Your Directors have pleasure in presenting their report together with the auditedfinancial statements for the financial year ended March 31 2017.
Your Company has adopted Indian Accounting Standards (Ind AS) from April 1 2016 andthese are the Company's first annual financial statements prepared in accordance with IndAS with comparatives for the previous year restated as per Ind AS.
The Company's financial performance for the year ended March 31 2017 is summarizedbelow:
|Parameters ||2016-17 ||2015-16 |
|Revenue from operations ||5981.39 ||5184.34 |
|Other income ||49.24 ||45.88 |
|Total income ||6030.63 ||5230.22 |
|Profit before tax ||702.21 ||722.64 |
|Profit for the year (A) ||478.49 ||491.63 |
|Total other comprehensive income (B) ||(1.29) ||1.12 |
|Total comprehensive income for the year (A+B) ||477.20 ||492.75 |
The paid up equity share capital of the Company as at March 31 2017 stood at Rs.17.08crores comprising of 170812500 equtiy shares of Rs.1 each. During the year underreview the Company has not issued shares with differential voting rights employee stockoptions and sweat equity shares.
In line with the dividend policy of the Company i.e. Dividend Payout (excludingcorporate dividend tax) upto 15% of the profit after tax of the Company your directorsrecommend a dividend of 425% i.e Rs.4.25 per equity share of Rs.1 each for the financialyear 2016-17 subject to the approval of the shareholders. The dividend if approvedwould involve a cash outflow of Rs.72.60 crores (excluding corporate dividend tax).Pursuant to Regulation 43A of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Board approved and adopted the Dividend Distribution Policy and thesame is available on the Company's website viz. www.amararaja.co.in
Transfer to reserves
Your Directors propose to transfer an amount of Rs.47.85 crores to the general reserve.An amount of Rs.2180.88 crore is retained in the retained earnings.
Material changes and commitments affecting the financial position of the companybetween the end of the financial year and the date of the report
There are no material changes and commitments affecting the financial position of theCompany between the end of the financial year and the date of this Report.
Automotive battery business
The Company's automotive battery business reported double digit revenue growthsupported by good volume increase in both four-wheeler and two-wheeler batteries over theprevious financial year.
During the year the Company fully utilized the first phase of expansion of the newfour-wheeler battery plant consolidating its position. In four-wheeler OEM space theCompany grew its share by growing beyond the 6% increase in automobile production. In theaftermarket segment the Company's brands grew at a healthy double digit growth infour-wheelers and in two-wheeler batteries. The volume growth in both four-wheeler andtwo-wheeler aftermarket business continued during the year due to strong preference forCompany's products supported by complete product offering strengthening of brands Amaronand PowerZoneTM expansion of channel and leveraging customer relationships.
The volume from export business grew significantly at 45% over previous year. The brandand products of the Company have started gaining recognition in overseas marketsresulting in increased business. The focused market strategy of the Company paid offleading to higher penetration and enhanced business.
The new four-wheeler battery plant at Nunegundlapalle Village Chittoor District addeda capacity of 2.25 million units p.a taking the total installed capacity of thisfour-wheeler automotive battery plant to 4.50 million units p.a. During the year theCompany commenced supplies from the new tubular battery plant. The inverter batterysegment saw a clear preference for tubular batteries.
In view of the anticipated growth in demand for two-wheeler battery the Board approvedexpansion of two-wheeler battery capacity to be implemented in four phases staggered overa period of five years which would on completion take the capacity from existing 11million units p.a to 25 million units p.a.
Industrial battery business
The recent developments in the telecom market with the new entrant had disrupted therevenue models of all Telcos and tower companies forcing to relook at their coststructures. This had impacted the volume off-take for replacement batteries in theindustrial battery business during the last quarter. In addition the increase in leadprice presented challenging market conditions in both Telecom and UPS segments. Under thiscompetitive environment the Company's industrial battery business achieved a moderategrowth in volume in industrial battery business during the year. The industrial batterybusiness improved the overall performance by virtue of its "preferred supplierstatus" with all major customers efficient after sales service customerrelationship management and consistent product performance of its A agship brandsPowerStack Quanta and QRS Series batteries.
