the weakness in order inflow both BTG / EPC projects continued to impact the performance of the Wholly Owned Subsidiary (WOS) DF Power Systems Private Limited. The orders for Thermal Power Market -15MW-150MW, the Company's mainstay was dismal in the year. Thermal Power Private EPC Companies reflected stress in domestic market and certain large players accepted orders merely in the hope of an improved market in future. Though there seemed some market traction starting in Small Power Plants (< 10MW) pricing was an issue. The Cement waste Heat recovery based Power plants, which was seen as an innovative option was cooling off due to lower fuel costs and longer payback periods. Thus, the overall scenario for power projects was rather dismal, the orders in the market were limited and at suboptimal prices prompting the Company to stay away from active bidding for projects. The difficult market conditions continued to affect revenues and profitability of the Company. Though revenue of Rs. 16,479.99 lakhs for the year ended March 31, 2015 was higher as compared to Rs. 1,3034.71 lakhs for year ended March 31, 2014, this company incurred a net loss of Rs. 1,773.43 lakhs for the year as compared to a loss of Rs. 668.16 lakhs in the previous year. Considering the uncertain market situation, the company's ability to operate viably and profitably, a decision was taken by its Board to disengage from BTG/ EPC projects, scale down the business after completion of the existing projects and review as and when opportunities emerge in future. US Subsidiary The seeding efforts in the USA through TD Power Systems (USA) Inc. have not borne fruit in the year under Report and the necessity of having an overseas sales office in the USA is under review. The operations of this company during the year under report have resulted in revenue of USD 20.92 lakhs (Rs. 1,287.5 lakhs) and a loss of USD -2.54 lakhs (Rs. -145.571 lakhs). Japan Subsidiary TD Power Systems Japan Limited was incorporated to support the Company's efforts to grow TG Island business in Japan. Due to the dismal market conditions in India and sluggish global economic scenario, the primary activity of TG Island business continued to witness severe stress further compounded by the strengthening of Japanese yen. The operations of this company during the year under report have resulted in revenue of JPY 9,288.21 lakhs (Rs. 5,170.51 lakhs) and a profit after tax of JPY Rs. 263.14 lakhs (Rs. 141.27 lakhs). The Company's order book as of March 31, 2015 stands at JPY 8,780.03 (Rs. 4,555.10 lakhs). Internal Financial Control The Company has established adequate internal control system, commensurate with the nature of its business and size of its operations in order to ensure quality and reliability of underlying processes focused towards achieving operational efficiency, reliability of financial data and safeguarding of assets. Internal Financial control system ensures that the financial and other records are reliable for preparing financial and other statements and for maintaining accountability of assets of the Company. Internal controls are evaluated by the external/internal Auditors and supported by Management reviews. All audit observations and follow up actions thereon are initiated for resolution by the Finance Function and reported to the Audit Committee. Directors' Responsibility Statement Pursuant to clause (c) of sub section (3) of section 134 of the Companies Act, 2013, with respect to the Directors' Responsibility Statement, it is hereby confirmed that 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; e. The directors, in the case of a listed company, 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 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. Board of Directors & Key Managerial Personnel Board of Directors ("The Board") As per the provisions of the Companies Act, 2013, Mr. Mohib N. Khericha retires at the ensuing Annual General Meeting and being eligible seeks re-appointment. The Board recommends his re-appointment. During the Financial Year 2014-15, in compliance of relevant provisions of the Companies Act, 2013 and Rules thereunder, Mr. Nitin Bagamane, Dr. Arjun Kalyanpur, Ms. Nandita Lakshmanan and Mr. Ravi K Mantha the existing Independent Directors were appointed as Independent Directors of the Company, at the Annual General Meeting of the Company held on August 12, 2014. The details of the terms & conditions of their appointment are available on the website of the Company (www.tdps.co.in) in compliance of the revised Clause 49 of the Listing Agreement. The said Independent Directors have given declaration stating that they meet the criteria of independence laid down in Section 149(6) of the Companies Act, 2013 and Clause 49 of the Listing Agreement. Mr. Hitoshi Matsuo, Non-Executive / Non Independent Director, has tendered resignation as Director of the Company effective from closing of business hours on February 21, 2015. The Board places on record its appreciation for the services rendered by Mr. Hitoshi Matsuo during his tenure with the Company. On the recommendation of the Nomination and Remuneration committee, the Board of Directors of the Company appointed Mr. K G Prabhakar as Director (Category-Non Independent/Executive) of the Company with effect from May 20, 2015 in the casual vacancy caused by the resignation of Mr. Hitoshi Matsuo. Mr. K.G. Prabhakar is a Chartered Accountant with over 28 years of work experience in corporate finance, Accounting and taxation and is associated with the Company since 2001. Currently he is the Chief Financial Officer (CFO) of the Company. Key Managerial personnel Mr. Nikhil Kumar, Managing Director, Mr. K. G. Prabhakar, Chief Financial Officer and