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CG Power & Industrial Solutions Ltd.

BSE: 500093 Sector: Engineering
NSE: CGPOWER ISIN Code: INE067A01029
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VOLUME 49146
52-Week high 99.00
52-Week low 67.60
P/E 31.70
Mkt Cap.(Rs cr) 4,669
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 73.00
CLOSE 71.90
VOLUME 49146
52-Week high 99.00
52-Week low 67.60
P/E 31.70
Mkt Cap.(Rs cr) 4,669
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

CG Power & Industrial Solutions Ltd. (CGPOWER) - Director Report

Company director report

The gross revenue of the Company on stand-alone basis reported a growth of 12.7% inFY2017. The consolidated net revenue of the Company during FY2017 from continuedoperations recorded a growth of 9.4% and stood at 16120 crore.

To

The Members

Your Directors are pleased to present their Eightieth Annual Report on the business andoperations of the Company along with the Audited Financial Statements both Standalone andConsolidated for the financial year ended31 March2017.

THE YEAR IN RETROSPECT

The Stand-alone and Consolidated Financial Statements of the Company represent thecontinuing operations for the year ended 31 March 2017. The discontinued operations havebeen presented under a separate head.

FY2017 has been a steady and an encouraging one. The Company achieved a stand-alonegross turnover from continued operations of 14761 crore during the year under review ascompared to 14225 crore during the previous year recording a growth of 12.7%. Theconsolidated net revenue of the Company during FY2017 from continued operations recorded agrowth of 9.4% and stood at 16120 crore as compared with 15595 crore in the last year.

The stand-alone profit before tax from continuing operations of the Company for theyear under review amounted to 1157 crore as compared to a loss of 1(1139) crore for theprevious year recording an increase of

113.8%. The consolidated profit before tax from continuing operations for the yearunder review amounted to 1127 crore as compared to 1180 crore in the previous yearrecording a decrease of 29.7% over last year.

Consolidated loss before tax from discontinued operations increased to 1(612) crorefrom 1(492) crore in the previous year an increase of 24.4%.

The tax expense for the year under review amounted to 1(1) crore on stand-alone basisand 117 crore on consolidated basis.

The Company recorded a stand-alone profit after tax from continuing operations of 1158crore an increase of 113.3% from loss of 1(1184) crore in the last year.

Consolidated profit after tax from continuing operations for the year under reviewstood at 1110 crore as compared with 1115 crore in the last year a decrease of 4.3%.

Details of Sales and Profit Before Interest and Tax of the respective Business Units incomparison with the previous financial year are given in Table 1. Further Table 2highlights details of the Financial Performance of the Company for the continuingoperations for the year ended 31 March 2017.

A detailed review of the operations and performance of the Company and each of

GROSS SALES AND PROFIT BEFORE INTEREST AND TAX (PBIT)

BUSINESS UNIT

SALES

PBIT

2016-17 2015-16 2016-17 2015-16
Power Systems
Stand-alone 2684 2425 208 117
Consolidated 3739 3474 384 329
Industrial Systems
Stand-alone 2078 1801 190 174
Consolidated 2361 2119 156 139

the Businesses including its international operations is contained in the sectiontitled ‘Management Discussion and Analysis' of this Annual Report.

DIVESTMENTS AND OTHER DEVELOPMENTS

The Share Purchase Agreement (SPA) for sale of CG's Power Businesses in Europe NorthAmerica and Indonesia was terminated due to certain conditions precedent the fulfillmentof which was beyond the reasonable control of the parties to the SPA. The Companycontinues to explore alternative geography / product wise options for sale of itsinternational power businesses excluding Indonesia while continuing with strategicinitiatives for improving the overall operational efficiency of its international powerbusinesses.

During the year under review the Company completed sale of its Automation businesscomprising of ZIV Aplicaciones y Tecnologia S.L its subsidiaries and Automationbusinesses in UK Ireland France and India at an Enterprise Value of Euro 120 Million.

The sale is part of the Company's strategy to focus on its core operations in Power andIndustrial Systems businesses in their respective markets. The Automation business salehas significantly contributed to the reduction of Company's international debts.

In line with the Shareholders approval at the previous Annual General Meeting held on30 August 2016 for sale of its overseas Transmission and Distribution businesses theCompany is actively pursuing divestment of its power business in United States of America(USA) comprised in its overseas step-down subsidiary—CG Power USA Inc.

Additionally CG Power Systems Belgium NV (PSBE) the Company's overseas step downsubsidiary has signed an SPA for exiting from the Joint Venture in Saudi Arabia-SaudiPower Transformer Co Ltd in which it holds 49% equity shareholding subject to completionof conditions precedent. The completion of the SPA is expected by 31 October 2017. The SPAalso envisages liquidation of CG Power Solutions Saudi Arabia Ltd in which CG HoldingsBelgium NV a step-down overseas subsidiary of the Company holds 51% equity shareholding.

Further the Solutions businesses in USA and UK upon completion of its existingcontracts are in the final stage of being phased out. The Company's branch office inPoland i.e. Crompton Greaves Ltd SA and overseas step-down subsidiaries CG Power SystemsBrazil Ltda and Microsol Limited were liquidated on 8 December 2016 21December2016and26April2017 respectively.

