To the Shareholders
(Including Management Discussion & Analysis)
Your Board of Directors are pleased to present the 70th Annual Report of the Companytogether with Audited Accounts for the year ended 31st March 2017.
The economic environment for the year 2016-17 was dominated by the single event ofdemonetisation of larger currency notes in November 2016. While this had certain positivesfor the battery industry in that it rang the death knell for the largely illegal andunorganised sector of the economy it also meant a temporary setback in certain productcategories like two wheeler battery.
On the external front several developments took place that will have significantimplications for the Indian economy. To be precise these two external developments are ofimportance. In the short run the outlook for global interest rates have changed in theaftermath of the US elections. India's capital flows and exchange rates would be impactedby US fiscal and monetary policy. Markets are factoring in a regime change in advancedcountries especially US macroeconomic policy with high expectations of fiscal stimulusand unwavering exit from unconventional monetary policies.
While GDP data for 2016-17 is yet to be out India is likely to lose the tag of beingthe fastest growing major economy to China. International Monetary Fund has alreadydowngraded India's GDP growth forecast from 7.6% announced earlier to 6.6%. Howeverbelying analysts' growth expectations of the Indian economy grew by 7% in the quarterOctober-December 2016. Except construction and real estate all the other sectors of theeconomy grew at a faster clip during this period than earlier.
INDUSTRY STRUCTURE & DEVELOPMENT
The Passenger Vehicle Industry during the year under review grew by about 9% over theprevious year. The Commercial Vehicle Division grew by 3% after 12% growth last year.Overall the 3/4 Wheeler market grew by about 5%. The 2-Wheeler Sales grew by around 6%.
Sales of automotive batteries registered a double digit growth in volume in thefinancial year 2016-2017 as compared to the previous year. The aftermarket sales of fourwheeler batteries witnessed a substantial growth in units as compared to the previousyear. In the two wheelers aftermarket there was a double digit growth during thefinancial year 2016-2017. Sale of batteries in the four wheeler OEM division was alsoconsiderably higher during the financial year 2016-2017. In the OEM two wheelers yourCompany witnessed a growth in volume as compared to that of the previous year.
Inspite of the competitive market conditions your Company continues to remain thepreferred supplier to most of the vehicle manufacturers in the country.
Your Company registered a robust growth in the Industrial division. It has become thepreferred choice of majority of OEM's in the UPS segment because of superior productperformance excellent after sales service and cordial relationship with the customers.
Your Company's advanced VRLA products have received great response from the telecomcustomers and the products have been found to be superior in charge acceptance andperformance and your Company has made significant inroads in establishing itself as apreferred vendor in the Telecom segment. The Solar division has registered a robust growthand your Company has now forayed in offering the complete package of Modules Solar HybridInverters and Solar Batteries for the home usage of the customers.
In Motive Power business your Company continues to be the market leader in thedomestic market and has added new Distributors in Spain Italy and France in the exportmarket.
Industrial R&D shall be shortly launching the Ultra Batteries in Collaboration withEast Penn for the Telecom market and Energy Storage and this technology will givesubstantial competitive advantage to your Company in the coming years.
IN ORDER TO MAINTAIN ITS LEADERSHIP POSITION YOUR COMPANY IS CONTINUOUSLY FOCUSED ONUPGRADING ITS PRODUCTS AND MANUFACTURING TECHNOLOGY AS WELL AS ACQUIRING NEW AND ADVANCEDTECHNOLOGY TO MEET THE EMERGING EXPECTATIONS OF THE CUSTOMERS.
Your Company achieved the highest ever production and supply of submarine batteries inthe financial year 2016-17 without adding any additional infrastructure recording animpressive 38% growth over last year.
During the financial year 2016-17 your Company received the first order from M/sMazagon Dock Shipbuilders Limited for indigenous battery for the new French Scorpene classsubmarine inducted into the Indian navy.
In addition to our regular supplies to Indian Navy two sets of submarine batterieswere exported to Admiralty shipyard Russia during the financial year 2016-17. YourCompany is also continuing its efforts to acquire new export customer and expand exportbusiness.
In the fiscal year 2016-17 both Automotive and Industrial have registered substantialgrowth primarily through penetrating into new markets and increasing the marketshares in the existing markets.
For automotive batteries during the financial year your Company was able to increaseits reach by entering four wheeler battery markets in Uzbekistan Indonesia all GCC (GulfCooperation Council) countries and selective African nations including Mozambique andAngola. As a result of such efforts made in exports there was a double digit growth insales as compared to the previous financial year.
For industrial batteries during the year your Company increased its reach by enteringinto new traction markets in Europe comprising of Spain Italy and Greece while increasingits market share in Germany the biggest traction market of Europe. In the Standbysegment the Company made inroads into Chile Vietnam and Zambia. As a result of suchefforts your Company registered robust growth in exports of industrial batteries over theprevious financial year.
In order to maintain its leadership position your Company is continuously focused onupgrading its products and manufacturing technology as well as acquiring new and advancedtechnology to meet the emerging expectations of the customers. The in-house Research &Development (R & D) Division is recognised by the Department of Scientific andIndustrial Research Government of India as a fully accredited Research Centre in thefield of energy storage. Import substitution of raw materials reducing energy consumptionand manufacturing cycle time reduction are some of the areas where the priorities arehighest.
The in-house R&D also plays a major role in providing the interface between theCompany priorities and the adoption of collaborators technology. Your Company has ongoingtechnical collaboration and assistance agreements with East Penn Manufacturing CompanyInc USA (EPM) a leading US manufacturer of lead acid batteries and related items. Amajor program on up-gradation in manufacturing systems and introduction of advancedproducts had been taken up in consultation with EPM engineers and are now at differentstages of completion. The introduction of state of the art Punched Grid Technology ensureselectrodes with superior corrosion resistance which optimises product consistency andallows for high levels of productivity. Additionally your Company has a long standingtechnical cooperation agreement with Hitachi Chemicals Co. (formerly Shin Kobe ElectricMachinery Co.) Japan for a variety of automotive as well as VRLA industrial range ofproducts. The other ongoing technical cooperation program is with Furukawa BatteriesJapan and it covers some very advanced maintenance free batteries for 4 Wheeler and 2Wheeler vehicles.
