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Harita Seating Systems Ltd.

BSE: 590043 Sector: Auto
NSE: HARITASEAT ISIN Code: INE939D01015
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P/E 22.39
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OPEN 749.80
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VOLUME 401
52-Week high 876.00
52-Week low 508.45
P/E 22.39
Mkt Cap.(Rs cr) 575
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Harita Seating Systems Ltd. (HARITASEAT) - Director Report

Company director report

To the Shareholders

The directors have pleasure in presenting the twentieth annual report and the auditedaccounts for the year ended 31st March 2016.

1. FINANCIAL HIGHLIGHTS

(Rs. in lakhs)

Particulars Year ended 31.3.2016 Year ended 31.3.2015
Sales and other income 31754.83 28019.25
Profit before financial costs depreciation and amortization expenses 2984.89 1692.60
Less : Finance costs 147.95 470.99
Depreciation 438.76 407.78
Profit after finance costs and depreciation 2398.18 813.83
Add: Exceptional Income 447.44
Profit before tax 2845.62 813.83
Less : Provision for:
Income tax 420.00 100.00
Deferred tax (292.52) (4.80)
Tax relating to earlier years 186.43 9.36
Profit after tax 2531.71 709.27
Surplus brought forward from previous year 1790.96 1275.92
Total 4322.67 1985.19
Appropriations:
First interim dividend paid 194.23 194.23
Second interim dividend paid 271.92
Dividend tax paid 18.11
Balance carried to Balance Sheet 3838.41 1790.96
Total 4322.67 1985.19

2. DIVIDEND

The board of directors of the Company (the board) at its meeting held on 2ndNovember 2015 declared a first interim dividend of Rs.2.50 per share (25%) for the year2015-16 absorbing a sum of Rs. 212.34 lakhs including dividend distribution tax. The samewas paid to the shareholders on 16th November 2015.

The board at its meeting held on 14 March 2016 declared a second interim dividend ofRs. 3.50 per share (35%) for the year 2015-16 absorbing a sum of Rs. 271.92 lakhs. Thesame was paid to the shareholders on 23rd March 2016.

Hence the total amount of both dividends for the year ended 31st March 2016aggregate to Rs. 6.00 per share (60%) absorbing a sum of Rs.484.26 lakhs 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 its subsidiarycompany on its dividend declared to the extent available. The board does not recommendany 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 2015-16 the economy is expected to grow at 7.4% (revised series) as against 7.3%(revised series) previous year.

The following table highlights the segment wise industry sales figures in vehicle unitsfor the year 2015-16.

Category 2015-16 2014-15 Growth / (decline) %
Nos. Nos.
Medium and
Heavy Commercial
Vehicles (M & H CV) 337565 263407 28.2
Light Commercial
Vehicles (LCV) 449828 438480 2.6
Buses - M & H CV 56176 48817 15.1
Tractors 570791 612876 (6.9)

[ Source: SIAM CRISIL ]

The Company registered sales at Rs.30781.08 lakhs in 2015-16 as against Rs.27375.54lakhs in 2014-15. During the year efficiency in supply chain was improved throughinter-plant coordination; horizontal deployment of lean and other improvement initiativeswas done across all plants. These initiatives along with the implementation of variousother cost reduction projects across functions have enabled the Company to post a profitbefore tax before exceptional income of Rs.2398.18 lakhs in 2015-16.

OPPORTUNITIES AND THREATS

The Company has initiated 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 2016-17. 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 is the entry of overseas competition and the Indianbus body builders getting into seat manufacturing. The Company continues to invest instrengthening the design and testing capabilities to retain the market leadership status.

The declining Tractor industry is a concern to the Company owing to the large share ofdomestic sales. The Company is taking steps to retain the sales growth by expandingcustomer base.

PRODUCT-WISE PERFORMANCE

The Company posted a growth of 12% in the overall sales. The Company's sales in theexports commercial vehicle segment and bus passenger seats grew by 53% 17% and 24%respectively.

BUSINESS OUTLOOK AND OVERVIEW

Indian economy is expected to grow at 7.7%-8% in 2016-17. The M&HCV segment isexpected to grow at 15% and LCV segment is expected to remain flat. Bus segment is alsoexpected to grow at 12% in 2016-17. The tractor segment is expected to further decline inthe year 2016-17.