The Company has initiated necessary measures in all key customer segments to provideintegrated solution offering for backup power requirements to its customers.
Subsidiaries Associates and Joint Ventures
There are no subsidiaries associates and joint venture companies.
Directors and Key Managerial Personnel
Mr. Nagarjun Valluripalli Mr. N Sri Vishnu Raju Mr. T R Narayanaswamy and Ms.Bhairavi Tushar Jani are the present Independent Directors of the Company appointedpursuant to the provisions of Section 149 of the Companies Act 2013 (Act). They havesubmitted a declaration that each of them meet the criteria of independence as provided inSection 149(6) of the Act and there has been no change in the circumstances which mayaffect their status as an Independent Director during the year.
In accordance with the provisions of Section 152 of the Companies Act 2013 Mr.Raphael John Shemanski Director (DIN: 07462586) is liable to retire by rotation at theensuing annual general meeting and being eligible offer himself for reappointment.
Mr. Raymond J Brown (DIN: 01916646) resigned from the Board with effect from November6 2016 and the Board of Directors wishes to place on record their sincere appreciation ofthe valuable services rendered by him during his tenure as a director of the Company.
Mr. Shu Qing Yang (DIN: 01916660) resigned from the Board with effect from January 222017 and Mr. Trent Moore Nevill (DIN: 07699463) was appointed as an Additional Director onthe Board with effect from January 22 2017 who holds office upto the date of the ensuingannual general meeting. The Board of Directors wishes to place on record their sincereappreciation of the valuable services rendered by Mr. Shu Qing Yang during his tenure as aDirector of the Company.
The Company has received a notice in writing under Section 160 of the Act proposing theappointment of Mr. Trent Moore Nevill as a Director. The resolutions seeking your approvalfor the re-appointment of Mr. Raphael J Shemanski Director and appointment of Mr. TrentMoore Nevill as a Director are included in the notice of the ensuing annual generalmeeting along with brief details about them.
The Board of Directors appointed Mr. S Vijayanand as Chief Executive Officer of theCompany with effect from April 1 2017. Pursuant to the provisions of Section 203 of theAct Mr. Jayadev Galla Vice Chairman and Managing Director Mr. S Vijayanand ChiefExecutive Officer Mr. S V Raghavendra Chief Financial Officer and Mr. M R RajaramCompany Secretary are the key managerial personnel of the Company.
Auditors and Auditors' Report
M/s. Brahmayya & Co. Chartered Accountants and M/s. Deloitte Haskins & SellsLLP Chartered Accountants were appointed as the joint statutory auditors at the AnnualGeneral Meeting held on August 14 2015 for a term of five (5) years from the conclusionof the 30th annual general meeting till the conclusion of 35th annualgeneral meeting. As required under the provisions of Section 139 of the Act a resolutionfor the annual ratification of their appointment is being placed before the shareholdersfor their approval. In this regard the Company has received a certificate from theauditors to the effect that if their appointment is ratified it would be in accordancewith the provisions of Section 141 of the Act. The Auditors' report does not contain anyqualification reservation or adverse remark.
As per Section 148 of the Companies Act 2013 read with the Companies (Cost Records andAudit) Rules as amended from time to time the cost records are required to be audited.Based on the recommendation of the Audit Committee your Board has appointed M/s. Sagar& Associates Cost Accountants Hyderabad as cost auditors for the financial year2017-18. Necessary resolution for ratification of their remuneration is being placedbefore the shareholders for their approval.
Pursuant to Section 204 of the Companies Act 2013 read with the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the Company had appointed M/s. R.Sridharan & Associates Company Secretaries to undertake the secretarial audit of theCompany for the financial year 2016-17. The Secretarial Audit Report in Form MR-3 receivedfrom them is annexed herewith as Annexure I. The Secretarial Audit Report does notcontain any qualification reservation or adverse remark.