The above divestments are part of the Company's stated strategy of debt reduction andfocusing on its core operations and core markets in India which provides significantgrowth opportunities besides enhancing shareholder's value.

NAME CHANGE

Pursuant to the Scheme of Arrangement between the Company and Crompton Greaves ConsumerElectricals Limited (CGCEL) as sanctioned by the Hon'ble High Court of Bombay on 20November 2015 inter-alia the trademarks associated with the Company's erstwhile consumerproducts business viz ‘Crompton' and ‘Crompton Greaves' were transferred toCGCEL. Since the Company consequent to demerger of its erstwhile consumer productsbusiness operates in a fully integrated B2B segment comprising of Power TransmissionDistribution and Industrial Businesses the registered trademark ‘CG' associated withthe B2B business has been retained by the Company.

As a consequence of the above and pursuant to approval of the Members of the Companyvide Special Resolution dated 25 January 2017 and the Central Government / Registrar ofCompanies Mumbai on 27 February 2017 the Company changed its name from ‘CromptonGreaves Limited' to ‘CG Power and Industrial Solutions Limited' effective 27 February2017.

The new name ‘CG Power and Industrial Solutions Limited' appropriately representsand reflects the business in which the Company is presently engaged and the existingregistered trademark / logo used by the Company. The change of Company name does notresult in change of the legal status constitution operations activities of the Companynor does it affect any rights liabilities or obligations of the Company.

DIRECTORS AND KEY MANAGERIAL PERSONNEL

BOARD OF DIRECTORS COMPOSITION

As on the date of this report the Company's Board of Directors consists of nineDirectors comprising of two Executive Directors and seven Non-Executive Directors of whichfour are Independent Directors. The Chairman

Mr Gautam Thapar is a Non-Executive Director and represents the Promoter Group. MrKNNeelkant is the CEO and Managing Director. Mr Madhav Acharya is the ExecutiveDirector-Finance and CFO. Four other Non-Executive Directors—MrSanjay LabrooDrValentin von Massow Ms Ramni Nirula and Mr Jitender Balakrishnan are Independent interms of Regulation 16 of the Listing Regulations and Section 149 of the Act. Two otherDirectors—Mr B Hariharan and Dr Omkar Goswami are Non-Executive Directors. The Boardconsists of reputed professionals with diverse functional expertise industry experienceeducational qualifications ethnicity and gender mix relevant to fulfilling the Company'sobjectives and strategic goals.

CHANGE IN COMPOSITION OF THE BOARD On recommendation of the Nomination and RemunerationCommittee of the Board

Mr Jitender Balakrishnan was appointed as an Additional Director in capacity ofNonExecutive Independent Director on the Board of Directors of the Company with effectfrom 2 May 2017. In accordance with Section 161 of the Act Mr Jitender Balakrishnan holdsoffice upto the date of the ensuing Annual General Meeting and being eligible offershimself for appointment as an independent Director. Attention of Members is invited torelevant disclosure made in Notice of the ensuing Annual General Meeting and Explanatorystatement thereto with respect to his appointment.

Ms Meher Pudumjee and Mr Shirish Apte Non-Executive Independent Directors resignedfrom the Board effective from 28 May2016 and 1 April 2017 respectively.

The Board places on record its gratitude and appreciation for the valuablecontributions made by Ms Pudumjee and Mr Apte during their respective tenures.

FINANCIAL HIGHLIGHTS

(In H crore)

PARTICULARS

STAND-ALONE

CONSOLIDATED

2016-17 2015-16 2016-17 2015-16
Revenue from Operations 4761 4225 6120 5595
EBIDTA 512 451 539 542
Less: Finance Cost 164 39 188 80
Less: Depreciation 91 99 150 172
Profit before Exceptional Items & Tax 257 313 201 290
Share of profit / (loss) in associates / Joint Ventures - - (1) 1
Exceptional items (100) (1452) (73) (111)
Profit / (loss) Before Tax 157 (1139) 127 180
Less: Tax expense / (Credit) (1) 45 17 66
Profit / (loss) After Tax 158 (1184) 110 114
Less: Minority Interest - - 0 (1)
Profit / (loss) from continuing operations 158 (1184) 110 115
Profit / (loss) before tax from discontinued operations (33) 146 (612) (492)
Tax expense from discontinued operations - 61 (11) 82
Net profit / (loss) from discontinued operations (33) 85 (601) (574)
Net profit / (loss) for the year attributable to the shareholders 125 (1099) (491) (459)

The individual and peer assessment of Directors contains facets such as relationshipwith Board and Senior Management knowledge competency and contribution to the Boardincluding 'Start- Continue-Stop' approach based evaluation of individual Directors.

RETIREMENT BY ROTATION In terms of the provisions of Section 152 of the Act and therules made thereunder and Article 114 of the Articles of Association of the Company MrGautam Thapar and Dr Omkar Goswami retire by rotation at the ensuing Annual GeneralMeeting of the Company and being eligible seek re-appointment. As per Regulation 36 ofthe Listing Regulations and Secretarial Standard-2 on General Meetings issued by theInstitute of Company Secretaries of India (SS-2) the brief profile and other relevantdetails regarding re-appointment of Mr Gautam Thapar and Dr Omkar Goswami are contained inthe Annexure accompanying the Explanatory Statement to the Notice of the ensuing AnnualGeneral Meeting.

