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CMI FPE Ltd.

BSE: 500147 Sector: Engineering
NSE: FLATPROD ISIN Code: INE515A01019
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OPEN 770.00
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VOLUME 66
52-Week high 1000.00
52-Week low 354.00
P/E 40.77
Mkt Cap.(Rs cr) 417
Buy Price 800.00
Buy Qty 25.00
Sell Price 844.00
Sell Qty 4.00
OPEN 770.00
CLOSE 807.40
VOLUME 66
52-Week high 1000.00
52-Week low 354.00
P/E 40.77
Mkt Cap.(Rs cr) 417
Buy Price 800.00
Buy Qty 25.00
Sell Price 844.00
Sell Qty 4.00

CMI FPE Ltd. (FLATPROD) - Director Report

Company director report

Dear Shareholders

Your Directors have pleasure in presenting the Thirty First Annual Report of theCompany on the business and operations of the Company together with the audited financialstatements for the financial year ended March 31 2017.

1. FINANCIAL PERFORMANCE

(Rs in lacs)

Particulars Financial Year 2016-2017 Financial Year 2015-2016
Total Revenue 16787.17 21449.07
Profit before provision for doubtful trade receivables depreciation and amortisation expense finance costs and tax expense 1065.18 2134.36
Less:
Depreciation and amortisation expense 524.85 579.19
Finance costs 102.93 237.45
Provision for doubtful trade receivables 792.44
Profit / (Loss) before Exceptional Item and Tax 437.40 525.28
Add : Exceptional Item 1433.93
Less : Tax expense:
Net current tax expense 79.00 23.00
Deferred tax 12.91 623.93
Profit / (Loss) for the year 345.49 1312.28
Balance brought forward from previous year 4053.96 2741.68
Balance carried forward 4399.45 4053.96

2. OVERVIEW OF COMPANY’S FINANCIAL PERFORMANCE

Operations

The year under review marked the deflation of commodity prices globally reducing thesteel prices. The growth in the demand for Indian steel lagged much behind theexpectations. The net revenue from operations of the Company dropped by almost 24% and theprofitability of the Company also decreased. The combination of predatory prices andimport has jeopardized the loans raised by the domestic steel industry for capacityexpansion.

Industrial Infrastructure Development

Infrastructure sector is a key driver for the Indian economy. The sector is highlyresponsible for propelling India’s overall development and enjoys intense focus fromGovernment for initiating policies that would ensure time-bound creation of goodinfrastructure in the country. India is witnessing significant interest from internationalinvestors in the infrastructure space. Steel industry and its associated mining andmetallurgy sectors have seen a number of major investments and developments in the recentpast.

India is expected to become the world’s second largest producer of crude steel inthe next 10 years moving up from the third position as its capacity is projected toincrease to about 300 MT by 2025. Hence scope for accelerated growth is offered byIndia’s comparatively low per capita steel consumption and the expected rise inconsumption due to increased infrastructure construction and the thriving automobilerailways and white goods sectors.

Your Company anticipating the growth in opportunities has realigned theinfrastructure and machines at Taloja Plant to achieve higher productivity and maximumutilization and to produce quality equipment at competitive cost. A full-fledged versatilefabrication facility has been developed at Hedavali for low cost production.

Material Changes and Commitments affecting the financial position of the Company

There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of this report.

3. DIVIDEND

In order to conserve resources for the operating business your Directors do notrecommend any dividend for the financial year 2016-17.

During the year the unclaimed dividend amount of Rs 130854/- out of the finaldividend for the year ended March 31 2009 was transferred to the Investor Education andProtection Fund.

4. SHARE CAPITAL

The paid up equity share capital of the Company as on March 31 2017 was Rs 493.78lacs. During the year under review the Company has not issued any shares with or withoutdifferential voting rights. It has neither issued employee stock options nor sweat equityshares. As on March 31 2017 none of the Directors of the Company holds shares of theCompany.

5. REGISTRAR AND SHARE TRANSFER AGENT

As informed in the last year Annual Report the Company had pursuant to the order ofSecurities and Exchange Board of India ("SEBI") switched over theactivities of Registrar and Share Transfer Agent from Sharepro Services (India) PrivateLimited ("Sharepro") to Bigshare Services Private Limited ("Bigshare")registered with SEBI. Bigshare has taken over all the data and records from Sharepro andthe transition of records was smooth without any inconvenience to the shareholders of theCompany.

The Company has made all the necessary disclosures and communication to BSE Limited asper the provisions of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 (‘‘Listing Regulations").