RISKS AND CONCERNS

The low recovery in rural economy was due to poor monsoon nominal growth in cropprices and declined Rabi output. The Indian commercial vehicle industry has strongcorrelation with the agricultural growth infrastructure development and the miningindustry and is cyclical. The Company's presence in all the segments of auto industry willlargely mitigate the segment specific risks.

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 depreciated significantly in the last year as against the US dollar. Theremay not be a major recovery in 2016-17 nor a further substantial depreciation. The Companyis taking suitable forex cover to mitigate the risk in foreign exchange fluctuations.

RISK MANAGEMENT POLICY

The Board has established a Risk Management 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 Company's Audit Committee also reviewsreports by members of the management team and recommends suitable action. RiskMinimisation Policy has been approved by the board.

OPERATIONS REVIEW

a. Manufacturing:

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.

Further improvements of Lean Manufacturing/ Flow Management initiatives will help theCompany in containing manufacturing costs.

The transfer of Nalagarh unit of the Company at Himachal Pradesh has been completed on30th September 2015 as agreed. Profit on sale of this 2 Wheeler business is Rs.447.44 lakhs which is shown as an exceptional profit.

For the half year ended 30th September 2015 (i.e. till date of businesstransfer) the Nalagarh unit generated a revenue of Rs. 7.49 Cr which is less than 3% ofthe total revenue of the Company for the period under review.

A new assembly facility was created in Chennai for manufacture of Commercial Vehicledriver seats and bus passenger seats for catering to the requirements of major customersof the Company located in and around Chennai and commenced its activities on 1stSeptember 2015.

b. Quality:

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 atthe 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 15thyear in succession.

c. Focus on Vendor Development:

The Company continued its vendor development initiative through Visionary Small andMedium Enterprise programme.

d. Financial performance:

The financial and operational performance of the Company for the year 2015-16 ascompared to the previous year 2014-15 is as follows:

Particulars Year ended 31st March 2016 Year ended 31st March 2015
Rs. in lakhs % Rs. in lakhs %
Income:
Sales 30781.08 96.93 27375.54 97.70
Other Income 973.75 3.07 643.71 2.30
Total Income 31754.83 100.00 28019.25 100.00
Less: Expenditure
Raw materials and components consumed 22040.22 69.41 20824.24 74.32
Changes in inventories of finished goods and work-in-process (4.44) (0.01) (119.92) (0.43)
Staff cost 3577.01 11.26 2997.85 10.70
Stores and tools consumed 75.03 0.24 32.40 0.12
Power and fuel 233.83 0.74 257.21 0.92
Repairs and maintenance 494.50 1.56 441.13 1.57
Carriage outward & Packing expenses 647.58 2.04 589.02 2.10
Other expenses 1706.21 5.37 1304.72 4.66
Finance costs 147.95 0.47 470.99 1.68
Depreciation and amortization expenses 438.76 1.38 407.78 1.46
Total expenditure 29356.65 92.45 27205.42 97.10
Profit before exceptional items and tax 2398.18 7.55 813.83 2.90
Add: Exceptional Item (2W business transfer profit) 447.44 1.41
Profit before tax 2845.62 8.96 813.83 2.90
Less: Provision for taxation
- Current tax 420.00 1.32 100.00 0.36
- Deferred tax (292.52) (0.92) (4.80) (0.02)
- Tax relating to earlier years 186.43 0.59 9.36 0.03
Profit after tax 2531.71 7.97 709.27 2.53
EBITDA / Turnover % 10.81 6.04
Profit before tax / Turnover % 8.96 2.90
Return on capital employed % 47.03 15.71
Return on net worth % 43.18 15.39
Earnings per share in Rs. 32.59 9.13

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 that all thetransactions are properly authorized and recorded. Information provided to management isreliable and timely and statutory obligations are adhered to.

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 Controls.

HUMAN RESOURCE DEVELOPMENT

The Company has achieved a good financial performance through the concerted andgoal-aligned efforts 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 2016 the Company had 336 employees on its rolls.

