The directors have pleasure in presenting the twenty first annual report and theaudited financial statements for the year ended 31st March 2017.
1. FINANCIAL HIGHLIGHTS
| || ||(Rs. in lakhs) |
|Particulars ||Year ended 31.03.2017 ||Year ended 31.03.2016 |
|Sales and other income ||35735.82 ||31754.83 |
|Profit before financial costs depreciation and amortization expenses ||3750.92 ||2984.89 |
|Less : Finance costs ||44.01 ||147.95 |
|Depreciation ||510.74 ||438.76 |
|Profit after finance costs and depreciation ||3196.17 ||2398.18 |
|Add: Exceptional Income || ||447.44 |
|Profit before tax ||3196.17 ||2845.62 |
|Less : Provision for: || || |
|Income tax ||463.63 ||420.00 |
|Deferred tax ||212.23 ||(292.52) |
|Tax relating to earlier years || ||186.43 |
|Profit after tax ||2520.31 ||2531.71 |
|Surplus brought forward from previous year ||3838.41 ||1790.96 |
|Total ||6358.72 ||4322.67 |
|Appropriations: || || |
|First interim dividend paid ||155.38 ||194.23 |
|Second interim dividend paid ||233.07 ||271.92 |
|Dividend tax paid ||0.33 ||18.11 |
|Balance carried to Balance Sheet ||5969.94 ||3838.41 |
|Total ||6358.72 ||4322.67 |
The board of directors of the Company at its meeting held on 2nd November2016 declared a first interim dividend of Rs.2.00 per share (20%) for the year 2016-17thereby absorbing a sum of Rs. 1.55 Cr. The same was paid to the shareholders on 15thNovember 2016. The board again at its meeting held on 3rd March 2017 declared asecond interim dividend of Rs. 3.00 per share (30%) for the year 2016-17 thereby absorbinga sum of Rs. 2.33 Cr. The same was paid to the shareholders on 16th March 2017.
Hence the total amount of both dividends for the year ended 31st March 2017will aggregate to Rs. 5.00 per share (50%) absorbing a sum of Rs.3.88 Cr on 7769040equity shares of Rs.10/-each.
The Company has set-off its dividend distribution tax payable under Section 115-O(1A)of the Income Tax Act 1961 against the dividend distribution tax paid by the subsidiarycompany on its dividend declared.
The board does not recommend any further dividend for the year under consideration.
3. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
The Company provides complete seating solutions for driver and cabin seating forcommercial vehicles tractors and construction equipment as well as passenger seats forbuses across all segments and has established itself as a leader in these segments in thecountry for seating systems.
INDUSTRY STRUCTURE AND DEVELOPMENTS
In 2016-17 the economy grew at 6.8% (revised series) as against 7.6% (revised series)previous year.
The following table highlights the segment wise industry sales figures in vehicle unitsfor the year 2016-17.
|Category ||2016-17 ||2015-16 ||Growth % |
| ||(Nos.) ||(Nos.) || |
|Medium and Heavy Commercial Vehicles (M & H CV) ||364163 ||354327 ||2.8 |
|Light Commercial Vehicles (LCV) ||476255 ||449828 ||5.9 |
|Buses (M & H CV) ||59033 ||56176 ||5.1 |
|Tractors ||661195 ||570791 ||15.8 |
The Company registered a total revenue of Rs.357.36 Cr in 2016-17 as against Rs.317.55Cr in 2015-16. During the year efficiency in supply chain was improved throughinter-plant coordination and horizontal deployment of lean and other improvementinitiatives was done across all plants.
These initiatives along with the implementation of various other cost reductionprojects across functions have enabled the Company to post a profit before tax of Rs.31.96Cr in 2016-17.
OPPORTUNITIES AND THREATS
The Company has initiated new product development activities to maintain the leadershipposition in the tractor segment in the domestic market. The Company continues tostrengthen its position in export markets and has won significant new orders from overseascustomer. The supplies are scheduled in 2017-18. As a leader in the bus passenger seatswith a wide range of seats the Company has further strengthened its position with newproduct launches in North India. The market has well responded to these new launches andthe Company is gaining market share in this region. A significant competitive threat isthe entry of overseas competition and the Indian bus body builders getting into seatmanufacturing. The Company continues to invest in strengthening the design and testingcapabilities to retain the market leadership status.