The Board recommends their reappointment as Directors of the Company liable to retireby rotation.

INDEPENDENT DIRECTORS' DECLARATION The Company has received declarations from all itsIndependent Directors confirming that they meet the criteria of independence as laid downunder Section 149 of the Act and Regulation 16 of the Listing Regulations.

BOARD MEETINGS

During FY2017 the Board of Directors met four times to discuss and decide the businessstrategies and performance in addition to the items reported to the Board in accordancewith the provisions of the Act Listing Regulations and other statutory provisions. Theintervening gap between the meetings was within the period prescribed under the ActListing Regulations and Secretarial Standard-1 on Board Meetings issued by the Instituteof Company Secretaries of India (SS-1). The details of the Board Meetings held and theattendance of the Directors thereat are given in the section titled ‘Report onCorporate Governance' which forms part of this Annual Report.

BOARD COMMITTEES The Board has established statutory and non-statutory Committees incompliance with the requirements of the Act and Listing Regulations viz. Risk and AuditCommittee Nomination and Remuneration Committee Corporate Social ResponsibilityCommittee Stakeholders' Relationship Committee and

Securities Transfer Committee. The details of composition of the said Committees itsterms of reference number of meetings held and attendance of the Committee Membersthereat during the financial year is given in the section titled ‘Report on CorporateGovernance' which forms part of this Annual Report.

During the year under review the Board constituted ZIV Business Divestment Committeeto evaluate determine and review the proposals for divestment of Automation Business ofthe Company in India and overseas locations. The Committee comprised of Mr Shirish Apte

Dr Omkar Goswami Mr B Hariharan

MrKN Neelkant and Mr Madhav Acharya. The Committee held two meetings during the yearunder review on 4 November 2016 and 7 November 2016.

All recommendations made by the Risk and Audit Committee during the year under reviewwere accepted by the Board of Directors.

KEY MANAGERIAL PERSONNEL

Pursuant to Section 203 of the Act the Key Managerial Personnel of the Company as onthe date of this report are:

• MrKN Neelkant CEO and Managing Director

• Mr Madhav Acharya Executive Director- Finance and CFO

• MrManojKoulCompanySecretary

During the year under review there has been no change in the Key Managerial Personnelof the Company.

REMUNERATION POLICY AND CRITERIA FOR DETERMINING ATTRIBUTES QUALIFICATIONINDEPENDENCE AND APPOINTMENT OF DIRECTORS

The Company has formulated a Remuneration Policy governing the appointment andremuneration of Directors Key Managerial Personnel Senior Management and other employeesof the Company. The Remuneration Policy also contains the criteria for determiningqualifications positive attributes independence of Directors provisions relating toloans and advances to the employees of the Company and also aims at attracting andretaining high calibre personnel

from diverse educational fields and with varied experience to serve on the Board of theCompany for guiding the Management team to enhance organizational performance. TheRemuneration Policy of the Company is provided in Annexure 6 to this Report.

The Company believes that diversity at Board level is a critical ingredient inmaintaining competitive advantage understanding customers and stakeholders from differentperspectives and broad experience leading to better decision making. With this objectivethe Company has adopted the Board Diversity Policy which sets out the approach fordiversity on the Board of Directors of the Company.

PERFORMANCE EVALUATION OF THE BOARD OF DIRECTORS

Pursuant to the provisions of Section 178 of the Act and Regulation 17 of the ListingRegulations the Board has carried out the annual evaluation of the performance of theBoard as well as the evaluation of the working of its Committees and individual Directorsincluding Chairman of the Board during the year under review. A detailed questionnaire onvarious facets such as role of the Board composition effectiveness of Board processesrelationships with external stakeholders strategy and risk management ethics andcompliance of the Board Committees and individual Directors (Executive Non-Executive andIndependent Director) self assessment form was circulated to all the Directors of theCompany.

Evaluation of Committees was carried out based on its composition adequacy ofinformation / material for effective discussion mandate of the Committees adequate timeallocation forfulfilling its mandate and recommendations to the Board.

The individual and peer assessment of Directors contains facets such as relationshipwith Board and Senior Management knowledge competency and contribution to the Boardincluding ‘Start-Continue-Stop' approach based evaluation of individual Directors.The Chairman provides feedback on the individual and peer assessment.

Based on the feedback received from each Director and the Chairman the Nomination andRemuneration Committee and the Board of Directors of the Company discussed the outcome ofthe annual evaluation and

identified Director's commitment size of the Board Board competencies strongCommittee constitution and Chairman's leadership as robust areas.

Pursuant to the provisions of Schedule IV of the Act and Regulation 25 of the ListingRegulations the Independent Directors of the Company at their meeting held on 10 February2017 carried out evaluation of the performance of Non-Independent Directors and the Boardas a whole performance of the Chairman and also assessed the quality quantity andtimeline of flow of information between the Management and the Board.

FAMILIARIZATION PROGRAMME FOR INDEPENDENT DIRECTORS

Pursuantto Regulation 25 ofthe Listing Regulations the Company familiarizes it'sIndependent Directors with their roles rights responsibilities as well as the Company'sbusiness and operations. Moreover the Directors are regularly updated on the businessstrategies and performance management structure and key initiatives of businesses atevery Board Meeting.