The report on corporate governance for the year ended March 31 2017 pursuant toRegulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed hereto as Annexure II. The certificate from practicing companysecretary regarding the compliance of conditions of corporate governance is attached tothe report on corporate governance.
Management discussion and analysis
Management discussion and analysis report highlighting the performance and prospectsof the Company's business is provided in a separate section and forms an integral part ofthis report.
Business Responsibility Report
Pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Business Responsibility Report (BRR) initiativestaken from an environmental social and governance perspective is annexed hereto as
Directors' responsibility statement
Pursuant to Section 134(3)(c) and 134(5) of the Companies Act 2013('Act') the Boardof Directors of the Company confirm to the best of their knowledge and belief that inthe preparation of Annual financial statements:
i) applicable accounting standards and Schedule III of the Act have been followed;
ii) appropriate accounting policies have been selected and applied consistently andsuch judgements and estimates that are reasonable and prudent have been made so as to givea true and fair view of the state of affairs of the Company as at the end of the financialyear and of the profit of the Company for that period;
iii) proper and sufficient care has been taken for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities. Toensure this the Company has established internal control systems consistent with itssize and nature of operations subject to the inherent limitations that should berecognised in weighing the assurance provided by any such system of internal controls.These systems are reviewed and updated on an on-going basis. Periodic internal audits areconducted to provide reasonable assurance of compliance with these systems. The auditcommittee meets at regular intervals to review the internal audit function;
iv) financial statements have been prepared on a going concern basis;
v) proper internal financial controls are in place and that such internal financialcontrols were adequate and were operating effectively;
vi) systems to ensure compliance with the provisions of all applicable laws are inplace and were adequate and operating effectively.
Information and Disclosures under the Companies Act 2013 Extract of the Annual Return
The extract of Annual Return pursuant to Section 134(3)(a) and Section 92(3) of theCompanies Act 2013 (Act') in the prescribed form MGT-9 is annexed herewith as AnnexureIV.
Number of Meetings of the Board
During the year five meetings of the Board of the Directors of the Company wereconvened and held in accordance with the provisions of the Act. The date(s) of the BoardMeeting attendance by the directors are given in the Corporate Governance Report formingan integral part of this report.
Committees of the Board
In compliance with the provisions of Sections 135 177 178 of the Companies Act 2013the Board constituted Corporate Social Responsibility Committee Audit CommitteeNomination and Remuneration Committee and Share Transfer and Stakeholders RelationshipCommittee (Committees). The details of composition of the Committees their meeting andattendance of the members are given in the Corporate Governance Report forming an integralpart of this report.
Corporate Social Responsibility (CSR)
The brief outline of the CSR Policy of the Company and the initiatives undertaken bythe Company on CSR activities during the year are given in Annexure V to thisreport in the format prescribed in Companies (Corporate Social Responsibility Policy)Rules 2014. The said policy is available on the Company's website athttp://www.amararaja.co.in/policies/ARBL-Corporate-Social-Responsibility-Policy.pdf
Nomination and Remuneration Policy
The Board has on the recommendation of Nomination and Remuneration Committee framed apolicy for selection and appointment of Directors Senior Management Personnel and theirremuneration. The Nomination and Remuneration Policy adopted by the Board is available onthe Company's website at https://www.amararaja.co.in/policies/ARBL%20-%20Nomination%20and%20Remuneration%20Policy.pdf
Evaluation of the Board
Pursuant to the provisions of the Companies Act 2013 and Regulation 17 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board had carriedout an annual evaluation of its own performance the Directors individually and of thecommittees of the Board.
A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors covering aspects of the Board's functioning such as adequacy of thecomposition of the Board and its committees execution and performance of specific dutiesobligations and governance.
A separate exercise was carried out to evaluate the performance of Individual Directorsincluding the Chairman of the Board. The Directors performance was evaluated on parameterssuch as level of engagement and contribution in safeguarding the interest of the Companyetc.
