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Esab India Ltd.

BSE: 500133 Sector: Engineering
NSE: ESABINDIA ISIN Code: INE284A01012
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VOLUME 50
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P/E 29.33
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OPEN 674.30
CLOSE 684.35
VOLUME 50
52-Week high 817.95
52-Week low 531.00
P/E 29.33
Mkt Cap.(Rs cr) 1,041
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Esab India Ltd. (ESABINDIA) - Director Report

Company director report

Your Directors take pleasure in presenting the Thirtieth Annual Report together withthe audited accounts of the Company for the financial year ended 31 March 2017.

1. FINANCIAL SUMMARY / HIGHLIGHTS

(Rs in Lakhs)
Particulars 2016-17 2015-16
Income 48657 45895
Profit before Interest and
Depreciation 5575 5415
Finance Charges
Gross Profit 5575 5415
Provision for Depreciation (1027) (952)
Profit before exceptional and
prior period items and tax 4548 4463
Exceptional items (911) (353)
Profit before Tax 3637 4110
Provision for Tax (1037) (1276)
Net Profit After Tax 2600 2834

2. EVENTS SUBSEQUENT TO THE DATE OF FINANCIAL STATEMENTS

There were no events to report that has happened subsequent to the date of financialstatements.

3. CHANGE IN THE NATURE OF BUSINESS IF ANY

There has been no material change in the nature of business during the period underreview.

4. DIVIDEND

The Board of Directors has recommended a dividend of Rs 1/- per equity share of Rs 10/-each (10%) at its meeting held on 25 May 2017 resulting in an estimated outflow of aboutRs 185.27 lakhs (Inclusive of dividend distribution tax) for approval of the shareholdersat the Annual General Meeting. The proposed dividend takes into consideration current andanticipated future resource requirements of the business.

5. BOARD MEETINGS

The Board of Directors met 4 times during the financial year 2016-17. The Meetings wereheld on 19 May 3 August and the 3 November of 2016 and on the 9 of February 2017.

6. DIRECTORS & KEY MANAGERIAL PERSONNEL

The Board of Directors of the Company has six members.

Mr Daniel A Pryor is the nominee of ESAB Holdings Limited and a non-retiring Directorin terms of the provisions of the Articles of Association.

Mr Rohit Gambhir is the Managing Director of the Company. He was appointed for a periodof five years with effect from 1 November 2013.

There are four Non-executive and Independent Directors on the Board of the Company.

In accordance with the provisions of Article 129 of the Company's Articles ofAssociation Mr Rohit Gambhir retires by rotation at the forthcoming Annual GeneralMeeting and being eligible has offered himself for re-appointment. The details asrequired under Regulation 36 (3) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 regarding Mr Rohit Gambhir are published as part of theNotice calling the Annual General Meeting.

Key Managerial Personnel

As stipulated under Section 203 of the Companies Act Mr Rohit Gambhir ManagingDirector Mr B Mohan Vice-President Finance & Chief Financial Officer and Mr SVenkatakrishnan Company Secretary have been designated as the Key Managerial Personnel ofthe Company.

Mr B Mohan Chief Financial Officer joined the Company on 1 February 2005 and Mr SVenkatakrishnan Company Secretary joined the Company on 10 March 2006.

7. DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

As required under Section 149 (7) of the Companies Act 2013 all the IndependentDirectors on the Board of the Company have individually issued the stipulated annualdeclaration confirming that they meet all the criteria of independence as stipulated underthe Act.

8. COMMITTEES OF THE COMPANY

A. AUDIT COMMITTEE

The Company's Audit Committee consists of three Independent Directors and oneNon-executive Director. Mr K Vaidyanathan is the Chairman of the said Committee. MrVikram Tandon Mr Sudhir Chand and Mr Daniel A Pryor are the other members of the saidCommittee. The said Committee met four times on 19 May 3 August 3 November 2016 and on9 February 2017. The constitution and the terms of reference of the Committee are in linewith the requirements of Section 177 of the Companies Act.

There were no occasions during the year where the Board of Directors did not accept therecommendations of the Audit Committee.

B. NOMINATION AND REMUNERATION COMMITTEE

The Company's Nomination and Remuneration Committee consists of three IndependentDirectors and one Non-Executive Director. Mr K Vaidyanathan is the Chairman of the saidCommittee while Mr Sudhir Chand & Ms Sabitha Rao Independent Directors and Mr DanielA Pryor Chairman of the Board are the other Members of the Committee.

The said Committee met once during the financial year 2016-17 on 19 May 2016.

The said Committee lays down the policy on remuneration stating therein the attributesrequired for the Managing Director Independent Directors and Key Managerial Personnel.The said policy also states the modus operandi for determining the remuneration for theabove referred personnel. The remuneration policy of the Company can be viewed on theCompany's website www.esabindia.com.

The above are in compliance with Section 178 (4) of the Companies Act 2013 andRegulation 19 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015.

C. STAKEHOLDERS RELATIONSHIP COMMITTEE

The Company's Stakeholders Relationship Committee consists of two IndependentDirectors one Non-executive Director and the Managing Director. Mr Vikram Tandon is theChairman of the Committee Mr Sudhir Chand Independent Director Mr Daniel A PryorChairman of the Board and Mr Rohit Gambhir Managing Director are the other Members of theCommittee.

