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Cimmco Ltd.

BSE: 505230 Sector: Engineering
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OPEN 84.50
52-Week high 114.00
52-Week low 56.35
Mkt Cap.(Rs cr) 173
Buy Price 85.05
Buy Qty 50.00
Sell Price 86.00
Sell Qty 25.00
OPEN 84.50
CLOSE 85.35
52-Week high 114.00
52-Week low 56.35
Mkt Cap.(Rs cr) 173
Buy Price 85.05
Buy Qty 50.00
Sell Price 86.00
Sell Qty 25.00

Cimmco Ltd. (CIMMCO) - Director Report

Company director report

Your Directors present the 71st Annual Report together with the audited accounts ofthe Companyfor thefinancial year ended March 31 2016.

Financial Results

The performanceofyour Company during thefinancial year ended the31st March 2016was asfollows.

(Rs. in lacs)

Particulars Year ended 31.03.2016 Year ended 31.03.2015
Turnover 6870.66 3421.72
Profit/(Loss) before Extra-ordinary Items&Tax (1000.35) (1473.65)
Add: Exceptional Items 131.54 1069.91
(Loss) before Taxation (1131.89) (2543.56)
Tax Expense including Deferred Tax 51.20 34.41
(Loss) after Taxation (1183.09) (2577.97)
(Loss) broughtforwardfrom previousyear (6496.49) (3831.42)
(Loss) carried to Balance Sheet (7679.58) (6496.49)
Reserves&Surplus 9846.35 11029.44
Earnings per Share (Rs.) (5.87) (12.79)

Company's Performance and Outlook

Your Company’s financial performance was affected adversely due to lack of orderfor procurement of Wagons from Indian Railways the largest customer whereas the counteroffer from IR had to be declined since the substantially lower prices owing to predatorypricing resorted to by some of the manufacturers aimed at securing larger allocation inthe tender rendered it un-remunerative. The Turnover during the year under review includesthe amounts from orders placed by IR in the earlier financial year i.e. 2014-15 and aboutRs.14 Crore from two private sector customers.

It is noteworthy that during the last tender of Indian Railways forprocurementyourCompany has been awarded in April 2016order for 1264 Wagons valued atRs.183 Crore execution of which is progressing as per schedule.

As part of your Company's endeavour to mitigate the risk of predominant dependence onbusiness from Indian Railways the Board has accorded in principle approval to merger ofTitagarh Agrico Private Limited a subsidiary ofyour Company's holding company to derivethe benefits of synergy in operations and more efficient utilization of combined resourcessubject to applicable compliances in this respect. Manufacture of tractors would beconveniently integrated with the core competencies ofyour Company's existing business.

Further your Company has been issued Industrial License by the Government of India formanufacture of various products for defence sector of the country and necessary steps arebeing taken in this direction.

With the order in hand for wagons procurement by the Indian Railways and the effortsfor diversification as stated herein the outlookfor the currentyear is reasonablyoptimistic.

Pursuant to the provisions of Section 23 of SICA the Board has approved the Reportstipulated thereby for placing the same before you at the Extra Ordinary General Meetingscheduled after the conclusion of the ensuing Annual General Meeting.

Overall Review

The overall performance of the Company during the financial year ended the 31st March2016 declined due to lack of order for procurement of Wagons from the Indian Railways.

Business Segment Wagons

a) Industry Outlook: Wagons industry is beset by irregular and decremental Wagonsprocurement orders by Indian Railways compounded by predatory pricing being resorted to bysome of the wagon manufacturers. Notwithstanding the Government of India's budgetannouncement the expenditure is reportedly flowing into infrastructurewhilethe WagonIndustry struggles for survival.

b) Opportunities: Rail is expected to be the preferred mode of movement of cargo beingan effective and more economical mode of carrying goods across the country. TheGovernment's plans to expand the railway networkand the project of dedicated freightcorridors if implemented in right earnest Wagon industry offers substantial opportunitywhich can be seized particularly by the established units to fullest extent.