The Company aims to take advantage of the growing Tractor industry by offering platformproducts to leading tractor OEMs and thereby looks forward to win a large share ofdomestic sales. With respect to the CV OEMs the Company is taking steps to retain thesales growth by expanding customer base and increasing share of business in existingdomestic customers.
During the year the Company posted a growth of 11.7% in overall sales. The Company'ssales grew in the commercial vehicle segment and in the bus passenger seats better thanthe market growth. The Company faced postponement of orders from customers in exports andhence experienced de-growth in exports segment. In the case of domestic tractor segmentthe Company catered to the existing base of customers and experienced decline in line withthe industry base. The Company positively looks forward to improve new product developmentlead time and effectively catapult growth in domestic tractor market in 2017-18.
BUSINESS OUTLOOK AND OVERVIEW
Indian economy is expected to grow at 6.5%-7% in 2017-18. The M&HCV segment isexpected to grow at 5% and LCV segment at 5%. Bus segment is also expected to grow at 10%and tractor segment at 12% in 2017-18 (based on SIAM CRISIL and internal estimates).
RISKS AND CONCERNS
The Indian commercial vehicle industry has strong correlation with the agriculturalgrowth infrastructure development and the mining industry and is cyclical. The Company'spresence in all the segments of auto industry will largely mitigate the segment specificrisks. The Company plans to develop additional products to maintain its growth plans. TheCompany has also put in place initiatives to improve product quality to support the growthplans.
The Rupee has appreciated sharply in the last quarter of 2016-17 against the US dollar.There may not be a major change in 2017-18 nor any substantial depreciation. The Companyis taking suitable forex cover to mitigate the risk in foreign exchange fluctuations.
The Board has established a Risk Minimisation Policy which formalizes the Company'sapproach to overview and manage material business risks. The policy is implemented througha top down and bottom up approach identifying assessing monitoring and managing keyrisks across the Company's business units.
Risks and effectiveness of their management are internally reviewed and reportedregularly to the Board. The management has reported to the board that the Company's riskmanagement and internal compliance and control system are operating efficiently andeffectively in all material respects.
The board is satisfied that there are adequate systems and procedures in place toidentify assess monitor and manage risks. The Audit Committee also reviews reports bymembers of the management team and recommends suitable action. Risk Minimisation Policyhas been approved by the board.
The Company has continued its focus on having best manufacturing processes andfacilities. It has also imparted training to key employees in an effort to reskill peopleand upgrade the manufacturing processes apart from improvements in the facility by meansof automation.
Fur there improvements of Lean Manufacturing / Flow Management initiatives will helpthe Company in containing manufacturing costs.
The Company has invested in new technology catering to customer requirements improvingthe overall quality of products with a new Cathode Electrode Deposition (CED) paintingfacility at Hosur Plant. Additionally the Company has taken up new initiatives to collectroad level data (RLD) to be used on a newly bought Multi Axle Simulation Table (MAST) toanalyse vibration and its impact on products developed in-house. The Company alsoinitiated creation of a torture track test site during the year under review to simulatecustomer test environment and improve seat comfort.
The Company's initiatives to introduce new refresh ideas in existing products was wellreceived by leading customers both in OEM and aftermarket segment.
The Company has taken steps to improve further the quality of its products. The FinalProduct Audit (FPA) initiative taken by the Company has brought appreciation fromcustomers. The quality system at the factories aims at achieving total customersatisfaction through its focus on improving product quality. Consistently the Company hasbeen achieving improved quality levels at the customer-end both in their line andwarranty quality.
The Company's plants are certified for TS 16949. In addition the quality laboratory ofthe Company is certified by National Accreditation Board for Testing and CalibrationLaboratories (NABL) for conformance to ISO/IEC 17025.
100% employee participation in the Company's improvement programmes like suggestionschemes quality control circle projects supervisory improvement team projects crossfunctional team projects and task force team projects continued successfully for the 16thyear in succession. c. Focus on Vendor Development: The Company continued its vendordevelopment initiative through Visionary Small and Medium Enterprise programme.
INTERNAL CONTROLS AND THEIR ADEQUACY
The Company has a proper and adequate internal control system to ensure that all theassets of the Company are safeguarded and protected against any loss and all thetransactions are properly authorized and recorded. Information provided to management isreliable and timely. The Company ensures adherence to all statutes.
