AFFLUENCE

NOTICE

Notice is hereby given that the 54th Annual General Meeting of the members of Divgi TorqTransfer Systems Private Limited will be held on Friday, the 20th day of September 2019 at 12 noon at the Registered Office of the Company situated at Plot no. 75, General Block, MIDC, Bhosari, Pune 411026 to transact the following business:

ORDINARY BUSINESS:

To receive, consider and adopt the financial statements for the year ended on 31st March 2019 including the audited Balance Sheet as at 31st March 2019 and the Statement of Profit & Loss for the year ended on that date together with the Director's Report and Auditor's Report thereon.

To declare the dividend.

BY THE ORDER OF THE BOARD OF DIRECTORS
DIVGI TORQTRANSFER SYSTEMS PRIVATE LIMITED

Sheetal Marathe
Company Secretary

Date: 19/08/2019
Place: Pune

Notes:

A member entitled to attend and vote at the meeting is entitled to appoint one or more proxies to attend and vote instead of himself and the proxy need not be a member of the Company.

Proxies in order to be effective must be received by the Company not less than 48 hours before the meeting at the Registered Office of the Company.

3. An explanatory statement pursuant to Section 102 of the Companies Act, 2013, in respect of special business items is annexed hereto.
DIRECTORS’ REPORT


To,
The Members,
Divgi TorqTransfer Systems Private Limited
Pune 411026

Your Directors have pleasure in presenting the 54th Annual Report on the business and operations of the Company together with the Audited Accounts for the year ended on 31st March 2019. 

Prologue
The financial year ended March 2019 generated unprecedented 28% growth over the previous year. This growth vindicated the management’s confidence in buying out the Borg Warner stake in it’s the erstwhile joint venture and strike out independently a few years ago. In turn, the subsequent merger of Divgi-TTS Private Limited with Divgi Metalwares Private Limited improved asset utilization and unified the respective teams around a common goal.

The growth reported by the Company during the year under review was achieved in the face of challenges in graduating new business opportunities into steady revenues. Some of the delays were on account of customer-induced delays, while some were on account of unforeseen development challenges. The management is pleased to report that most of these challenges have since been addressed, generating steady revenues.

The Indian economy was marked by structural shifts during the year under review. The Insolvency and Bankruptcy Code (IBC) introduced by the Government of India was considered as one of the most significant reforms since India’s liberalization of 1991. Even as the stress in Non-Banking Financial Companies appeared to have been caused by systemic remedial measures, there is a widespread feeling that that this could lead to stronger economic fundamentals necessary to drive sustainable growth.

The end of the financial year also coincided with the eve of India’s General Election to the Lok Sabha, which eventually resulted in a sweeping majority for the pro-business existing government. In view of this, the company’s medium-term and long term business development activities continued along their strategic and tactical trajectories. The company perceives a strengthening of the broad Long Range Plan resulting in the prospective achievement of directional milestones and objectives.

India’s automotive market prepares for a stringent emissions control regime across the next three years. By April 2020, India is expected to graduate from the Euro 4 to Euro 6 standard, bypassing the intermediate Euro V stage. What is creditable is that India expects to achieve this challenging transition in just three years where the same took Europe a period of 11 years. After April 2020, India will implement carbon dioxide emissions norms across OEM fleets through the Corporate Average Fleet Efficiency norm, effectively putting a cap on the carbon dioxide limit emitted per kilometer travelled. Besides, the new CAFÉ norms are expected to come into effect from April 2022.

Going ahead, the company expects to strengthen its business development with the objective to sustain financial growth despite challenges if any, resulting in revenue visibility and business sustainability.

With the uncertainties related to the General Elections over and a strong government in place for five years, the long-term outlook for the company appears optimistic.


Financial results

Revenue trend graph





The following table summarizes the Company’s revenues across product lines:

Company’s Operations


The Company reported all-round increase in its operations following growth generated in the domestic market, exports and increased Indian budgetary allocations for defense spending.

In the 4WD market, demand was catalysed by the increased procurement of TATA Safaris by the Ministry of Defense and increased demand for the Mahindra Thar 4WD as a utility and recreational vehicle. This strengthened demand for the Automatic Locking Hub product line. The overall synchronizer demand remained stable, the declining volumes at TATA and Mahindra being offset by new programs at Force Motors and Toyota (which increased around 50%).

Exports reported a 12% increase despite delays in three critical programs – UAZ Russia, Tesla in the USA and the Ford U375 program with BorgWarner in Korea. All three programs are going on stream, with substantial benefits likely to be generated in the current financial year. During the year under review, there saw a significant increase in the China and Korea business, which accounted for over 25% of the total operating revenues.

