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Cummins India Ltd.

BSE: 500480 Sector: Engineering
NSE: CUMMINSIND ISIN Code: INE298A01020
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OPEN 799.80
PREVIOUS CLOSE 790.15
VOLUME 8158
52-Week high 1055.70
52-Week low 746.80
P/E 30.49
Mkt Cap.(Rs cr) 22060.96
Buy Price 0.00
Buy Qty 0.00
Sell Price 794.00
Sell Qty 7.00
OPEN 799.80
CLOSE 790.15
VOLUME 8158
52-Week high 1055.70
52-Week low 746.80
P/E 30.49
Mkt Cap.(Rs cr) 22060.96
Buy Price 0.00
Buy Qty 0.00
Sell Price 794.00
Sell Qty 7.00

Cummins India Ltd. (CUMMINSIND) - Director Report

Company director report

The Directors take pleasure in presenting the Fifty-Fifth Annual Report together withthe audited financial statements for the year ended March 31 2016. With the challengingeconomic conditions of the previous year continuing into 2015 your Company has focused onimproving productivity eliminating waste re-aligning the cost structure and increasingmarket share.

1. FINANCIAL RESULTS :

On a standalone basis: -

During the Financial Year 2015-16 net revenue from operations was Rs. 472429 Lacs ascompared to Rs. 440580 Lacs during the previous year (7.23% higher). Exports and otherforeign exchange earnings stood at Rs. 171357 Lacs as compared to Rs. 177422 Lacs duringthe previous year (3.42 % lower). Profit after tax decreased to Rs. 75185 Lacs from Rs.78585 Lacs recorded for the previous year (4.33% lower).

On a consolidated basis: -

During the Financial Year 2015-16 net revenue from operations was Rs. 525222 Lacs ascompared to Rs. 491608 Lacs during the previous year (6.84% higher). Profit after taxdecreased to Rs. 73331 Lacs from Rs. 77202 Lacs recorded for the previous year (5.01%lower).

Standalone

Consolidated

2016-17 2015-16 2016-17 2015-16
(Rs. in Lacs) (Rs. in Lacs) (Rs. in Lacs) (Rs. in Lacs)
APPROPRIATION OF PROFIT:
Profit before taxation 90642 93739 90774 93467
Net Profit for the year after tax but before tax on dividend 75185 78585 73331 77202
Tax on dividend 7900 7434 10084 8924
Dividend 38808 38808 38808 38808

2. DIVIDEND:

Your Directors have recommended a final dividend of Rs. 9 /- per equity share of Rs.2/- each fully paid-up in addition to the interim dividend of Rs. 5/- per equity share ofRs. 2/- each fully paid-up share declared on February 2 2016 aggregating to Rs. 14/-(i.e. 700%) per equity share of Rs. 2/- each fully paid-up share for the year ended March31 2016 (last year Rs. 14/- per equity share i.e. 700%). The final dividend payout issubject to approval of the Members at the ensuing annual general meeting.

The paid up share capital of the Company is Rs. 554400000/- divided into 277200000equity shares of Rs. 2/- each. Your Company has not come out with any issue (publicrights or preferential) during the Financial Year.

3. SUBSIDIARIES JOINT VENTURES AND ASSOCIATES:

Your Board is pleased to provide details of the following subsidiary joint venturesand associate as on March 31 2016 : -

a) Cummins Sales & Service Private Limited (CSSPL):

The Board of Directors of your Company at their meeting held on May 28 2015 approvedthe proposal to increase its existing shareholding in Cummins Svam Sales & ServicePrivate Limited (originally incorporated as ‘Cummins Svam Sales & ServiceLimited') from 50% to 100% by way of purchasing 6000000 equity shares of Rs. 10/- eachheld by Svam Power Plants Private Limited and effective October 12015 CSSPL (nowknown as