During the year under review your Company has signed a technology co-operationagreement for the design and manufacture of Lithium Ion' family of products withChaowei Group a large renowned company of China.
With bulk energy storage being a major priority in the country your Company has signedtwo technical collaboration agreements during the year under review: (a) with EPM forUltra Battery Technology for Stationary Industrial Applications viz. integration of alead acid battery with an Ultra Capacitor; and (b) with Smart Storage Pty Ltd (ECoultAustralia) a hundred percent subsidiary of EPM for Technology cooperation and jointmarketing agreement for testing and study of energy storage solutions centered on UltraBattery Technology and indigenisation of Storage Blocks.
HIGHLIGHTS OF PERFORMANCE
Your Company recorded a Net Sales of Rs. 7620.28 crores in 2016-17 as compared to Rs.6847.65 crores in the previous year with a corresponding profit before tax of Rs. 975.73crores as compared to Rs. 908.18 crores.
(Rs. in Crores)
| ||2016-17 ||2015-16 |
|Profit before depreciation finance cost & tax expenses ||1186.36 ||1067.78 |
|Depreciation and amortisation expenses ||206.32 ||157.93 |
|Finance cost ||4.31 ||1.67 |
|Profit Before Tax ||975.73 ||908.18 |
|Tax expenses ||282.09 ||283.72 |
|Profit After Tax ||693.64 ||624.46 |
|Other Comprehensive Income ||1.90 ||(10.26) |
|Total Comprehensive Income for the year ||695.54 ||614.20 |
|Balance brought forward ||4426.43 ||4046.62 |
|Making a total of Out of this appropriations are : ||5121.97 ||4660.82 |
|Final Dividend for 2014-15 (70%) ||- ||59.50 |
|Final Dividend for 2015-16 (80%) ||68.00 ||- |
|Tax on Final Dividend ||11.69 ||11.20 |
|Interim Dividend for 2015-16 (160%) ||- ||136.00 |
|Interim Dividend for 2016-17 (160%) ||136.00 ||- |
|Tax on Interim Dividend ||27.69 ||27.69 |
|Aggregate Dividend amount paid ||243.38 ||234.39 |
|And leaving a balance of (which is carried forward to next year) ||4878.59 ||4426.43 |
Your Company has adopted Indian Accounting Standards ("Ind-AS") as prescribedunder Section 133 of the Companies Act 2013 read with the Companies (Indian AccountingStandards) Rules 2015 as amended with effect from 1st April 2016 with the date oftransition to Ind-AS as 1st April 2015. Consequently General Reserves appearing in theBalance Sheet as at 31st March 2015 has been subsumed into Retained Earnings with effectfrom 1st April 2015.
Effect of Lead Price Movement
Lead and Lead Alloys are the primary materials consumed in the manufacturing ofbatteries representing more than 70% of total material consumption by value. Your Companyprocures about 30% of its Lead and Lead Alloys requirement through imports or importparity pricing based on prices quoted on London Metal Exchange (LME). The balance 70% isprocured locally at prices which are influenced by demand/ supply situation as well as LMEmovement.
Your Company procures Lead and Lead Alloys mostly at current prices or on LME averagesand there is no long-term contract for pricing. About 30% of your Company's business withOEM's as well as institutional customers is having "Lead price variation clause"and thus this portion of the business is protected from lead price volatility. The balance70% of the
Company's business to retail customers is exposed to lead price volatility the risk ofwhich is reduced to an extent by increasing the usage of recycled lead which is cheaperthan pure lead and not directly exposed to LME price movement.
The exposure to currency fluctuations and its impact on Company's business issignificant since about 30% of Lead and Lead Alloys procurement is based on "importparity price". Further your Company imports few other materials and capital goods.Exports made by your Company which constitutes about 5% of the Company's business acts asan automatic hedge against risks resulting from currency fluctuation.
Your Company as a policy does not enter into commodity hedging or currency hedging. Attimes forward covers are taken against import liabilities but they are very few and farbetween.
During FY 2016-2017 the average LME price of pure lead increased by 13% as compared toFY 2015-2016 while the average landed cost of Lead and Lead Alloys including recycledlead in 2016-2017 indicates a rise of 10% as compared to the previous financial year.
Consolidated Financial Statements
As required under the Securities and Exchange Board of India (Listing Obligations &Disclosure Requirements) Regulations 2015 and in accordance with the Indian AccountingStandards (Ind-AS) 110 consolidated financial statements of the Company and itssubsidiaries form part of the Annual Report and are reflected in the consolidatedfinancial statements of the Company. These statements have been prepared on the basis ofaudited financial statements received from the subsidiary companies as approved by itsrespective Board of Directors.
Your Company has paid an interim dividend at the rate of 160% i.e. Rs. 1.60 per equityshare of Re. 1/- each on the equity shares to the shareholders whose names appeared onthe Register of Members on November 05 2016. Your Directors are now pleased to recommenda final dividend at the rate of 80% i.e. Re. 0.80 per equity share of Re.1/- each for theyear ended March 31 2017 subject to approval of the shareholders at the ensuing AnnualGeneral Meeting. Consequently the total dividend for the year ended March 31 2017including the interim dividend paid during the year amounts to 240% i.e. Rs. 2.40 perequity share of Re.1/- each.