The Company expects strong head winds due to systemic remedial actions by the Government of India in the financial sector for both the banking and non-banking segments. Besides, the global situation is being aggravated by an emerging trade war between China and USA coupled with belligerent geopolitics in the Middle East. These conditions notwithstanding, the Company is cautiously optimistic as US customers appear to be turning towards India to source products and counter an increase in costs resulting from additional levies imposed by their government.   

Long range strategy and growth plans 

The Company is focusing on innovation across the following categories:

* Sustaining innovation: Improving existing products, leading to larger market shares and sustainable revenue growth.
* Efficiency innovations: Engaging in activities that moderate costs of manufacturing and delivery, strengthening margins.
* Disruptive innovation: Focusing on the creation of new products and market segments while entering new geographies.

The Company invested considerable resources during the year under review to emerge future-ready, particularly given the current state of flux in the automotive industry as global emission-related legislation gets more stringent and the onslaught of hybrid and electric drive technology increases consistently. The result is that product development time expectations are shrinking coupled with shortening product life cycles.

In this challenging scenario, there is a premium on the ability to prudently allocate resources across initiatives that sustain innovation and efficiency on the one hand and those catalyzing disruptive innovation on the other.

Beyond technology alliances, resources were allocated towards research in identifying new global markets and disruption opportunities.

The company’s portfolio comprises four product lines where sustained market and product development are underway – manual transmissions and synchronizers, 4WD products including transfer cases and torque couplers, transmissions and components for electric vehicles, and dual clutch automatic transmissions for internal combustion and hybrid applications.

The company is engaged in manufacturing modernization to address the requirements of new product lines. It is concluding export programs to utilize investments under EPCG schemes and operate high monthly production for global markets in China, Korea, Europe and the USA. Besides, our Business Development Register tracks new business opportunities across four product lines including global opportunities for DCTs.

The product development and investment timetable is synchronized with our LRP and a separate Growth & Launch team works within the context of the LRP. Resource mobilization is communicated and piloted through a mature Capital Appropriation Request process that links individual teams, senior management and the Board in a cohesive way. 

Employee and competence development

A human resource vision statement – ‘Strengthening the leadership pipeline by developing, attracting and retaining talent’ - was supported by the following strategies:

1. Workforce Planning
2. Competency Analysis & development
3. Competency based practices 
4. Work Group development
5. Career Development
6. Participatory culture

In line with the vision statement, fast-growing business environment and be expertise-ready, the company plugged senior positions during the year under review. The HR team was strengthened with the addition of a HR Head – Operations to address the newly-included Shivare facility (along with the Bhosari and Sirsi facilities). Besides, key executives were recruited in ABD group to introduce the key account manager concept to provided dedicated customer support for business development. With the inclusion of the Shivare facility, systems like Manufacturing, QSB, Operator Licensing systems were horizontally deployed, ensuring smoother functioning. Wage re-structuring of contractual workers was completed for all three facilities, ensuring that statutory compliances were adhered to.

The Product Leadership Competency Model (PLCM) is guiding the Company to understand and implement competence-based practices. Its organizational and individual competencies are helping deepen insights.

The Company won the first Prize for Employee Relations and Employee Engagement 2018 in the National HR Circle competition conducted by Confederation of Indian Industry.

The Company encouraged employees in extracurricular activities, the Divgi Premier League cricket tournament attracting participants across three facilities.  Besides, regular employee communication, training and development were conducted.

Achievements, 2018-19

* KRA Performance Score – 91%
* Won 1st Prize in CII HR competition
* Recruitment Closed for 22 Positions
* Strengthened Finance & Engineering group.
* Resource review of ABD Group
* Strengthened HR group across all facilities.
* Streamlined Operations leadership
* Project Management: Support for resources and skill building

Focus areas for 2019-20

* Education and Training- Focus on ‘Back to the Basics’ theme: Policies and Procedures* and PLCM
* Strengthening the Operator Licensing Process - Automization.
* Supervisory Development Program
* Employee-Konnect Program for enriching Employee motivation & relations
* Infrastructure: Office and Plant expansion
* Support to IPO Process
* Advanced Security Practices
* Dedicated sources for facility housekeeping
* Web-based lateral recruitments
* Health Initiatives for Employees

Achievements for the year

   The Company’s achievements for 2018–19 comprise the following:

* First PPAP batch of transfer case submitted to UAZ Russia
* Batch production of Nextrac coupler for Mahindra
* Production kick -off for FDG (Final Drive Gear) Tesla. Approval received from SONA BLW
* Bonding facility being productionized for Synchro parts in Divgi-TTS, Sirsi.
* Divgi-TTS Sustainability reporting for FY2017-18 published as per GRI standard, with external assurance/ assessment from TUV India.
* System requirements: -Achieved EMS (Environment Management System) certification ISO14001:2015 from DQS Holding Gmbh.
* Quality Performance: Customer PPM is in single digit, 8 PPM YTD.