INTERNAL FINANCIAL CONTROL
The Company has an established internal financial control framework including internalcontrols over financial reporting operating controls and anti-fraud framework. Theframework is reviewed regularly by the management and tested by internal audit team andpresented to the audit committee. Based on the periodical testing the framework isstrengthened from time to time to ensure adequacy and effectiveness of InternalFinancial Control.
HUMAN RESOURCE DEVELOPMENT
The Company has achieved a good financial performance through the concerted andgoal-aligned effor ts by employees across the hierarchy. The Company places on record itsdeep appreciation for the exemplary contribution of the employees at all levels.
The Company continued to induct fresh talent. The Company has upgraded the trainingneeds identification based on the role requirements and gaps in this identification areclosed by providing training to improve employee competencies. The Company's industrialrelations continue to be cordial.
As of 31st March 2017 the Company had 332 employees on its rolls.
Statements in the management discussion and analysis report describing the Company'sobjectives projections estimates expectations may be forward looking statements withinthe meaning of applicable Securities Laws and Regulations. Actual results could differmaterially from those expressed and implied. Important factors that could make adifference to the Company's operations include among other things economic conditionsaffecting the demand supply and price conditions in the markets in which the Companyoperates changes in government regulations tax laws and other statutes and incidentalfactors.
4. DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Companies Act 2013 withrespect to Directors' Responsibility Statement it is hereby stated -i. that in thepreparation of annual accounts for the financial year ended 31st March 2017the applicable Accounting Standards had been followed along with proper explanationrelating to material departures if any; ii. that the directors had selected suchaccounting policies and applied them consistently and made judgments and estimates thatwere reasonable and prudent so as to give a true and fair view of the state of affairs ofthe Company at the end of the financial year and of the profit of the Company for the yearunder review; iii. that the directors had taken proper and sufficient care for themaintenance of adequate accounting records in accordance with the provisions of the Actfor safeguarding the assets of the Company and for preventing and detecting fraud andother irregularities; iv. that the directors had prepared the annual accounts for thefinancial year ended 31st March 2017 on a "going concern basis"; v.that the directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and vi. that the directors had devised proper systems to ensure compliancewith the provisions of all applicable laws and that such systems were adequate andoperating effectively.
5. CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR activities have already been textured into the Company's value system throughSrinivasan Services Trust (SST) the CSR arm of the Company established in 1996 with thevision of building self-reliant rural community.
Over 21 years of service SST has played a pivotal role in changing lives of people inrural India by creating self-reliant communities that are models of sustainabledevelopment.
The Company is eligible to spend on their ongoing projects / programmes falling withinthe CSR activities specified under the Act 2013 as mandated by the Ministry of CorporateAffairs for carrying out the CSR activities.
The Committee formulated and recommended a CSR policy in terms of Section 135 of theAct 2013 along with a list of projects / programmes to be under taken for CSR spending inaccordance with the Companies (Corporate Social Responsibility Policy) Rules 2014. Basedon the recommendation of the CSR Committee the board has approved the projects /programmes carried out as CSR activities by SST having an established track record formore than the prescribed years in undertaking similar programmes / projects constitutingmore than 2% of average net profits made during the three immediately preceding financialyears towards CSR spending for the current financial year 2016-17 amounting to Rs.0.19Crores.
Presently SST is working in 5000 villages spread across Tamil Nadu KarnatakaMaharashtra Himachal Pradesh and Andhra Pradesh covering about 3144590 population and719890 families. Its major focus areas are Economic development health care qualityeducation environment and infrastructure.
Of the 5000 villages 3172 villages (1919952 population and 427048 families) havebeen funded by the Company during the year.
Achievements in 3172 villages are:
296003 families living in these villages have a monthly income of aboveRs.15000/- which make them financially secured.
2985 farmers groups have been formed with 42965 members.
Improved agriculture practices enabled 192147 farmers owning 208925 hectaresto increase the yields higher than the state average by 15%.
174958 families earn more than Rs 3500/- per month through livestock.
Formed 8115 Self Help Groups with 122604 women as members.
Out of 122604 members 117762 members are in income generation activities.They earn a minimum income of Rs. 3000/- per month.
63996 children in the age group below 5 are not malnourished.
399710 women are free from anaemia.
287009 households made access to toilet facilities.
The morbidity percentage reduced from 9% to 5%.
Enrolment in anganwadis increased from 86% to 100% and attendance is 99%.
1441 anganwadis have met all the Integrated Child Development Services Scheme(ICDS) standards.
