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HBL Power Systems Ltd.

BSE: 517271 Sector: Consumer
NSE: HBLPOWER ISIN Code: INE292B01021
BSE LIVE 19:40 | 19 Oct 58.10 0.55
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NSE 19:40 | 19 Oct 57.90 0.55
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OPEN 57.95
PREVIOUS CLOSE 57.55
VOLUME 89681
52-Week high 70.65
52-Week low 32.80
P/E 37.73
Mkt Cap.(Rs cr) 1,470
Buy Price 0.00
Buy Qty 0.00
Sell Price 57.85
Sell Qty 56.00
OPEN 57.95
CLOSE 57.55
VOLUME 89681
52-Week high 70.65
52-Week low 32.80
P/E 37.73
Mkt Cap.(Rs cr) 1,470
Buy Price 0.00
Buy Qty 0.00
Sell Price 57.85
Sell Qty 56.00

HBL Power Systems Ltd. (HBLPOWER) - Director Report

Company director report

Dear Members

Your Directors take pleasure in presenting the 30th Annual Report for the financialyear ended on March 31 2016. The financial performance is presented below (stand-alonebasis).

(Rs. In Lakhs)
Particulars 2015-16 2014-15
1 Net sales 128835.87 133007.03
2 Other income 1208.05 1660.52
3 Total income 130043.92 134667.55
4 Total expenditure 115646.67 118462.24
5 Profit before interest depreciation and tax (PBIDT) 14397.25 16205.31
6 Finance cost 5264.70 7066.02
7 Depreciation & amortisation expenses 4958.96 5103.85
8 Profit before exceptional items and tax 4173.59 4035.44
9 Exceptional items - Income/(expenses) (896.16) (1503.82)
10 Profit Before Tax (PBT) 3277.43 2531.62
11 Provision for tax & tax adjustment 1334.44 1069.55
12 Profit After Tax (PAT) 1942.99 1462.07
13 Transfer to General Reserve 105.35 500.00
14 Earnings Per Share (H) 0.77 0.58
15 Proposed dividend (on share of RS.1/- each) 25% 20%

Performance review: 2015-16

Financial Year (FY) 2015-16 has been a challenging year for the Company. The overalleconomic environment remained weak through the year 2015-16 than was anticipated at thebeginning of the year. Growth momentum remained modest during most part of the year withgeneral demand in the major telecom segment remaining sluggish. Your Company has continuedthe steady strengthening of internal efficiencies to achieve external competitiveness.Focus on cost design optimisation and diversified marketing approaches amongst othersaided the Company in improving the margins. Despite operating in an increasinglycompetitive business environment your Company demonstrated a creditable performance.While your Company witnessed a reasonable growth in certain business segments theaggregate turn-over for the year registered a marginal decline over FY 2014-15; thebottom-line however registered substantial improvement by 32.9% at PAT.

Greater emphasis was laid on cost and operational efficiencies resulting in Profitafter Tax (PAT) at Rs.1942.99 lakhs compared to H1462.07 lakhs for the previous year.

Current year's performance:

During the current year a stream of opportunities is expected to open up in thetraditional as well as new areas of business which shall enable your Company to regainthe growth trajectory. Make- in-India initiative by the Government of India provides apotential platform to some of the business segments to charter higher growth vistas. YourCompany is a leading manufacturer of a variety of industrial batteries and nicheengineering products and meets the demand of major industries. Your Company has been adeptat aligning itself to the market requirements. Delays in Railway and Defence businesssegments can have an effect on your Company's performance. Considering all the factors inline with the management thoughts placed in the Management Discussion

Analysis last year the Company is expected to perform better on the profitability thisyear also for a given business environment while consolidating the topline. YourDirectors have factored these effects and have been taking necessary corrective steps;barring unforeseen circumstances performance of the Company in the coming years (fromFY18) is expected to be highly encouraging. The Management Discussion and Analysis sectionof the Annual Report presents a detailed business review of the Company.