CAUTIONARY STATEMENT

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 2016the applicable Accounting Standards had been followed and that there were no materialdepartures; ii. that the directors had selected such accounting policies and applied themconsistently and made judgments and estimates that were 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 of the Company for the year under review; iii. that thedirectors had taken proper and sufficient care for the maintenance of adequate accountingrecords in accordance with the provisions of the Act for safeguarding the assets of theCompany and for preventing and detecting fraud and other irregularities; iv. that thedirectors had prepared the accounts for the financial year ended 31st March2016 on a "going concern basis."; v. that the directors had laid down internalfinancial controls to be followed by the company and that such internal financial controlsare adequate and were operating effectively; and vi. that the directors had devised propersystems to ensure compliance with the provisions of all applicable laws and that suchsystems were adequate and operating 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 by the groupcompanies in 1996 with the vision of building self-reliant rural community.

Over 20 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 / programs falling withinthe CSR activities specified under the Act 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 along with a list of projects / programmes to be undertaken for CSR spending inaccordance with the Companies (Corporate Social Responsibility Policy) Rules 2014.

Based on the recommendation of the CSR Committee the board has approved the projects /programs carried out as CSR activities by SST having an established track record for morethan the prescribed years in undertaking similar programmes / projects constituting morethan 2% of average net profits for the immediate past three financial years towards CSRspending for the current financial year 2015-16.

During the year 2015-16 the Company had spent Rs. 15 lakhs constituting more than 2%of average net profits for the immediate past three financial years towards CSRactivities through SST.

Presently SST is working in 3449 villages spread across Tamil Nadu KarnatakaMaharashtra Himachal Pradesh and Andhra Pradesh covering about 2090000 population and463500 families. Its major focus areas include Economic development Health careQuality education Environment and Infrastructure.

Of the 3449 villages 216 villages (72186 population and 13480 families) have beenfunded by the Company during the year. Achievements in 216 villages are:

Economic development:

• 8523 families living in these villages have a monthly income of aboveRs.15000/-. They have financial security.

• 244 farmers groups have been formed with 3661 members.

• Improved agriculture practices enabled 5940 farmers owning 19676 hectares toincrease the yields than the state average by 15%.

• 7608 families earn more than Rs 3500/- per month through livestock.

Women empowerment:

• Formed 793 Self Help Groups. These groups have 11412 women as members.

• Of the 11412 members 9944 members are in income generation activities. Theyearn a minimum income of Rs. 2500/- per month.

Health care:

• 5543 children in the age group below 5 are not malnourished.

• 18905 women are freed from anaemia.

• 9246 households were provided access to toilet facilities.

• The morbidity percentage reduced from 9% to 4%.

• Enrolment in anganwadis increased from 86% to 100% and attendance is 99%.

• 67 anganwadis have met all the Integrated Child Development Services Scheme(ICDS) standards.

• 82% involvement of mother volunteers in the functioning of anganwadis. Theyvolunteer their time to ensure proper functioning.

Quality education:

• 100% enrolment of children in schools. There are no drop outs in the schools.

• Percentage of slow learners reduced in schools from 27% to 14%.

• Out of 104 schools 68 schools are now model schools.

• 4235 illiterate women out of 4331 have been made literates.

Environment and Infrastructure:

• 8844 households dispose solid waste through individual and common compost pits.26 tons of vermi compost generated per month from wastes.

• Sewage water from 7580 households disposed through soak pits kitchen gardensand drain.

• Safe drinking water is available to 99 villages.

Community takes care of their development needs. 668 social leaders are active in thiseffort.

As required under Section 135 of the Companies Act 2013 read with Rule 8 of theCompanies (Corporate Social Responsibility Policy) Rules 2014 the annual report on CSRcontaining the particulars of the projects / programmes approved and recommended by CSRCommittee and approved by the board are given by way of Annexure IV attached to thisReport.

6. FINANCIAL PERFORMANCE AND POSITION OF THE SUBSIDIARY COMPANY

As on the date of this report Harita Fehrer Limited Chennai (HFRL) is the onlysubsidiary of the 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 2015) as the totalturnover of the subsidiary exceeds 20% of the consolidated turnover of the Company.

During the year HFRL achieved a turnover of Rs.36096.66 lakhs and earned a profitafter tax of Rs.1326.44 lakhs. HFRL declared two interim dividends for the year ended 31stMarch 2016 aggregating to Rs.4.50 per share (45%) on 20098040 equity shares of Rs. 10/-each absorbing a sum of Rs.1088.52 lakhs including dividend distribution tax.

The Company is fully compliant with the provisions as specified in the SEBI LODRRegulations 2015.

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 the SEBI (LODR) Regulations 2015 along with a separate statementcontaining the salient features of the financial performance of the subsidiary.