The Committee met four times during the year on 19 May 3 August 3 November 2016 andon 9 February 2017.

The Committee and the conduct of its business are in compliance with Section 178(5) ofthe Companies Act 2013 and Regulation 20 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015.

D. CORPORATE SOCIAL RESPONSIBILITY COMMITTEE

The Company's Corporate Social Responsibility Committee consists of one IndependentDirector one Non-executive Director and the Managing Director. Ms Sabitha Rao is theChairperson of the said Committee. Mr Daniel A Pryor Chairman of the Board and Mr RohitGambhir Managing Director are the other Members of the said Committee.

The Committee met twice during the financial year on 19 May and 3 November 2016.

The Committee lays down the Policy on Corporate Social Responsibility stating thereinthe strategy objectives funding & allocation for the CSR projects implementationstrategy and steps involved in achieving the CSR objectives. The Policy on CorporateSocial Responsibility of the Company can be viewed on the Company's websitewww.esabindia.com.

The formation of the Committee and its terms of reference are in line with therequirements of Section 135 (1) of the Companies Act 2013.

E. RISK MANAGEMENT COMMITTEE

The Company has a Risk Management Committee as stipulated by the Companies Act 2013and Regulation 21 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015. The Company's Risk Management Committee consists of Mr Daniel A PryorChairman of the Board Mr Rohit Gambhir Managing Director and Mr B Mohan Vice PresidentFinance & Chief Financial Officer of the Company.

The said Committee met twice on 3 August 2016 and 9 February 2017.

The said Committee lays down the Policy on Risk Management stating therein theobjectives and purpose of the said policy. The main objective of this policy is to ensuresustainable business growth with stability and to promote a pro-active approach inreporting evaluating and resolving those risks which are material in nature and areassociated with the business. In order to achieve the key objective the policyestablishes a structured and disciplined approach to Risk Management in order to guidedecisions on material risk related issues.

The Risk Management Policy of the Company can be viewed on the Company's websitewww.esabindia.com.

9. VIGIL MECHANISM

The Company has set up a whistleblower policy which can be viewed on the Company'swebsite www.esabindia.com. In terms of the said policy the Directors and employees aregiven direct access to the Chairman of the Audit Committee to report on allegedwrongdoings. The said policy has been made available at the Offices / Plants of theCompany at conspicuous places to enable the employees to report concerns if any directlyto the Chairman of the Board and to the Chairman of the Audit Committee. Employees whojoin the Company newly are apprised of the availability of the said policy as a part oftheir induction schedule.

The above is in compliance of Section 177 (9) & (10) of the Companies Act 2013 andin terms of Regulation 22 of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.

10. 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 statement as per therequirements of Section 134 (5) of the Companies Act 2013.

1. In the preparation of the annual accounts for the financial year ended 31 March2017 the applicable accounting standards have been followed;

2. The Directors have selected such accounting policies listed in Note 2.1 to the Notesto the Financial Statements and applied consistently and made judgments and estimates thatare reasonable and prudent so as to give a true and fair view of the state of the affairsof the Company at the end of the financial year on 31 March 2017 and of the Profit of theCompany for that year;

3. The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;

4. The Directors have prepared the annual accounts for the year ended 31 March 2017 ona going concern basis;

5. The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively; and

6. The Directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectively.

11. MANAGEMENT DISCUSSION AND ANALYSIS ECONOMIC & BUSINESS ENVIRONMENT

The financial year under review witnessed a slew of initiatives from the Governmentwith varying ranges of present and potential impact. There appeared to be legislativeintent in addressing multiple issues notably on financial sector reforms digitization andpolicy push on infrastructure. The short term adverse impact on some of these initiativesaffected business for a part of the financial year and we expect to have some more shortterm volatilities in the current fiscal year. This is specifically in the context of theproposed Goods and Services Tax. The longer term impact of these initiatives ondigitization demonetization and GST are expected to be positives for players in theorganized sector including your Company. However there are expected short termdisruptions compliance risks and multiple change management issues to address on thesupply chain IT and other business elements.

In the specific context of segments addressed by your Company the indicators continuedto reflect a continuing phase of low to often negative core manufacturing growth. TheInvestment cycle is reportedly yet to revive and steel consumption growth for relevantsegments addressed by the Company continued to languish at low levels.

Key end customer segments for Welding products were affected to various degrees by theabove elements.

Input costs on Steel hardened in the face of reported cost increases on ore and cokingcoal. Pass through in terms of pricing changes was limited given the market conditions andthe consequent squeeze on margins had to be addressed through productivity gains and costreductions.

The Company enhanced its range of product offerings with the introduction of newproducts. The Company made a small beginning in terms of exports to South East Asiancountries on a range of consumables that were hitherto sourced from another ESAB locationoutside India.

The Company discontinued manufacturing operations at its Khardah Plant and successfullycompleted the transfer of manufacture of products mainly to its Ambattur Plant. Some ofthe products relating to Wires are now being supplied out of the Company's Plant atKalmeshwar Nagpur.