c) Challenges: Uncertainty in timely placement of wagons procurement orders by IndianRailways and availability of funds coupled with the stressed margins due to unhealthycompetition in the industry besides rising cost of inputs are major challenges for WagonIndustryin India. The dependenceon one customer i.e. Indian Railways is a serious concernin as much as any change in the Government policy stands to directly impact the industry.

d) Segment Review and Analysis:

Unit March 31 2016 March 31 2015 %Change
Productionof Wagons No. 420 187 124.60
Sales No. 466 141 230
Average Realisation Rs. Lacs/No. 13.32 16.07 -17.11

Review of operations: Performance of the Wagons segment has been affected severely dueto lack of order from the Indian Railways during theyear under review.

e) While the placement of order for Wagons by the Indian Railways in April 2016 isencouraging the development of markets for other products takes substantial time and hencethe outlook for currentfiscal is reasonably optimistic.


In view of the loss sustained the Directors do not recommend any dividend for the yearunder review.

Internal Financial Controls

Appropriate policies and procedures have been adopted by the Board to ensure effectivefinancial controls risk assessment and mitigation measures accuracy and completeness ofthe accounting records the prevention and detection of frauds and errors and orderly andefficient conduct of the Company's business.

The internal financial controls (IFC) have been documented and adequacy of IFC has beenevaluated by an external firm of experts and certified by the Statutory Auditors. Based onthe aforesaid the Board has concluded that during the year IFC were operatingeffectively.

Risks and Concerns

The Company has laid down a risk management mechanism which is reviewed periodically. ARisk Management Policy to identify and assess the key risk areas monitor mitigationmeasures and report compliance has been adopted. Based on the review the following keyrisks have been identified:

a) DependenceontheIndianRailways

The Company is engaged in the business of manufacturing wagons which is entirelydependent upon the policies of Indian Railways and any change in the policies whetherpositive or negative directly impacts the business of the Company.

b) Increase in the cost of raw materials and other inputs

The major raw materials required by the Company include steel specialized componentsincluding bogies coupler sets air brakes etc. which are exposed to volatility in pricesand availability in required specifications.

c) Risk of performance guarantee product warranty and liquidated damages

The contracts involve performance guarantee based on contract value and warrantyperiods within which if any defect is detected in the products the Company may have toincur expenditure for correcting the defects or even replacing the products. Delay inscheduled delivery may attract liquidated damages upto 10%.

Subsidiary Companies

There is no subsidiary ofyour Company.

Extract ofAnnual Return

The details forming part of the extract of the annual return in the Form MGT-9 isannexed and marked as Annexure DR-1.

Number of Board Meetings

The Board of Directors met eight (8) times during the financial year ended 31st March2016 as per the details provided in the Corporate Governance Reportforming part of theAnnual Report.

Loans Guarantees and Investments

Particulars of loans guarantees and investments made by the Company pursuant to theSection 186 of the Act are furnished under notes to financial statements.

Significant and material orders

There were no material/significant orders passed by any regulator/ tribunal impactingthe going concern status and the Company's operations in future.

Composition ofAudit Committee

The Board has constituted the Audit Committee comprising Shri J K Shukla as theChairman Shri Anil Kumar Agarwal and Shri KS B Sanyal as the members and the details areprovided in the Corporate Governance Report annexed hereto.

Related Party Transactions

All Related Party Transactions (RPTs) areentered in compliancewith the applicable lawsand also in accordance with the policy on the subject adopted by the Board. AuditCommittee reviews and approves all the RPTs as stipulated by the Listing Regulations andbased thereon final approval of the Board obtained. RPTs as approved by the Board duringthe financial year 2016 are furnished in the Form AOC 2 annexed hereto and marked as AnnexureDR-2.

Corporate Governance Report

The Company has complied with the corporate governance requirements under the Act andSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015. A separatesection on corporate governance under Listing Regulations along with a certificate from acompany secretary in practice confirming the compliance is annexed to and forms part ofthe Annual Report.