The audited financial statements in respect of the subsidiary company will be madeavailable to the shareholders on receipt of a request from any shareholder of the Companyand it has also been placed on the website of the Company. This will also be available forinspection by the shareholders at the registered office during the business hours.

The consolidated profit after tax of the Company and its subsidiary amounted to Rs.3242.67 lakhs for the financial year 2015-16 as compared to Rs.1451.99 lakhs in theprevious year.

8. DIRECTORS & KEY MANAGERIAL PERSONNEL

Independent Directors (IDs)

All IDs hold office for a fixed term and are not liable to retire by rotation.

At the Annual General Meeting (AGM) held on 6th August 2014 M/s HLakshmanan C N Prasad and S I Jaffar Ali were appointed as IDs for the first term offive consecutive years from the conclusion of the eighteenth AGM and to receiveremuneration by way of fees reimbursement of expenses for participation in the meetingsof the board and / or committees and profit related commission in terms of applicableprovisions of the Act 2013 as determined by the board from time to time. During the yearMr L Bhadri and Ms Sasikala Varadachari were appointed as IDs for a period of threeconsecutive years effective 13th October 2015 and 22nd March 2016respectively.

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 metthe 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 https://www.haritaseating.com/ PDF/HSSL-TermsofAppointmentofIDs.pdf.

Separate meeting of Independent Directors:

The IDs were fully kept informed of the Company's activities in all its spheres.

During the year under review a separate meeting of IDs was held on 14thMarch 2016 and the IDs reviewed the performance of: (i) non-ID viz. Mr Martin Grammer;and (ii) the board as a whole.

They also reviewed the performance of Chairman after taking into account the views ofall Non-Executive Directors.

They also assessed the quality quantity and timeliness of flow of information betweenthe Company's Management and the Board that are necessary for the Board to effectively andreasonably perform their duties.

All the IDs were present at the meeting.

Woman director

Mrs Sujatha Balaji director resigned from the board for personal reasons effective 31stDecember 2015. The Board wishes to place its deep appreciation of the services andguidance rendered by Mrs Sujatha Balaji during her tenure as director of the Company.

Ms Sasikala Varadachari was appointed as a non-executive independent director of theCompany effective 22nd March 2016 in terms of Section 149 of the Act 2013 andRegulation 17 of the SEBI LODR Regulations 2015. Hence the Company is fully compliant withthe provisions relating to appointment of woman director.

Non-executive and non-independent directors (NE-NIDs)

In terms of the provisions of sub-section (6) read with explanation to Section 152 ofthe Act 2013 two-thirds of the total number of directors i.e. excluding IDs are liableto retire by rotation and out of which one-third are liable to retire by rotation atevery annual general meeting. Mr Martin Grammer director is liable to retire by rotationat the AGM and being eligible offers himself for re-appointment.

Key Managerial Personnel (KMP):

M/s A G Giridharan President & CEO A Baskar Chief Financial Officer and NIswarya Lakshmi Company Secretary are KMPs of the Company in terms of Section 2(51) andSection 203 of the Act 2013.

Nomination and Remuneration Policy

The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe board to ensure that there is an appropriate mix of abilities experience anddiversity to serve the interests of all shareholders and the Company.

In accordance with the requirements under Section 178 of the Act 2013 the NRCformulated a Nomination and Remuneration Policy to govern the terms of nomination /appointment and remuneration of (i) Directors (ii) Key Managerial Personnel (KMP) and(iii) Senior Management Personnel (SMP) of the Company. The same was approved by the boardat its meeting held on 22nd September 2014. There is no change in the Policyduring the year under review.

The NRC also reviews succession planning of both SMP and board. The Company's approachin recent years is to have a greater component of performance linked remuneration for SMP.

The process of appointing a director / KMP / SMP is that when a vacancy arises or isexpected the NRC will identify ascertain the integrity qualification appropriateexpertise and experience having regard to the skills that the candidate will bring to theboard / company and the balance of skills added to that of which the existing membershold.

The NRC will review the profile of persons and the most suitable person is eitherrecommended for appointment by the board or is recommended to shareholders for theirelection. The NRC has discretion to decide whether qualification expertise and experiencepossessed by a person are sufficient / satisfactory for the concerned position.

NRC will ensure that any person(s) who is / are appointed or continues in theemployment of the Company as its executive chairman managing director whole-timedirector shall comply with the conditions as laid out under Part I of Schedule V to theAct 2013.