The Company undertook a restructuring exercise at Taratala involving right sizing ofheadcount through a voluntary separation scheme for workmen and one time settlement ofsome of the contractors. This is expected to help us stay cost competitive in a difficultmarket.

The Company continued to make good progress on its support service activities out ofIndia in the areas of R&D shared services and operational support for othersubsidiaries of Colfax around the world. We have had encouraging response from theconcerned end customers in the Colfax group. We continue to focus on this to growemployment opportunities in India and to optimize on costs apart from bringing in foreignexchange earnings.

We continue to explore avenues to drive down costs and improve productivity throughinternal and global benchmarking of performance metrics.

OUTLOOK OPPORTUNITIES AND THREATS

Despite mixed signals within various segments the overall outlook appears to bemoderately better for the current fiscal year. We expect to see the benefits of some ofthe reforms which tend to benefit the organized sector of the economy. We also expect tosee some change management issues in the economy in the transition phase of GST when it isimplemented. We also expect to see some benefits from the restructuring projectsundertaken over the last 2 years to accrue in terms of costs and productivity.

RISKS AND CONCERNS

Acute price pressures on some of our key product segments continuing volatility inSteel prices Exchange rate volatilities with an upside bias on the Rupee and the eventuallevels of Monsoon are some of the external elements to deal with. We also continue to seethreats arising from excess capacities in the market and competition from the unorganizedsegment.

INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY

The Company's internal controls are continuously evaluated by Management and tested byour Auditors. Additionally the Company is subjected to reviews applicable forSubsidiaries of US headquartered entities. The Company continues to list and evaluate keycontrols and process to an extent leveraging on the work done as part of its globalreporting requirements. The Audit Committee reviews key findings and follow up actions atits meetings. The scope and coverage of internal audits are aligned to have coverage interms of key controls and locations. The endeavor is to align to the requirements ofInternal Control on Financial Reporting (ICFR) framework while leveraging on work done aspart of global reporting requirements. Management testing through independent audit teamsfollowed by external testing were done during the year.

The scope of work of Internal Auditors includes review of controls on accountingfinancial reporting statutory and other compliances and operational areas in addition toreviews relating to efficiency and economy in operations.

Our efforts on the above lines are expected to ensure compliance with the requirementsof Internal Controls on Financial Reporting.

FINANCIAL PERFORMANCE OF THE COMPANY INCOME AND EXPENDITURE

Revenue from operations grew by about 5% over the previous year. Consumables businessgrew by 3.9% while Equipment grew by 6.3%. The growth was driven by volume growth inElectrodes Cored Wires Gas Equipment and Automation businesses. Overall Equipmentbusiness continued to be affected by a continuing slowdown in the capital expenditurecycle.

Other income grew by 60.6% driven by higher investment income exchange gains andprofits on disposal of fixed assets primarily relating to Assets following the closure ofthe Khardah Plant. Cash surpluses were deployed in debt and liquid funds through the year.

Materials costs as a percentage to sales were higher at 65% as against 64% in theprevious year. This was due to higher Steel costs and growth in traded items sales withrelatively lesser margins.

Overheads including employee costs were higher at 28.3% of Net Sales and Service Incomeas against 27.7% in the previous accounting period. The increases were primarily onaccount of;

- Employee benefit expenses were higher by 12.4% on a comparable basis driven byrecruitments primarily on global support functions wage inflation and higher retirementbenefits costs on funding due to reduction in interest rates.

- Higher costs on transportation outwards in line with changes in terms of trade andcustomer mix.

- Increases in sales promotion expenses for furthering sales and channel growth.

Depreciation was higher by 7.9% as compared to 2015-16 due impact of additions duringthe year. The Company has continued to provide for Depreciation at rates aligned to theerstwhile Schedule XIV of the Companies Act 1956 based on a technical evaluation ofuseful life of assets.

BALANCE SHEET

Market conditions on liquidity continued to be tight throughout the year with apronounced short term impact arising from demonetization during the year. Additionallythere were transition issues arising from product transfers and plant closure relatedactivities.

The Company continued to monitor closely all key elements of working capital andcapital expenditure. This resulted in a healthy cash conversion with a healthy growth of19.8% in cash and current investments from the end of the previous financial year.

Capital Expenditure was about $. 1491 lakhs as against $.1053 lakhs in the previousyear. The capital expenditure was primarily on productivity improvements capacityenhancements and upgrading IT systems.

Inventories were higher by about 7.5% in value terms due to seasonal elements includingproduct transfers and restructuring as also due to increases in forecast based inventorylevels at the end of March 2017. Measured in days to sales it went up marginally from48.6 days at the end of 2015-16 to 50.1 days.

Trade receivables were relatively stable at 38.2 days to sales as compared to 37.7 daysat the end of the previous financial year.

Current liabilities were higher by 25.8% after negotiated improvements in payment termswith vendors.

SUBSIDIARY / JOINT VENTURE / ASSOCIATE COMPANY

The Company does not have any subsidiary joint venture or an associate company.

HOLDING COMPANY

Colfax Corporation is a Delaware USA based industrial group with existing globalbusiness interests in gas and fluid handling and fabrication technology products andservices. Colfax Corporation holds 73.72% of equity shares of your Company through ESABHoldings Limited UK and Exelvia Group India BV Netherlands which are its indirectwholly-owned subsidiaries.