The paid up equity share capital as on March 31 2017 was Rs. 85 crores divided into850000000 equity shares of face value of Re. 1/- each.
A) Issue of equity shares with differential rights
The Company did not issue equity shares with differential rights during the financialyear 2016-17.
B) Issue of sweat equity shares
The Company did not issue sweat equity shares during the financial year 2016-17.
C) Issue of employee stock options
The Company did not issue stock options during the financial year 2016-17.
D) Provision of money by company for purchase of its own shares by employees or bytrustees for the benefit of employees
The Company does not have a scheme for purchase of its own shares by employees or bytrustees for the benefit of employees.
During the year under review the Company did not accept any deposits from the publicwithin the ambit of Section 73 of the Companies Act 2013 and the Companies (Acceptance ofDeposits) Rules 2014.
Particulars of Loans Guarantees or Investments
Pursuant to Section 186 of the Companies Act 2013 the details of the loans given(Note nos. 6 and 13) guarantees on securities provided (Note no. 38 (ii)) and investmentsmade (Note nos. 4 and 9) by the Company during the year under review have been disclosedin the financial statements.
Material Changes and Commitments
There have been no material changes which have occurred subsequent to the close of thefinancial year of the Company to which the financial statements relates and the date ofthe report for example:
Settlement of tax liabilities;
Operation of patent rights;
Depression in market value of investments;
Institution of cases by or against the Company;
Destruction of any assets or disposal of a part of undertaking;
Changes in capital structure;
Alteration in wage structure arising out of trade negotiation; and
Material changes concerning purchase of raw and sale of the product.
Statutory Auditors and their Report
Pursuant to Section 139 of the Companies Act 2013 S. R. Batliboi & Co. LLPChartered Accountants would complete their current term as Statutory Auditors as permittedunder the Companies Act 2013 read with the relevant rules thereof at the conclusion ofthe ensuing 70th Annual General Meeting of the Company. Accordingly the Board ofDirectors has recommended the appointment of B S R & Co. LLP Chartered Accountants asStatutory Auditors to hold office for a period of five (5) consecutive years from theconclusion of 70th Annual General Meeting till the conclusion of 75th Annual GeneralMeeting of the Company subject to approval of shareholders.
B S R & Co. LLP Chartered Accountants have confirmed their eligibility underSection 141 of the Companies Act 2013 and the Rules framed thereunder for appointment asauditors of the Company. As required under Regulation 33(1)(d) of Securities and ExchangeBoard of India (Listing Obligations & Disclosure Requirements) Regulations 2015 theauditors have also confirmed that they hold a valid certificate issued by the Peer ReviewBoard of the Institute of Chartered Accountants of India.
The Statutory Auditors have not reported any incidence of fraud to the Audit Committeeof the Company during the year under review.
Pursuant to Section 148 of the Companies Act 2013 read with the Companies (CostRecords and Audit) Rules 2014 (as amended) the cost records maintained by the Company inrespect of the products manufactured by the Company are required to be audited. YourDirectors on the recommendation of the Audit Committee has appointed M/s Shome andBanerjee Cost Accountants to audit the cost records of the Company for the financial year2017-18 at a remuneration of Rs. 900000/- plus out-of-pocket expenses and taxes asapplicable. A resolution regarding ratification of remuneration payable to M/s Shome &Banerjee Cost Accountants forms part of the Notice convening the 70th Annual GeneralMeeting of the Company.
Secretarial Auditors & their Report
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed M/s A. K. Labh & Co. Practicing Company Secretaries to undertake auditof secretarial and other related records of the Company for the financial year 2016-2017.The Secretarial Audit Report is annexed herewith as "Annexure I". TheSecretarial Audit Report does not contain any qualification reservation or adverseremark.
BUSINESS RESPONSIBILITY REPORT
The Ministry of Corporate Affairs Government of India in July 2011 came out with theNational Voluntary Guidelines on Social Environmental and Economic Responsibilitiesof Business'. These guidelines contain certain principles which are to be adopted bycompanies as part of its business practices and disclosures regarding the steps taken toimplement these principles through a structured reporting format viz. BusinessResponsibility Report. Pursuant to Regulation 34(2)(f) of Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 your Companyhas prepared the Business Responsibility Report and is annexed herewith as "Annexure- II".
Transparency is the cornerstone of your Company's philosophy and all requirements ofcorporate governance are adhered to both in letter and spirit. All the committees of theBoard of Directors have held meetings at regular intervals as required in terms ofSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015. Your Board of Directors has taken all necessary steps to ensurecompliance with all statutory requirements. The Directors and key management personnel andsenior executives of your Company have complied with the approved Code of Ethics forBoard of Directors and Senior Executives' of the Company. The declaration to this effectpursuant to Schedule V of the Securities and Exchange Board of India (Listing Obligationsand Disclosure Requirements) Regulations 2015 signed by Managing Director and CEO of theCompany forms part of the Annual Report.
The Report on Corporate Governance as required under Regulation 34(3) read along withSchedule V of the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 forms part of and is annexed herewith marked as"Annexure III". The Auditors' Certificate on compliance with CorporateGovernance norms is also attached to this Report. Further as required under Regulation17(8) of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 a certificate from the Managing Director & CEO andDirector-Finance & CFO is being annexed with this Report.
Your Company has a well-designed TQM model to drive the organisation towards continualimprovement in order to deliver high-quality products and services to customers. The TQMmodel is aimed at developing TQM culture for longterm success through customersatisfaction. All members of the organisation participate in improving processesproducts services aligned with the business needs.
The TQM initiatives deployed in your Company at present are: 5S Kaizen QualityCircle Suggestion TPM Six Sigma and implementation of International Standards. Theorganisational learning and development is one of the key focus areas during the financialyear. Over 65 training programs covering 1272 people across the organisation have beentrained on various TQM modules during the financial year. There is structured monitoringand measurement system in your Company that fiashes the monthly report on various TQMPerformance metrics for each initiative.