The details of the programme can be viewed under the following link available on theCompany's website http://www . cgglobal.com/frontend/finalnonproduct.aspx?cnl2=yrnPqECUvhk=

PROMOTER GROUP

The Company is a part of the Avantha Group one of India's leading businessconglomerates. Led by Chairman Mr Gautam Thapar the Avantha Group has global footprintand presence in 90 countries with more than 25000 employees worldwide. As required underthe Listing Regulations

CG periodically discloses the details of its promoter group and person acting inconcert in the shareholding pattern and other filings with the Stock Exchanges.

SUBSIDIARY JOINT VENTURES AND ASSOCIATE COMPANIES

As on 31 March 2017 the Company has three Indian subsidiaries 25 foreignsubsidiaries one joint venture and three associate companies. Details of the subsidiaryjoint venture and associate companies existing as of 31 March 2017 and formed or ceasedduring the year under

review are provided in Annexure 5 to this Report in Form MGT-9 (ExtractofAnnualReturn).

The Company has adopted the Indian Accounting Standards (Ind AS) voluntarily asstated in the Companies (Indian Accounting Standards) Rules 2015 with effect from 1 April2015 and thereafter. Pursuant to the Companies (Indian Accounting Standards) Rules 2015and Regulation 33 of Listing Regulations the Financial Statements of the Company reflectthe consolidation of accounts of the Company its subsidiaries associates and jointventure companies.

Pursuant to Section 136 of the Act the audited annual accounts of each of theCompany's subsidiaries associates and joint venture entities are placed on the website ofthe Company and not enclosed in this Annual Report. If any Member of the Company sodesires the Company will be happy to make available the said audited annual accounts onwritten request. The physical copies of the aforesaid documents will also be available atthe Company's Registered Office for inspection during normal business hours on all workingdays excluding Saturdays upto the date of the ensuing Annual General Meeting and at thevenue of the Annual General Meeting.

In terms of Section 129 of the Act statement containing salient features of theFinancial Statements of the Company's subsidiaries / associates / joint ventures /companies in Form AOC-1 is given in the notes to the Financial Statements in this AnnualReport.

Pursuant to Regulation 16 of the Listing Regulations a Policy for determining MaterialSubsidiary of the Company as approved by the Board of Directors of the Company isavailable on the website of the Company.

The weblink to download the policy is as under http://www . cgglobal.com/frontend/finalnonproduct.aspx?cnl2=yrnPqECUvhk=

RELATED PARTY TRANSACTIONS

During the year related party transactions that were entered into by the Company wereon an arm's length basis and in the ordinary course of business. In terms of the IndiaRelated Party Transaction Policy of the Company there are no material related partycontracts arrangements or transactions undertaken by the Company during the year

under review. Hence disclosure of particulars of contracts / arrangements entered intoby the Company with related parties referred to in sub-section (1) ofSection 188 oftheActin Form AOC-2 is not applicable to the Company for the year under review.

An omnibus approval has been granted by the Risk and Audit Committee of the Boardbased on the criteria determined and approved by the Board of Directors of the Company andby the Risk and Audit Committee for transactions which are of foreseen and repetitivenature with related parties. Such omnibus approvals are subjected to renewal by the Riskand Audit Committee every year and are monitored by the Risk and Audit Committee on aquarterly basis. All related party transactions entered into by the Company are presentedand reviewed by the Risk and Audit Committee every quarter.

The Company's India Related Party Transactions Policy can be downloaded from thewebsite of the Company. The weblink of the same is as under http://www.cgglobal .com/pdfs/policies /India%20Related%20 Party%20Transactions%20Policy.pdf

PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS

Particulars of loans guarantees given and investments made by the Company duringFY2017 pursuant to the provisions of Section 186 of the Act and Schedule V of the ListingRegulations are given in the notes to the Financial Statements in this Annual Report.

BUSINESS RESPONSIBILITY REPORT

Pursuant to Regulation 34 of the Listing Regulations the Business ResponsibilityReport highlighting the initiatives taken by the Company in the areas of environmentsocial economical and governance is available on the website of the Company. The weblinkto download the report is as under http://www . cgglobal.com/frontend/finalnonproduct.aspx?cnl2=Nu/tTrrPlMI=

ENTERPRISE RISK MANAGEMENT FRAMEWORK

Integrating the process for managing risks across the Company's business and operationsis the Company's philosophy for Enterprise Risk Management. In this regard the Companyhas developed a

comprehensive ‘Enterprise Risk Management (ERM) framework' for identification ofelements of risk conducting risk assessment and suggesting mitigation procedure to theBoard of Directors of the Company to ensure that management controls the risks through aproperly defined framework.

ERM framework aims to imbibe a ‘risk culture' throughout the organizationfacilitate risk based decision making improve governance and accountability protect andenhance stakeholder value.