12. EXTRACT OF THE ANNUAL RETURN

The Extract of the Annual Return in form MGT-9 of the Company made up as on theFinancial Year ended 31 March 2017 is attached by way of Annexure - 1 to thisreport.

13. STATUTORY AUDITORS

M/s. S R Batliboi & Associates LLP Chennai (Firm Regn No.101049W / E300004) wereappointed by the shareholders at the Annual General Meeting held on 7 August 2015 as theStatutory Auditors of the Company for a period of five years in compliance with Section139 (1). Their appointment as statutory auditor was informed to the Registrar of Companiesthrough Form ADT-1 dated 14 August 2015 vide SRN S39001086.

Further as envisaged in Section 139 and 142 of the Companies Act 2013 theirappointment is subject to ratification by the shareholders of the Company at the

Annual General Meeting. This being the third consecutive year out of the five yearsthat they have been appointed the subject is being placed before the shareholders at theAnnual General Meeting on 3 August 2017.

M/s. S R Batliboi & Associates LLP Chartered Accountants have vide their letterdated April 10 2017 given their written consent to continue as the Statutory Auditors ofthe Company and have also issued a certificate that the appointment if made shall be inaccordance with the conditions and that they satisfy the criteria provided under therelevant section and Chapter X of the Companies Act read with Companies (Audit andAuditors) Rules 2014.

The Statutory Auditors have issued a clean report on the financials of the Company andhave not issued any qualifications for the financial year ended 31 March 2017.

14. SECRETARIAL AUDIT

In terms of Section 204 (1) of the Companies Act 2013 the Company has appointed M/s.V Mahesh & Associates Chennai to do the secretarial audit of the Company for thefinancial year 1 April 2016 to 31 March 2017. The said firm had vide their letter dated24 March 2016 issued their consent to do the secretarial audit for the Company for thesaid period. Their appointment was informed to the Registrar of Companies Chennai videform MGT-14 dated 30 May 2016 vide SRN G04321774.

M/s. V Mahesh & Associates have now completed their secretarial audit and haveissued their certificate as per the prescribed format in MR-3 to the shareholders of theCompany which is annexed to this Report as Annexure - 2. They have no observationsin their report and have confirmed that the Company has proper board processes and acompliance mechanism in place. They have also affirmed that the Company has complied withthe relevant statutes rules and regulations and secretarial standards as applicable.

15. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE OUTGO

The information required under Section 134 (3) (m) of the Companies Act 2013 read withRule 8 of the Companies (Accounts) Rules 2014 is given in the Annexure - 3 andforms part of this Report.

16. DETAILS RELATING TO DEPOSITS

The Company has not accepted any deposits during the period under review as envisagedunder Section 73 74 & 76 of the Companies Act 2013.

17. SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORS

During the year under review there have been no significant and material orders passedby any regulators / courts / tribunals that could impact the going concern status and thecompany's operations in future.

18. PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

The Company has not made any loans to any third party as envisaged under Section 186 ofthe Companies Act 2013 during the year under review.

The Board of Directors from time to time has authorized the Company to invest thesurplus funds of the Company in deposits with Bank and investments in debt funds liquidfunds and fixed maturity plans with mutual funds for a tenor not exceeding 100 days. Theinvestments are made in liquid and debt funds .The Company has earned an income of around$.935 Lakhs for the period 1 April 2016 to 31 March 2017 in the form of dividends andprofit on redemption of investments. The Company has not given any guarantees other thanbank guarantees in the normal course of business to meet contractual obligations.

19. RISK MANAGEMENT POLICY

In order to comply with the requirements of Section 134 (n) of the Companies Act 2013and as required under Regulation 21 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has constituted a Risk Management Committeeconsisting of Mr Daniel A Pryor as the Chairman and Mr Rohit Gambhir Managing Directorand Mr B Mohan Chief Financial Officer as the Members of the Committee. The saidCommittee lays down the procedures to identify risks and the mitigation procedures andadopted a policy in this regard. The Board of Directors defines the roles andresponsibilities of the Committee. The policy on Risk Management has been hosted in theCompany's website www.esabindia.com. The said committee updates the Board of Directors ona periodical basis on the material risks faced by the Company and the measures taken bythe Company to mitigate the said risks.

20. CORPORATE SOCIAL RESPONSIBILITY

As required under Section 134 (o) read with Section 135 (1) of the Companies Act 2013the Company has constituted a Corporate Social Responsibility Committee. The Committee hasMs Sabitha Rao as the Chairperson Mr Daniel A Pryor and Mr Rohit Gambhir as the Membersof the said Committee.

The Committee formulated a policy on CSR and the Board of Directors approved the same.The policy as required under Section 135 (4) (a) of the Companies Act 2013 has beenuploaded on the Company's website www.esabindia.com.

The Company promotes education on safe welding practices especially in smaller townsthrough deployment of consultants to work with welders. The Company is also in the processof identifying vocational institutions where it could contribute by way of education onwelding through deployment of personnel and also through contributions in the form ofEquipment and / or welding consumables.