Cummins Sales & Service Private Limited) became a wholly-owned subsidiary of theCompany further strengthening our distribution capabilities in India. CSSPL focuses onsales and service of Cummins engines and generator sets in parts of Northern India closeto NCR. Your Company is benefited with better integrated customer insights received fromCSSPL into product planning supply chain and customer facing processes of your Company.CSSPL generated net revenue of Rs. 7542 Lacs from its operations for the year ended March312016 as compared to Rs. 6940 Lacs during the previous year (8.67% higher).

b) Cummins Research and Technology India Private Limited (CRTI):

The net revenue from the operations of Cummins Research and Technology India PrivateLimited (CRTI) a 50:50 joint venture between Cummins Inc. U.S.A. and your Company forthe year ended March 312016 was Rs. 3084 Lacs as compared to Rs. 3372 Lacs during theprevious year (8.53% lower). CRTI was formed in 2003 with an intent to provide InformationTechnology enabled Mechanical Engineering development services primarily to Cummins Inc.U.S.A. its subsidiaries and joint ventures in all parts of the world. In order to enhanceefficiency optimize the response time reduce the administrative procedures and avoidduplication of efforts your Board of Directors decided that the Company would run theactivity which is carried out by CRTI for your Company inhouse by absorbing theappropriate number of employees from CRTI in your Company. This will result in simplicityin running the same activities in a more effective manner. On completion of absorption ofappropriate number of employees your Company would exit from the operations of CRTI andits shareholding.

c) Valvoline Cummins Private Limited (VCPL):

VCPL a 50:50 joint venture with Valvoline International Inc. U.S.A. a global leaderin lubricants and engine oils generated net revenue of Rs. 102914 Lacs from itsoperations for the year ended March 312016 as compared to Rs. 100614 Lacs during theprevious year.

d) Cummins Generator Technologies India Private Limited (CGT):

Your Company owns approx. 48.50% shareholding in the Associate Company namely CGT whichis in the business of manufacturing marketing sales and service of alternators andrelated spare parts. CGT generated net revenue of Rs. 49564 Lacs from its operations forthe year ended March 312016 as compared to Rs. 51565 Lacs during the previous year(3.88% lower).

Your Company announces consolidated financial results on an annual basis. As requiredunder the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015Consolidated Financial Statements of the Company its subsidiary joint ventures andassociates prepared in accordance with the applicable Accounting Standards issued by theInstitute of Chartered Accountants of India form part of the Annual Report and arereflected in the Consolidated Financial Statements of the Company.

Further a statement containing the salient features of the joint ventures andassociate in the prescribed Form AOC-1 is appended as Annexure ‘1' which formspart of this Report.

The Company will make available the said financial statements and related detailedinformation of CSSPL companies upon the request by any member of the Company. Thesefinancial statements will also be kept open for inspection by any Member at the RegisteredOffice of the Company and of CSSPL. Pursuant to the provisions of section 136 of the Actthe financial statements of the Company consolidated financial statements along withrelevant documents and separate audited accounts in respect of CSSPL are available on thewebsite of the Company.

4. INITIATIVES AT PHALTAN:

Currently the manufacturing plants of your Company operational at the Megasite Phaltanare the HHP Rebuild Center and Phaltan MidRange Upfit Center (PMUC) at the Domestic TariffArea and the Low Horsepower Generator set plant at the Special Economic Zone (SEZ) alongwith the India Parts Distribution Center.

Due to economic slowdown the global demand for B C L series engines and gas engineshave reduced drastically requiring the existing PMUC factory to operate below 40%utilization. In order to optimize costs and better utilize the existing resources it isproposed to outsource manufacturing of ‘C' series engines and gas engines by way ofcontract manufacturing and shift certain activities resources and operations to otherexisting factories of Cummins group companies operating at Phaltan which results intoclosure of PMUC operations by December 2016. After closure the empty plant will be madeavailable for Cummins Technologies India Private Limited on rental basis at arm's lengthbasis.

While the common facilities like the creche administration office and health centerhave commenced operations since August 2014 the Training Center for employees comprisingof an auditorium with a seating capacity of 250 people has become functional since June2015.