Dividend

Your Directors are pleased to recommend 25% dividend - Rs.0.25 per equity share of HI/-fully paid up (Previous Year 20%) for the Financial Year 2015-16 subject to approval ofthe members at the ensuing Annual General Meeting. The proposed dividend includingdividend tax will absorb H761.26 lakhs.

Transfer to reserves

The Company proposes to transfer H105.35 lakhs to the General Reserve out of the amountavailable for appropriation from current year profits.

Subsidiary companies

The consolidated financial statements of the Company and its subsidiaries prepared inaccordance with the Companies Act 2013 and applicable accounting standards forms part ofthis annual report. The consolidated financial statements presented by the Company includethe financial results of its subsidiary companies associates and joint ventures.

The Company has four subsidiaries as on March 312016 namely

HBL America Inc.

HBL Germany GmbH Germany SCIL Infracon Private Limited HBL Suntech LLP

The Company has two associate companies namely Naval Systems and Technologies PrivateLimited (NSTL) and Kairos Engineering Limited (KEL) within the meaning of Section 2(6) ofthe Companies Act 2013 ("Act"); and one joint venture company namely GulfBatteries Co. Ltd (JV in the Kingdom of Saudi Arabia - KSA).

There has been no material change in the nature of the business of the subsidiaries.Pursuant to the provisions of Section 129(3) of the

Act a table containing salient features of the financial statements of the Company'ssubsidiaries in Form AOC-1 is attached.

Pursuant to the provisions of Section 136 of the Act the financial statements of theCompany consolidated financial statements along with relevant documents and separateaudited accounts in respect of subsidiaries are placed on the website of the Company.

Highlights of performance of subsidiaries associates and joint venture companies andtheir contribution on overall performance of the Company.

As per the notification issued by the Ministry of Corporate Affairs on July 27 2016with regard to Companies (Accounts) Amendment Rules 2016 the report of the Board shallcontain highlights of performance of subsidiaries associates and joint venture companiesand their contribution on overall performance of the Company. Accordingly we herebyfurnish the following:

Subsidiaries

HBL Germany GmbH (HBLG)

HBL Germany is our base for selling in Europe - and continues efforts to build keyrelationships with major German engineering companies and our global customers where theyhave offices in Europe. HBL Germany offers our customers in the Euro-Zone the convenienceof dealing with HBL locally and avoiding having to manage long distance trading. This isespecially valuable for smaller customers who may be adverse to international risks. HBL-Ghas continued to grow with further success at major power systems OEM's in Europe and ahealthy backlog has been built for FY2017.

HBL America Inc. (HBLA)

HBL America had a challenging year - especially in the oil and gas sector and SouthAmerica - however the pipeline of projects is growing and key approval work is underway.New approvals in the rail and aviation sector in particular will increase sales in thenear term. FAA approval of certain aviation products is expected in FY17 and this willhave a marked impact on revenues. Significant orders were obtained from Central Americawhile Brazil saw a dramatic drop as our main end user - Petrobras - suffered fallout fromthe political situation.

SCIL Infracon Private Limited (SIPL)

Shareholders are already aware that SIPL is not in operation since a few years. Asalready reported elsewhere the proposal of merger of SIPL with the Company which wasenvisaged earlier was dropped after re-considering the benefits of such an action. Someof the assets of SIPL were disposed off during the year to pay off the liabilities. Theloss reported in the year was mainly due to depreciation and amortisation of assets andloss on sale of such assets.

HBL Suntech LLP

HBL Suntech LLP was incorporated in 2011 to take up trading and sale of monoblockbatteries. However due to continuous losses and unviable business outlook operations ofHBL Suntech LLP were discontinued with effect from 1 April 2014. Only administrativeprocedures related to closure of business follow up on certain statutory matters andrealisation of old book debts were conducted in the year under review.