The Company's policy on CSR envisages expenditure in areas falling within the purviewof Schedule VII of the Companies Act 2013. The annual report on CSR activities isenclosed by way of Annexure - 4 to this report.

In addition to ongoing initiatives for promoting safe welding practices the Company isconcentrating on providing employment enhancing vocation / skill development training andpromoting livelihood enhancement projects as an identified area. Towards this end theCompany is currently working on identifying vocational centers / beneficiaries of theseprojects understanding their needs shortlisting the partnering agencies and theimplementing NGOs having the necessary expertise in this field. The Company is evaluatingplans to scale up the identified CSR activities in a structured and controlled manner toensure maximum advantage to the relevant communities.

The Company has expended about $.8.22 lakhs during the financial year towards its CSRinitiatives.

21. RELATED PARTY TRANSACTIONS

As required under Section 188 of the Companies Act 2013 and Regulation 23 of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Company placesbefore the audit committee the list of related parties from whom they buy raw materials orfinished goods to whom the Company extends services or exports goods. The details of thebasis of pricing and the margins on such transactions are also tabled. The Audit Committeeaccords its omnibus approval for such related party transactions on an annual basis. Theupdates on the transactions with the related parties are placed before the audit committeeon a quarterly basis. The details are also placed before the Board of Directors for itsinformation.

As required under Regulation 23 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Company has formulated a policy on related partytransactions and the same was approved by the Audit Committee and the Board of Directors.The said policy has been uploaded on the company's website www.esabindia.com.

All the transactions with the related parties entered into during the period underreview have been in the ordinary course of business and at arms' length basis. There havebeen no material related party transactions entered into during this period which requiredthe approval of the shareholders by way of special resolution. The details of relatedparty transactions pursuant to Clause (h) of sub-section (3) of Section 134 of the Act isenclosed in form no. AOC 2 as Annexure - 5.

22. FORMAL ANNUAL EVALUATION

As required under Section 134 (p) of the Companies Act 2013 and Regulation 17 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board ofDirectors had already approved the evaluation criteria for evaluating the performance ofthe Board of Directors its committees and the performance of Independent Directors.

Accordingly as required under Schedule IV of the Companies Act 2013 and Regulation 17of the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 theIndependent Directors at their separate meeting held on 9 February 2017 evaluated theperformance of the non-independent Directors and the Board as a whole. They also reviewedthe performance of the Chairman of the Company and also assessed the quality quantity andtimeliness of flow of information between the Company Management and the Board that wasnecessary for the Board to effectively and reasonably perform their duties.

Also as required under Regulation 17 (10) SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Board assessed the performance of the IndependentDirectors as per the criteria laid down and has recommended their continuation on theBoard of the Company at its meeting.

The Board of Directors assessed the performance of the individual directors on theBoard based on parameters such as relevant experience and skills ability andwillingness to speak up focus on shareholder value creation high governance standardsknowledge of business processes and procedures followed openness of discussion /integrity relationship with Management impact on key management decisions etc. TheMembers of the Committee of Audit Nomination & remuneration Stakeholdersrelationship and Corporate social responsibility committee were also assessed on the aboveparameters and also in the context of the committee's effectiveness vis-a-vis the Act andthe listing regulations.

23. COST AUDITOR

As required under Section 148 of the Companies Act 2013 the Board of Directors at itsmeeting held on 25 May 2017 have appointed M/s.Geeyes & Co. Cost Accountants withinthe meaning of Cost & Works Accountants Act and holding a valid certificate ofpractice No.000044 as the Cost Auditor for conducting the Cost Audit for the financialyear 2017-2018. The Audit Committee recommended the appointment subject to the complianceof the requirements stipulated in the relevant notifications issued by Ministry ofCorporate Affairs.

The Company has received a letter from the Cost Auditor stating that the appointmentif made will be within the limit prescribed under the Act.

The relevant Form CRA-2 for appointment of Cost Auditor for the financial year 2015-16was filed with the Registrar of Companies on 6 June 2016 vide SRN G04764023.

The cost audit report issued by the Cost Auditor for the financial year ended 31 March2016 was filed with the Registrar of Companies vide form CRA-4 dated 2 September 2016vide SRN G10496263.

24. RATIO OF REMUNERATION TO EACH DIRECTOR

As required under Section 197 (12) and Rule 5 of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the details of ratio of remuneration toeach Director to the median employee remuneration are as given below:

A. Executive Director

Ratio of remuneration paid to Mr Rohit Gambhir Managing Director vs the medianemployee is 23 : 1 (22 : 1 for the year ended 31.3.2016).

Non-executive Independent Director

Ratio of remuneration paid to Mr Vikram Tandon Non-executive Independent Director vsthe median employee is 0.77 : 1 (0.58 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Mr Sudhir Chand Non-executive Independent Director vsthe median employee is 0.83 : 1 (0.66 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Mr K Vaidyanathan Non-executive Independent Director vsthe median employee is 0.88 : 1 (0.70 : 1 for the year ended 31.3.2016).

Ratio of remuneration paid to Ms Sabitha Rao Non-executive Independent Director vs themedian employee is 0.78 : 1 (0.62 : 1 for the year ended 31.3.2016).