The other training center that commenced operations in December 2015 at the MegasitePhaltan is the Technical Training Center. With a capacity to train more than 550engineers and 300 customers annually to service High Horsepower Heavy duty and MidRangemechanical engines the training center will further enhance your Company's capability toprovide world-class service experience to the end-user.

In addition to manufacturing and related facilities a residential campus to housePhaltan based employees of your Company in a high quality safe and clean environment nearthe Megasite was inaugurated on August 5 2015. This facility comprises of four buildingswith 240 rooms a cafeteria and a club house.

5. INDIA OFFICE CAMPUS (IOC):

The Company has shifted its Registered Office from Kothrud Pune 411038 MaharashtraIndia to Cummins India Office Campus Tower A 5th Floor Survey No. 21Balewadi Pune 411045 with effect from July 12015. India Office Campus at Balewadi Pune- the headquarters for Cummins India where close to 2500 employees across all ourbusiness units and functions work has become fully functional.

6. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS:

Other than the unsecured loan given to Cummins Technologies India Private Limited (asubsidiary of Cummins Inc. USA) in 2011 in compliance with the Companies Act 1956 andRules thereunder no other loan or guarantee is given or investment is made by yourCompany during the Financial Year 2015-16.

7. PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES:

Particulars of contracts or arrangements with related parties referred to in Section188 (1) of the Companies Act 2013 in the prescribed Form AOC-2 is appended as Annexure‘2' which forms part of this Report.

The Policy on materiality of related party transactions and dealings with related partytransactions as approved by the Board may be accessed on the Company's website at thelink: ‘http://www.cumminsindia.com/MAIN/corporate.html'.

8. CONSERVATION OF ENERGY:

Your Company continued to undertake various energy conservation initiatives during theyear some of which are given below:

Industrial Engine Business Unit Plants (Kothrud):

• Reduction of 68% in power consumption achieved by way of:

- Replacement of 2x36 watt lamps in the new cylinder head machining section byefficient 2x28 watt lamps (50 nos.);

- Replacement of 400 watt Metal Halide lamps in the KV Assembly Test Paint Unit sectionby 100 watt LED Lamps (46 nos.);

- Replacement of 2x36 watt lamps by 20 watt LED tubes (46 nos.); which also improvedlux level and energy efficiency of illumination devices at NH NT Assembly section;

• Reduction of 45% in power consumption achieved by way of upgrading ventilationblowers and water pumps at the unit 4 Power House;

• Reduction of 10% in power consumption each in BU01 BU04 and BU-06 againststandard man hours;

• Reduction of 37% in the installed rated energy consumption of EMA Machines (3nos.) pumping system from 12319 kWh per month to 7662 kWh per month; and

• Use of energy review tool & energy balance tool for identifying energysaving projects.

Phaltan Midrange Upfit Center Phaltan:

• Reduction of 10% in electrical energy consumption for all external utilitylights which saves approx. 200 units per month;

• Reduction of 5% in electrical energy consumption for lights and fans at thePlant;

- Installed the automated day timer for operation (Switching ON/OFF) of street lightson timely basis as per the pre-set timings;

- Installed the automated timers for operation (Switching ON/OFF) of shop lights &fan on timely basis as per the pre-set timings.

Power Generation Business Unit Plant Pirangut and Phaltan SEZ:

• Saved 43% energy by way of

- using LED tube fittings (saving of 42345 kWh);

- setting up timers in office and canteen (saving of 75029 kWh);

• Reduction of 31% of energy consumption at paint booth by making it to beutilized at full load capacity; and

• Reduction of 21 % of energy consumption at HVAC unit.

Distribution Business Unit Plants (Erandwane Pune and HHP Rebuild Center Phaltan):

• Maintaining a unity power factor at the HHP Rebuild Centre;

• Alternate switching off of the street lights after duty hours;

• Use of VRV air conditioners for the administrative building at Phaltan therebyachieving energy savings;

• Use of sky lights on roofs to ensure minimal use of lights on the shop floorduring day time; and

• Optimizing use of heater tanks used for cleaning of cylinder blocks andcrank-cams through one of initiative from six sigma.