The ERM framework enables the Company to identify elements of risk based on the riskidentification techniques analyze and comprehend the nature of risk escalate andconsolidate risks at Unit level to Business Unit level monitor and review risks andimplement action plans to mitigate risk. Quarterly meetings at Unit level and BusinessUnit level are held for overseeing existing risk portfolio monitor effectiveness of therisk management framework including mitigation plans identified by the Management throughthe risk management exercise. The Risk and Audit Committee reviews the adequacy of the ERMframework of the Company key risks associated with the businesses of the Companymeasures and steps in place to mitigate the same from time to time.

The assessment of the risks covers Strategy Technology Financial Operations &Systems Legal & Regulatory and Human Resources risks.

During the year under review none of the risks identified threaten the existence ofthe Company.

INTERNAL FINANCIAL CONTROLS

The Company has in place an effective and efficient internal controls testing andmonitoring system which enables the Company to ensure that these controls are operatingeffectively. CG's controls have been designed to provide reasonable assurance with regardto maintaining of proper internal controls monitoring of operations protecting assetsfrom unauthorised use or losses compliances with regulations for ensuring reliabilityoffinancial reporting.

RESEARCH AND DEVELOPMENT (R&D)

During the year under review the Company's R&D activities continued to focus on

development of indigenous and energy efficient products.

Power Transformers Division developed 4.5MVA 33 / 4*380 (4LV IN ONE core coil assembly)inverter duty for solar application and amorphous transformers. Research was carried outfor 315MVA 765kV GT & 85MVA 765kV short circuit job and ANSI Standard BH10587143MVA500kV. All rating from 315KVA to 2500KVA 11kV& 33kV as per IS 1180 level 1 weresuccessfully type tested.

Switchgear Division indigenously designed and developed composite insulators to caterto the changing requirements of utilities for switchgear products and to reduce dependenceon imported materials. Switchgear Division also developed Arc assist double motioninterrupters that will result in approximately 40% reduction of mechanism energyrequirement algorithms for controlled switching of reactor & transformer and CG'sArista GIS which will achieve the requirements of global market for the ratings 36kV31.5kA 2500A 50 / 60Hz.

CG is also in process of developing high voltage vacuum circuit breakers for the ratingof 72.5kV 31.5kA 2500A which will become a platform technology for future development of145kV VCB ratings. CG focused on research in SPAR drive for GT01 GAI3S 245kV GIS withspring drive pole mounted auto-recloser oil immersed vacuum breaker for completely selfprotected transformer Self Powered Pole Mounted Outdoor Capacitor Switches Compact 245kVand 145kV GIS 245kV DTB CLASS 5ZNO blocks with 16kJ / kV energy and external gappedtransmission line arrestor.

Industrial Systems business focused on development of electronic excitation system for1200KW alternator and 1600HP AC-AC DEMU and 550KW inverterfor DEMU. New range of 480Vac‘stacked drives' (including AFE) from 250kW to 2MW in smaller footprint AFE drivesnext generation control platform TSA range of Normal Duty softstarters with integratedbypass upto 1100A and next generation IP2X IP54 (and possibly IP65) variable speed driveswere developed during the year. CG also developed CSA certified single phase motors upto5HP-4P and 6P.

During FY2017 CG registered designs of Compact Series 160C frame Alternator 450 frameAlternator Solid Yoke DC Motor-AFS / AUS315 Amplydine for T90 Stabilizer-BEL

The Company propagates 'Zero Harm Culture' towards employees environment and otherstakeholders as reflected in our EHS Policy and guidelines.

Chennai Solid Yoke DC Motor in frame AUS / AFS250 (Locomotive) and Flameproof BrakeMotors E90-160.

R&D efforts enables the Company to manufacture cost competitive products offerimproved and integrated product portfolio increase its market share shorten lead timeimport substitution and offer high specification products as per requirements ofinternational markets.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO

Details pertaining to conservation of energy technology absorption and foreignexchange earnings and outgo as required under Section 134 of the Act read with theCompanies (Accounts) Rules 2014 are given in the prescribed format as Annexure 1 to thisReport.

ENVIRONMENT HEALTH & SAFETY (EHS)

The Company propagates ‘Zero Harm Culture' towards employees environment andother stakeholders as reflected in our EHS Policy and guidelines. Through our EHS Policywe aim at not only complying with legal requisites of safeguarding our employeesenvironment and the society at large but also setting high internal standards forcompliance.

All CG manufacturing units in Asia

EMEA and Americas have maintained their ISO14001 and OSHAS18001 certifications. Regulartrainings on safety awareness and sustainable growth are conducted at all manufacturinglocations. Fire safety week is also observed across all locations in India under theguidance of the Fire Adviser Ministry of Home Affairs Government of India.

EHS Key Performance Indicators (KPIs) are linked with SMART goals of all units andindividuals for their Annual Performance Management process. Quarterly audits areconducted to review the EHS implementation and process compliances across all locations ofthe Company. Corrective actions generated from these audits and various EHS events arecaptured and tracked for closure in an Online Event Reporting System Portal an EHS onestop shop.

During the year under review CG Mandideep Unit was felicitated with Annual OutstandingAchievement Award 2016 in the EHS category of large industry sector from the Federation ofMadhya Pradesh Chamber of Commerce and Industries (FMPCCI) for its best practices andprocesses adopted for EHS.

The Company also has EHS RECOGNIZE policy aligned with organizational RECOGNIZE drivewith the objective of rewarding individual and teams for collective efforts towards EHS.Two units were awarded as Best EHS Unit under the category of CEO Annual Award.