NRC will ensure that any appointment of a person as an independent Director of theCompany will be made in accordance with the provisions of Section 149 read with ScheduleIV to the Act 2013 along with any other applicable provisions and SEBI LODR Regulations2015. 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.

Evaluation of the board committees and directors

In terms of Section 134 of the Act 2013 and the Corporate Governance requirements asprescribed under SEBI LODR Regulations 2015 the board reviewed and evaluated its ownperformance from the perspectives of Company Performance Strategy and ImplementationRisk Management Corporate ethics based on the evaluation criteria laid down by the NRC.

Board

The board discussed and assessed its own composition size mix of skills andexperience its meeting sequence effectiveness of discussion decision making follow upaction quality of information and the performance and reporting by the Committees viz.Audit Committee NRC Stakeholders Relationship Committee (SRC) and Corporate SocialResponsibility Committee (CSR).

The board upon evaluation concluded that it is well balanced in terms of diversity ofexperience encompassing all the activities of the Company. The Company endeavour to have adiverse board representing a range of experience at policy-making levels in business andtechnology and in areas that are relevant to the Company's global activities.

The board also noted that corporate responsibility ethics and compliance are takenseriously and there is a good balance between the core values of the Company and theinterests of stakeholders. The board satisfied with the Company's performance in allfronts viz. new product development operations sales and marketing finance managementinternational business employee relations and compliance with statutory / regulatoryrequirements and finally concluded that the board operates effectively and is closelyaligned to the culture of the business.

Directors

The performance of individual directors including all independent directors assessedagainst a range of criteria such as contribution to the development of business strategyand performance of the Company understanding the major risks affecting the Company cleardirection to the management and contribution to the board cohesion. The performanceevaluation of individual directors has been done by the entire board of directors exceptthe director concerned being evaluated on a rotation basis.

The board noted that all directors have understood the opportunities and risks to theCompany's strategy and are supportive of the direction articulated by the management teamtowards consistent improvement.

Committees

The performance of each committee was evaluated by the board after seeking inputs fromits members on the basis of the criteria such as matters assessed against terms ofreference time spent by the committees in considering matters quality of informationreceived work of each committee overall effectiveness and decision making and compliancewith the corporate governance requirements and concluded that all the committees continuedto function effectively with full participation by all its members and the members ofexecutive management of the Company.

The board reviewed each committee's terms of reference to ensure that the Company'sexisting practices remain appropriate. Recommendations from each committee are consideredand approved by the board prior to implementation.

Number of board meetings held

The number of board meetings held during the financial year 2015-16 is provided as partof Corporate Governance Report prepared in terms of the SEBI LODR Regulations 2015.

9. AUDITORS

Statutory Auditors

The Company at its AGM held on 6th August 2014 appointed M/s Sundaram &Srinivasan Chartered Accountants Chennai having Firm Registration No. 004207S allottedby The Institute of Chartered Accountants of India as statutory auditors of the Companyto hold office for the transitional period of three consecutive years from the conclusionof the said AGM subject to ratification at every AGM at such remuneration in addition toall applicable taxes out of pocket expenses travelling and other expenses as may bemutually agreed between the board and the Auditors.

It is therefore proposed to re-appoint them as statutory auditors for the final year inthe transitional period of three consecutive years from the conclusion of this AGMsubject to ratification by the members at the AGM.

The Company has obtained necessary certificate under Section 141 of the Act 2013conveying their eligibility for being statutory auditors of the Company for the year2016-17.

The Auditors' Report for the financial year 2015-16 does not contain any qualificationreservation or adverse remark and the same is attached with the annual financialstatements.

Secretarial Auditor

As per Section 204 of the Act 2013 and the Companies (Appointment and Remuneration ofManagerial Personnel) Rules 2014 the Company is required to appoint a Secretarial Auditorfor auditing secretarial and related records of the Company.

As required by Section 204 of the Act 2013 the Secretarial Audit Report for the year2015-16 given by Ms B Chandra Practising Company Secretary Chennai for auditing thesecretarial and related records is attached to this report. The Secretarial Audit Reportdoes not contain any qualification reservation or other remarks.

Ms B Chandra Practising Company Secretary Chennai was re-appointed as SecretarialAuditors for carrying out the secretarial audit for the financial year 2016-17.