India Parts Distribution Center Phaltan:

• Regular testing of capacitor bank introduced to ensure power factor remains inrange of 0.99 throughout the year;

• Dock levelers electrical circuit modified to control wastage;

• Installation of a solar water heater for dish cleaning at the cafeteria.Quarterly preventive maintenance plan is in place to validate effectiveness;

• Use of motion activated sensors in the racking aisles and the office area anddock station. Quarterly preventive maintenance plan is to check working conditions of allsensors;

• Use of sky lights in the factory premises to reduce need for lighting duringdaytime; and

• Use of motion sensors in rest rooms to reduce electricity consumption.

Your Company has made an overall capital investment of Rs. 6.32 Lacs on energyconservation equipment at various plants during the year ending March 31 2016.

IMPACT OF THE ABOVE MEASURES:

The above initiatives resulted in savings of about Rs. 101 Lacs in addition toGreenhouse Gas (GHG) emission reduction by 20% as compared to FY 2014-15. The energy unitssaved during the year were about 990085 kWh.

9. RESEARCH & DEVELOPMENT AND TECHNOLOGY ABSORPTION:

Your Company is committed to introducing new products and improving existing productsto have better performance levels lower life cycle costs excellent safety recyclabilitycharacteristics meet stringent emission norms and specific needs of the Indian customer.

The Technical Center of your Company continues in this endeavour by indigenizingcomponents and developing the next generation of components and systems in collaborationwith the parent company - Cummins Inc.

In order to improve technical productivity new methodologies and technologies havebeen introduced and enhancements in capabilities are being continuously pursued to reducethe costs associated with new product development and customer support. An example of thisis the enhanced use of analysis-led design computer models that help minimize hardwaretesting and therefore accelerate product development cycle times. Continued implementationof Six Sigma initiatives have resulted in significant cost savings and improved operatingefficiency.

To ensure the health and safety of employees the Technical Center also pursued severalinitiatives to help drive towards the goal of zero-recordable incidents.

A. New Product Development:-

The following new Products were developed as part of the above initiatives during theyear:-

1. Emissions recipe to meet BSIII BSIV and OBDII emission regulations foron-highway commercial vehicle ratings.

2. Advanced BSIII and BSIV electronic products to enhance competitiveness in theon-highway segment and drive towards lower fuel consumption and higher power densityproduct offerings for customers.

3. Multiple stationary engine families to meet the upcoming CPCB II PowerGeneration regulations above 800 kW.

4. Key Industrial engine product families to support the growing IndustrialBusiness.

5. Key Marine engine product families to support the increasing commercial MarineBusiness.

6. Fundamental electronics capability to help develop products that comply with OBDII (On Board Diagnostics) legislation.

7. Further enhancement of non-diesel product development capability.

8. Improved capability in intake air characteristic measurements to enhanceunderstanding and control of the combustion process.

B. Benefits derived as a result of the above activities are:-

1. Enhanced development capabilities through use of electronic tools and simulationsoftware to control the engine performance and combustion process.

2. Enhanced capability to tailor engine designs to improve the value propositionfor customers through delivering superior power output fuel economy and transientresponse and reduced emissions.

3. Product and component availability to meet the new emission norms ahead ofimplementation.

4. More safe recyclable reliable durable and performance-efficient products andcritical components.

5. Component indigenization capability was improved through enhanced testcapability rig test flow bench development and availability.

6. Significant enhancements in measurement capability were made to pursue businessopportunities in nondiesel markets to serve both the rural and international communities.

C. Future plans include:-

1. Developing local ‘fit for market' solutions to meet upcoming emissionregulations local and rural market needs.

2. Technological innovation to add value to the products in the areas of alternatefuels recycle / re-use and hybrid engines.