88% involvement of mother volunteers in anganwadis have ensured their properfunctioning.
100% enrolment of children in schools. There are no drop outs in the schools.
Number of percentage of slow learners reduced in schools from 27% to 8%.
Out of 1460 schools 999 schools are now model schools.
93007 illiterate women out of 133505 have been made literate.
Environment and Infrastructure:
265176 households dispose solid waste through individual and common compostpits. 89 tons of vermi compost generated per month from wastes.
Sewage water from 264583 households disposed through soak pits kitchengardens and drain.
Safe drinking water made available to 2994 villages.
Community takes care of their development needs. 8853 social leaders are active inthis effort.
As required under Section 135 of the Act 2013 read with Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 the annual report on CSR containingthe particulars of the projects / programmes approved and recommended by CSR Committee andapproved by the board for the financial year 2016-17 are given by way of Annexure IVattached to this Report.
6. FINANCIAL PERFORMANCE AND POSITION OF THE SUBSIDIARY COMPANY
As on the date of this report Harita Fehrer Limited (HFRL) is the only subsidiary ofthe Company.
HFRL is a material un-listed Indian subsidiary in terms of Regulation 24 read withRegulation 16(1)(c) of Securities and Exchange Board of India (Listing Obligations andDisclosure
Requirements) Regulations 2015 (SEBI (LODR) Regulations) as the total turnover of thesubsidiary exceeds 20% of the consolidated turnover of the Company.
During the year HFRL achieved a turnover of Rs.397.81 Cr and earned a profit after taxof Rs.17.20 Cr. HFRL declared two interim dividends for the year ended 31stMarch 2017 aggregating to Rs.5/- per share (50%) on 20098040 equity shares of Rs 10/-each absorbing a sum of Rs.12.09 Cr including dividend distribution tax.
7. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company are prepared in accordance withthe provisions of Section 129 of the Act 2013 read with the Companies (Accounts) Rules2014 and Regulation 33 of SEBI (LODR) Regulations alongwith a separate statementcontaining the salient features of the financial performance of the subsidiary. Theaudited consolidated financial statements together with Auditors' Report form part of theAnnual Report.
The audited financial statements of the subsidiary company will be made available tothe shareholders on receipt of a request from any shareholder and it has also been placedon the website of the Company. This will also be available for inspection by theshareholders at the registered office during business hours. The consolidated profit aftertax of the Company and its subsidiary amounted to Rs. 37.27 Cr for the financial year2016-17 as compared to Rs. 32.43 Cr in the previous year.
8. DIRECTORS & KEY MANAGERIAL PERSONNEL
Independent Directors (IDs)
At the Annual General Meeting (AGM) held on 6th August 2014 M/s HLakshmananC N Prasad and S I Jaffar Ali were appointed as IDs for the first term of fiveconsecutive years from the conclusion of the eighteenth AGM and to receive remuneration byway of fees reimbursement of expenses for participation in the meetings of the board and/ or committees and profit related commission in terms of applicable provisions of theAct 2013 as determined by the board from time to time. During the year 2015-16 Mr LBhadri and Ms Sasikala Varadachari were appointed as IDs for a period of three consecutiveyears effective 13th October 2015 and 22nd March 2016 respectively.
On appointment each ID has acknowledged the terms of appointment as set out in theirletter of appointment. The terms cover inter alia the duties rights of access toinformation disclosure of their interest / concern dealing in Company's sharesremuneration and expenses insurance and indemnity. The IDs are provided with copies ofthe Company's policies and charters of various committees of the board.
In accordance with Section 149(7) of the Act 2013 all IDs have declared that they meetthe criteria of independence as provided under Section 149(6) of the Act 2013.
The detailed terms of appointment of IDs are disclosed on the Company's website withfollowing link: www.haritaseating.com/PDF/HSSL-Terms of Appointment of IDs.pdf.
Separate meeting of Independent Directors:
During the year under review a separate meeting of IDs was held on 3rdMarch 2017 and all the Independent Directors were present at the Meeting.
Complete feedback on Non-Independent Directors and details of various activitiesundertaken by the Company were provided to them to facilitate their review / evaluationthrough a set of questionnaire.
Non-Independent Directors (Non-IDs) and their evaluation
The Independent Directors (IDs) used various criteria and methodology practiced inIndustry for evaluation of Non-ID viz. Mr Martin Grammer. IDs evaluated the performanceof Mr Martin Grammer Non-ID individually through a set of questionnaires. They reviewedhis interaction during the board meetings and strategic inputs given by him to improve therisk management internal controls and contribution to the Company's growth.
