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Bajaj Auto Ltd.

BSE: 532977 Sector: Auto
NSE: BAJAJ-AUTO ISIN Code: INE917I01010
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OPEN 2755.00
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VOLUME 9864
52-Week high 3122.00
52-Week low 2173.40
P/E 19.59
Mkt Cap.(Rs cr) 78179.09
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 2755.00
CLOSE 2728.05
VOLUME 9864
52-Week high 3122.00
52-Week low 2173.40
P/E 19.59
Mkt Cap.(Rs cr) 78179.09
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bajaj Auto Ltd. (BAJAJ-AUTO) - Director Report

Company director report

The Directors present their Ninth Annual report and Audited Financial Statements forthe year ended 31 March 2016.

Financial results

The financial results of the Company are elaborated in the Management Discussion andAnalysis Report.

The highlights of the Financial Results are as under:

Sales in Numbers FY2016 FY2015
Two-wheelers 3358252 3292084
Three-wheelers + Quadricycle 535329 519117
Total 3893581 3811201
Of which Exports 1739629 1806078

(Rs. In Crore)

Particulars FY2016 FY2015
Total revenue 23600.86 22194.43
Total expenses 18215.68 17769.35
Profit before exceptional items and tax 5385.18 4425.08
Exceptional items 340.29
Profit before tax 5385.18 4084.79
Tax expense 1732.77 1271.05
Profit for the year 3652.41 2813.74
Transfer to General Reserve 366.00 282.00
Interim dividend (inclusive of dividend tax) 1741.38
Proposed dividend (inclusive of dividend tax) 174.13 1734.57
Provision for dividend tax for previous year written back (11.35)
Balance carried to Balance Sheet 1382.25 797.17
Earnings per share ( Rs. ) 126.2 97.2

Dividend

The Board at its meeting held on 9 March 2016 declared an interim dividend at the rateof Rs. 50 per share (500%) for the year ended 31 March 2016 which was paid to all theeligible shareholders as on 17 March 2016 being the record date for the purpose ofdividend. The amount of dividend and the tax thereon to the extent applicable aggregatedto Rs. 1741.38 crore.

The directors now recommend for consideration of the shareholders at the ensuing annualgeneral meeting payment of final dividend at the rate of Rs. 5 per equity share (50%) forthe financial year ended 31 March 2016. The amount of final dividend and tax thereon tothe extent applicable aggregate to Rs. 174.13 crore.

For the year ended 31 March 2016 the total dividend including interim dividendtherefore works out to Rs. 55 per share (550%) and the total dividend and tax thereon tothe extent applicable aggregate to Rs. 1915.51 crore.

For the year ended 31 March 2015 dividend paid was Rs. 50 per share (500%). The amountof dividend and the tax thereon to the extent applicable aggregated to Rs. 1734.57 crore.

Share capital

The paid up equity share capital as on 31 March 2016 was Rs. 289.37 crore. There was nopublic issue rights issue bonus issue or preferential issue etc. during the year. TheCompany has not issued shares with differential voting rights sweat equity shares norhas it granted any stock options.

Operations

Detailed information on the operations of the Company and details on the state ofaffairs of the Company are covered in the Management Discussion and Analysis Report.

Capacity expansion and new projects

The Company’s current installed capacity is 6.06 million units per annum. TheCompany plans to increase the installed capacity to around 6.24 million units per annum byMarch 2017.

Detailed information on the quadricycle RE 60 and new projects is provided in theManagement Discussion and Analysis Report.

Research and Development and technology absorption

A) Products

Many new products have been launched during the year under review. Detailed informationon the new products is covered in the Management Discussion and Analysis Report.

B) Process

R&D has been working on improving its operations in a number of areas as listedbelow:

Manpower: R&D has been expanding its team size in areas of designanalysis and validation in order to keep up with the rapidly expanding aspirations of theCompany.

Facilities: R&D continued to enhance its design computing prototypemanufacturing and validation facilities. A number of new test facilities and prototypingfacilities were added.

C) Technology

As in the past new and improved technology has been introduced during the year underreview and the detailed information on the same is covered in the Management Discussionand Analysis Report.

D) Outgo

The expenditure on research and development during 2015-16 and in the previous yearwas:

(Rs. In Crore)

Particulars FY2016 FY2015
i. Capital (including technical know-how) 52.82 139.73
ii. Recurring 277.13 221.68
Total 329.95 361.41
iii. Total research and development expenditure as a percentage of sales net of excise duty 1.48% 1.71%

Conservation of energy

Company continues its efforts to reduce and optimise energy consumption at allmanufacturing facilities including corporate office at Pune.