6. DEPOSITS

Your Company has not accepted any deposits from the public falling within the ambit ofSections 73 and 74 of the Companies Act 2013 read together with the Companies (Acceptanceof Deposits) Rules 2014.

7. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS BY THE COMPANY

Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 and Schedule V of the Listing Regulations are given in thenotes to the Financial Statements.

8. CORPORATE SOCIAL RESPONSIBILITY INITIATIVES

Pursuant to the provisions of Section 135 of the Companies Act 2013 and the Rulesframed thereunder the Company spent Rs 3.19 lacs towards CSR activities for the yearended March 31 2017. The contents of the CSR policy and initiatives taken by the Companyduring the year ended March 31 2017 as per the format prescribed in the Companies(Corporate Social Responsibility Policy) Rules 2014 are furnished in Annexure A to thisReport. The CSR policy of the Company is available on the Company’s website -www.cmifpe.com. The Company considers the community as an important stakeholder and hasbeen investing in its well being with a belief that people around should prosper at thesame pace as the business does. The Company has meticulously taken up social developmentas a core responsibility.

9. HUMAN RESOURCES

Personnel

The industrial relations continued to be cordial at all levels throughout the year.Your Directors wish to thank all the Employees and Workmen of the Company for theircontribution support and continued co-operation throughout the year.

Health and Safety

The details on Health and Safety are provided in the Management Discussion and Analysiswhich forms part of this Report.

Policy on Prevention Prohibition and Redressal of Sexual Harassment at Workplace

The Company as an organization is committed to provide a healthy environment to all theemployees and thus does not tolerate any discrimination and / or harassment in any form.The Company has in place a policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and Rules thereunder. Allwomen – permanent temporary or contractual are covered under the policy. This hasbeen widely communicated internally and is uploaded on the Company’s intranet portal.The Company has set up an Internal Complaints Committee to inquire into complaints ofsexual harassment and recommend appropriate action.

During the year under review the Internal Complaints Committee has not received anycomplaint of sexual harassment.

10. INNOVATION

The Company alongwith its holding Company has a track record of research anddevelopment and has been recognised as a trendsetter with several breakthroughs in theindustry. More recently the Group has added many new products and techniques for specialand customized applications. The spirit of innovativeness has helped the Company toachieve cost efficiencies in the areas of energy raw materials sourcing logisticsexcellence in customer service and manpower optimization leading to productivityimprovement.

11. BUSINESS RISK MANAGEMENT

The Board of Directors has constituted a Risk Management Committee. The Committeeoversees the risk management process including risk identification impact and controlself-assessment effective implementation of the mitigation plans and risk reporting. Theobjective of the Committee is to assist the Board in fulfilling its oversightresponsibilities with regard to business risk management. The details and the process ofRisk Management as implemented by the Company are provided as part of the ManagementDiscussion and Analysis which forms part of this Report.

12. INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company has an adequate system of internal controls in place with reference to theFinancial Statements. The management of the Company is responsible for ensuring thatInternal Financial Controls (IFC) have been instituted in the Company and that suchcontrols are adequate and operating effectively.

The Company’s internal controls system is founded on values of integrity andoperational excellence. It supports the vision of the Company. The foundation of theinternal controls system lies in the corporate strategies risk management framework andpolicies and procedures. The Company has a robust internal control framework commensuratewith the size scale and complexity of its operations. The framework has been designed toprovide reasonable assurance related to financial and operational information compliancewith applicable laws and for safeguarding the assets of the Company.

The Internal Audit (IA) function for the year 2016-17 was entrusted to M/s. KPMG. Tomaintain objectivity and independence the Internal Auditors report to the AuditCommittee.

During the year under review the Risk Management Committee of the Company had reviewedthe test of controls with detailed analysis of 10 key processes; no reportable materialweakness in the design or operations was observed. The Internal Audit team monitors andevaluates the efficacy and adequacy of internal control systems in the Company on thebasis of Standard Operating Procedures instruction manuals accounting policy andprocedures its compliance with operating system accounting procedures and policies atall locations of the Company. The results of the tests of the controls were discussed withthe Statutory Auditors. The Statutory Auditors have submitted their report on the InternalFinancial Controls which forms an integral part of this Report.

This formalized system of internal control and risk management framework facilitateseffective compliance of the Listing Regulations Companies Act 2013 and relevant statueapplicable to the Company.