CORPORATE SOCIAL RESPONSIBILITY (CSR)

The Company believes that business sustainability is closely connected to thesustainable development of the communities and hence it uses CSR to integrate economicenvironment and social objectives with the Company's operations and growth. During theyear the Company has undertaken various CSR projects in the areas of employabilityeducation and health. The Company also supports Avantha Foundation on programs such asreduction of malnutrition and hunger expansion of Avantha Urban Innovation Project andbuilding capacities of stakeholders in small towns to ensure better delivery of servicesto citizens.

The details of the composition of CSR Committee CSR Policy and projects undertaken bythe Company during FY2017 are given in the section titled ‘Annual Report on CSRinitiatives' in Annexure 2 of this Report.

MATERIAL CHANGES AND COMMITMENT AFFECTING FINANCIAL POSITION OF THE COMPANY

There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year of the Company i.e. 31March 2017 and the date of this Report.

MATERIAL ORDERS OF REGULATORS / COURTS / TRIBUNALS

During the year under review no significant or material orders were passed by the

Regulators or Courts or Tribunals which impact the going concern status and Company'soperations in future.

REGISTRAR & SHARE TRANSFER AGENT

The Company has appointed Datamatics Financial Services Limited (DFSL) as itsRegistrar & Share Transfer Agent. DFSL is a SEBI-registered Registrar & ShareTransfer Agent. The contact details of DFSL are mentioned in the section titled‘Report on Corporate Governance' of this Annual Report.

DIVIDEND DISTRIBUTION POLICY

Pursuant to Regulation 43A of the Listing Regulations the Company has formulated aDividend Distribution Policy to help investors to get a clearer picture on returns fromtheir investments in the Company and also identify the stocks matching their investmentobjectives. The policy includes the financial parameters dividend pay-out circumstancesinternal and external factors dividend pay-out ratio and retained earnings utilisationwhich will be considered at the time of declaration of Dividend. The Dividend DistributionPolicy is provided in Annexure 7 which forms part of this report and is also available onthe website of the Company.

The weblink to download the policy is http:// www.cgglobal.com/frontend/finalnonproduct. aspx?cnl2=yrnPqECUvhk=

PUBLIC DEPOSITS

The Company has not accepted any deposits from Public or its Members during FY2017under Sections 73 and 76 of the Act and no deposits are subsisting as on date.

PARTICULARS OF EMPLOYEES

Disclosures pertaining to remuneration and other details as required under Section 197of the Act read with Rule5(1)ofthe Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are given in Annexure 3 of this Report.

In terms of the provisions of Section 197 of the Act read with Rules 5(2) and 5(3) ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 astatement showing the names and other particulars of the employees drawing remuneration inexcess of the limits set out in the said rules is given in Annexure 8 which forms part ofthis Report. The said information is available for inspection at the Registered Office ofthe Company during working hours up to the date of the ensuing Annual General Meeting andany Member interested in obtaining a copy thereof may write to the Company Secretary /Compliance Officer in this regard.

COMPLAINTS RELATING TO SEXUAL HARASSMENT

In terms of the Sexual Harassment of Women at Workplace (Prevention Prohibition andRedressal) Act 2013 it is mandatory to review status of sexual harassment relatedcomplaints in the Annual Report.

For protection against sexual harassment the Company has adopted a Prevention ofSexual Harassment Policy which has formalised a free and fair enquiry process for dealingwith such issues with clear timelines.

The Company has also constituted regionwise Sexual Harassment Committees presided by awoman employee and comprising of four to six Company employees and an external member towhich employees can address their complaints.

During the year under review the Committee met once a year and conducted 43 workshopsand programs covering 1010 employees to spread awareness on sexual harassment relatedissues.

There were no incidents of sexual harassment reported during the year under review.

VIGIL MECHANISM

The Company has set up a vigil mechanism viz. Whistle Blower Policy as per theprovisions of Section 177 of the Act and Regulation 18 of the Listing Regulations toenable its employees to report violations genuine concerns unethical behavior andirregularities if any noticed by them which could adversely affect the Company'soperations. The Policy also lays down the procedures to be followed by Senior Managementfor tracking of complaints giving feedback conducting investigations and takingdisciplinary actions if required.

The Head of Internal Audit submits a report to the Chairman of the Risk and AuditCommittee on a quarterly basis on all complaints referred to the Management Committeenominated by the CEO and

Managing Director of the Company with the status of investigations and actions takenby the Management Committee.

No material concerns or irregularities have been reported during the year under reviewand none of the Whistle Blowers were denied i access to the Risk and Audit Committee ofthe Board.

AUDITORS AND AUDIT REPORTS STATUTORY AUDITORS

At the 79th Annual General Meeting of the Company M/s. Chaturvedi &Shah Chartered Accountants Mumbai (Firm Registration No. 101720W) were appointed asStatutory Auditors of the Company for a term of five years upto the conclusion of the 84thAnnual General Meeting and also as Joint Statutory Auditors of the Company alongwithM/s. Sharp &Tannan Chartered Accountants (Firm Registration No. 109982W) upto theconclusion of 80th Annual General Meeting.