Significant reduction in energy consumption has been achieved as set out below:

A) Electrical energy

• Micro mapping of equipments for energy consumption and countermeasures thereon.

• Lifecycle cost analysis and countermeasures at centralised coolant system.

• Installation of DC brushless motor with direct drive in place of AC inductionmotor at paint shop air supply unit.

• Reduction in emission height of exhaust blowers.

• Use of electrical blower in place of pneumatic vacuum blower at de-wateringstage in paint shop.

• Installation of energy efficient pumps/motors equipments air dryers exhaustblowers axial fans.

• Use of induction/LED/CFLs for street lighting/shop lighting/office.

• Use of auto shut off coolant pumps in machine shop to prevent excess pump loads.

• Use of isolator switches for standby transformers for reduction of fixed load.

• Providing portable compressor for jig stripping plant for non-working days.

• Installation of breeze air coolers in record room in place of air circulators.

• Use of HVLS (High Volume and Low Speed) fans for fixed load reduction of aircirculators.

B) Water

• Reuse of treated water by using reverse osmosis plants.

• Use of auto close water taps and orificing for controlled consumption of waterat wash basin.

• Installation of water meters for monitoring and controlling consumption of keyusers.

• Use of ETP/STP water for gardening and toilet flushing.

• Rain water harvesting at all plants.

C) LPG/propane

• Thermal imaging audit to assess the heat losses through paint shop ovens andcountermeasures on them.

• Extending incinerator heat for backing ovens.

• Removable hook arrangement for multi models for fuel tank jigs.

• Reducing colour change time from 11 min to 5 min/occurrence.

• Optimisation of air velocity in ovens.

• Burner efficiency improvement through magnetic resonators.

• Provision of air curtains at oven exit to reduce heat loss.

• Weight reduction of job fixtures in heat treatment.

• Operation of lower size oven in heat treatment.

• Usage of solar water heaters for canteen.

D) Utilisation of renewable energy - key initiatives• Use of solar energythrough solar concentrator.

• Installation of natural light transparent roof sheets.

Impact of measures taken

As a result of the initiatives taken for conservation of energy and natural resourcesthe Company has effected an overall reduction in consumption as given in the Table below:

% Reduction w.r.t. previous year
Description FY2016 FY2015
Electricity consumption 5.96 3.95
Water consumption 16.99 7.37
LPG/PNG consumption 15.65 9.66

Investment/savings

Description FY2016 FY2015
Investment for energy conservation activities 3.76 3.24
Annual savings achieved through above activities 2.52 3.57

Awards and Accolades

Sr. Details
1 Excellence in Energy Conservation and Management by MEDA for Waluj Plant
2 Green Manufacturing Excellence Award by Frost and Sullivan for Chakan Plant
3 Best Energy Efficient plant Award by TV 100 for Pantnagar Plant

International Business

Bajaj Auto continues to be India’s No.1 exporter of motorcycles andthree-wheelers. It exports to 74 countries and enjoys the No.1 or No.2 position in morethan 20 of them. During the year under review exports accounted for 43.9 % of theCompany’s net sales. Detailed information on the International Business is given inthe Management Discussion and Analysis Report.

Foreign exchange earnings and outgo

The Company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the Company during the year under review was Rs.9404.55 crore compared to Rs. 9443.51 crore during the previous year.

Total foreign exchange outflow during the year under review was Rs. 774.90 crore asagainst Rs. 856.08 crore during the previous year.

Industrial relations

Industrial relations with staff and workmen across all the plants viz. Akurdi WalujChakan and Pantnagar continued to be cordial.

At Akurdi and Chakan periodic wage review is due with effect from 1 April 2016 as perthe terms of the respective wage settlements signed for a period of nine years in theyear 2010. Both Management and Union have exchanged their Charter of Demands/Requirementswith each other. Negotiations/dialogues to conclude the review process have commenced andare going on in a congenial atmosphere at both the locations.

The Employers’ Federation of India (EFI) conferred The National Award forExcellence in Employee Relations - 2015 on Bajaj Auto Ltd. Motorcycle Division WalujAurangabad in recognition of 'Strong Commitment to Employee Relations' at Mumbai on 9December 2015.

One workman from Engine Assembly (MCD) Waluj received National ‘VishwakarmaRashtriya Puraskar’ from the Labour and Employment Ministry Government of India forthe year 2013.

The employees of Chakan Plant won first prize five times in TPM Circle National LevelCompetition and once in National Level Champion’s Competition organised byConfederation of Indian Industry (CII). The Chakan Plant also received first prize in theProductivity Case Study Contest 2016 organised by Indian Institute of IndustrialEngineering (IIIE).