13. VIGIL MECHANISM / WHISTLE BLOWER POLICY

Fraud and corruption-free work culture has been at the core of the Company. To meetthis objective the Company has adopted a Whistle Blower Policy to deal with any instancesof fraud and mismanagement in the Company. The mechanism provides for adequate safeguardsagainst victimization of Director(s) and Employee(s) who avail themselves of themechanism. The Whistle Blower Policy is available on the website of the Company –www.cmifpe.com. It is affirmed that no personnel of the Company has been denied access tothe Audit Committee.

14. DIRECTORS & KEY MANAGERIAL PERSONNEL

Changes in the composition of the Board of Directors

Mr. Jean Jouet consequent to his taking new responsibilities within the CMI Groupresigned as the Chairman and Director of the Company with effect from May 30 2017.

The Board of Directors ("Board") places on record its collectiveunanimous appreciation of the valuable services rendered and contribution made by Mr. JeanJouet during his tenure as the Chairman of the Board.

The Board on the recommendations of the Nomination and Remuneration Committee hasappointed Mr. Joao Felix Da Silva (DIN 07662251) as an Additional Director and also asthe Chairman of the Board of Directors of the Company with effect from May 30 2017.Pursuant to the provisons of Section 161 of the Companies Act 2013 Mr. Joao Felix DaSilva holds office upto the date of the ensuing Annual General Meeting of the Company andis eligible for appointment as a Non Executive Director. The Company has received a noticefrom a member along with a cheque in favour of the Company under Section 160 of theCompanies Act 2013 signifying his intention to propose Mr. Joao Felix Da Silva ascandidate for the office of Director of the Company at the ensuing Annual General Meeting.The necessary resolution proposing the appointment of Mr. Joao Felix Da Silva as Directoris being placed before the members for their approval.

Retirement by rotation

In accordance with the provisions of Section 152 of the Companies Act 2013 Mr. YvesHonhon (DIN 02268831) retires by rotation at the ensuing Annual General Meeting and beingeligible offers himself for re-appointment. The Board recommends his re-appointment forthe consideration of the members of the Company at the ensuing Annual General Meeting.

Re-appointment of Managing Director

The re-appointment and remuneration of Mr. Raman Madhok as Managing Director wasapproved by the members of the Company at the last Annual General Meeting for a furtherperiod of 3 years effective from October 9 2016 subject to the approval of the CentralGovernment.

Subsequently on September 12 2016 the Ministry of Corporate Affairs amended theSchedule V of the Companies Act 2013 wherein the requirements relating to remuneration toprofessional managerial personnel would not be applicable on compliance of certainconditions. The required compliance information was included in the special resolution andthe explanatory statement for re-appointment of Managing Director. The Central Governmentvide its letter dated

October 20 2016 has confirmed that the approval of Central Government was notrequired for the payment of remuneration to Mr. Raman Madhok he being a professionalmanagerial personnel.

Independent Directors

All Independent Directors have submitted the declaration of Independence as requiredunder Section 149(7) of the Companies Act 2013 confirming that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Regulation16(1) (b) of Listing Regulations.

Brief profile of the Directors proposed to be appointed / re-appointed and otherinformation as stipulated under Listing Regulations and Secretarial Standard 2 arefurnished in the Notice attached to this Report.

Board Evaluation

Pursuant to the provisions of the Companies Act 2013 read with the Rules issuedthereunder and Regulation 17 of the Listing Regulations the Board had carried out theannual performance evaluation of its own performance an evaluation of the working ofvarious Committees as well as an evaluation of the directors individually. Further SEBIvide its guidance note dated January 5 2017 has suggested certain process / practice thatmay be adopted by the companies for performance evaluation. The Company had taken intoconsideration these guidelines also. The evaluation exercise was carried out internallyusing the experience gathered from the external evaluation outsourced in earlier years. Astructured questionnaire was prepared after taking into inputs received from theDirectors covering various aspects of the Board’s functioning such as adequacy ofthe composition of the Board and its Committees Board culture execution and performanceof specific duties obligations and governance.

After the conclusion of such exercise and afer reviewing the findings the Chairman ofthe Board met each Director individually to get an overview of the functioning of theBoard and its constituents inter alia on the criteria such as attendance andlevel of participation at the meetings of the Board and Committees independence ofjudgement exercised by the Independent Directors interpersonal relationship etc.

Significant collective highlights learnings and action points with respect to theevaluation were presented to the Board. The Board of Directors expressed theirsatisfaction with the evaluation process and also with the findings.

Key Managerial Personnel

Mr. Raman Madhok Managing Director Mr. Akash Ohri Chief Financial Officer and Mr.Haresh Vala Company Secretary are the Key Managerial Personnel of the Company.