Joint Ventures and Associates

Gulf Batteries Company Limited (JV in the Kingdom of Saudi Arabia)

Your Company is a 40% stake holder in the JV. Due to low oil prices most of the oilcompanies reduced their capex requirements and deferred some of the major anticipatedorders. Due to overall economic and business scenario in KSA operations were belowbreakeven level.

Naval Systems and Technologies Limited (NSTL)

NSTL is an associate Company of HBL. NSTL is a service provider to foreign OriginalEquipment Manufacturers (OEMs) mainly operating in the field of marine equipment in IndianNavy. The services provided include installation trials and commissioning of variousequipment annual maintenance specialised documentation etc. NSTL has proven expertise inproviding technical support conducting feasibility studies for complex systems marketresearch and software support. FY 2015-16 was an all time record performance year for NSTLwith an income of H1280.42 lakhs and a PBT of H290.79 lakhs. Your Directors believe thatNSTL will continue to grow into different niche areas and maintain its profitability.

Kairos Engineering Limited (KEL)

KEL was primarily engaged in software solution for railway monitoring controls. Some ofthe products developed earlier are yet to get due recognition from Railways for commercialimplementation. As result of such delays during the year KEL did not receive any neworders and there was no operational income from sales or service.

Highlights of financial performance and impact of the contribution of subsidiariesassociates and joint venture companies on overall performance of your Company arepresented in the Consolidated Financial Statements Annexure 37.3 in Notes on accounts.The overall consolidated profit for the year was Rs.2598.71 lakhs and an EPS of Rs.1.03per share were reported with a moderate increase.

Explanation or comments on qualifications reservations or adverse remarks ordisclaimers made by the auditors in their reports

The Board has considered the observations/ queries as raised by the statutory auditorsand the explanations are as under.

Comments of the auditors:

Annexure B to the Independent Auditors' report on standalone financials statements.

According to the information and explanations given to us and based on our audit we areof the opinion that the Company has in all material respects maintained adequateinternal financial controls over financial reporting as of March 31 2016 based on theinternal control over financial reporting criteria established by the Company consideringthe essential components of internal control stated in the Guidance Note on Audit ofInternal Financial Controls Over Financial Reporting issued by the Institute of CharteredAccountants of India and except for the possible effects of the material weaknesses inthe operating effectiveness of controls described below on the achievement of theobjectives of the control criteria the Company's internal financial controls overfinancial reporting were operating effectively as of March 312016.

a) During the year the Company had migrated from its existing ERP package to SAP whichis in its final implementation stage. The Company's internal financial controlsimplemented through Information Technology Controls and General IT Controls are yet to befully implemented which may lead to a failure of the Company's control procedures toprevent or detect a misstatement of an account balance or disclosure.

b) Control Documents evidencing the operating effectiveness of controls are not signedoff appropriately resulting in nonidentification of deviations from the approveddelegation of authority & responsibility company's controls & procedures. In asmuch effecting the assessment of risks associated and determining the effect of thedeviations of the control being tested and the evidence to be obtained as well as formingan opinion on the operating effectiveness of the controls.

A 'material weakness'is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the Company's annual or interim financial statements willnot be prevented or detected on a timely basis.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2016financial statements of the Company and these material weaknesses do not affect ouropinion on the standalone financial statements of the Company.

Annexure A to the Independent Auditors' report on consolidated financial statements

According to the information and explanations given to us and based on our audit we areof the opinion that the Holding Company and its subsidiary companies incorporated inIndia have in all material respects maintained adequate internal financial controls overfinancial reporting as of March 312016 based on the internal control over financialreporting criteria established by the Holding Company its subsidiary companiesconsidering the essential components of internal control stated in the Guidance Note onAudit of Internal Financial Controls Over Financial Reporting issued by the Institute ofChartered Accountants of India and except for the possible effects of the materialweaknesses in the operating effectiveness of controls in the Holding Company describedbelow on the achievement of the objectives of the control criteria the Company's internalfinancial controls over financial reporting were operating effectively as of March312016.

a) During the year the Holding Company had migrated from its existing ERP package toSAP which is in its final implementation stage. The Company's internal financial controlsimplemented through Information Technology Controls and General IT Controls are yet to befully implemented which may lead to a failure of the Company's control procedures toprevent or detect a misstatement of an account balance or disclosure.

b) Control Documents in the Holding Company evidencing the operating effectiveness ofcontrols are not signed off appropriately resulting in non-identification of deviationsfrom the approved delegation of authority & responsibility company's controls &procedures. In as much effecting the assessment of risks associated and determining theeffect of the deviations of the control being tested and the evidence to be obtained aswell as forming an opinion on the operating effectiveness of the controls.