3. Continued expansion of the product range to serve the local and global market needs.

4. Providing energy-efficient solutions to reduce carbon footprint and improverecyclability.

5. Continued focus on indigenization and partnering with suppliers for wasteelimination initiatives.

6. Alternate source development for various engine components.

7. Expanding the coverage of our engine development for the Power Generation market.

8. Advanced common rail electronic fuel systems to meet market needs for upcoming BS IVemission norms in Commercial Vehicle market aimed at delivering better performance throughglobally tested Cummins Fuel Systems technology.

D. Your Company continues to draw benefits from Cummins Inc.'s technical capabilitiesand advanced technology.

With continued support from Cummins Inc. your Company is committed to develop advancedfuel-efficient and emission-compliant engines that work on a variety of fuel sources andcomply with forthcoming domestic and global emission regulations to help reduceGreenhouse Gas emission whilst also enabling the products to deliver superiorperformance reliability durability and recyclability.

E. EXPENDITURE ON R & D:-

The total expenditure on R & D was as follows:-

2015-2016 2014-2015
(Rs. in Lacs) (Rs. in Lacs)
Capital 1 1138
Recurring 2510 1639
Total 2511 2777
Total R&D expenditure as a percentage of total sales turnover 0.53% 0.63%

10. FOREIGN EXCHANGE EARNINGS AND OUTGO:

Your Company continues to be Net Foreign Exchange Earner. During the year under reviewyour Company exported 7015 engines and 10590 generator sets thereby achieving totalexport earnings of Rs. 166939 Lacs.

Foreign Exchange earnings and gross outgo (including royalty dividend etc.) during theyear under review were as follows:-

2015-2016 2014-2015
(Rs. in Lacs) (Rs. in Lacs)
(a) Earnings 171357 177422
(b) Outgo - 82640 94058
- Raw Materials/components 48038 58113
- Capital equipment 229 611
- Others 34373 35334

11. MANAGEMENT DISCUSSION & ANALYSIS AND CORPORATE GOVERNANCE REPORT:

Pursuant to Regulation 34 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the Management Discussion and Analysis Report and the CorporateGovernance Report are appended as Annexure ‘3' and ‘4' respectivelywhich form part of this Report.

The Company has obtained a Certificate from the Statutory Auditors confirmingcompliance with conditions of the Code of Corporate Governance as stipulated in Schedule Vof the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and thesame is appended as Annexure ‘5' which forms part of this Report.

12. EXTRACT OF THE ANNUAL RETURN:

Extract of the annual return as prescribed under Section 92 (3) of the Companies Act2013 is appended as Annexure ‘6' which forms part of this Report.

13. RISK MANAGEMENT:

Business Risk Evaluation and Management is an ongoing process within the Organization.The Company has a robust risk management framework to identify monitor and minimize risksas also identify business opportunities. As a process the risk associated with thebusiness are identified and prioritized based on severity likelihood and effectiveness ofcurrent detection. Such risks are reviewed by the senior management on a quarterly basis.Process owners are identified for each risk and metrics are developed for monitoring andreviewing the risk mitigation through Six Sigma Projects.

Audit and Risk Management Committee of the Board of Directors of your Company assiststhe Board in (a) overseeing and approving the Company's enterprise wide risk managementframework; and (b) overseeing that all the risks that the organization faces such asstrategic financial credit market liquidity security property IT legalregulatory reputational and other risks have been identified and assessed and there is anadequate risk management infrastructure in place capable of addressing those risks. YourDirectors would like to disclose pursuant to Section 134 (3) of Act that there was not anymatter or decision where the Board had not accepted any recommendation of the Audit andRisk Management Committee.

14. INTERNAL FINANCIAL CONTROL:

Details of internal financial control and its adequacy are included in the ManagementDiscussion and Analysis Report which is appended as Annexure ‘3' and whichforms part of this Report.