The performance of every Director was evaluated by the Nomination and RemunerationCommittee. The performance evaluation of the Independent Directors was carried out by theentire Board. Further the performance evaluation of the Chairman and the Non IndependentDirectors was carried out by the Independent Directors
Mr. Trent Moore Nevill additional director did not participate in the evaluationprocess or being evaluated as he was appointed at the end of the financial year 2016-17.
Familiarisation Programme for Directors
In addition to giving a formal appointment letter to newly appointed Directors on theBoard a handbook covering the role function duties and responsibilities and the detailsof the compliance requirements expected from the Directors under the Companies Act 2013and relevant Regulations of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 were given and explained to the new Directors.
The newly appointed Directors are given induction and orientation with respect toCompany's Vision Core purpose Core Values and business operations. In addition detailedpresentations are made by Senior Management Personnel on business environment performanceof the Company at every Board Meeting.
The above initiatives help the Directors to understand the Company its business andthe regulatory framework in which the Company operates and enables the Directors tofulfill their role/responsibility. The details of the familiarization programme areavailable on the Company's website www.amararaja.co.in.
Particulars of loans guarantees and investments
The Company has not given any loans guarantees or security in connection with loans ormade any investments falling within the ambit of Section 186 of the Companies Act 2013.
Transactions with the Related Parties
All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of business.
During the financial year 2016-17 there were no materially significant transactionswith the related parties which might be deemed to have had a potential material conflictwith the interest of the Company at large.
In line with the provisions of Section 177 of the Companies Act 2013 read with theCompanies (Meetings of the Board and its Powers) Rules 2014 omnibus approval for theestimated value of transactions with the related parties for the financial year ahead isobtained from the Audit Committee. The transactions with the related parties are routineand repetitive in nature.
The summary statement of transactions entered into with the related parties pursuant tothe omnibus approval so granted are reviewed and approved by the Audit Committee and theBoard of Directors on a quarterly basis. The summary statements are supported by anindependent audit report certifying that the transactions are at an arm's length basis andin the ordinary course of business. The members at the annual general meeting held onAugust 14 2015 approved and authorised the Board to enter into transactions with MangalIndustries Limited (MIL) upto a cumulative value of transactions of Rs.600 crores in eachfinancial year. During the financial year 2016-17 the transactions with MIL amounted toRs.645.86 crores a material transaction and necessary resolution for approval of themembers for additional transaction value of Rs.45.86 crores is being included in thenotice of ensuing annual general meeting as required under the Regulation 23 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015("Regulations") and the policy adopted by the Company under the saidRegulations.
The Form AOC- 2 pursuant to Section 134 (3)(h) of the Companies Act 2013 read withRule 8(2) of the Companies (Accounts) Rules 2014 is annexed hereto as Annexure VI.
The Company has put in place adequate system of internal controls commensurate with itssize and the nature of its operations. The Company's internal control system covers thefollowing aspects:
The Audit Committee of the Board periodically reviews audit plans observations andrecommendations of the internal and external auditors with reference to the significantrisk areas and adequacy of internal controls and keeps the Board of Directors informed ofits observations if any from time to time.
During the year the risk assessment parameters were reviewed and modified. The auditcommittee reviewed the element of risks and the steps taken to mitigate the risks. In theopinion of the Board there are no major elements of risk which has the potential ofthreatening the existence of the Company.
Whistle Blower Policy /Vigil Mechanism
The Company has established a whistle blower policy/vigil mechanism to provide anavenue to raise concerns. The mechanism provides for adequate safeguards againstvictimization of employees who avail of it and also for appointment of an Ombudsperson whowill deal with the complaints received. The policy also lays down the process to befollowed for dealing with the complaints and in exceptional cases also provides fordirect appeal to the Chairperson of the Audit Committee. The Whistle Blower Policyestablished by the Board is available on the Company's website athttps://www.amararaja.co.in/ policies/ARBL-Whistle-Blower-Policy.pdf
Deposits from Public
The Company has not accepted any deposits from the public falling within the ambit ofSection 73 of the Companies Act 2013 and the Companies (Acceptance of Deposit) Rules2014 during the year under review. There are no outstanding deposits as on March 31 2017.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo
The information on conservation of energy technology absorption foreign exchangeearnings and outgo as per Section 134(3)(m) of the Act read with Rule 8 of The Companies(Accounts) Rules 2014 are annexed hereto as Annexure VII and forms an integralpart of this report.