A 'material weakness'is a deficiency or a combination of deficiencies in internalfinancial control over financial reporting such that there is a reasonable possibilitythat a material misstatement of the Company's annual or interim financial statements willnot be prevented or detected on a timely basis.

We have considered the material weaknesses identified and reported above in determiningthe nature timing and extent of audit tests applied in our audit of the March 31 2016Consolidated Financial Statements and these material weaknesses do not affect our opinionon the Consolidated Financial Statements of the Holding Company and its subsidiarycompanies and the jointly controlled entity.

Board's reply

The process of phase wise migration of the existing ERP system with SAP platform is atan advanced stage and Communication and IT controls are in the process of beingestablished. This will be completed in the current financial year. We are informed suchtransitional issues are not unusual especially when a migration happens as is in manysimilar cases elsewhere. Further auditors have stated that these weaknesses do not affecttheir opinion on the standalone financial statement of the Company.

Scheme of arrangement and amalgamation between Beaver Engineering and Holdings PrivateLimited and the Company

The Board of Directors of your Company at a meeting held on March 23 2016 haveapproved the Scheme of Arrangement and Amalgamation of Beaver Engineering and HoldingsPrivate Limited ('Beaver' or 'Transferor Company') with HBL Power Systems Limited ('HBL'or 'the Transferee Company') and their respective shareholders and creditors (hereinreferred to as the 'Scheme') after taking into consideration inter alia an independentvaluation report and a fairness opinion. The Scheme shall be subject to theapproval/sanction by the Hon'ble High Court at Hyderabad and/or such other competentauthority as may be necessary. Proposed Appointed Date for the amalgamation is April12016. Necessary approvals have been received from BSE and NSE. The Company has filednecessary application to the Hon'ble High Court.

The Board recommended the following share exchange/share entitlement ratio

i) 3883 fully paid up Equity Shares of HI/- each of the Transferee Company shall beissued and allotted as fully paid up for every 10 Equity Shares of H10/- each fully paidup held in the Transferor Company.

ii) 3753 fully paid up Equity Shares of RS.1/- each of the Transferee Company shall beissued and allotted as fully paid up for every 10 Compulsorily Convertible PreferenceShares of Rs.10/- each fully paid up held in the Transferor Company.

iii) 3901 fully paid up Equity Shares of Rs.1/- each of the Transferee Company shallbe issued and allotted as fully paid up for every 10 Optionally Convertible RedeemablePreference Shares of Rs.20/- each fully paid up held in the Transferor Company.

Beaver Engineering and Holdings Private Limited is the holding company for HBL PowerSystems Ltd. Beaver is also engaged in the business of providing engineering know-how andservices; sales of engineered products; developing as a center of competence forengineering knowledge and skill in all branches of engineering and technology. Theproposed merger shall allow the shareholders of the Transferor Company viz. the promotersand the investors to directly hold shares in the listed company. This will result inbenefits to the Companies and their respective shareholders and stakeholders such as:

• Improved debt equity ratio for Transferee Company Increase in public float ofthe Transferee Company.

• This will in turn increase trading stock and positively impact the liquidity ofshares of the Transferee Company.

• Simplification of group structure.

Updates on merger of SCIL Infracon Private Limited

With regard to the proposal of merger of SCIL Infracon Private Limited with the Companyas envisaged earlier considering the priorities in merger proposal of Beaver Engineeringand Holdings Private Limited with the Company no formal application was made during theyear to the Hon'ble High Court of Andhra Pradesh and Telangana though the proposal hasbeen cleared by the BSE Limited and the National Stock Exchange of India Limited.