Quality Circle is an effective approach to voluntarily involve people in continuousimprovement journey. The QC projects are aligned to the business strategy to achieve thebusiness goals and produce tangible and intangible benefits through involvement ofworkmen. This initiative is deployed in all the factories and extended supply chain.Workmen participation during the financial year was achieved at 47% in this initiative and164 QC projects have been completed. There is mechanism to evaluate and recognise theprojects in Exide Regional Conferences which were conducted at Kolkata Delhi and Pune.These conferences are learning and sharing platform for factories and suppliers.
The QC teams regularly participate in external competitions organised by QCFI as wellas internal competitions organised by your Company. During the year a total of 99 QualityCircle awards have been received by the QC teams.
Implementation of best practices and promoting competitive capability of theorganisation is one of the important areas your Company focused during the year andcommitted to excel in the years ahead. The excellence in areas of supply chain operationsustainability quality innovation corporate governance etc. were assessed by externalorganising bodies like CII Institute of Directors JIPM ACFI Greentech etc. YourCompany received 112 Awards in various categories during the financial year.
Your Company is committed to develop robust TPM culture across the organisation. Allmanufacturing units have TPM practice though maturity level varies from factory tofactory. There is a road map for each factory to take to the next level. JIPM regularlymonitors and assesses the maturity of TPM practices. Hosur factory has been awarded forExcellence in Consistent TPM Commitment in March 2017 by JIPM Japan. The TPM initiativehas been extended to upstream partners to build their manufacturing competitiveness andincrease their operating performance.
A new TQM ranking assessment system has been introduced for transparent rating andevaluation with an intense focus to regularly monitor and measure the various TQMinitiatives practiced in the factories. It helped in identifying the gaps and improvingthe system and process along with cross functional learning. This ranking system has beeninstitutionalised for building competitiveness among factories and flow of best practicesfrom one factory to other. The audit is conducted quarterly and factories are rankeddepending on the results of audit.
In order to meet the compliance with ISO/IEC 17025:2005 (International standard) andcontinually improve the effectiveness of the management systems laboratory quality policyhas been framed and the same is being deployed across the organisation. R & D CentreLaboratory has achieved accreditation to ACCAB for ISO/IEC 17025 Standard in March 2017.Laboratories at Haldia and Hosur are in process of accreditation. Your Company has plannedto have 100% accreditation for ISO/IEC 17025 Standard by next financial year.
OCCUPATIONAL HEALTH SAFETY AND ENVIRONMENT
Your Company has effectively deployed the policies on occupational health safety andenvironment in all factories. During the year EHS (Environment Health and Safety)standards have been implemented and certified in Ahmednagar factory.
Your Company has a well designed EHS policy. Your Company utilises natural and man-maderesources in an optimal and responsible manner and ensure the sustainability of resourcesby reducing re-using recycling and managing waste. Your Company regularly monitors andprevents pollution through waste minimisation at the source recovery / treatment ofemissions and releases and conservation of energy. Thus it has helped in progressivelyimproving environment occupational health and the overall carbon footprint.
Your Company has established implemented and maintained a procedure for the ongoingidentification of hazards assessment of their risk and determining the necessarycontrols. Safety audits hazard evaluation emergency management planning is conductedperiodically in the factories.
Your Company's employees as well as the upstream partners are being regularly trainedand awareness programmes are conducted to ensure that health and safety risks areminimised for the employees and contract workers. National Safety Day is celebratedannually by your Company. Various training and awareness programs based on safety areconducted in the week.
The maturity level of Occupational Health Safety and Environment system are assessedby different external certification bodies. During the financial year 2016-2017 yourCompany has been awarded with:
Annual Greentech Gold Award in Safety Category Hosur factory;
Annual Greentech Silver Award in Safety Category Ahmednagar factory; and
Annual Greentech Silver Award in Safety Category Taloja factory.
Your Company is transparent about the sustainability challenges. Identifying whicheconomic environmental and social issues are most important for the business environmentand stakeholders is most important. The sustainability efforts include reduction ofpollution waste elimination effective utilisation and recycling of existing naturalresources (like as water oil gas metal) and energy saving. Your Company complies withapplicable legal statutory regulatory customer specific and other requirements relatedto the environmental aspects occupational health and safety. Your Company has alwaysfocused on the sustainability of its upstream partners for business sustainability.Several vendor sustainability programs have been conducted in all the regions involvingalmost all the critical vendors. Periodic training on risk assessment environment healthand safety and quality have been provided to them for sustainability of their business. Inview of driving sustainability in vendors supply chain assessment was done by CII in2016. Your Company was awarded the CII-ITC Award 2016 for commendable achievement in SCMSustainability.
CORPORATE SOCIAL RESPONSIBILITY
Your Company always seeks ways to make a positive impact on the society at largethrough various CSR activities. Environment basic education health women empowermentand community development have been the main pillars of your Company's CSR philosophyeven before the passing of the Companies Act 2013.
The Board of Directors of your Company has approved a Corporate Social Responsibility(CSR) Policy namely "EIL CSR Policy" in accordance with Section 135 of theCompanies Act 2013 and the Companies (Corporate Social Responsibility Policy) Rules 2014notified by the Ministry of Corporate Affairs Government of India which is available athttp://www.exideindustries.com/investors/governance-policies.aspx.
The disclosures as per Rule 9 of Companies (Corporate Social Responsibility Policy)Rules 2014 is annexed hereto as ("Annexure IV").
During the year the Company has made significant strides in accomplishing socialoutcomes and impacts in the immediate and greater community at large at the nationallevel. These were achieved by investing considerable amount of resources and efforts inlaying down a strong foundation for CSR project planning identification implementationmonitoring and evaluation mechanism. The Company has also put in place institutionalarrangements for further expansion to newer geographical locations. Preference was givento allocate and spend higher amount on activities pertaining to local area and areasaround the Company's factories.