B. The percentage increase in the median remuneration of employees in the financialyear was 7%.

C. The number of non-unionized employees in the rolls of the Company as at 31 March2017 is 371 (344 as on 31 March 2016).

D. Average percentile increase made in salaries of employees other than KMP incomparison to the percentile increase in the remuneration of KMP and the justificationthereof.

The average percentile increase in salaries of employees other than KMP is 8.5% whilethat of KMPs is 8.6%.

Justification thereof: Compensation revisions take into account performance metrics onsales operating profits and working capital apart from specific elements attributable tovarious functions within the organization. Despite difficulties in the operatingenvironment the Company's performance against the above metrics were close to ormarginally above budgeted levels. The revisions also need to be reviewed in the light ofshort and medium term forecasts and budgets on profitability and working capital elementsapart from qualitative objectives including safety quality and leadership parameters.Taking into account all the above elements we chose to consider an overall averageincrease of 6.6% to sustain the morale and motivation levels.

E. The key parameters for any variable component of remuneration availed by theDirectors.

Variable Component to Mr Rohit Gambhir - This is linked to various parametersfinancial and non-financial. Key elements include sales operating profit workingcapital implementation of business systems.

Variable Component to Independent Directors - This is based on the roles andresponsibilities and their contribution to the Company in their respective capacities. TheCommission is individually determined based on their varying commitments of time andeffort to the Board and to its Committees.

The Board of Directors would like to affirm that the remuneration paid to the Executiveand Non-executive Directors and the Key Managerial Personnel is in line with theRemuneration Policy of the Company.

As required under the provisions of Section 197 (12) of the Companies Act 2013 readwith Rule 5 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 as amended the name and other particulars of the employee is set out in theAnnexure - 6 to this Report. Further as required under Companies (Appointment andRemuneration of Managerial Personnel) Rules2014 rule 5 sub-rule (2) the names of Top 10employees in terms of the remuneration drawn is given in Annexure - 6.

As at the end of March 2017 the Company had 660 employees as against 622 at the end of31 March 2016. The Company believes in providing a working environment that is focused onthe customers teamwork continuous improvement innovation and a competitive environmentwhere employees strive to improve value for shareholders.

25. FINANCE

The Company's relationships with its Bankers viz. AXIS Bank Ltd. and HDFC Bank Ltd.continued to be cordial during the year. The Company would like to thank its Bankers fortheir support.

26. ENVIRONMENT HEALTH AND SAFETY

The Company continued its commitment to industrial safety and environment protectionand all its factories have obtained its OHSAS 18001 certification. Periodical audits aredone by external and internal agencies to assess the continued levels of EHS efficiency ofeach of these plants and the OHSAS certification given is renewed after every such audit.The Company is also networked with the Group on EHS initiatives and works closely withthem on initiatives and actions concerning EHS.

Cautionary Statement

Certain statements in this Directors' Report may constitute "forward lookingstatements" within the meaning of applicable laws and regulations. Actual results maydiffer materially from those either expressed or implied in this Report.

27. LISTING WITH STOCK EXCHANGES

The Company's equity shares are listed with a) BSE Limited and b) National StockExchange of India Limited. The annual fee for both the exchanges have been paid promptlyfor the year 2016-2017. Pursuant to the requirements of SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 the Company had executed fresh listingagreements with BSE Limited and National Stock Exchange of India Limited on 9 November2015.

The Company had 9472 shareholders as at the end of the year 31 March 2017.98.28% of the shares are held in dematerialized form.

As required under Regulation 39 (4) read with Schedule VI of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 the details of the sharesissued by the Company consequent to amalgamation of erstwhile Maharashtra Weldaids Limitedwith the Company in 1994 the details of the physical shares which remains unclaimed andtransferred to the Unclaimed Suspense Account and the reconciliation of the shares claimedby shareholders during the year 2016-2017 and the shares outstanding in the suspenseaccount as on 31.3.2017 is given below:

Sl. No. Details No. of shareholders No. of equity shares
1. Aggregate number of shareholders and the outstanding shares lying in the unclaimed suspense account at the beginning of the year i.e. as on 1.4.2016 127 9515
2. Number of Shareholders who approached the Company during the year 1 50
3. Number of shareholders to whom shares were transferred from the unclaimed suspense account during the year 1 50
4. Aggregate Number of shareholders and the outstanding shares lying in the unclaimed Suspense Account at the end of the year i.e. 31.3.2017 126 9465

126 Shareholders holding 9465 equity shares constituting about 0.06% of shares havenot made their claim from the Company on the shares outstanding in the Unclaimed SuspenseAccount of ESAB India Limited. The voting rights for these shares shall remain frozenuntil these are claimed by the rightful owners.

28. CORPORATE GOVERNANCE

In terms of Chapter IV Regulation 15 read with Schedule II of the SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 a Corporate Governance Reportis made part of this Annual report.

A certificate from the Statutory Auditors of the Company regarding compliance of theconditions stipulated for Corporate Governance as required under Clause E of Schedule Vread with Regulation 34 (3) of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 is attached to this report.