IDs were satisfied fully with the performance of Mr Martin Grammer Non-ID of theCompany.
The IDs reviewed the performance of Chairman of the Board by benchmarking theachievement of the Company with industry under his stewardship. The IDs appreciated theprobity quality and leadership of Chairman and his proactive role on strategic issues andpassion for customer centricity improving the quality of the products and for guardingthe values of the Company.
The IDs also evaluated board's composition size mix of skills and experience itsmeeting sequence effectiveness of discussion decision making follow up action so as toimprove governance and enhance personal effectiveness of directors.
The board upon evaluation concluded that it is well balanced in terms of diversity ofexperience with expert in each domain viz. Banking Finance Operations Legal andAdministration. The Company has a board with wide range of expertise in all aspects ofbusiness.
The IDs unanimously evaluated the prerequisites of the board viz. formulation ofstrategy acquisition & allocation of overall resources setting up policiesdirectors' selection process and cohesiveness on key issues including succession planning.
They were satisfied with the Company's performance in all fronts and finally concludedthat the board operates with global best practices.
Quality Quantity and Timeliness of flow of Information between the Company Managementand the Board
All IDs have expressed their overall satisfaction with the support received from themanagement and the excellent work done by the management during the last year.
The IDs appreciated the management for their hard work and commitment to meet thecorporate goals and also expressed that the relationship between the top management andboard is smooth and seamless.
Directors retirement by rotation
In terms of Section 152 of the Act 2013 two-thirds of the total number of directorsi.e. excluding IDs are liable to retire by rotation and out of which one-third areliable to retire by rotation at every annual general meeting. Mr Martin Grammer directoris liable to retire by rotation at the AGM and being eligible offers himself forre-appointment.
The nomination and remuneration committee recommended his re-appointment. The briefresume of the director has been furnished in the Notice convening the AGM of the Company.Appropriate resolution for his re-appointment is being placed for approval of theshareholders at the ensuing AGM.
Key Managerial Personnel (KMP):
During the year Mr S Jagannathan was appointed as Chief Financial Officer (CFO) ofthe Company in the place of Mr A Baskar effective 2nd November 2016.
Mr A G Giridharan CEO Mr S Jagannathan CFO and Ms N Iswarya Lakshmi CompanySecretary are KMP of the Company in terms of Section 2(51) and Section 203 of the Act2013.
Nomination and Remuneration Policy
The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe board to ensure an appropriate mix of abilities experience and diversity to serve theinterests of all shareholders of the Company. Nomination and Remuneration Policy wasapproved by the board at its meeting held on 22nd September 2014 in terms ofSection 178 of the Act 2013. The objective of such policy shall be to attract retain andmotivate executive management and remuneration structured to link to Company's strategiclong term goals appropriateness relevance and risk appetite of the Company.
The process of appointing a director / KMP / SMP is that when there is a need or avacancy arises or is expected the NRC will identify ascertain the integrityqualification appropriate expertise and experience having regard to the skills that thecandidate will bring to the board / Company in addition to what the existing members hold.Criteria for performance evaluation disclosures on the remuneration of directorscriteria of making payments to non-executive directors have been disclosed as part ofCorporate Governance Report attached herewith.
Remuneration payable to Non-executive Independent Directors
The shareholders at the 20th AGM held on 8th August 2016 approvedthe remuneration by way of commission not exceeding 3% of the net profits in aggregatepayable to non-executive and independent directors of the Company (NE-IDs) for every yearfor a period of 5 years commencing from 1st April 2015.
NE-IDs devote considerable time in deliberating the operational and other issues of theCompany and provide valuable advice in regard to the management of the Company from timeto time and the Company also derives substantial benefit through their expertise andadvice.
Evaluation of Independent Directors and Committees of Directors
In terms of Section 134 of the Act 2013 and the Corporate Governance requirements asprescribed under SEBI (LODR) Regulations the board reviewed and evaluated Independentdirectors and its committees viz. Audit Committee Nomination and Remuneration CommitteeCorporate Social Responsibility Committee and Stakeholders' Relationship Committee basedon the evaluation criteria laid down by the NRC.