Transfer to Reserves
The Company did not transfer any amount to General Reserves during the year ended on 31/03/2019.


Dividend- 
The Board in its meeting on August 12; 2019 recommended an equity dividend of 62.29% per equity share and preferential dividend of Rs 43.61 per share.

Financial summary -
The authorized share capital of the Company is Rs. 10,40,00,000 (Rupees Ten Crore Forty Lakh only.) the subscribed and Paid up Capital of the Company is Rs 8,86,03,800 comprising equity shares and Compulsory Convertible Preference Shares at the end of the financial year.



Financial position of subsidiary company, associate company and joint venture company
The Company did not have any subsidiary company, associate company or joint venture company.

Fixed deposits
The Company did not accept any deposits from the public during the year under review.

State of the Company’s affairs 
Changes in Constitution of Board:There was no change in the constitution of Board for the period under consideration.
Change in Shareholding Structure – There is no change in the Equity Shareholding structure of the Company. On 03/05/2018 Company issued 1,53,962 CCPS of Rs. 100 each to Oman India Joint investment Fund II
Change in the Share Capital of the Company –The authorized share capital of the Company is Rs. 10,40,00,000 (Rupees Ten Crore Forty Lakh only.) the subscribed and Paid up Capital of the Company is Rs 88603800 comprising of equity shares and Compulsory Convertible Preference Shares at the end of the financial year.

Auditors-
Pursuant to the provisions of section 139, 141 and other applicable provisions, if any, of the Companies Act, 2013, M/s B K Khare & Co., Chartered Accountants, having Firm Registration No. 105102W, were appointed as the statutory auditors of the Company to hold office for a period of five years commencing from the conclusion of Annual General Meeting held at 2017 up to conclusion of the sixth consecutive Annual General Meeting to be held in 2022, on such remuneration as may be mutually decided by the auditors and the board of directors.

Details of frauds reported by auditors under Section 143(12) of Companies Act, 2013

The Auditors have not reported any case of frauds in auditor’s report during the year under review.








Particulars of employees
Disclosure under Companies (Particulars and Employees) Rules 2014 read with Section 134 of the Companies Act 2013 for Employees having remuneration above prescribed limit of Rs. 1.02 Crore p. a. as follows:

Details with respect to adequacy of internal financial controls with reference to the financial statement Based on the recommendations of the management, the Board believes that the Company has implemented internal financial controls that are adequate for a company of the size and operations as that of the Company and engaged in a business similar to that of the Company in the territories that the Company operates in and with the systems and resources that a company of similar size and operations has in India.

Material orders passed by the regulators or courts or tribunals
No material order was passed by the regulators, courts or Tribunals during the period under review.
Details regarding issue of equity shares with differential rights
The Company did not issue any equity shares with differential rights in FY 2019.

Details regarding the issue of sweat equity shares
The Company did not issue any sweat equity shares in FY 2019.

Material changes since the end of FY 2019 through the date of this report
There were no material changes since the end of financial year 2019 through the date of this report.


Number of Board meetings held -

Particulars of loans and guarantees U/S 186 -
There are no loans & guarantees given by the company in the financial year 2018 – 2019.

Disclosure of related party & transactions with them
Please refer to Form AOC-2 annexed hereto as Annexure –I.

Directors’ Responsibility Statement -
Based on the information and explanation provided by the management of the Company and to the best of their knowledge and ability, the Board believes that:-

The annual accounts of the Company have been prepared in accordance with the accounting standards applicable to the Company and any material departures have been explained;

The accounting policies applied by the Company and the judgments and estimates made are such that it will provide a true and fair view of the state of affairs and profit of the Company for FY 2018-2019;

Sufficient care has been taken for a company of the size and operations as that of the Company and operating in territories that the Company operates in, relating to the maintenance of accounting records required to be maintained under the Companies Act, 2013 in order to safeguard the assets of the Company and for preventing and detecting any fraud;

The annual accounts of the Company have been prepared on a going concern basis;

The Company has implemented systems in respect of compliance with the provisions of material laws applicable to the Company that a company of the size and operations as that of the Company and operating in the territories that the Company operates in and having the resources that a company of similar size and operations in India has and in view of the limited proceedings and enquiries pending against the Company or which the Company is involved in, such systems are adequate in respect of the purpose that they were designed for and have been effective in addressing the Company’s compliance with such material laws.