Internal Control System

The Company has system of internal controls and necessary checks and balances which arebeing strengthened so as to ensure

a. that its assets are safeguarded

b. that transactions are authorised recorded and reported properly; and

c. that the accounting records are properly maintained and its financial statements arereliable.

The Company has appointed external firm of Chartered Accountants to conduct internalaudit whose periodic reports are reviewed by the Audit Committee and management forbringing about desired improvement wherever necessary.

Vigil Mechanism

A fraud free and corruption free environment as part of work culture of the Companycannot be over emphasized and with that objective a Vigil Mechanism policy has beenadopted by the Board and is uploaded on the web site of the Company at No complaint of this nature wasreceived by the Audit Committee during the year.

Internal Complaints Committee

As per the requirement of Section 4 of The Sexual Harassment of Women At Workplace(Prevention Prohibition and Redressal) Act 2013 an Internal Complaints Committee hasbeen formed by the Company the details of which are given in the Corporate GovernanceReport. No complaint has been lodged with the Committee during the year.


Retirement by rotation

Shri J P Chowdhary Executive Chairman retires by rotation pursuant to the provisionsof Section 152 of the Act and is eligible for re-appointment.


The terms of appointment of Shri J P Chowdhary Executive Chairman and Shri UmeshChowdhary Vice Chairman & Managing Director ended on 10th May 2016. Pursuant to thedecision of Nomination & Remuneration Committee the Board at its meeting held onApril 292016subject to approval oftheshareholders reappointed them for Five years w.e.f.11th May 2016.

Shri Umesh Chowdhary has with a view to providing greater focus on the overseassubsidiaries of the holding company been redesignated from Vice Chairman & ManagingDirector to Vice Chairman as a Non-Executive Director as approved by the Board at itsmeeting held on 25th May 2016.

The information prescribed by SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 in respect of the above said Directors is given in the NoticeofAnnualGeneral Meeting.

Evaluation of the Board's performance. Committee and Individual Directors

In compliance with the Act and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the performance evaluation of the Board Committees and IndividualDirectors was carried out during the year under review as per the details given inCorporate Governance Report.

Declaration by Independent Directors

Declarations pursuant to the Sections 164 and 149(6) of the Act and Listing Regulationsand affirmation of compliancewith the Codeof Conduct as well as the Code for Regulation ofInsider Trading adopted by the Board by all the Independent Directors of the Company havebeen made.

Remuneration Policyand remuneration

A policy approved by the Nomination and Remuneration Committee and the Board isfollowed by the Company on remuneration of Directors and Senior Management Employees asper the details provided in the Corporate Governance Report.

Particulars of Remuneration of Directors/KMP/Employees

Thedisclosure stipulated bySection 197(12) of the Companies Act 2013 read with Rules5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is not applicable.

Disclosure pertaining to Remuneration and other details as required under Section 197(12) of the Act read with Rule 5(1) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 is annexed and marked as Annexure DR-3.

Directors' Responsibility Statement

The Directors state that:

• Appropriate Accounting Standards as are applicable to the Annual Statement ofAccounts for the financial year ended March 312016 have been followed in preparation ofthe said accounts and there were no material departures therefrom requiring anyexplanation;

• The Directors have selected and followed the accounting policies as described inthe Notes on Accounts and applied them consistently and made judgments and estimates thatare reasonable and prudent so as to give true and fair view of the state of affairs of theCompany at the end of financial year and of the profit and loss statement of the Companyfor that period;

• Proper and sufficient care has been taken for maintaining adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities;

• The Annual Accounts have been prepared on a going concern basis; and

• The Directors have laid down Internal Financial Controls (IFC) to be followed bythe Company and that such IFC are adequate and operating effectively.

Statutory Auditors

Messrs S R Batliboi &Co. LLP Chartered Accountants Auditors of the Company wereappointed at the 69th AGM until the conclusion of 71st AGM. It is proposed to re-appointthem as statutory auditors from this AGM till the conclusion of 72nd AGM.