The term of M/s. Sharp & Tannan as Joint Statutory Auditors of the Company expiresat the ensuing 80th Annual General Meeting pursuant to Section 139 of the Actand Rules made thereunder. The Board places on record its appreciation for the servicesrendered by M/s. Sharp & Tannan as the Statutory Auditors of the Company.

M/s. Chaturvedi & Shah have provided their consent and confirmed that they meet theeligibility criteria prescribed under Section 141 of the Act read with Rule 4 of theCompanies (Audit and Auditors) Rules 2014 and that they are not disqualified to act asStatutory Auditors of the Company.

M/s. Chaturvedi &Shah have confirmed that the firm holds a valid certificate issuedby the Peer Review Board of the Institute of Chartered Accountants of India. They havealso furnished a declaration confirming their independence as well as their arm's lengthrelationship with the Company and declared that they have not taken up any prohibitednon-audit assignments for the Company.

Accordingly the Risk and Audit Committee and the Board have recommended ratification ofappointment of M/s. Chaturvedi & Shah as Statutory Auditors of the Company at theensuing Annual General Meeting.

During the year under review the Statutory Auditor have not reported any instances ofoffence or fraud committed by the officers or employees of the Company to the Risk and

Audit Committee of the Board or the Board of Directors of the Company.

COST AUDITOR

The Company had appointed M/s. Ashwin Solanki & Associates Cost AccountantsMumbai (Firm Registration No. 100392) to audit the cost records related to the Company'sproducts for FY2017. The cost audit reports for FY2016 were filed with the Registrar ofCompanies Mumbai within the prescribed statutory deadline.

Upon recommendation of the Risk and Audit Committee the Board has re-appointed M/s.Ashwin Solanki & Associates as Cost Auditor of the Company for FY2018 at aremuneration of 15 lakhs plus out of pocket expenses and taxes as applicable. Theremuneration payable to M/s. Ashwin Solanki & Associates for FY2018 is recommended forratification by the Members at the ensuing Annual General Meeting.

SECRETARIAL AUDITOR

The Company had appointed M/s. Pramod S Shah & Associates Practising CompanySecretaries Mumbai (Firm Registration No. P2001MH010300) to undertake the SecretarialAudit of the Company for FY2017. Secretarial Audit Report for FY2017 in Form MR-3 isannexed as Annexure 4 to this Report.

There are no qualifications reservations or adverse remarks or disclaimers made by theStatutory Auditor or the Secretarial Auditor in their reports and hence do not call forany further comments.

DIVIDEND

No dividend has been recommended or paid for the year ended 31 March 2017.

RESERVES

The Reserves on stand-alone basis at the beginning of the year amounted to 14003crore and at the end of the year stood at 14074 crore.

SHARE CAPITAL

As at 31 March 2017 the authorised share capital of the Company was 14076000000(Rupees Four Hundred Seven Crore And Sixty Lakhs only) divided into 2038000000 equityshares of 12 (Rupees two only) each.

As at 31 March 2017 the subscribed and paid-up share capital of the Company stood at11253492284 (Rupees One Hundred Twenty Five Crore Thirty Four Lakhs Ninety Two ThousandTwo Hundred and Eighty Four only) consisting of 626746142 equity shares of 12 (Rupeestwo only) each.

The Company's Equity Shares are listed and traded in compulsory dematerialized form onBSE Limited and National Stock Exchange of India Limited.

The Company has issued Global Depository Receipts (GDRs) in 1996 and the underlyingshares for each GDR were issued in the name of The Bank of New York the Depository. EachGDR of the Company is equivalent to five equity shares. As on 31 March 2017 176466 GDRswere outstanding which represent 882329 underlying equity shares of the Company.

EXTRACT OF ANNUAL RETURN

The details forming part of the extract of the Annual Return in Form MGT-9 are given inAnnexure 5 to this Report in accordance with Section 92 of the Act and Rule 12 of theCompanies (Management and Administration) Rules 2014 as amended from time to time.

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors would like to assure the Members that the Financial Statements both onstand-alone and consolidated basis for the year under review conform in their entiretyto the requirements of the Act.

The Directors confirm that:

• the Annual Accounts have been prepared in conformity with the applicableAccounting Standards alongwith proper explanations relating to material departures;

• the Accounting Policies selected and applied on a consistent basis and judgmentsand estimates made are reasonable and prudent to give a true and fair view of the state ofaffairs of the Company at the end of the financial year and of the profit and loss of theCompany for the financial year;

• proper and sufficient care has been taken to maintain adequate accountingrecords for safeguarding the assets of the Company and for preventing and detecting fraudand other irregularities;

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

• the internal financial controls laid down in the Company were adequate andoperating effectively;

• the systems devised to ensure compliance with the provisions of all applicablelaws were adequate and operating effectively.

ACKNOWLEDGEMENTS

The Board of Directors wish to convey their gratitude and appreciation to all theemployees of the Company globally for their tremendous efforts as well as their exemplarydedication and contribution to the Company's performance.

The Directors would also like to thank the employee unions shareholders customersdealers suppliers bankers government and all other business associates for theircontinued support extended to the Company and the Management.

