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Cimmco Ltd.

BSE: 505230 Sector: Others
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OPEN 69.00
52-Week high 103.40
52-Week low 56.35
Mkt Cap.(Rs cr) 133.59
Buy Price 65.90
Buy Qty 70.00
Sell Price 66.30
Sell Qty 153.00
OPEN 69.00
CLOSE 67.80
52-Week high 103.40
52-Week low 56.35
Mkt Cap.(Rs cr) 133.59
Buy Price 65.90
Buy Qty 70.00
Sell Price 66.30
Sell Qty 153.00

Cimmco Ltd. (CIMMCO) - Director Report

Company director report



Your Directors present the 70th Annual Report together with the audited accounts ofthe Company for the financial year ended March 312015.

Financial Results

The performance of your Company during the financial year ended the31st March 2015 wasas follows.

(Rs. in lacs)

Particulars Year ended 31.03.2015 Year ended 31.03.2014
Turnover 3421.72 13236.27
Profit/(Loss) before Extra-ordinary Items & Tax (1473.65) 450.64
Less/Add: Exceptional Items 1069.91 1250.00
(Loss) before Taxation (2543.56) (799.36)
Tax Expense including Deferred Tax 34.41 439.34
(Loss) after Taxation (2577.97) (1238.70)
(Loss) brought forward from previous year (3831.42) (2592.72)
(Loss) carried to Balance Sheet (6496.49) (3831.42)
Reserves & Surplus 11029.44 13694.51
Earnings per Share (Rs.) (12.79) (6.15)

Company's Performance

Your Company’s financial performance was affected adversely due tonon-remunerative order for wagons procurement placed by the Indian Railways resulting inloss of Rs.549.28 lacs incurred during the financial year ended the31st March 2015.

In the last tender opened for wagons procurement by the Indian Railways prices offeredwere even lower than the cost of materials making the contract entirely a loss makingproposition and hence your Company had no option but to decline the order. This situationappears to have arisen out of predatory pricing resorted to by some of the Wagonmanufacturers who have quoted absurdly low prices. Marketing efforts have been stepped upfor securing orders for wagons from private sector customers.

As part of your Company's endeavor to mitigate the risk of predominant dependence onbusiness from Indian Railways a joint venture has been entered into with two groupcompanies for manufacture of tractors/agriculture implements at Bharatpur plant which isunder implementation while development of other products within the core competencies ofyour Company is receiving consistently focused attention. Active efforts are also beingmade to pursue orders for custom designed wagons from private sector customers.

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

With uncertainty in wagons procurement by the Indian Railways persisting the outlookfor the current year is cautious.


The overall performance of the Company during the financial year ended the 31st March2015 declined due to non-remunerative contract from the Indian Railways .



a) Industry Outlook: Wagons industry is beset with irregular and decremental Wagonsprocurement orders by Indian Railways compounded by predatory pricing being resorted to bysome of the wagon manufacturers. Though the Government of India has announced varioussteps viz. focus on safety and environment protection through Green initiativesstrengthening of Railway Tariff Regulatory Authority etc. to improve the infrastructure ofIndian Railways however procurement policy has to improve to provide the much neededimpetus to the industry.

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 network and 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 WagonIndustry in India. The dependence on one customer i.e. Indian Railways is a seriousconcern in as much as any change in the Government policy stands to directly impact theindustry.

d) Segment Review and Analysis :

Unit March 31 2015 March 31 2014 %Change
Production of Wagons No. 187 644 (70.96)
Sales No. 141 652 (78.37)
Average Realisation Rs. Lacs/No. 16.07 16.04 0.18

Review of operations: Performance of the Wagons segment has been affected adversely dueto unremunerative contract placed by the Indian Railways for substantially lower quantityduring the year under review.

e) Uncertainty persists with regard to placement of wagons procurement order by theIndian Railways even as development of markets for other products takes substantial timeand hence the outlook for current fiscal is cautious.


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

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:

Dependence on the Indian Railways

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.

Increase in the cost of raw materials and other inputs

(i) The major raw materials required by the Company include steel specializedcomponents including bogies coupler sets air brakes etc. which are exposed to volatilityin prices and availability in required specifications.

(ii) Steel based raw materials being the principal inputs in manufacturing wagons andheavy engineering equipment cost of finished goods totally depends on the prices of steelprevalent in both National and International markets which are highly volatile andcyclical in nature. However the risk is mitigated to some extent as the most of thecontracts have price variation clause.

Risk of performance guarantee product warranty and liquidated damages

The contracts involve performance guarantee based on contract value and warrantyperiods within which ifany 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.

Subsidiary Companies

There is no subsidiary of your Company.

Extract of Annual 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 March2015 as per the details provided in the Corporate Governance Report forming part of theAnnual Report.