The performance of all Independent directors (IDs) was assessed against a range ofcriteria such as contribution to the development of business strategy and performance ofthe Company understanding the major risks affecting the Company clear direction to themanagement and contribution to the board cohesion. The performance evaluation has beendone by the entire board of directors except the director concerned being evaluated.
The board noted that all IDs have understood the opportunities and risks to theCompany's strategy and are supportive of the direction articulated by the management teamtowards consistent improvement.
Board delegates specific mandates to its various committees to optimize directors'skills and talents besides complying with key regulatory aspects.
- Audit Committee for overseeing financial reporting;
- Nomination and Remuneration Committee for selecting and compensating directors /employees;
- Stakeholders' Relationship Committee for redressing investors grievances; and
- Corporate Social Responsibility Committee for overseeing CSR initiatives.
The performance of each committee was evaluated by the board after seeking inputs fromits members on the basis of the specific terms of reference its charter time spent bythe committees in considering key issues major recommendations action plans and work ofeach committee.
The board is satisfied with overall effectiveness and decision making of allcommittees. The board reviewed each committee's terms of reference to ensure that theCompany's existing practices remain appropriate. Recommendations from each committee areconsidered and approved by the board prior to implementation.
Number of board meetings held
The number of board meetings held during the financial year 2016-17 is provided as partof Corporate Governance Report prepared in terms of the SEBI (LODR) Regulations.
As per the provisions of Section 139 of the Act 2013 the transitional period ofoffice of M/s Sundaram & Srinivasan Char tered Accountants Chennai as StatutoryAuditors of the Company will conclude from the close of the ensuing Annual General Meetingof the Company.
The Board of Directors place on record their appreciation and gratitude for theservices rendered by M/s Sundaram & Srinivasan Chartered Accountants Chennai duringtheir tenure as the Statutory Auditors of the Company for over two decades.
The Audit Committee and the Board of Directors of the Company have recommended theappointment of M/s. Raghavan Chaudhuri and Narayanan Chartered Accountants Bengaluru(ICAI Firm Registration Number 007761S) as Statutory Auditors of the Company subject tothe approval of the shareholders. They have given their consent for the said appointmentand confirmed that their appointment if made would be within the limits mentioned underthe provisions of Section 141 of the Act 2013 and the Companies (Audit and Auditors)Rules 2014. They will hold office as statutory auditors for the first term of five yearsfrom the conclusion of the 21st Annual General Meeting till the conclusion of26th Annual General Meeting of the Company subject to ratification of theirappointment by
Members at every Annual General Meeting held during their tenure of office as statutoryauditors. The Auditors' Report for the financial year 2016-17 does not contain anyqualification reservation or adverse remark and the same is attached with the annualfinancial statements.
Ms B Chandra Practising Company Secretary Chennai was appointed as SecretarialAuditor for carrying out the secretarial audit for the financial year 2016-17.
As required under Section 204 of the Act 2013 the Secretarial Audit Repor t for theyear 2016-17 given by her is attached to this report. The Secretarial Audit Report doesnot contain any qualifications reservations or other remarks. The Board at its meetingheld on 18th May 2017 has re-appointed Ms B Chandra Practising CompanySecretary as Secretarial Auditor for the financial year 2017-18.
10. CORPORATE GOVERNANCE
The Company has been practicing the principles of good governance over the years andlays strong emphasis on transparency accountability and integrity.
A separate section on Corporate Governance and a certificate from the statutoryauditors of the Company regarding compliance of conditions of Corporate Governance asstipulated under SEBI (LODR) Regulations forms part of this Annual Report.
The CEO & CFO of the Company have certified to the board on financial statementsand other matters in accordance with the Regulation 17 (8) of the SEBI (LODR) Regulationspertaining to CEO/CFO certification for the financial year ended 31st March2017.
11. POLICY ON VIGIL MECHANISM
The Audit Committee has adopted a Policy on Vigil Mechanism in accordance with theprovisions of the Act 2013 and Regulation 22 of SEBI (LODR) Regulations which provides aformal mechanism for all directors employees and other stakeholders of the Company toreport to the management their genuine concerns or grievances about unethical behaviouractual or suspected fraud and any violation of the Company's Code of conduct or ethicspolicy.
The policy also provides a direct access to the Chairperson of the Audit Committee tomake protective disclosures to the management about grievances or violation of theCompany's Code of Conduct.
The Policy is disclosed on the Company's website in the following link:www.haritaseating.com/PDF/WhistleBlowerPolicy.pdf.