15. VIGIL MECHANISM/ WHISTLE BLOWER POLICY:

Your Company is committed to fostering a physically and psychologically safe integritybased respectful inclusive high performance culture that breaks down hierarchies andorganizational boundaries and engaging the full talents of our diverse employees todelight all our stakeholders (employees customers partners shareholders supplierscommunities) consistently.

The Company has a ‘Whistle Blower Policy' which inter alia providesadequate safeguards against victimization of persons who may blow the whistle. Inaddition the Company also has constituted an Internal Complaints Committee (under theSexual Harassment of Women at Workplace (Prevention Prohibition and Redressal) Act 2013)and an Ethics Committee comprising of senior executives of the Company. Protecteddisclosures can be made by a whistle blower through an email or dedicated telephone lineor letter to the Chairman & Managing Director of the Company or Letter to the Chairmanof Audit and Risk Management Committee. Whistle Blower Policy may be accessed on theCompany's website at the link: ‘http://www.cumminsindia.com/MAIN/corporate.html'.Details of number of complaints filed and resolved by the Internal Complaints Committeeduring the year are provided in the Business Responsibility Report of the Company.

16. CODE OF CONDUCT COMPLIANCE:

A declaration signed by the Chairman & Managing Director affirming compliance withthe Company's Code of Conduct by the Directors and Senior Management for the FinancialYear 2015-16 as required under Regulation 17 of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 is included in the Corporate Governance Reportwhich is appended as Annexure ‘4' and forms part of this Report.

17. DIRECTORS' RESPONSIBILITY STATEMENT:

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory costand secretarial auditors and external consultant(s) including audit of internal financialcontrols over financial reporting by the statutory auditors and the reviews performed byManagement and the relevant Board Committees including the Audit and Risk ManagementCommittee the Board is of the opinion that the Company's internal financial controls wereadequate and effective during the Financial Year 201516.

Accordingly pursuant to Section 134(5) of the Companies Act 2013 the Board ofDirectors to the best of their knowledge and ability confirm that:

(i) in the preparation of the annual accounts for the year ended March 312016 theapplicable accounting standards have been followed and there was no material departurefrom the same;

(ii) they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as on March 31 2016 and of the profit for theperiod April 1 2015 to March 312016;

(iii) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

(iv) they have prepared the annual accounts on a going concern basis;

(v) they have laid down internal financial controls to be followed by the Companyand that such internal financial controls are adequate and were operating effectivelyduring the year; and

(vi) they have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

18. DIRECTORS:

a) Changes in the composition of the Board of Directors:

During the year Ms. Nicole McDonald (DIN: 07369062) has been appointed as an AlternateDirector for Ms. Suzanne Wells (DIN: 06954891) w.e.f. November 15 2015.

The Board at its meeting held on May 28 2015 noted the presence of Mr. Mark Smith(DIN: 06852777) in India during May 26 2015 to May 28 2015 and consequent cessation ofMr. Pradeep Bhargava (DIN: 00525234) as an Alternate Director for Mr. Smith effective May26 2015. The Board confirmed appointment of Mr. Bhargava as an Alternate Director for Mr.Smith effective May 29 2015 upon return of Original Director (Mr. Mark Smith) to theU.S.A.

At its meeting held on August 6 2015 the Board of Directors noted the presence of Mr.Edward Pence (DIN: 06577765) in India during August 3 2015 to August 6 2015 andconsequent cessation of Mr. J. M. Barrowman (DIN: 00668324) as an Alternate Director forMr. Pence effective August 3 2015. The Board at its meeting dated August 6 2015confirmed appointment of Mr. Barrowman as an Alternate Director for Mr. Pence effectiveAugust 7 2015 upon return of Original Director (Mr. Edward Pence) to the U.S.A.

The Board at its meeting held on February 2 2016 noted the presence of Ms. SuzanneWells (DIN: 06954891) in India during January 30 2015 to February 3 2016 and consequentcessation of Ms. Nicole McDonald (DIN: 07369062) as an Alternate director of Ms. Wellseffective January 30 2015. The Board confirmed appointment of Ms. McDonald as anAlternate Director for Ms. Wells effective February 4 2016 upon return of OriginalDirector (Ms. Wells) to the U.S.A.