As part of its CSR initiatives in 2016 - 2017 the Company has spent (includingcommitted to spent) INR 1394 lakhs which is significantly higher as compared to theprevious year's CSR spend. The projects undertaken by the Company includes in the areas ofeducation health safe drinking water sanitation women empowerment and livelihoodgeneration rural development eradication of hunger poverty and malnutrition etc. Theseprojects were mainly executed directly or in association with some renowned and localpartner organisations around our operations in West Bengal Maharashtra Tamil NaduUttarakhand and Haryana. In addition to these national level CSR investments we havecontributed to the Prime Minister's National Relief Fund and Swachh Bharat Kosh. The WASHproject with Unicef covers different districts in West Bengal Assam and Bihar.
Some of the projects identified by the Company which were engaged in social activitiesaligned with the Company's CSR Policy could not materialise due to procedural delays ingetting requisite approvals. As a result of this there was a shortfall in the total CSRspent from its total obligations of at least 2% of the average net profits (before tax)made during the three immediately preceding financial years.
The social initiatives taken by the Company will certainly help in impacting the largercommunity in a sustainable manner over a period of time. The Company plans to rapidlyscale up in utilising its full CSR budget in the coming financial years. The Companyremains committed to the cause of CSR and will take necessary steps to fulfill its CSRobligations during the coming financial years.
A strong internal controls framework is an essential prerequisite of growing business.In this context to the best of their knowledge and belief and according to theinformation and explanations obtained by them your Directors state that your Company'sinternal control systems are commensurate with its size and scale of operations that aredesigned to provide reasonable assurance that the Company's financial statements arereliable and prepared in accordance with the law.
The overall outlook on economic growth of the country has improved with the Goods andServices Tax expected to come into force from July 2017 and the effects of demonetisationgetting over. It is expected that this will facilitate the industry to grow at a fasterrate in the medium and long term. The forecast is that the economy will grow more than7.2% in the financial year 2017-2018.
The interest rates have softened and inflation is under control. The industry andinfrastructural sectors are expected to benefit out of this and the automobile industryin particular is expected to perform much better in the coming years.
OPPORTUNITIES AND THREATS
Your Company has growth opportunities in industrial and automotive divisions speciallyenergy storage solar telecom e-rickshaw and commercial vehicle divisions. Your Companyhas strategies in place to tap the potential. However the new entrants and aggressiveexpansion plan of existing competitors are biggest challenge. The competitive pricenetwork strategy technology & product quality are critical to our success. YourCompany has advantage of having strong brand value large network widely spread productrange strong partners and collaborators relationship. It is fully prepared to meet thechallenge of competition leveraging its competitive strengths of network qualitytechnology product range and brand value.
In Lead Acid Storage battery your Company has a very large share of business indivisions like Automotive OEM Power Project Manufacturing and Solar. Economy plays avery important role in these divisions. A subdued economy is a threat to your Company.
RISKS AND CONCERN
Your Company is exposed to risk of environmental damage due to the nature of itsbusiness. However mitigating actions are in place to ensure protection of environment.Natural water harvesting plantation hazardous waste management plan environmentalmonitoring monitoring of the blood lead level of employees and statutory compliancemanagement are carried out.
Evolution of alternate battery chemistry may lead to technology disruption. YourCompany has mitigated the risk of disruptive technology and taken priority steps intransfer/ development of technology to safeguard the present and future market in allsegments. Long term technology road map is also in place. R & D function of theCompany has been re-structured to deliver as per change in market trends. Separatevertical for technology innovation has been created. Focus on product benchmarking hasbeen brought to forefront and tailored energy storage solution development initiativeshave been started. Your Company is fully geared up to meet future technology needs andprepared against all possible disruptions.
Exide has a very strong brand name. This trust has been built in last seven decades inquality & reliability of product business ethics & customer service. There isrisk of its damage due to ineficient and negligent handling / abuse/ under performance ofproduct negative advocacy/ conduct by partners factors like regulatory violation. Thereis comprehensive process in place to ensure product quality customer satisfactionstatutory compliance and these processes are highly matured.
VIGIL MECHANISM/WHISTLE BLOWER POLICY
Your Company has a Whistle Blower Policy establishing vigil mechanism to provide aformal mechanism to the directors employees and stakeholders to report genuine concernsabout unethical behavior actual or suspected fraud or violation of the Company's Code ofconduct or ethics policy in accordance with the provisions of the Companies Act 2013 readwith the Companies (Meeting of Board and its Powers) Rules 2014 and Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015. The Policy provides for adequate safeguards against victimisation of persons who usesuch mechanism and make provision for direct access to the chairperson of the AuditCommittee in appropriate or exceptional cases. It is afirmed that no personnel of theCompany has been denied access to the Audit committee. The Policy is available on theweb-site of the Company under the web-linkhttp://www.exideindustries.com/investors/governance-policies.aspx. The AuditCommittee of Directors are entrusted with the responsibility to oversee the vigilmechanism.
Your Company has four Indian subsidiaries viz Chloride Metals Limited Chloride PowerSystems & Solutions Limited Chloride International Limited Exide Life InsuranceCompany Limited and three foreign subsidiaries viz. Chloride Batteries S.E Asia Pte.Ltd. Singapore Espex Batteries Limited UK and Associated Battery Manufacturers (Ceylon)Limited Sri Lanka.
Exide Life Insurance Company Limited (ELI') a 100% subsidiary of your Companyis engaged in the business of life insurance and annuity offering a range of individualand group life pension and health products across traditional and unit-linked platforms.It reaches customers through technology enabled solutions and its network of 200 plusoffices to cater to the needs of customers.