The declaration by the Managing Director addressed to the Members of the Companypursuant to Clause D of Schedule V read with Regulation 34 (3) Chapter IV of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 regarding adherence tothe Code of

Conduct by the Members of the Board and by the Members of the Senior ManagementPersonnel of the Company is also attached to this Report.

29. POLICY ON PREVENTION OF SEXUAL HARASSMENT OF WOMEN AT WORK PLACE ACT

The Company has also adopted the mandatory policy on Sexual Harassment of Women atWorkplace (Prevention Prohibition & Redressal) Act 2013. Employees have beensensitized on the provisions of this enactment and the Company has also constituted aninternal complaints committee with effect from 30 October 2013 to deal with complaintsif any under the said Act. The Committee meets as and when requirement arises. TheCompany believes in providing safe working place for the Women in the Company and adequateprotection are given for them to carry out their duties without fear or favour. There wereno complaints received during the year to report under the said statute. As required underSection 21 of Chapter VIII of the said Act the Committee has submitted its annual reportin the prescribed format to the designated authority within the stipulated period.

30. SECRETARIAL STANDARDS

As on 31 March 2017 the Secretarial Standard 1 & 2 on Board Meetings and GeneralMeetings have been notified and the Company has complied with the requirements of the saidSecretarial Standards.

A certificate of compliances issued by the Secretarial Auditor M/s. V Mahesh &Associates dated 15 May 2017 is enclosed as Annexure - 2 and forms part of thisReport.

31. ISSUE OF SHARES

The Company during the year under review has not issued any SWEAT equity shares orshares with differential rights or under Employee stock option scheme nor did it buy backany of its shares.

32. ACKNOWLEDGEMENTS

Your Directors place on record their appreciation for the confidence reposed andcontinued support extended by its customers suppliers and shareholders.

Your Board would like to place on record its sincere appreciation to the employees forhaving played a very significant part in the Company's operations till date.

For and on behalf of the Board of Directors
Daniel A Pryor
Chairman
25 May 2017

Annexure - A

To

The Members

M/s. ESAB INDIA LIMITED CIN:L29299TN1987PLC058738 Plot No. 13 3rd MainRoad Industrial Estate Ambattur Chennai - 600 058.

Our Secretarial Audit report dated 15 May 2017 is to be read along with this letter.

1. Maintenance of secretarial record is the responsibility of the management of theCompany. Our responsibility is to express an opinion on these Secretarial records based onour audit.

2. We have followed the audit practices and processes as were appropriate to obtainreasonable assurance about the correctness of the contents of the Secretarial records. Theverification was done on test basis to ensure that correct facts are reflected insecretarial records. We believe that the processes and practices we followed provide areasonable basis for our opinion.

3. We have not verified the correctness and appropriateness of financial records andbooks of accounts of the Company.

4. Wherever required we have obtained the management representation about thecompliance of laws rules and regulations and happening of events etc.

5. The compliance of the provisions of Corporate and other applicable laws rulesregulations standards is the responsibility of management. Our examination was limited tothe verification of procedures on test basis.

6. The Secretarial Audit Report is neither an assurance as to the future viability ofthe Company nor of the efficacy or effectiveness with which the Management has conductedthe affairs of the Company.

For V Mahesh & Associates
V Mahesh
Practising Company Secretary
Place: Chennai M.No. F4162
Date : 15 May 2017 C.P. No. : 2473

ANNEXURE - 3

ANNEXURE TO THE DIRECTORS' REPORT

Statement under Section 134(3)(m) of the Companies Act 2013 read with Companies(Disclosure of Particulars in the Report of the Board of Directors) Rules 1988 andforming part of the Directors' Report for the year ended 31 March 2017.

A. CONSERVATION OF ENERGY

1. Replacement of 250 watt Metal halide street light by 75 Watt LED Fittings-20 nos.

2. Replacement of 150 Watt High Bay Induction Lamp and Mercury Vapour Lamp by 80 WattLED high bay Fittings in Shop floor-15 No's.

3. Eliminated air leaks across factories & optimized compressor utilization to saveenergy.

4. Installation of One 40 HP compressor instead of running two no's 25 HP (Total 50 HP)Compressor.

5. Installation of Electrically Actuated Auto Stop Valve in Water line in all CopperingLines resulting in water (Natural Resource) saving by 50%.

6. Design of Tubular Air Heaters used for Ovens changed by adding cold zone in mountingarea to eliminate failures of heaters. 5% electrical energy saving achieved on heatingloads.

7. Polycarbonate roofing sheets provided in shop floor to maximise natural skylightthereby increasing resource efficiency and reduce environmental impact. 10% savingachieved on lighting loads.

8. LED lighting provided for all office areas. 23% saving achieved on lighting loads.

9. Compressor utilization was optimized by replacing lower capacity compressor andeliminating air leaks in the pipe lines saving of 4% achieved.

B. TECHNOLOGY ABSORPTION

1. Installation of alarm system for uniform dosing of Copper in Coppering Lines.

2. Installation of Wear Plate Machineries for Job Work.

C. FOREIGN EXCHANGE

The Company exports its products to Bangladesh South Africa Singapore Middle EastIndonesia Australia and USA.

During the year the total outflows in foreign exchange amounted to $.6325 lakhs(which includes $.5396 lakhs for the import of raw materials components and capitalgoods and $.929 lakhs towards expenditure in foreign currency).