12. PUBLIC DEPOSITS
The Company has not accepted any deposit from the public within the meaning of Section76 of the Act 2013 for the year ended 31st March 2017.
13. STATUTORY STATEMENTS
Information on conservation of energy technology absorption foreign exchange etc.
Relevant information is given in Annexure I to this report in terms of therequirements of Section 134(3)(m) of the Act 2013 read with the Companies (Accounts)Rules 2014.
Material changes and commitments
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich the financial statements relate and the date of this report.
Significant and material orders passed by the Regulators or Courts or Tribunalsimpacting the going concern status of the Company
There are no significant and material orders passed by the Regulators or Courts orTribunals which would impact the going concern status of the Company and its futureoperations.
Extract of Annual Return in the prescribed form is given as Annexure II to this reportin terms of the requirement of Section 134(3)(a) of Act 2013 read with the Companies(Accounts) Rules 2014.
Details of employees receiving the remuneration as prescribed under Section 197 of theAct 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are given in Annexure III. In terms of first proviso to Section136(1) of the Act 2013 the Annual Report excluding the aforesaid annexure is being sentto the shareholders of the Company. The annexure is available for inspection at theRegistered Office of the Company during business hours and any shareholder interested inobtaining a copy of the said annexure may write to the Company Secretary at the RegisteredOffice of the Company.
Comparative analysis of remuneration paid
A comparative analysis of remuneration paid to Directors and employees with theCompany's performance is given as Annexure V to this report.
Details of material related party transactions
Details of material related party transactions under Section 188 of the Act 2013 readwith the Companies (Meetings of Board and its Powers) Rules 2014 are given in AnnexureVI to this report in the prescribed form.
Details of loans / guarantees / investments made
During the year under review the Company had not granted any loans or guaranteescovered under Section 186 of the Act 2013.
Please refer note Number IX to Notes on accounts for the financial year 2016-17 fordetails of investments made by the Company.
Reporting of fraud
The auditors of the Company have not reported any fraud as specified under Section143(12) of the Act 2013.
During the year under review the Company has not received any complaints of sexualharassment from any of the women employees of the Company in terms of Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.
The directors gratefully acknowledge the continued support and co-operation receivedfrom the promoters Harita Group and Mr Martin Grammer. The directors thank the customerssuppliers financial institutions and bankers for their valuable support and assistance.
The directors wish to place on record their appreciation of the sincere efforts of allthe employees of the Company during the year under review.
The directors also thank the shareholders for their continued faith in the Company.
| ||For and on behalf of the Board |
|Chennai ||H Lakshmanan |
|18th May 2017 ||Chairman |
Annexure - I to Directors' Report to the shareholders
Information pursuant to Section 134(3)(m) of the Companies Act 2013
A. CONSERVATION OF ENERGY
1. Measures taken in the year 2016-17 Reduction of energy consumption
by implementing LED fittings
through solar heating systems in CED pre-treatment
through energy efficient motors in pre-treatment process
through Air audit and leak detection The above measures had resulted in anannual saving of Rs. 10.85 lakhs.
2. Proposed measures during the year 2017-18 Reduce energy consumption
by expanding implementation of LED fittings
through energy efficient motors in pre-treatment processes
through Air audit and leak detection The above measures will result in an annualsaving of Rs. 20 lakhs.
3. Steps taken for utilizing alternate sources of energy Solar thermal heating systemfor CED (Cathodic electro deposition coating) painting process has been commissionedduring the year under review.
4. Capital investment in Energy Conservation Equipment The Company is planning toinvest Rs.15 lakhs for electrical equipments as energy efficient measures and Rs.20 lakhsfor conserving energy by investing in Solar thermal heating.
B. TECHNOLOGY ABSORPTION FOR 2016-17
Research & Development (R&D)
1. Specific areas in which R&D is carried out in the Company:
Instructor seat proto development completed for exports market.
New product tooling for mechanical and pnuematic suspension seat (currentlydeveloped as platform for global OEM customers)
Deluxe Seats developed for Indian bus passenger seat market.
Auto folding co driver seat developed for deluxe buses.
School Bus Seats developed under platform concept.
Single Pan Seat productionised and commenced supplies.
Rear suspension tractor seat developed under platform concept.
2. Benefits derived as a result of above measures:
Entry into new segment and expanded market.