Authorised Capital and Issue of Preference Shares

In June 2014 your Company's authorised capital has been reclassified and thenincreased from Rs.50 crore of equity to Rs.50 crore of Preference Shares and Rs.25 croreofequity divided into 25000000 equity shares and 50000000 preference shares ofRs.10/- each to facilitate issue and allotment of 8% Non Convertible Non CumulativePreference Shares of Rs.10/- each aggregating Rs.40 crore to the promoter group entities.

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 not material/significant orders passed by any regulator tribunal impactingthe going concern status and the Company's operations in future.

Composition of Audit Committee

The Board has constituted the Audit Committee comprising ShriJ K Shukla as theChairman Shri Anil Kumar Agarwal and Shri K S B Sanyal as the members and the details areprovided in the Corporate Governance Report annexed. Shri D N Davar has resigned from theBoard of the Company w.e.f. 13th February 2015and may attend the Audit Committee Meetingas Special Invitee.

Related Party Transactions

All Related Party Transactions (RPTs) are entered in compliance with the applicablelaws and 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 Agreement andbased thereon final approval of the Board obtained. RPTs as approved by the Board duringthe financial year 2015 are furnished in the form AOC 2 annexed hereto and marked asAnnexure DR-2.

Corporate Governance Report

The Company has complied with the corporate governance requirements under the Act andListing Agreement. A separate section on corporate governance under Listing Agreementalong with a certificate from a company secretary in practice confirming the complianceis annexed to and forms part of the 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 was receivedby 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.



Shri D N Davar Independent Director resigned from the Board w.e.f. 13th February2015.

Retirement by rotation

Shri Umesh Chowdhary Vice-Chairman & Managing Director retires by rotationpursuant to the provisions of Section 152 of the Act and is eligible for re-appointment.


Shri R N Tiwari's term as Director (Works) ended on 25th February 2015.The Board atits meeting held on February 132015 has subject to approval of the shareholdersreappointed him for two years w.e.f. February 252015 at the remuneration approved by theNomination and Remuneration Committee.

Shri Nandan Bhattacharya is proposed to be appointed as an Independent Director inaccordance with the provisions ofSections 149 and 152 of the Act read with the rules madethereunder and the Clause 49 of the Listing Agreement with the Stock Exchanges concerned.He was appointed as an Additional Director w.e.f. February 28 2015.

Smt.Vinita Bajoria is proposed to be appointed as Non-Executive Director in accordancewith the provisions of Section 152 of the Companies Act 2013 read with the rules madethereunder and the Clause 49 of the Listing Agreement with the Stock Exchanges concerned.She was appointed as an Additional Director w.e.f. 11th September 2014 in conformity withthe Clause 49 stipulating appointment of woman director.

The information prescribed by Clause 49 of the Listing Agreement in respect of theabove said Directors is given in the Notice of Annual General Meeting.

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

In compliance with the Act and Clause 49 of the Listing Agreement the performanceevaluation of the Board Committees and Individual Directors was carried out during theyear under review as per the details given in Corporate Governance Report.

Declaration by Independent Directors

Declarations pursuant to the Sections 164 and 149(6) of the Act and

Listing Agreement and affirmation of compliance with the Code of Conduct as well as theCode for Regulation of Insider Trading adopted by the Board by all the IndependentDirectors of the Company have been made.

Remuneration Policy and 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

The disclosure stipulated by Section 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 31 2015 have been followed in preparation ofthe said accounts and there were no material departures there from 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 subject to ratification oftheir appointment at the AGM every year and the Board recommends the same.

As regards the qualified opinion expressed by the Statutory Auditors the Note 12.2 inthe relevant notes on the financial statement (the Notes) is self explanatory requiring nofurther specific response from the Directors at this stage. The Company with itspersistently diligent efforts is reasonably confident of recovering the entire amountreceivable and address the issue in due course.

Cost Auditors

Messrs D. Radhakrishnan & Co. Cost Accountants have been reappointed 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 2015-16 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 Report for the financial year ended 31st March 2014 has beenfiled as stipulated by the applicable provisions of law.

Secretarial Auditor

Secretarial Audit has been conducted by Messrs M Rathi & Co Practicing CompanySecretaries appointed by the Board and their report is annexed hereto and marked asAnnexure DR-4.

Fixed Deposits

The Company did not accept any deposits during the financial year ended March 312015.

Personnel Human Resources

A. Empowering the employees

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 312015 was 146

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 Bombay Stock Exchange Limited (BSE) The Delhi Stock Exchange Limited(DSE)The Calcutta Stock Exchange Limited (CSE) and The Madhya Pradesh Stock ExchangeLimited (MPSE) and Listing fees for the financial year ending the 31st March 2016 havebeen duly paid.

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 backdrop of thetrends witnessed in the industries in which the Company operates.

Corporate Social Responsibility

Your Company continues its endeavors 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 and Governments of Rajasthan Madhya Pradesh and Delhi localadministration (West Bengal)/other Government Departments; for contribution of theemployees of the Company and all other stakeholders.

On behalf of the Board
Place: Kolkata J. P.Chowdhary
Date: August 122015 Executive Chairman


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