During the year the Foreign exchange earnings were

$.3094 lakhs resulting in net foreign exchange outflow of $.3231 lakhs for the year.

For and on behalf of the Board of Directors
Daniel A Pryor
Chairman
25 May 2017

ANNEXURE - 5

FORM No. AOC-2

Pursuant to Clause (h) of sub-section (3) of Section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014

Form for disclosure of particulars of contracts / arrangements entered into by theCompany with related parties referred to in sub-section (1) of Section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso thereto

A. Details of contracts or arrangements or transactions not at arm's length basis:

(a) Name(s) of the related party and nature of relationship
(b) Nature of contracts / arrangements / transactions
(c) Duration of the contracts / arrangements / transactions
(d) Salient terms of the contracts or arrangements or transactions including the value if any Nil
(e) Justification for entering into such contracts or arrangements or transactions
(f) Date(s) of approval by the Board
(g) Amount paid as advances if any
(h) Date on which the special resolution was passed in general meeting as required under first proviso to Section 188
B. Details of Material contracts or arrangements or transactions at arm's length basis:
(a) Name(s) of the related party and nature of relationship
(b) Nature of contracts / arrangements / transactions
(c) Duration of the contracts / arrangements / transactions
(d) Salient terms of the contracts or arrangements or transactions including the value if any
Nil
(e) Justification for entering into such contracts or arrangements or transactions
(f) Date(s) of approval by the Board
(g) Amount paid as advances if any

 

Sd/-
Daniel A Pryor
25 May 2017 Chairman

ANNEXURE - 6

Statement pursuant to Section 197(12) read with Chapter XIII Rule 5 (2) and (3) of theCompanies Act 2013

Particulars of Employees Employed throughout the financial year and was in receipt ofremuneration for the year in the aggregate in excess of the limits specified under rule 5(2)

Sl. No. Name Design- ation Remuner- ation Received ($) Nature of Employ- ment Qualific- ation & Experi- ence Date of Commenc- ment of Employ- ment Age Previous Employment Percent- age of Shares held by the Emp- loyee Relative of a Director / Manager or not
1 Jagannathan Palle Venkata Vice President Operations 10224608 Full time B.E. Mech & MS in Manage- ment Systems 28 years 25.08.2014 52 Weirs Minerals (India) Limited Nil No
2 Manish Prasad Vice President APAC and Operations 11154019 Full time B.E. Mech 29 years 19.05.2014 52 Royal Bank of Scotland India Nil No

Statement pursuant to Section 197(12) read with Chapter XIII Rule 5 (2) and (3) of theCompanies Act 2013

Particulars of top ten employees employed in terms of remuneration drawn

Sl. No. Name Design- ation Remuner- ation Received ($) Nature of Employ- ment Qualific- ation & Experi- ence Date of Commenc- ment of Employ- ment Age Previous Employment Percent- age of Shares held by the Emp- loyee Relative of a Director / Manager or not
1 Manish Prasad Vice President - APAC and Operations 11154019 Full time B.E. Mech 29 Years 19.05.2014 52 Managing Director and Head Royal Bank of Scotland India Nil No
2 Jagannathan P V Vice President - Operations 10224608 Full time B.E. Mech & MS in Manange- ment Systems 29 Years 25.08.2014 52 Chief Operating Officer Manufacturing & Supply Chain Management Weirs Minerals (India) Ltd Nil No
3 B Mohan Vice President - Finance 7275596 Full time B.Com ACA ACS 30 Years 01.02.2005 51 GM Finance and Company Secretary Amagamation Valeo Clutch (P) Ltd Nil No
4 Vilas Tank Deputy General Manager - ESD 6663693 Full time B.E. Mech MS in Industrial Engineering MBA 13 Years 02.05.2014 38 Director - Sales & Marketing Tank Auto Tools (P) Ltd Nil No
5 M Myilvaganan Vice President - Human Resource 5437455 Full time LLB Masters in Social Work 34 Years 10.07.2005 58 General Manager - HR & Admin Futura Polyesters Ltd Nil No
6 Amit Kumar De Vice President - R&M Business 4848795 Full time B.Sc. (Hons.) 39 Years 15.10.1979 60 Sales Representative Indian Oxygen Ltd Nil No
7 S Venkata krishnan Company Secretary 4399397 Full time ACS MA (Public Admin.) BGL 31 Years 10.03.2006 53 Company Secretary TVS Group of Companies Nil No
8 Narula Anil Kumar Deputy General Manager - Sales (Welding Consum- ables) 4127859 Full time A.M.I.E PGDBM DEEE 31 Years 01.12.1986 53 Nil No
9 Biswadeep Banerjee Deputy General Manager - Equipment Sales & After Market) 3815420 Full time B.E. Mech I.C.W.A 31 Years 07.08.2000 52 Deputy General Manager - Planning and Product Development ICLC Ltd Nil No
10 V Parthasarathy Head - Sourcing 3771740 Full time B.E. Mech 23 Years 27.06.2014 44 Senior Manager - Global Sourcing Vestas Wind Technology Nil No

 

Sd/-
Daniel A Pryor
25 May 2017 Chairman