Improved share of business in driver seats both for CV and BPS
Entry into Europe market / new customer addition.
3. Future plan of action:
Development of identified new technologies for Tractor Commercial Vehicle andBus passenger seats;
Introduction of Product upgrade / refresh for the identified seats.
Development of new models of seats for Lawn mowers & Garden Tractors.
Expenditure on R&D: Rs. 1326.30 Lakhs Technology absorption adaptation andinnovation:
(i) Efforts in brief: Development of modular / platform structural design par ts andraw materials level standardization leads to reduction in product weight.
(ii) Benefits derived as a result of the above are: a. Price competitiveness; and b.Better fuel economy of vehicles both contributing to increase in market share.
(iii) Details relating to imported technology: Technology imported during the lastthree years reckoned from the beginning of the financial year - NIL
C. FOREIGN EXCHANGE - ACTUAL EARNINGS
Export activities during the year ended 31st March 2017 amounted toRs.3096.20 lakhs as against Rs.3228.08 lakhs for the year ended 31st March2016.
1. Activities relating to export:
During the year 2016-17 the Company has pursued multiple opportunities for neworders for tractor seats.
The Company has been continuing its efforts to increase the current volume ofexport of tractor seats to USA and Germany.
2. Total foreign exchange earned and used (actual):
| ||(Rs. in lakhs) |
|Foreign exchange earned ||3096.20 |
|Foreign exchange used ||1698.04 |
| ||For and on behalf of the Board |
|Chennai ||H LAKSHMANAN |
|18th May 2017 ||Chairman |
Annexure - V to Directors' Report to the Shareholders
Comparative analysis of remuneration paid to directors and employees with the Company'sperformance
|Sl. No. ||Name of the Director (M/s.) ||Designation ||Ratio to median remuneration ||% increase in remuneration |
|1 ||H Lakshmanan ||NEID || || |
| ||Martin Grammer ||NED || || |
| ||C N Prasad ||NEID || || |
| ||L Bhadri ||NEID || || |
| ||S I Jaffar Ali ||NEID ||1:2 || |
| ||Sasikala Varadachari ||NEID ||1:1 ||NA |
| ||A G Giridharan ||CEO ||NA ||10% |
| ||A Baskar (From 01.04.2016 to 02.11.2016) ||CFO ||NA || |
| ||S Jagannathan (From 02.11.2016 to 31.03.2017) ||CFO ||NA || |
| ||N Iswarya Lakshmi ||CS ||NA || |
|2 ||The percentage increase in the median remuneration of employees in the financial year; ||1% |
|3 ||The number of permanent employees on the rolls of company; ||332 |
|4 ||a. Average percentile increase already made in the salaries of employees other than the managerial || |
| ||personnel in the financial year 2016-17 ||6% |
| ||b. Average percentile increase in the managerial remuneration in the financial year 2016-17 ||NA |
| ||There are no exceptional circumstances for increase in the managerial remuneration. || |
|5 ||Affirmation that the remuneration is as per the remuneration policy of the Company. ||Remuneration paid during the year 2016- 17 is as per the Remuneration Policy of the Company. |
NEID - Non-Executive Independent Director; NED - Non-Executive Director; CEO - ChiefExecutive Officer; CFO - Chief Financial Officer; CS - Company Secretary
Annexure - VI to Directors' Report to the Shareholders
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 provisothereto.
1. Details of contracts or arrangements or transactions not at arm's length basis: NIL
2. Details of material contract arrangement or transaction at arm's length basis:
|(a) Name of the related party ||Harita Fehrer Limited |
|(b) Nature of relationship ||Subsidiary |
|(c) Duration of the contracts / arrangements / transactions ||2016-17 |
|(d) Date(s) of approval by the Board if any: ||20th May 2016 |
|Nature of contracts / arrangements / transactions ||Goods / Services ||Salient terms of the contracts or arrangements or transactions ||Amount of contract or arrangement |
| || || ||(Rs. in lakhs) |
|Sale ||Rexine ||Purchase price ||4.68 |
|Purchase ||Foams ||Cost plus ||3225.50 |
| ||Capital Goods - Moulds ||Mark-up ||99.97 |
|Services ||Lease rent ||As per ||57.41 |
|availed ||Other services Electricity Manpower ||Guideline value ||87.54 |
|Rendering of services ||Rent Telephone Management service ||At Cost ||690.63 |
| ||charges salary canteen and Lease rent || || |