Remuneration Policy

The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel ("KMP") and other employees pursuant to the provisions ofCompanies Act 2013 and the Listing Regulations. The main objective of the said policy isto ensure that the level and composition of remuneration is reasonable and sufficient toattract retain and motivate the Directors KMP and senior management employees. Theremuneration involves a balance between fixed and incentive pay reflecting short and longterm performance objectives appropriate to the working of the Company and its goals. Thedetails of this policy are explained in the Corporate Governance Report.

15. DIRECTORS’ RESPONSIBILITY STATEMENT

To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofthe provisions of Section 134(3)(c) of the Companies Act 2013 that: a. in the preparationof the annual financial statements for the year ended March 31 2017 the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any;

b. such accounting policies as mentioned in the Notes to the financial statements havebeen selected and applied consistently and judgments and estimates have been made thatare reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company as at March 31 2017 and of the profit of the Company for the year ended onthat date;

c. proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

d. the annual financial statements have been prepared on a ‘going concern’basis;

e. proper internal financial controls have been laid down and are being followed andthat such internal financial controls are adequate and are operating effectively; and

f. proper systems were in place to ensure compliance with the provision of allapplicable laws and these were adequate and operating effectively.

16. MEETINGS & COMMITTEES

Meetings held during the year

During the year under review 4 (four) Board Meetings and 4 (four) Audit CommitteeMeetings were convened and held the details of the meetings held and attendance ofDirectors at such meetings are provided in the Corporate Governance Report. Theintervening gaps between the meetings were within the limits stipulated under theCompanies Act 2013 and the Listing Regulations.

Audit Committee

The Audit Committee is constituted in line with the regulatory requirements mandated bythe Companies Act 2013 and the Listing Regulations. The details of the Committee and itsterms of reference are set out in the Corporate Governance Report forming part of thisReport.

Nomination and Remuneration Committee

The Nomination and Remuneration Committee is constituted in line with the regulatoryrequirements mandated by the Companies Act 2013 and the Listing Regulations. The detailsof the Committee and its terms of reference are set out in the Corporate Governance Reportforming part of this Report.

Corporate Social Responsibility (CSR) Committee

The CSR Committee is constituted in line with the regulatory requirements mandated bythe Companies Act 2013. The details of the Committee and its terms of reference are setout in the Corporate Governance Report forming part of this Report.

17. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES

All related party transactions that were entered into during the financial year were onan arm’s length basis in the ordinary course of business and were in compliance withthe applicable provisions of the Companies Act 2013 and the Rules made thereunder and theListing Regulations. There were no materially significant Related Party Transactions madeby the Company during the year that would have required members’ approval under theListing Regulations. The members at the last Annual General Meeting held on July 292016 had approved an omnibus prior approval for material related party transactions withCMI SA Holding Company for a value upto Rs 500 crores and with CMI Industry AutomationPrivate Limited Fellow Subsidiary for a value upto Rs 25 crores for orders to betransacted in a span of 2 to 3 years. The Company is pleased to inform that orders withCMI SA for the financial year ended March 31 2017 were for Rs 112.47 crores.

All Related Party Transactions are placed before the Audit Committee and also the Boardfor approval. Prior omnibus approval of the Audit Committee is obtained for transactionswhich are foreseen and are repetitive in nature. A statement of all related partytransactions is placed before the Audit Committee for its review on a quarterly basisspecifying the nature value and terms and conditions of the transactions. The Company hasadopted a Related Party Transactions Policy. The Policy as approved by the Board isuploaded on the Company’s website at http://cmifpe.com/financialreport.aspx?Subcat=RPT Policy as per LODR&InvestorType=Policies. Details oftransactions with Related Parties are given in the Notes to the Financial Statements inaccordance with the Accounting Standards. There were no transactions during the year whichwere required to be reported in Form AOC 2.

None of the Directors has any pecuniary relationships or transactions with the Company.

18. SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS

There are no significant and material orders passed by the Regulators or Courts orTribunals that would impact the going concern status of the Company and its futureoperations.