ELI manages assets (AUM) of over INR 11000 crores as at March 31 2017. The totalpremium collected by ELI during the year ended March 31 2017 was Rs. 2408 crores asagainst Rs. 2016.24 crores collected during the previous year ended March 31 2016. Ithas also recorded a profit before tax of Rs. 112.51 crores during the year ended March 312017. as against a profit of Rs. 88.80 crores recorded during the previous year.
As at March 31 2017 market consistent embedded value (MCEV) of ELI was INR 2051crores against MCEV of INR 1870 crores in the previous year.
The profit reconciliation from IRDA (IGAAP) to IND-AS is given below:
(Rs. in Crores)
|Particulars ||2016-17 ||2015-16 |
|Profit before tax as per IRDA (IGAAP) ||112.5 ||88.8 |
|a) Finance income on measurement of financial assets at amortized cost ||0.8 ||1.0 |
|b) Amortization of prepaid expense relating to financial assets measured at amortized cost ||0.4 ||(1.0) |
|c) Lease straightlining ||0.2 ||(0.3) |
|d) Prior period expense recognized in IGAAP reinstated ||3.8 ||- |
|e) Recognition of amortization of premium/discount on investments measured at amortized cost on EIR basis. ||(3.7) ||0.7 |
|f) Reclassification of actuarial gains/losses for measurement through other comprehensive income ||0.7 ||1.2 |
|g) Reclassification of Net gain on derecognition of equity instruments measured at fair value through other comprehensive income ||(24.3) ||(22.3) |
|h) Reclassification of unrealized changes in fair value on mutual funds from liability to investment income ||3.5 ||(0.1) |
|Profit before tax as per Ind-AS ||93.9 ||68.0 |
Chloride Metals Limited another 100% your Company having its plants situated atMarkal Taluka Khed Pune and Malur Kolar district Karnataka is engaged in thebusiness of running smelting plants having integrated facilities for extracting lead fromexhausted batteries and manufacturing and supplying recycled lead and lead alloys. The netsales of Chloride Metals Limited was Rs.1424.08 crores and the profit before tax was Rs.34.04 crores representing an increase of 42% and 41% in net sales and profit before taxrespectively compared to the previous financial year.
Chloride Power Systems & Solutions Limited a 100% subsidiary of your Companyhaving its factory at Sector V Salt Lake City Kolkata is engaged in manufacture and saleof battery chargers D.C. Power Systems solar installations and associated equipment.During the year 2016-17 the said Company achieved a turnover of Rs. 77.78 croresand a profit before tax of Rs. 3.07 crores representing an increase of 34% and 15%respectively over the previous financial year.
Chloride International Limited is presently not engaged in any trading or manufacturingactivity and has income from rent and interest/dividend on securities. The income ofChloride International Limited during 2016-2017 amounted to Rs. 71.88 lacs with a profitbefore tax of Rs. 61.22 lacs.
Your Company also holds 100% of the share capital in Chloride Batteries S.E Asia Pte.Ltd. Singapore. The said Company is engaged in production and distribution of industrialbattery chargers rectifiers and parts thereof and the distribution of industrial andautomotive batteries. It caters to the South East Asian and Australian markets. During theyear 2016-2017 the said Company achieved a turnover of SGD 22.28 million and incurred aloss of SGD 0.43 million.
Espex Batteries Limited UK 100% subsidiary of your Company is engaged in marketingand selling of lead acid batteries for industrial applications in UK and its neighboringareas. During 2016-2017 the Company achieved a turnover of GBP 5.88 million and made aprofit before tax of GBP 0.21million.
Your Company also holds 61.5% of the share capital in Associated Battery Manufacturers(Ceylon) Limited Sri of Lanka. The said Company is engaged in the business ofmanufacturing and marketing of lead acid batteries. During the year 2016-2017 the saidCompany achieved a turnover of SLR 2713.50 million and made a profit before tax of SLR241.66 million.
The profit and loss account the balance sheet the auditors' report and the directors'report of the subsidiaries are not attached to the annual accounts of your Companypursuant to general exemption granted vide general circular number 2/2011 dated 08.02.2011issued by the Government of India Ministry of Corporate Affairs and in terms of Section136 of the Companies Act 2013. Pursuant to the provisions of Section 129(3) of theCompanies Act 2013 read with Rule 5 of Companies (Accounts) Rules 2014 a statementcontaining salient features of financial statements of subsidiaries in Form AOC-1 isattached to the financial statements. However the necessary details about thesubsidiaries are given in the consolidated financial statements. The Company will makeavailable the said financial statements and related detailed information of the subsidiarycompanies upon request by any member of the Company or its subsidiary companies. Copies ofthe financial statement of the subsidiaries would also be available for inspection by anysuch person at the registered office of your Company on any working day as specified inthe Notice convening the 70th Annual General Meeting.
Pursuant to Section 136 of the Companies Act 2013 the financial statements of theCompany consolidated financial statements along with relevant documents and separateaudited accounts in respect of subsidiaries are available on the website of the Company.
EXTRACT OF THE ANNUAL RETURN
The extract of the Annual Return in Form No. MGT 9 (Attached as "Annexure-V") shall form part of the Board's report.
At its meeting held on 18th July 2016 your Board appointed Mr. Bharat D Shah as theChairman of the Board of Directors.
During the year Mr. Rajesh G. Kapadia Non-Executive Independent Director expired on 22ndOctober 2016. Your directors wish to record their deep regret on the untimely demise ofMr. Kapadia and also wish to place on record their sincere appreciation for the guidanceprovided by Mr. Kapadia during his tenure as a member of the Board and as Chairmanof the Company. In his death your Company has lost a visionary leader who has made animmense contribution towards the growth and development of your Company over a periodspanning two decades.