The employees of Pantnagar Plant won first prize in Breakthrough Kaizen category inNational Level Kaizen Competition organised by CII. Likewise the Pantnagar Plant alsoreceived TV 100 Excellence Award for implementing various Kaizens for Energy Saving. TheAward was given by the Hon’ble Chief Minister of State of Uttarakhand Mr. HarishRawat.

Subsidiaries and joint ventures

PT. Bajaj Auto Indonesia

Routine business operations of PT. Bajaj Auto Indonesia have stopped. In March 2016Bajaj Auto and KTM entered into an agreement vide which Bajaj Auto will establish the KTMbrand in Indonesia the largest motorcycle market in South-East Asia.

Bajaj Auto International Holdings BV Netherlands (BAIH BV)

Bajaj Auto International Holdings BV is a 100% Netherlands based subsidiary of BajajAuto Ltd. Over the years through this subsidiary Bajaj Auto has invested a total of€ 198.1 million (H 1219 crore) and holds approximately 48% stake in KTM AG ofAustria (KTM) the fastest growing motorcycle brand in the world. Calendar year 2015 hasagain been a record year for KTM with highest sales in units and highest turnover in thehistory of the Company. Detailed information on the developments at the subsidiary and KTMAG is provided in the Management Discussion and Analysis Report.

Signing of anti-corruption initiative of World Economic Forum (WEF)

In support of the initiative taken by WEF with a view to strengthening the efforts tocounter bribery and corruption your Company is a signatory to the 'Commitment toanti-corruption' and is supporting the 'Partnering Against Corruption-Principles forCountering Bribery' derived from Transparency International’s Business Principles.This calls for a commitment to two fundamental actions viz.a zero-tolerance policytowards bribery and development of practical and effective implementation programme.

Extract of annual return

The extract of Annual Return as provided under sub-section (3) of section 92 of theCompanies Act 2013 in the prescribed Form MGT-9 is annexed to this Report.

Number of meetings of the board

There were eight meetings of the Board held during the year. Detailed information isgiven in the Corporate Governance Report.

Directors’ responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that-

• in the preparation of the annual accounts the applicable Accounting Standardshad been followed along with proper explanation relating to material departures;

• the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit and loss of the Company for that period;

• the directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities;

• the directors had prepared the annual accounts on a going concern basis;

• the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

• the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems are adequate and were operatingeffectively.

Details in respect of frauds reported by auditors under section 143(12)

During the year under review there were no frauds reported by the auditors to theAudit Committee or the Board under section 143(12) of the Companies Act 2013.

Declaration by independent directors

The independent directors have submitted the declaration of Independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in sub-section (6).

Directors’ Remuneration Policy and criteria for matters under section 178

Information regarding Directors’ Remuneration Policy and criteria for determiningqualifications positive attributes independence of a director and other matters providedunder sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans guarantees or investments

Information regarding loans guarantees and investments covered under the provisions ofsection 186 of the Companies Act 2013 are detailed in the Financial Statements.

Related party transactions

There were no Related Party Transactions (RPTs) entered into by the Company during thefinancial year which attracted the provisions of section 188 of the Companies Act 2013.There being no ‘material’ related party transactions as defined under regulation23 of SEBI Listing Regulations 2015 there are no details to be disclosed in Form AOC-2in that regard.

During the year 2015-16 pursuant to section 177 of the Companies Act 2013 andregulation 23 of SEBI Listing Regulations 2015 all RPTs were placed before the AuditCommittee for its approval.

The Policy on RPTs as approved by the Board is uploaded on the Company’s websitewww.bajajauto.com

Material changes and commitments

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year and the date ofthis Report.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may threaten the existence of the Company is given in the Corporate GovernanceReport.

Corporate Social Responsibility (CSR)

Detailed information on Corporate Social Responsibility Policy developed andimplemented by the company on CSR initiatives taken during the year pursuant to section135 of the Companies Act 2013 is given in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of Board its Committees and Directors

Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees and individual directors is given in theCorporate Governance Report.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2016 have beendisclosed as per Schedule III to the Companies Act 2013.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporatingthe duly audited financial statements of the subsidiaries and as prepared in compliancewith the Companies Act 2013 applicable Accounting Standards and SEBI ListingRegulations 2015 as prescribed by SEBI.

A separate statement containing the salient features of its subsidiaries in theprescribed form (AOC-1) is annexed separately.

Statutory disclosures

The summary of the key financials of the Company’s subsidiaries (Form AOC-1) isincluded in this Annual Report. A copy of audited financial statements for each of thesubsidiary companies will be made available to the members of the Company seeking suchinformation at any point of time. The audited financial statements for each of thesubsidiary companies will be kept for inspection by any member of the Company at itsregistered office during business hours. The same are placed on the Company’s websitewww.bajajauto.com

Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 are placed on the Company’s website www.bajajauto.com as an annexure tothe Directors’ Report. A physical copy of the same will be made available to anyshareholder on request.

Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(2) and 5(3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 which form part of the Directors’ Report will be madeavailable to any shareholder on request as per provisions of section 136(1) of the saidAct.

A Cash Flow Statement for the year 2015-16 is attached to the Balance Sheet.

Pursuant to the legislation 'Prevention Prohibition and Redressal of Sexual Harassmentof Women at Workplace Act 2013' introduced by the Government of India which came intoeffect from 9 December 2013 the Company has framed a Policy on Prevention of SexualHarassment at Workplace. There was no case reported during the year under review under thesaid Policy.

Directors and Key Managerial Personnel-changes

The Directors regret to report about the sad demise of S H Khan an independentdirector of the Company on 12 January 2016. The directors record their whole-heartedappreciation of the valuable contribution made by him during his long tenure as directorin the Company.

Pradeep Shrivastava COO has been appointed as an Additional Director and whole-timedirector with the designation of Executive Director for a period of five years commencingfrom 1 April 2016. The members are requested to approve his appointment in the ensuingannual general meeting.

In light of the provisions of the Companies Act 2013 Sanjiv Bajaj and Manish Kejriwalretire from the Board by rotation this year and being eligible offer themselves forre-appointment. The information as required to be disclosed under regulation 36(3) of theSEBI Listing Regulations 2015 in case of re-appointment of the directors is provided inthe Notice of the ensuing annual general meeting.

There was no other change in the directors and KMP during the year under review.

Detailed information on the directors is provided in the annexed Corporate GovernanceReport.

Significant and material orders passed by the regulators or courts

During the year under review there were no significant and material orders passed bythe regulators or courts or tribunals which may impact the going concern status of theCompany and its operations in future.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational which includes itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance.

This ensures orderly and efficient conduct of its business including adherence toCompany’s policies safeguarding of its assets prevention of errors accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation.

The internal financial controls with reference to the financial statements wereadequate and operating effectively.

Corporate governance

Pursuant to SEBI Listing Regulations 2015 a separate chapter titled ‘CorporateGovernance’ has been included in this Annual Report along with the reports onManagement Discussion and Analysis and General Shareholder Information.

All Board members and Senior Management personnel have affirmed compliance with theCode of Conduct for the year 2015-16. A declaration to this effect signed by the ManagingDirector (CEO) of the Company is contained in this Annual Report.

The Managing Director and CFO have certified to the Board with regard to the financialstatements and other matters as required under regulation 17 (8) of the SEBI ListingRegulations 2015.

Certificate from Auditors of the company regarding compliance of conditions ofcorporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations 2015 inter alia provides that theannual report of the top 100 listed entities based on market capitalisation (calculated ason March 31 of every financial year) shall include a Business Responsibility Report.

Since Bajaj Auto Ltd. is one of the top 100 listed entities the Company as in theprevious years has presented its BR Report for the financial year 2015-16 which is partof this Annual Report. As a green initiative the BR Report has been hosted on theCompany’s website www.bajajauto.com

A physical copy of the BR Report will be made available to any shareholder on request.

Secretarial Standards of ICSI

Pursuant to the approval given on 10 April 2015 by the Central Government to theSecretarial Standards specified by the Institute of Company Secretaries of India theSecretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings(SS-2) came into effect from 1 July 2015. The Company is in compliance with the same.

Auditors

Statutory Auditor

Pursuant to the provisions of section 139 of the Companies Act 2013 and the Rules madethereunder the current auditors of the Company Dalal & Shah LLP CharteredAccountants (registration number: 102021W) were appointed by the members at the 7th annualgeneral meeting to hold office until the conclusion of the 10th annual general meetingsubject to ratification by members at each annual general meeting.

The members are requested to ratify the appointment of Dalal & Shah LLP CharteredAccountants (registration number: 102021W/W100110) as statutory auditors of the Companyand to fix their remuneration for the year 2016-17.

The Statutory Audit Report does not contain any qualification reservation or adverseremark or disclaimer made by Statutory Auditor.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act 2013 and rules madethereunder the Company has re-appointed Shyamprasad D Limaye (Membership No.1587)Company Secretary in Practice to undertake the secretarial audit of the Company.Secretarial Audit Report for the year 2015-16 issued by him in the prescribed form MR-3 isannexed to this Report.

The said Secretarial Audit Report does not contain any qualification reservation oradverse remark or disclaimer made by the Secretarial Auditor.

On behalf of the Board of Directors

Rahul Bajaj

Chairman

Pune: 25 May 2016

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