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 2015 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 Regulation 17 (8) of the SEBI LODR Regulations 2015pertaining to CEO / CFO certification for the financial year ended 31st March2016.

11. POLICY ON VIGIL MECHANISM

The Company has adopted a Policy on Vigil Mechanism in accordance with the provisionsof the Act 2013 and Regulation 22 of SEBI LODR Regulations 2015 which provides a formalmechanism for all directors employees and other stakeholders of the Company to report tothe management their genuine concerns or grievances about unethical behaviour actual orsuspected fraud and any violation of the Company's Code of conduct or ethics policy.

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 with the following link https:// w w w. h a r i t a s e a t i n g . c o m / P D F / WhistleBlowerPolicy.pdf.

12. PUBLIC DEPOSITS

The Company has not accepted any deposit from the public within the meaning of ChapterV of the Act 2013 for the year ended 31st March 2016.

13. STATUTORY STATEMENTS

Information on conservation of energy technology absorption foreign exchange etc.

Information on conservation of energy technology absorption and foreign exchangeearnings and outgo are given in Annexure I to this report in terms of the requirements ofSection 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.

Annual Return

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.

Employee's remuneration

Details of employees receiving the remuneration in excess of the limits prescribedunder Section 197 of the Act 2013 read with Rule 5(2) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are annexed as a statement and given inAnnexure III. In terms of first proviso to Section 136(1) of the Act 2013 the AnnualReport excluding the aforesaid annexure is being sent to the shareholders of the Company.The annexure is available for inspection at the Registered Office of the Company duringbusiness hours and any shareholder interested in obtaining a copy of the said annexure maywrite to the Company Secretary at the Registered Office 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 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

Furnishing the details of loans guarantees or investments under Section 186 of the Act2013 for the financial year 2015-2016 does not arise since the Company has not extendedany guarantee or loans to other companies during the year under review.

Please refer note No. IX to Notes on accounts for the financial year 2015-16 fordetails of investments made by the Company.

Other laws

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.

14. ACKNOWLEDGEMENT

The directors acknowledge the support and co-operation received from the promotersHarita Group and Mr Martin Grammer. The directors thank the customers suppliersfinancial 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
20th May 2016 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 2015-16

i) Energy conservation in treatment plants by introduction of energy efficient motors.

ii) Energy conservation by replacement of T5 light fittings to Light Emitting Diode(LED) fittings.

iii) Introduction of timer based auto shut off system for lights in Canteen.

During the year the Company has invested Rs.9 lakhs on variable frequency drive andother equipments as 'energy efficient measures'. The above measures had resulted in anannual saving of Rs. 10.85 lakhs.

2. Proposed measures during the year 2016 - 17 Reduce energy consumption

• by implementing LED fittings

• through heat recovery systems

• through energy efficient motors in pre-treatment process

• 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 Planning to use solar thermalheating system for CED (Cathodic electro deposition coating) painting process.

4. Capital investment in Energy Conservation Equipment

The Company is planning to invest Rs.15 lakhs for electrical equipments as energyefficient measures and Rs. 20 lakhs for conserving energy by investing in Solar thermalheating.

B. TECHNOLOGY ABSORPTION FOR 2015-16

1. Specific areas in which Research & Development is carried out in the Company:

• Instructor seat proto development completed for exports market.

• Deluxe Seats developed for Western Indian 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 expanded market.

• Improved share of business in LCV bus segment.

• 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. 602.87 lakhs.

Technology absorption adaptation and innovation:

(i) Efforts in brief: Development of modular / platform structural design parts andraw materials level standardization leads to reduction in product weight.

(ii) Benefits derived as a result of the above are:

a. Price competitiveness.

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 EARNINGS AND

OUTGO

Export activities during the year ended 31st March 2016 amounted to Rs.3596.09 lakhs as against Rs.2133.74 lakhs for the year ended 31st March 2015.

1. Activities relating to export:

• During the year 2015-2016 the Company has pursued multiple opportunities fornew orders for tractor seats.

• The Company has been continuing its efforts to increase the current volume ofexport of tractor seats to USA.

2. Total foreign exchange earned and used (actual):

(Rs. in lakhs)
Foreign exchange earned : 3596.09
Foreign exchange used : 928.70

 

For and on behalf of the Board
Chennai H LAKSHMANAN
20th May 2016 Chairman