Material changes and commitments:

No material changes and commitments have occurred after the closure of Financial Year2015-16 till the date of this Report which would affect the financial position of yourCompany.

Directors' responsibility statement:

Pursuant to Section 134(5) of the Companies Act 2013 the Board of Directors to thebest of their knowledge and ability confirm that:

i. in the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures;

ii. they have selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at the end of the financial year and of the profitof the Company for that period;

iii. they have taken proper and sufficient care for 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. they have prepared the annual accounts on a going concern basis;

v. they have laid down internal financial controls to be followed by the Company andsuch internal financial controls were adequate and operating effectively;

vi. they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.

Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutoryauditors and external consultants and the reviews performed by management and the relevantboard committees including the audit committee the board is of the opinion that theCompany's internal financial controls were adequate and effective during the financialyear 201516 except to the extent of possible insignificant effects on internal controlsdue to stage wise migration of existing ERP system to SAP which is at its final stage.However such migration will not have any material impact on the overall internal controlsand reporting established by the Company as stated in the Guidance Note issued by theInstitute of Chartered Accountants of India.

Directors and key managerial personnel

Mr. Sanjiv Singhal has resigned from the Board with effect from March 23 2016. YourBoard conveys sincere appreciation for his advice during his tenure as a Director.

Mr. Mitin Jain has been appointed as a director in the vacancy caused by Mr. SanjivSinghal with effect from March 23 2016. Your Board welcomes him.

During the year the non-executive directors of the Company had no pecuniaryrelationship or transactions with the Company. There was no change in key managementpersonnel.

Mr. MSS Srinath retires by rotation and is eligible for re-appointment. Your Boardrecommends his reappointment.

Number of meetings of the Board

Five meetings of the Board were held during the year. For details of the meetings ofthe Board please refer to the corporate governance report which forms part of thisreport.

Board evaluation

Pursuant to the provisions of the Companies Act and the Corporate Governancerequirements prescribed by SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 the annual evaluation of the Board Committees of the Board and theindividual Directors was carried out.

Necessary inputs were obtained from all the directors on the Board and members of therespective Committees to evaluate the performance of the Board and the Committees as awhole on the basis of the criteria such as the composition of committees effectiveness ofcommittee meetings etc.

The Board and the Nomination and Remuneration Committee ("NRC") whilereviewing the performance of the individual directors considered the contribution of theindividual director to the Board and Committee meetings on the basis of the criteria suchas preparedness on the issues circulated in agenda meaningful and constructivecontribution and inputs in meetings etc. In addition the Chairman was also evaluated onthe key aspects of his role.

In a separate meeting of independent directors performance of nonindependentdirectors performance of the Board as a whole and performance of the Chairman wasevaluated taking into account the views of executive directors and non-executivedirectors.

Policy on Directors' appointment and remuneration and other details

The Company's policy on directors' appointment and remuneration and other mattersprovided in Section 178(3) of the Act has been disclosed in the Corporate GovernanceReport which forms part of the Directors' report.

Audit committee

The details pertaining to composition of audit committee are included in the Report onCorporate Governance which forms part of this report. The Board of Directors has acceptedall the recommendations of the audit committee.

Statutory auditors

M/s Rao & Kumar Chartered Accountants (FRN 03089S) Visakhapatnam who are thestatutory auditors of the Company retire at the conclusion of the ensuing Annual GeneralMeeting and are eligible for reappointment. Your directors recommend their reappointment.

Risk management

The Company has deployed a comprehensive framework to identify monitor and take allnecessary steps towards mitigation of various risk elements which can impact the existenceof the Company on a periodic basis. All the identified risks are managed throughcontinuous review of business parameters by the Management and the Board of Directors arealso informed of the risks and concerns.