Mr. N. Srivatsa, Company Secretary are deemed to be Key Managerial Personnel of the Company as per the provisions of the Companies Act, 2013 and Rules thereunder and they were already in office before the commencement of the Companies Act, 2013. Risk Management Policy Pursuant to the revised Clause 49 of the Listing Agreement, a Risk Management committee of the Board of directors of the Company has been constituted. The details of the committee and its terms of reference are set out in the corporate governance report forming part of this report. While the Company has identified certain major risks and initiated appropriate measures to mitigate the said risks, a process to enhance the risk management framework is underway. Auditors M/s. B. K. Ramadhyani & Co. LLP, Chartered Accountants, were appointed as Statutory Auditors of the Company to hold office till the conclusion of the ensuing Annual General Meeting and are eligible for reappointment. They have confirmed their eligibility to the effect that their reappointment, if made, would be within the prescribed limits under the Companies Act, 2013 and that they are not disqualified for reappointment. The Notes on financial statements referred to in the Auditors Report are self -explanatory. The Auditors Report does not contain any qualification, reservation or adverse remark. Secretarial Auditor The Board appointed Mr. Sudhir V Hulyalkar, Practicing Company Secretary, Bangalore, to conduct the Secretarial Audit of the Company for the Financial Year 2014-15. The Secretarial Audit Report for FY 2014-15 forms part of the Annual Report at Annexure 8 to the Boards' Report and does not contain any qualification, reservation or adverse remark. Cost Auditor In terms of Section 148 of the Companies Act, 2013 read with the Companies (Cost Records and Audit) Amendment Rules, 2014, M/s. Rao, Murthy & Associates, Cost Accountants, Bangalore have been appointed as Cost Auditors of the Company for the Financial Year 2015-16. Disclosure Extract of the Annual Return In accordance with Section 134(3) (a) of the Companies Act, 2013, an extract of the Annual Return in the prescribed format is appended as Annexure 1 to the Boards' Report. Number of Board Meetings The Board met four times during the Financial Year 2014-2015 the details of which are given in the Corporate governance report that forms part of this Annual Report. The intervening gap between any two meetings was within the period prescribed by the Companies Act, 2013. Particulars of Contracts or Arrangements Particulars of contracts or arrangements with related parties referred to in Section 188(1) of the Companies Act, 2013, in the prescribed Form AOC-2, is appended as Annexure 3 to the Boards' Report. Conservation of Energy, Research and Development, Technology Absorption, Foreign Exchange Earnings and Outgo The particulars as prescribed under Sub-section (3) (m) of Section 134 of the Companies Act, 2013, read with the Companies (Accounts) Rules, 2014, are enclosed as Annexure 4 to the Boards' Report. Particulars of employees A table containing the names and other particulars of employees in accordance with the provisions of Section 197(12) of the Companies Act, 2013, read with Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is appended as Annexure 5 to the Boards' Report. A statement containing the names of every employee employed throughout the financial year and in receipt of remuneration of Rs. 6,000,000 or more per annum or employed for part of the year and in receipt of Rs. 500,000 or more per month, in terms of Rule 5(2) of the Companies (Appointment and Remuneration of Managerial Personnel) Rules, 2014, is enclosed as Annexure 6 to the Boards' Report. CSR Committee In terms of the requirements of the Companies Act, 2013, a Corporate Social Responsibility committee (CSR Committee) has been formed which has approved a CSR policy for the Company which is available on the website of the Company. The annual report on CSR is annexed as Annexure 7 to the Boards' Report. Audit Committee The composition and function of the Audit committee of the Board of Directors of the Company is disclosed in the Report on Corporate Governance forming part of this report. General Your Directors state as follows 1. No significant or material orders were passed by the Regulators or Courts or Tribunals impacting the going concern status and Company's operations in future. 2. There was no issue of equity shares with differential rights, as to voting, dividend or otherwise. 3. There was no issue of shares including as sweat equity shares or employee stock options. 4. There were no deposits covered under Chapter V of the Companies Act, 2013. 5. No money has been provided by company for purchase of its own shares by employees or by trustees for the benefit of employees. 6. No subsidiary has paid remuneration to Managing Director except DF Power Systems Private Limited (Rs. 1,851,500). 7. The Company has in place an Anti-Sexual Harassment Policy in line with the requirements of the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Internal Complaints Committee (ICC) has been set up to redress complaints received regarding sexual harassment. During the year under review there were no cases filed pursuant to the Sexual Harassment of Women at the Workplace (Prevention, Prohibition & Redressal) Act, 2013. Acknowledgement Your Directors place on record their appreciation of the contribution and support of the employees at all levels. They also place on record their appreciation of the continued support and faith extended during the year by the Company's customers, suppliers, bankers and shareholders. For and on behalf of the Board of Directors Mohib N. Khericha Chairman Place : Bangalore Date : May 20, 2015 |