Board of Directors -
The total Board consists of eight (8) directors. Mr. Jitendra Divgi (DIN 00471531) is the Managing Director of the Company; Mr. Hirendra Divgi (DIN 01634431) is Executive Director of the Company.

The other board members are Mr. Ramesh Savoor (DIN 00149089), Mr. Pradip Dubhashi (DIN 01445030), Mr. Sanjay Divgi (DIN 00471465), Mr. Pundalik Kudva (DIN 03385091), Mr. Bharat Divgi (DIN 00471587)

As on 03rd May 2018, Mr. Ajay Limaye (DIN 02762738) was appointed as the Nominee Director by Oman India Joint Investment Fund II.


Industrial relations -
The Industrial relations of the Company during the period were very cordial.

Energy conservation, technology absorption and foreign exchange earnings and outgo

Environmental conservations:

Divgi-TTS continuously engage in various environmental conservation activities and as parts of its commitment, company recently recommended for latest Environment management standard

ISO 14001:2015 by DQS Holding Gmbh.
Retained occupational health and safety management systems standard BS OHSAS 18001.

The Company has imported raw materials and officials of the Company had undertaken business tours to China, Thailand, Korea, USA and few more countries. Foreign exchange outgo as a result is Rs. 27.61Cr. (Previous year Rs. 28.38 Cr.). As against this the earnings from exports amounted to Rs. 62.98 Cr (previous year Rs. 60.92 Cr).

Sustainability and CSR 
Divgi-TTS is committed to good corporate citizenship. We strive to supply goods and services of superior value to our customers; to create jobs that provide meaning for those who do them and to contribute generously of our talents and our wealth of the communities in which and for whom we do business.

Since the ‘Responsibility to our Communities’ is one of our core values, Divgi-TTS strives the efforts in the area of social and community development under the initiative of Corporate Social Responsibility with planned and systematic actions put in investment projects.

To strengthen the educational and knowledge base: Strengthen the educational and knowledge base, for promoting education based on the fundamental conviction that education can help provide the answers to some of the greatest challenges like poverty, inequality and environmental degradation. To inculcate and develop leadership qualities in underprivileged children through innovative and creative programs, by developing soft skills through music, games and sports.
Rural development: Rural development to improve the living standards of rural people by development of educational infrastructure in rural area where the Company is operating one of its plants. Help in building better & Progressive communities, Youth development & better family living.
Compliance with the law: Section 135 of the Companies Act; 2013 and Rules made under it prescribe that every company having Net worth of Rs. 500 crore or more, or Turnover of Rs.1000 crore or more, or a Net Profit of Rs. 5 crore or more during any financial year shall ensure that it spends at least 2% of the average net profits made during the preceding three financial years. The provisions pertaining to CSR as prescribed under Companies Act; 2013 are applicable to Divgi TorqTransfer Systems Pvt. Ltd.

CSR calculations: 2% of the average net profit (PBT) of the Company for the last three financial years. (FY 2015-16, 2016-17, 2017-18.)

Our CSR Responsibility: - We hereby affirm that the CSR Policy, as approved by the Board, would be implemented and the CSR Committee monitors the implementation of the projects and activities in compliance with our CSR objectives.

The Company has already identified two projects viz. Punyatma Prabhakar Sharma Seva Mandal, (at Igatpuri) & Guruprasad Education Society, Mallapur, Krnataka and their evaluation is in progress and the Company has committed an amount of Rs 36,50,000/- for these projects.

Please see annexure III for CSR Policy Annual report.


Risk management policy
The Company’s overall policy with respect to managing risk arising in the normal course of the Company’s business is to minimize the potential adverse effects on the financial performance of the Company. The policies for managing specific risks are summarized below:

Credit risk management
Credit risk refers to the risk that counterparty will default on its contractual obligations resulting in financial loss to the Company. The carrying amounts of the financial assets are identical to their maximum credit risk. Trade receivables are receivables from related parties and are considered risk free. Cash and cash equivalents are placed with credit worthy financial institutions.
Interest rate risk management
The Company has no significant interest rate risk as its financial assets and financial liabilities are non-interest bearing.
Foreign exchange risk management
The Company’s foreign currency exposures arise mainly from the exchange rate movements of the United States Dollar against the India Rupee. Foreign exchange losses are included in the revenue calculation and are therefore not considered a risk to the company.
Liquidity risk management
The Company monitors liquidity closely and ensures that it has sufficient funds to meet its contractual and financial obligations. Cash required for day to day operations is funded from related group companies upon settlement of trade receivables whereas Cash required for capital investment including office fit out, is funded by a loan from related group companies, and repayable over a number of years.