On behalf of the Board of Directors

GAUTAM THAPAR

Chairman (DIN:00012289) New Delhi 26 May 2017

ANNEXURE 1

Information pertaining to conservation of energy technology absorption and foreignexchange earnings and outgo under Section 134 of the Companies Act 2013 and rules madethereunder

A. CONSERVATION OF ENERGY:

1. ENERGY CONSERVATION MEASURES TAKEN:

The accelerated momentum on energy conservation initiatives continued this year atmanufacturing plants worldwide with further efforts towards substitution of traditionalsources of energy with renewable energy measures for heat control and additionalequipments for saving electricity.

Illustrative measures taken towards energy conservation at Units were:

• Energy efficient air-compressors installed atfactory location;

• LED lighting and daylighting solutions were adopted and new equipment based oninvertertechnologies were installed;

Installation of Variable Frequency Drives (VFD) for energy saving in

-paint booth exhaust blowers;

-cranes; and -compressors

• Installation of efficient heating system on Auto clave for locomotivemanufacturing plant;

• Passive infrared sensors have been installed for automatic light control;

• Saving in annual power cost was accomplished through replacement of 180KWThyristor controlled ovens by more energy efficient 120KW ovens at factory location;

• Replacement of conventional lights with solar panels and installation ofAutomatic Power Factor Control (APFC) panels;

• Reduction in consumption of Q-reactive power resulting in power saving andimproved efficiency of the whole electric power system.

Every unit has set targets for paper power and water consumption per employee which ismonitored on a regular basis.

2. ALTERNATE SOURCES OF ENERGY

• BOOT model (Build Operate Own Transfer Model) is being implemented to generatesolar power at roof top at Switchgear division.

• Hot air from compressors was recycled to drive out compressed air from machinesand tools to heat work areas and also to heat water in European locations.

• Central-heating systems were modernized in factories and offices in Hungary toreduce energy consumption.

3. CAPITAL INVESTMENT ON ENERGY CONSERVATION EQUIPMENT

The following processes are under implementation for further reducing energyconsumption:

Installation of Variable Frequency Drives (VFD) for stationary andnon-stationary applications;

• Installation of equipments based on inverter technology

• Installation of Thyristor controlled ovens;

• Used fixed and variable capacitor bank for power factor improvement;

• Installation of retrofitted LED lights in offices and shop floors.

B. TECHNOLOGY ABSORPTION

1. EFFORTS MADE TOWARDS TECHNOLOGY

ABSORPTION

• Indigenized and type tested new designs for control electronics of IGBT powerconvertor for 6000HP electric locomotive acquired from CAF P&A Spain;

• 420kV condenser bushing was developed to enhance electrical performance (i.e.voltage stress) and meet application based specification requirements;

• Multiple validation tests were conducted to verify thermal gradients inarresters with composite insulators;

• 72.5kV Dead Tank Breaker Technology & 245kV GIS Technology was successfullyabsorbed and enhanced and indigenized spring drive for 145kV GIS.

2. THE BENEFITS DERIVED LIKE PRODUCT IMPROVEMENT COST REDUCTION PRODUCT DEVELOPMENTOR IMPORT SUBSTITUTION

The benefits derived from these efforts are:

• Enhanced product quality efficient solutions thereby meeting specific customerrequirements;

• Improved 420kV CT with aluminium cast tank for better aesthetics and 420kV CTwith composite insulators for shatter proof design;

• Increased energy efficiency and reduced CO2 emissions;

• 245kV and 420kV CT were redesigned to achieve reduction in total material cost;

Increased market penetration by expanding product lines and reducingproduct lead time;

• Developed indigenous composite insulator to meet switchgears requirementsstarting with composite insulators for Surge Arresters and also developed 420kV and 245kVCT with copper primary.

3. IMPORTED TECHNOLOGY

The data for details of the technology imported is given in Table 1 of Annexure 1.

4. EXPENDITURE ON R&D

The Company's expenditure on R&D on stand-alone basis for the year ended 31 March2017is given in Table 2 of Annexure 1.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO

The total foreign exchange earned and used by the Company during the year under reviewis given in Table 3 of Annexure 1.

On behalf of the Board of Directors

GAUTAM THAPAR

Chairman (DIN:00012289) New Delhi 26 May 2017

IMPORTED

TECHNOLOGY

DETAILS OF TECHNOLOGY IMPORTED YEAR OF IMPORT WHETHER THE TECHNOLOGY HAS BEEN FULLY ABSORBED IF NOT FULLY ABSORBED AREAS WHERE ABSORPTION HAS NOT TAKEN PLACE AND REASONS THEREOF
Control electronics for IGBT based power converter from CAF P&A SPAIN (ALT+D) FY2017 No Commissioning in Q1 of FY2018 Field Trial in Q2 of FY2018

 

EXPENDITURE ON R&D (H in crore)
PARTICULARS AMOUNT
A. Capital 10.55
B. Revenue 34.68
C. Total (A+B) 45.23
Total R&D Expenditure
-as a percentage of gross turnover (continued operations) 0.95%
-as a percentage of profit / (loss) before tax (continued and discontinued operations) 36.55%
FOREIGN EXCHANGE EARNINGS AND OUTGO (H in crore)
PARTICULARS AMOUNT
Total Foreign Exchange earned 806.42
Total Foreign Exchange used 527.92