Particulars of Remuneration
The information required pursuant to Section 197(12) of the Act read with Rule 5 of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedhereto as Annexure VIII.
A statement showing names and other particulars of the top ten employees and employeesdrawing remuneration in excess of the limits prescribed under Rule 5(2) of the said rulesis also annexed to the Directors' Report as Annexure IX. However as per theprovisions of Section 136(1) of Companies Act 2013 the annual report is being sent toall the members excluding the aforesaid statement. The statement is available forinspection at the registered office of the Company during working hours.
Reporting of Frauds
There was no instance of fraud during the year under reviewwhich required theStatutory Auditors to report to the Audit Committee and / or Board under Section 143(12)of the Act and the rules made there under.
There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operations.
Investor Education and Protection Fund (IEPF)
In terms of Section 124 (5) of the Companies Act 2013 (erstwhile Section 205A of theCompanies Act 1956) an amount of Rs.776953 being unclaimed dividend pertaining to thefinancial year 2008-09 was transferred to IEPF on September 26 2016.
Health Safety and Environmental protection (HSE)
The Company has complied with all applicable environmental and labour laws. The Companycontinues to be certified under ISO-14001 and OHSAS 18001-2007 for its environmentmanagement systems and occupational health and safety management systems respectively.
Prevention of Sexual Harassment at workplace policy
The Company has in place prevention of Sexual Harassment Policy in line with therequirements of the Sexual Harassment of women at the workplace (Prevention Prohibitionand Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All women employees are covered underthis policy. During the year 2016-17 no complaints were received by the ICC.
Awards and Recognitions
Your Company continues to get accolades and awards from its customers and otherprestigious domestic/international forums. Some of the awards and recognitions yourCompany received during the year under review:
"India's most promising Company of the year 2016-17" at 12thCNBC TV18 India Business Leader Awards event.
"Plaque" award in ICAI Awards for Excellence in FinancialReporting' for the financial year 2015-16 from Institute of Chartered Accountants ofIndia.
"Telecom Infra Leader" in the Power Solutions Category for theyear 2016 at the 24th Annual Cyber Media ICT Awards event.
ABK AOTS awards in following three different categories
i. Model 5S Company award for Automotive Battery Plant Tirupati
ii. 5S sustenance award for MVRLA Battery plant Chittoor
iii. Gold award under Excellence category Automotive Battery plant II Chittoor
Six teams won Gold awards in ICQCC (International Convention of QualityControl Circles) 2016 competition held in Bangkok Thailand
"Significant Achievement in HR Excellence" CII National HRExcellence Award from Confederation of Indian Industry.
Best Practices in Employee Relations' and Best Talent ManagementPractices' from Employer Branding Institute India.
During the year under review industrial relations remained cordial and stable. Thedirectors wish to place on record their sincere appreciation for the co-operation receivedfrom employees at all levels.
The Board of Directors takes this opportunity to place on record their appreciation forthe unstinted co-operation commitment and dedication of all the employees of the Companyand the support extended by the channel partners customers vendors business associatesbanks government authorities and all concerned without which it would not have beenpossible to achieve all round growth of the Company.
Your Directors also take this opportunity to thank the joint venture partner JohnsonControls for their valuable assistance and support. The Directors are thankful to theshareholders for their continued patronage.
| ||On behalf of the Board |
|Place: Hyderabad ||Dr. Ramachandra N Galla |
|Date: May 24 2017 ||Chairman |