There was no cessation of any Director of the Company during the Financial Year2015-16.

In accordance with the Companies Act 2013 and Articles of Association of the CompanyMr. Mark Smith and Mr. Casimiro Antonio Vieira Leitao Directors of the Company retire byrotation and are eligible for re-appointment.

The details of number of meetings of the Board etc. are provided in the CorporateGovernance Report which is appended as Annexure ‘4' and forms part of thisReport.

b) Committees of the Board:

The Board of Directors have constituted following committees in order to effectivelycater its duties towards diversified role under the Companies Act 2013 and the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015: -

• Audit and Risk Management Committee;

• Stakeholders Relationship Committee;

• Nomination and Remuneration Committee; and

• Corporate Social Responsibility Committee.

Details of the constitution terms of references of each Committee and number ofmeetings attended by individual director etc. are provided in the Corporate GovernanceReport which is appended as Annexure ‘4' and forms part of this Report.

c) Policy on Director's Appointment and Remuneration:

The Policy of the Company on Director's Appointment and Remuneration includingcriteria for determining qualifications positive attributes independence of thedirectors and other matters provided under Section 178 (3) of the Companies Act 2013adopted by the Board is appended as Annexure ‘7' which forms part of thisReport. Details of the remuneration paid to the Board of Directors are provided in theCorporate Governance Report. We affirm that the remuneration paid to the Directors is asper the terms laid down in the Nomination and Remuneration Policy of the Company.

d) Board Performance Evaluation Mechanism:

Pursuant to the provisions of the Companies Act 2013 and Regulation 34 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Board has carriedout the annual performance evaluation of its own performance and the Directorsindividually as well as the evaluation of the working of its Committees. Details of theevaluation mechanism is provided in the Corporate Governance Report which is appended as Annexure‘4' and forms part of this Report.

e) Familiarization Programme for Independent Directors:

The Independent Directors of the Company are associated with the Company for many yearsand are very familiar with the Company. During the year the Management provided variousdocuments background notes etc. to have a better insight of the Company. The Chairman& Managing Director also holds a one-to-one discussion with the newly appointedDirectors. Details of initiatives for the Director to understand the Company its businessand the regulatory framework in which the Company operates and equips him/ her toeffectively fulfil his/ her role as a Director of the Company are available at‘http://www.cumminsindia.com/MAIN/ corporate.html'.

On November 5 2015 the Management conducted an interactive session for all Directorsof your Company on Indian Accounting Standards (Ind ASs) which was facilitated through Mr.Sumit Seth Head - IFRS India

(M/s Price Waterhouse Mumbai) at Hotel Taj Mahal Palace Apollo Bunder Mumbai 400001wherein the participants discussed different aspects of applicability and implementationof Ind ASs.

f) Declarations from the Independent Directors:

The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under of theCompanies Act 2013 and the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

19. PARTICULARS OF EMPLOYEES:

The details in accordance with the provisions of Section 197 (12) of the Companies Act2013 read with Rule 5 (1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is appended as Annexure ‘8' which forms part of thisReport.

A statement containing the details as prescribed under Rule 5 (2) and 5 (3) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 forms part ofthis Report. Any shareholder interested in obtaining a copy of the statement may write tothe Company Secretary at the Registered Office of the Company.

20. INDUSTRIAL RELATIONS:

Industrial relations at the Company's plants continue to be cordial.

21. AUDITORS:

STATUTORY AUDITORS:

The Company's auditors M/s. Price Waterhouse (Firm Registration No. 301112E) havealready completed more than ten years as Statutory Auditors of the Company.