Mr. Nadeem Kazim Director - HR & Personnel resigned w.e.f. 28th November 2016.Your Directors placed on record their sincere appreciation and gratitude towards valuableservices rendered by Mr. Kazim during his tenure as a Whole-time Director of the Company.
Mr. R. B. Raheja Non-Executive Director and Mr. Subir Chakraborty Director -Automotive retire by rotation at the ensuing Annual General Meeting and being eligibleoffer themselves for re-appointment.
Necessary information pursuant to Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 in respect of Directors to bere-appointed at the ensuing Annual General Meeting are given in the Annexure to the Noticeconvening the Annual General Meeting scheduled to be held on 27th July 2017.
None of the Directors of your Company are disqualified for being appointed asDirectors as specified in Section 164(2) and Rule 14(1) of Companies (Appointment andQualification of Directors) Rules 2014.
KEY MANAGERIAL PERSONNEL
During the year Mr. Nadeem Kazim Whole-time Director designated Director-HR &Personnel resigned w.e.f. 28th November 2016 and the following directors/executivescontinued as Key Managerial Personnel of the Company:
Mr. Gautam Chatterjee Managing Director & CEO
Mr. A. K. Mukherjee Director Finance & CFO
Mr. Subir Chakraborty Director Automotive
Mr. Arun Mittal Director Industrial
Mr. Jitendra Kumar Company Secretary & Sr. Vice President - Legal
DECLARATION OF INDEPENDENCE
All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013 and Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015.
Pursuant to the provisions of the Companies Act 2013 and Securities and Exchange Boardof India (Listing Obligations and Disclosure Requirements) Regulations 2015 theperformance evaluation of the Board as a whole Chairman and the Non-Independent Directorswas carried out by the Independent Directors. This exercise was carried out in accordancewith the Remuneration Policy framed by the Company within the framework of applicablelaws.
The Board carried out an annual evaluation of its own performance as well as theevaluation of the working of its committees and individual Directors including Chairmanof the Board. The performance evaluation of all the Directors was carried out by theNomination and Remuneration Committee. The evaluation process was reviewed in the light ofthe guidance note issued by the Securities and Exchange Board of India on Board evaluationdated January 5 2017 and aligned in accordance with the requirements specified therein.
While evaluating the performance and effectiveness of the Board various aspects of theBoard's functioning such as adequacy of the composition and quality of the Board timedevoted by the Board to Company's long-term strategic issues quality and transparency ofBoard discussions execution and performance of specific duties obligations andgovernance were taken into consideration. Committee performance was evaluated on the basisof their effectiveness in carrying out respective mandates composition effectiveness ofthe committees structure of the committees and meetings independence of the committeefrom the Board contribution to decisions of the Board. A separate exercise was carriedout to evaluate the performance of Independent Directors including the Chairman of theBoard who were evaluated on parameters such as level of engagement and contribution toBoard deliberations independence of judgement safeguarding the interest of the Companyand focus on creation of shareholders value ability to guide the Company in key mattersattendance at meetings etc.
The Directors expressed their satisfaction with the evaluation process.
In accordance with the provisions of Section 178(3) of the Companies Act 2013 and theSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 the Company has remuneration policy in place. The objectives and keyfeatures of this Policy are:
(a) Formulation of the criteria for determining qualifications positive attributes ofdirectors Key Managerial Personnel (KMP) and senior management personnel and alsoindependence of Independent Directors;
(b) Aligning the remuneration of Directors KMPs and senior management personnel withthe Company's financial position remuneration paid by its industry peers etc.;
(c) Performance evaluation of the Board its committees and Directors includingIndependent Directors;
(d) Ensuring Board diversity;
(e) Identifying persons who are qualified to become Directors and who may be appointedin senior management in accordance with the criteria laid down; and (f) Directors'induction and continued training.
The Remuneration Policy is available on the Company's web-site under the followingweb-link http://www.exideindustries. com/investors/governance-policies.aspx.
During the year under review four (4) board meetings and six (6) audit committeemeetings were convened and held the details of which are given in the CorporateGovernance report. The intervening gap between the meetings was within the periodprescribed under the Companies Act 2013.
The details of constitution of the Board and its committees are given in the CorporateGovernance report.
COMPLIANCE WITH CODE OF ETHICS FOR BOARD OF DIRECTORS AND SENIOR EXECUTIVES
All Directors and senior management personnel have afirmed compliance with the code ofethics for Board of Directors and senior executives. A declaration to that effect isattached with the Corporate Governance report.
RISK MANAGEMENT POLICY
In accordance with the Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 the Board of Directors of the Company areresponsible for framing implementing and monitoring the risk management plans of theCompany. The Company has a "Risk Management Policy" to identify risks associatedwith the Company assess its impact and take appropriate corrective steps to minimise therisks which may threaten the existence of the Company.
In your Company's endeavor to become global power house it is exposed to certain risksthat may adversely afiect its ability to service customer achieve objective and protectassets. The risk management policy of the Company has been reviewed and revised inSeptember 2016. The policy stresses on exploring the new opportunities strengtheningcorporate governance while achieving the business objectives.
The Policy also stresses on optimisation of risk situations sharing the experience ondealing with risks allocation of necessary resources for mitigation of risks andeffective working of risk management system. In line with the policy the procedure hasalso been revised and implemented across the organisation.
The corporate risk register of the organisation is reviewed by audit committee andBoard to ensure adequacy of mitigating actions. Risk management framework of your Companyis well grounded. It involves the executives across the organisation and promotes riskevaluation as an integral part of decision making.
The Risk Management Policy is available on the Company's web-site under the followingweb-link http://www. exideindustries.com/investors/governance-policies.aspx.
The equity shares continue to be listed on the BSE Limited (BSE) the National StockExchange of India Limited (NSE) and The Calcutta Stock Exchange Limited (CSE). The Companyhas paid annual listing fees for the financial year 2017-18.