As regards the qualified opinion expressed by the Statutory Auditors the Note No. 13(i) and emphasis ofmatter the note no. 29(A) in the relevant notes on the financialstatement (the Notes) are selfexplanatory requiring no further specific response from theDirectors at this stage. The Company with its persistently diligent efforts is reasonablyconfident of recovering the entire amount receivable and address the issue in due course.

Cost Auditors

Messrs M. R. Vyas & Associates Cost Accountants have been appointed as CostAuditors to conduct cost audit of the accounts maintained by the Company in respect of theproducts manufactured by the Company for the Financial Year 2016-17 subject toratification of their remuneration by the shareholders in accordance with the provisionsof Section 148 of the Companies Act 2013 and the Companies (Cost Records and Audit)Rules 2014. The Cost Audit Reportfor thefinancial year ended 31st March 2015 has beenfiled as stipulated by the applicable provisions of law.

Secretarial Auditor

Secretarial Audit has been conducted by Messrs R B Mandal and Associates PracticingCompany Secretaries appointed by the Board and their report is annexed hereto and markedas Annexure DR-4.

Fixed Deposits

TheCompany did not accept anydeposits during thefinancial year ended March 312016.


Human Resources

A. Empoweringtheemployees

The Company considers its organizational structure to be evolving consistently overtime while continuing with its efforts to follow good HR practices. Adequate efforts ofthe staff and management personnel are directed on imparting continuous training toimprove the management practices.

B. Industrial Relations

Industrial relations at all sites of the Company remained cordial.

C. No. of Employees : Manpower employed as at March 31 2016 was 123.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

A statement pursuant to Section 134(3)(m) of the Act read with Rule 8 of the Companies(Accounts) Rules 2014 on conservation of energy technology absorption foreign exchangeearnings and outgo is annexed to and marked as Annexure DR-5.

Listing with Stock Exchanges

The equity shares of the Company are listed at The National Stock Exchange of IndiaLimited (NSE)The BSE Limited (BSE)The Delhi Stock Exchange Limited (DSE) The CalcuttaStock Exchange Limited (CSE) and The Madhya Pradesh Stock Exchange Limited (MPSE) andListing fees for thefinancial year ending the 31st March 2017have been duly paid.

The Board has approved submission ofapplications for delisting of Equity Shares of theCompany from DSE CSE and MPSE since the cost of continued listing at the said stockexchanges is not commensurate with the benefits to the shareholders. Your Company's EquityShares shall continue to be listed at BSE and NSE which have nationwide terminals.

Discussion on Financial Performance with respect to Operational Performance

To mitigate the risk factors referred to hereinabove impacting the operations bettermanufacturing processes improved productivity and focus on optimization of resourcedeployment are undertaken for a reasonable performance viewed in the backdropofthetrendswitnessed in the industries in which the Company operates.

CorporateSocial Responsibility

Your Company continues its endeavours to contribute suitably to the society by beinginvolved in a series of Community Welfare Programs directly or through philanthropicorganizations. Bharatpur plant is located close to the Bharatpur Bird Sanctuary amidstvast green area and all care is taken to preserve the environment to allow the nature'sexpanse to remain green and grow healthily.

Forward Looking Statement

The statements in this report describing the Company’s policy strategyprojections estimation and expectations may appear forward looking statements within themeaning of applicable securities laws or regulations. These statements are based oncertain assumptions and expectations of future events and the actual results couldmaterially differ from those expressly mentioned in this Report or implied for variousfactors including those mentioned in the paragraph "Risks and Concerns" hereinabove and subsequent developments information or events.


Your Directors wish to place on record their appreciation for the cooperation andsupport of the Banks Governments of Rajasthan and Madhya Pradesh local administration(West Bengal)/other Government Departments; for contribution of the employees of theCompany and all other stakeholders.

On behalfofthe Board
Place: Kolkata J. P. Chowdhary
Date : August 22 2016 Executive Chairman