Disclosures under Sexual Harassment of Women and Workplace (prevention, prohibition & redressal) Act 2013
The Company has in place an Anti-Sexual Harassment policy in line with requirements of the Sexual Harassment of Women at Work place (Prevention, Prohibition and Redressal) Act, 2013. The Internal Complaints Committee has been set up to redress complaints received regarding sexual harassment. This policy has been extended to all three facilities and team has been re-visited and re-defined. The same has been communicating to concerned government authorities and all employees. No complaints of sexual harassment were reported in the Company during FY 2018-19. Awareness sessions are being conducted in monthly employee meetings.



Explanation or comments on qualifications, reservations or adverse remarks made by the auditor
Notes contained in the reports of the auditors read with explanations given in the notes to accounts are self-explanatory.

Extract of annual return under Section 92 (3)
Annual Return Extract is attached as Annexure – II


Acknowledgements
The Directors wish to place on record their sincere appreciation for the co-operation received from the executives, employees, Bankers, State & Central Government Departments at all level during the period under review and look forward to their continued support.

                          
       

        For and on behalf of the Board of Directors of
                Divgi TorqTransfer Systems Private Limited
                                 





Date: 26/06/2019       Ramesh A. Savoor              Jitendra B. Divgi              
                      Chairman                    Managing Director
                      DIN 00149089                  DIN 00471531       
        

Annexure - II

Form No. MGT-9
EXTRACT OF ANNUAL RETURN
As on the financial year ended on 31st March 2019
[Pursuant to section 92(3) of the Companies Act, 2013 and Rule 12(1) of the Companies (Management and Administration) Rules, 2014]

REGISTRATION AND OTHER DETAILS:

PRINCIPAL BUSINESS ACTIVITIES OF THE COMPANY

All the business activities contributing 10 % or more of the total turnover of the company shall be stated: -

PARTICULARS OF HOLDING, SUBSIDIARY AND ASSOCIATE COMPANIES

SHAREHOLDING PATTERN (Equity Share Capital Breakup as percentage of Total Equity)

Category-wise Shareholding

(ii) Shareholding of Promoters:

(iii) Change in Promoters’ Shareholding: There was no change in the promoter shareholding during the period under review

Shareholding Pattern of top ten Shareholders (other than Directors, Promoters and Holders of GDRs and ADRs):

Shareholding of Directors and Key Managerial Personnel:

INDEBTEDNESS:
Indebtedness of the Company including interest outstanding/accrued but not due for payment:

REMUNERATION OF DIRECTORS AND KEY MANAGERIAL PERSONNEL:

Remuneration to Managing Director, Whole Time Directors and / or Manager:

Company does not have any Whole Time Director and have not appointed any Manager

Remuneration to other directors: 

Remuneration to Managerial Personnel other than Managing Director / Whole Time Director / Manager:

PENALTIES / PUNISHMENT / COMPOUNDING OF OFFENCES:

FOR DIVGI TORQTRANSFER SYSTEMS PRIVATE LIMITED




Ramesh Savoor Jitendra Divgi
Chairman Managing Director
DIN: 00149089 DIN: 00471531


Date: - 26.6.2019
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 thereto

    
FOR DIVGI TORQTRANSFER SYSTEMS PRIVATE LIMITED

 
Annexure III
CORPORATE SOCIAL RESPONSIBILITY POLICY ANNUAL REPORT

A brief outline of the company's CSR policy, including overview of projects or programs proposed to be undertaken and a reference to the web-link to the CSR policy and projects or programs.

As stated in Directors Report.


The Composition of the CSR Committee.

The Committee consists of three members, namely:

Average net profit of the company for last three financial years –INR 24.46 Cr

Prescribed CSR Expenditure (two per cent. Of the amount as in item 3 above) –INR 48 Lakh

Details of CSR spent during the financial year

Total amount spent for the financial year – INR 12.75 Lakh

Amount unspent, if any – INR 35.25 Lakh

Manner in which the amount spent during the financial year is detailed below.

We hereby affirm that the CSR policy, as approved by the Board, has been implemented and the CSR committee monitors the implementation of the CSR projects and activities in compliance with our CSR objectives and CSR policies.

FOR DIVGI TORQTRANSFER SYSTEMS PRIVATE LIMITED



_________                        _________
Jitendra Divgi                    Ramesh Savoor
DIN:   00471531                 DIN:00149089

Date: 26th June 2019