PARTICULARS OF CONTRACTS OR ARRANGEMENTS WITH RELATED PARTIES
All related party transactions those were entered during the financial year were in theordinary course of business and on an arm's length basis. There were no materiallysignificant related party transactions entered into by the Company with promotersdirectors key managerial personnel or other persons which may have a potential confiictwith the interest of the Company.
All related party transactions are placed before the audit committee for review andapproval. Prior omnibus approval is also obtained from the audit committee for the relatedparty transactions which are of repetitive nature and which can be foreseen andaccordingly the required disclosures are made to the audit committee on quarterly basis interms of the omnibus approval of the committee.
The policy on materiality of related party transactions and also on dealing withrelated party transactions as approved by the audit committee and the Board of Directorsis uploaded on the web-site under the following web-link http://www.exideindustries.com/investors/governance-policies.aspx.
Since all related party transactions entered into by the Company were in the ordinarycourse of business and were on an arm's length basis and there were no material relatedparty transactions during the year Form AOC 2 is not applicable to the Company.
DETAILS OF SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS ORTRIBUNALS IMPACTING THE GOING CONCERN STATUS AND COMPANY'S OPERATIONS IN FUTURE
There are no significant material orders passed by the regulators/courts/tribunalswhich would impact the going concern status of the Company and its future operations.However member's attention is drawn to the statement on contingent liabilities andcommitments in the notes forming part of the financial statements.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Information pursuant to Clause (m) of Sub-Section (3) of Section 134 of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 is annexed herewith as"Annexure - VI".
Your Company believes in engaging human resources as they are the key differentiatorfor the success of the organisation. Keeping the employees engaged and committed can go along way in attainment of objectives and ensuring sustained business performance. In linewith this your Company has initiated several interventions that will enhance theengagement of the employees. Your Company has established systems which promotetransparency and bring objectivity in people practices. Being a people centricorganisation your Company recognises the significance of building next generationleadership by developing internal talent to meet the organisational objectives. Throughthis the human resources function continues to align its strategic interventions andprocesses while simultaneously addressing the needs of multiple stakeholders andmaintaining a competitive employee cost. Your Company has a robust talent acquisitionprocess and continues to invest in people development activities to keep them attuned withthe dynamic business requirements. This is practiced by retaining and developing talentthrough appropriate platforms and performance management process.
Your Company continues to have cordial and harmonious industrial relations across allthe manufacturing units. During the year under review long term agreements were signedwith the Trade Union at Chinchwad Plant.
The total number of employees of the Company as on March 31 2017 stood at 5157.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company will be provided upon request. In terms of Section 136 of the Act theReport and financial statements are being sent to Members and others entitled theretoexcluding the information on employees particulars which are available for inspection bythe Members at the registered office of the Company during business hours on working daysof the Company up to the date of the ensuing Annual General Meeting. Any Member interestedin obtaining a copy thereof may write to the Company Secretary. Further we confirm thatthere was no employee employed throughout the financial year or part thereof who was inreceipt of remuneration in the financial year which in the aggregate is in excess ofthat drawn by the Managing Director and Whole-time Directors and holds by himself or alongwith his spouse and dependent children not less than two percent of the equity shares ofthe Company.
Particulars of employees pursuant to Section 134(3)(q) of the Companies Act 2013 readwith Rule 5(1) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 is annexed hereto and marked as ("Annexure - VII").
PREVENTION OF SEXUAL HARASSMENT AT WORKPLACE
The Company has zero tolerance for sexual harassment at workplace and has adopted aPolicy on prevention prohibition & redressal of sexual harassment at workplace inline with the provisions of The Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013 (Act') and Rules thereunder. The Company iscommitted to providing equal opportunities without regard to their race caste sexreligion colour nationality disability etc. Your Company has constituted InternalComplaints Committees (ICC). The Company has designated the external independent member asa Chairperson of the Committee. During the year no complaints with allegations of sexualharassment were filed with the Company.
DIRECTOR'S RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors make the following statements in terms ofSection 134(3)(c) of the Companies Act 2013:
a. That in the preparation of the annual financial statements the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures if any;
b. That the Directors have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the profit or loss of the Company for that period;
c. That the Directors have taken proper and suficient care for the maintenance ofadequate accounting records in accordance with the provisions of this Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
d. That the Directors have prepared the annual accounts on a going concern basis;
e. That proper internal financial controls were in place and that the financialcontrols were adequate and were operating effectively; and
f. That systems to ensure compliance with the provisions of all applicable laws were inplace and were adequate and operating effectively.
FORWARD LOOKING STATEMENTS
This Report contains forward-looking statements that involve risks and uncertainties.
When used in this Report the words "anticipate" "believe""estimate" "expect" "intend" "will" and othersimilar expressions as they relate to the Company and/or its businesses are intended toidentify such forward-looking statements. The Company undertakes no obligation to publiclyupdate or revise any forward-looking statements whether as a result of new informationfuture events or otherwise. Actual results performance or achievements could difiermaterially from those expressed or implied in such forward-looking statements. Readers arecautioned not to place undue reliance on these forward-looking statements that speak onlyas of their dates. This Report should be read in conjunction with the financial statementsincluded herein and the notes thereto.
Your Directors would like to place on record their appreciation to employees at alllevels for their contribution to the Company's performance. The Directors would also liketo thank its customers employee unions shareholders dealers suppliers bankersgovernment agencies and all stakeholders for the cooperation and support given by them tothe Company and the confidence and trust reposed by them in the management.
| ||On behalf of the Board of Directors |
| ||Sd/- |
| ||(Bharat D. Shah) |
|Place: Mumbai ||Chairman |
|Date: 4th May 2017 ||DIN: 00136969 |