19. AUDITORS Statutory Auditors

At the Annual General Meeting ("AGM") of the Company held last yearpursuant to the provisions of the Companies Act 2013 and Rules made there under M/s.Deloitte Haskins & Sells Chartered Accountants were appointed as the StatutoryAuditors of the Company from the conclusion of the 30th Annual General Meetingheld on July 29 2016 till the conclusion of the 32nd Annual General Meeting ofthe Company to be held in the year 2018 subject to the ratification of their appointmentat the AGM to be held in 2017. M/s. Deloitte Haskins & Sells have furnished acertificate of their eligibility and consent under Section 141 of the Companies Act 2013.In terms of the Listing Regulations the Auditors have confirmed that they hold a validcertificate issued by the Peer Review Board of the Institute of Chartered Accountants ofIndia. The members are requested to consider the ratification of the appointment of M/s.Deloitte Haskins & Sells Chartered Accountants as Auditors and authorize the Board tofix their remuneration. There are no qualifications reservations or adverse remarks ordisclaimers made by the Statutory Auditors in their report.

Cost Auditor

In terms of the provisions of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Rules 2014 the Company is required to audit its CostAccounting records for the financial year 2017-2018. The Board of Directors on therecommendation of the Audit Committee has appointed M/s. Kishore Bhatia & AssociatesCost Accountants to audit the cost accounts of the Company for the financial year 2017-18on a remuneration of Rs 200000/-. As required under the Companies Act 2013 aresolution seeking member’s approval for the remuneration payable to the Cost Auditorforms part of the Notice convening the Annual General Meeting for their ratification.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Board of Directorshad appointed M/s. VKM & Associates Company Secretaries in Practice to undertake theSecretarial Audit of the Company for the financial year 2016-17. The SecretarialAuditor’s Report is annexed as Annexure B and forms an integral part of this Report.

There is no secretarial audit qualification for the year under review.

20. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

The information on conservation of energy technology absorption and foreign exchangeearnings and outgo stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is annexed as Annexure C and forms anintegral part of this Report.

21. CORPORATE GOVERNANCE

The Company has complied fully with the corporate governance requirements under theCompanies Act 2013 and as stipulated under the Listing Regulations. A separate section onCorporate Governance practices followed by the Company along with a certificate from theStatutory Auditors of the Company confirming the compliance is annexed and forms anintegral part of this Report.

22. MANAGEMENT DISCUSSION AND ANALYSIS

The Management Discussion and Analysis Report appended as stipulated under the ListingRegulations forms an integral part of this Report.

23. EXTRACT OF ANNUAL RETURN

Pursuant to Section 92(3) of the Companies Act 2013 read with Rule 12(1) of theCompanies (Management and Administration) Rules 2014 the extract of the Annual Return isannexed as Annexure D and forms an integral part of this Report.

24. PARTICULARS OF EMPLOYEES AND RELATED DISCLOSURES

The information required under Section 197(12) of the Companies Act 2013 read withRule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is annexed as Annexure E and forms an integral part of this Report. The informationrequired under Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 a statement showing the names and other particulars ofthe employees drawing remuneration in excess of the limits set out in the said Rules willbe provided upon request. In terms of first proviso to Section 136 of the Companies Act2013 the Report and Accounts are being sent to the members and others entitled theretoexcluding the information on employees’ particulars which is available forinspection by the members at the Registered Office of the Company during the businesshours on working days of the Company upto the date of the ensuing Annual General Meeting.Any member interested in obtaining a copy thereof may write to the Company Secretary.

None of the employees listed in the said Annexure is related to any Director of theCompany. None of the employees hold (by himself or along with his / her spouse anddependent children) more than 2% of the equity shares of the Company.

25. PLANT VISIT

The management will make arrangements for visit of the interested shareholders to theCompany’s plant at Taloja on Friday September 22 2017. The plant visit is a halfday program and for operational convenience and safety reasons is limited to 100shareholders. Such of those shareholders who are keen to visit the Company’s plantare requested to submit their intention by filling up the enclosed form to the Registrarand Transfer Agents of the Company at the 31st Annual General Meeting.Eligible shareholders will be those whose names appear in the Register of Members as onthe date of 31st Annual General Meeting. The Company will finalise by August14 2017 the list of shareholders identified to attend the plant. The identification willbe on first come first serve basis. The shareholders so identified will not be allowed totransfer their ‘visit requests’ to others nor will any companions be allowed tojoin the plant visit. Shareholders are requested to note that clicking of photos / videosis strictly prohibited inside the premises of the plant. Shareholders will be required toshow their identity proof as and when requested for visiting the plant.

ACKNOWLEDGEMENT

Your Directors would like to express their appreciation for the co-operation andassistance received from the Government authorities bankers financial institutionsvendors customers and shareholders and also from all the employees and otherstakeholders during the year under review.

For and on behalf of the Board
Taloja Joao Felix Da Silva
May 30 2017 Chairman