In view of the mandatory requirement of rotation of auditor under Section 139 of theCompanies Act 2013 and the Companies (Audit and Auditors) Rules 2014 it is proposed toappoint S R B C & Co. LLP (Firm Registration No. 324982E) ("E&Y") fromconclusion of this Annual General Meeting till the conclusion of the Sixtieth AnnualGeneral Meeting. E&Y have informed the Company vide letter dated May 2 2016 thattheir appointment if made would be within the limits prescribed under Section 141 of theCompanies Act 2013.

S R B C & Co. LLP have confirmed that they have subjected themselves to the peerreview process of Institute of Chartered Accountants of India (ICAI) and hold validcertificate issued by the Peer Review Board of the ICAI.

There are no qualifications reservations or adverse remarks or disclaimers made by theauditors in the Audit Report for the year 2015-16.

SECRETARIAL AUDITOR:

Dr. K. R. Chandratre Company Secretary in practice was appointed to conduct thesecretarial audit of the Company for the Financial Year 2015-16 as required under Section204 of the Companies Act 2013 and the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014. The Secretarial Audit Report in Form MR-3 for FinancialYear 2015-16 is appended as Annexure ‘9' which forms part of this Report. TheSecretarial Audit Report does not contain any qualification reservation or adverseremark.

COST AUDITORS:

Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Amendment Rules 2014 the cost audit records maintained by the Companyin respect of its manufacturing activity is required to be audited. Your Directors had onthe recommendation of the Audit and Risk Management Committee appointed Messrs. AjayJoshi and Associates Pune to audit the cost accounts of the Company for the FinancialYear 2016-17 on a remuneration of Rs. 9 Lacs plus service tax as applicable andre-imbursement of out of pocket expenses. As required under the Companies Act 2013 theMember's determination for the remuneration payable to Messrs. Ajay Joshi and AssociatesCost Auditors is being sought at the ensuing annual general meeting.

22. CORPORATE SOCIAL RESPONSIBILITY POLICY AND ITS REPORT:

Your Company is an early adopter of the corporate social responsibility (CSR)initiatives. Corporate Responsibility is one of the six core values of your Company whichfocuses on ‘serving and improving the communities in which we live'. Your Companyworks with ‘Cummins India Foundation' towards three broad focus areas viz. HigherEducation Energy and Environment and Social Justice and Infrastructure.

Details about the CSR Policy and initiatives taken by the Company during the year areavailable on our website ‘http:/ /www.cumminsindia.com/CIF/about us.html'. The AnnualReport on our CSR Activities is appended as Annexure ‘10' which forms part ofthis Report.

23. BUSINESS RESPONSIBILITY REPORT:

As stipulated under the Regulation 34 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Business Responsibility Report describing theinitiatives taken by the Company from environmental social and governance perspective isattached as part of the Annual Report.

24. GENERAL:

Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions on these items during the year under review:

a. Change in Key Managerial Personnel during the year;

b. Details relating to deposits covered under Chapter V of the Companies Act 2013;

c. Issue of equity shares with differential rights as to dividend voting orotherwise;

d. Issue of shares (including sweat equity shares) to employees of the Companyunder any scheme;

e. Neither the Managing Director nor the Whole-time Directors of the Companyreceived any remuneration or commission from any of its subsidiaries;

f. No frauds reported by auditors under Section 143 (12) of the Companies Act2013;

g. No significant or material orders were passed by the Regulators or Courts orTribunals which impact the going concern status and Company's operations (HoweverMembers' attention is drawn to the Statement on Contingent Liabilities commitments in thenotes forming part of the Financial Statement); and

h. No material changes and commitments occurred during April 1 2015 till the dateof this Report which would affect the financial position of your Company.

ACKNOWLEDGEMENT:

Your Directors would like to express their sincere appreciation for the assistance andco-operation received from the financial institutions banks government authoritiescustomers vendors and members during the year under review. Your Directors also wish toplace on record their deep sense of appreciation for the committed services by theCompany's executives staff and workers.

On behalf of the Board of Directors
Anant J. Talaulicar
Chairman & Managing Director
Pune : June 20 2016 DIN: 00031051

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