Internal financial controls

Pursuant to Section 134 of the Companies Act 2013 the Directors state that the Boardthrough the operating management has laid down internal financial controls to be followedby the Company. To the best of their knowledge and ability and inputs provided by variousassurance providers confirm that such financial controls are adequate with reference tothe size and operations of the Company. It is pertinent to note that the Company is in thefinal stage of phase wise migration to SAP platform. The migration from ERP system wouldcertainly have transitional effects on the internal controls. The effect of such migrationwill be insignificant in nature on the entire internal controls. The Internal controlshave been assessed during the year under review taking into consideration the essentialcomponents of internal controls stated in the Guidance Note on Audit of Internal FinancialControls over Financial Reporting issued by The Institute of Chartered Accountants ofIndia. Based on the results of such assessments carried out by the management noreportable material weakness or significant deficiencies in the design or operation ofinternal financial controls was observed.

Particulars of loans guarantees and investments

The particulars of loans guarantees and investments have been disclosed in thefinancial statements.

Transactions with related parties

None of the transactions with related parties falls under the scope of Section 188(1)of the Act. Information on transactions with related parties pursuant to Section 134(3)(h)of the Act read with Rule 8(2) of the Companies (Accounts) Rules 2014 are given inAnnexure I in Form AOC-2 and the same forms part of this report. Related partytransactions are in the ordinary course of business and on arm's length basis.

Corporate social responsibility

The Company has a Board-level committee that supervises its Corporate SocialResponsibility (CSR) activities. The brief outline of the CSR policy of the Company andthe initiatives undertaken by the Company on CSR activities during the year are set out inAnnexure II of this report in the format prescribed in the Companies (Corporate SocialResponsibility Policy) Rules 2014.

Extract of annual return

Pursuant to Section 92(3) of the Act the extract of annual return is given in AnnexureIII in the prescribed Form MGT-9 which forms part of this report.

Particulars of employees

The information required under Section 197 of the Act read with rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 are givenbelow:

1. Employee name Mr. Suresh Kalyan
2. Total remuneration CTC (H lakhs) H 121.50 lakhs
3. Designation and nature of duties Chief Operating Officer (COO)
4. Qualification BSc. Chartered Accountant
5. Exp.(Year) 26
6. Date of commencement of employment 17.11.2014
7. Age 52
8. Last employment held before joining the Company Amara Raja Batteries Limited Hyderabad as President - Finance

a. The ratio of the remuneration of each non-executive director to the medianremuneration of the employees of the Company for the financial year: Not Applicable asnone of the non-executive director was paid any remuneration.

b. The percentage increase in remuneration of each Director finance head and CompanySecretary in the financial year:

Name of the Directors/Key Managerial Personnel % increase in remuneration in the financial year
Dr. A J Prasad Chairman and Managing Director 62.80 (excluding commission)
Mr. MSS Srinath Whole-Time Director 98.50

At the AGM held on September 29 2015 shareholders have approved Increasedremuneration to Dr. A J Prasad and Mr. MSS Srinath w.e.f. October 12015 and September12015 respectively.

c. The percentage increase in the median remuneration of employees in the financialyear: 15.7%

d. There are 2197 permanent employees on the rolls of Company as at March 312016

e. The explanation on the relationship between average increase in remuneration andCompany performance:

On an average employees received an annual increase of 15.7%. The individualincrements varied from 8% to 20% based on individual performance. As per the remunerationpolicy of your Company employees are compensated broadly in comparison with the median ofthe comparator basket on the basis of performance potential and criticality forachieving competitive advantage in the business. Salary increases during the year were inline with your Company's performance as well as per inflation and motivational factors.

f. Comparison of the remuneration of the Key Managerial Personnel (KMP) against theperformance of the Company:

Aggregate remuneration of KMP in FY2015-16 (H lakhs) 304.26
Revenue (H lakhs) 128835.87
Profit before Tax (PBT) 3277.43
Remuneration of KMPs (as % of revenue) 0.24
Remuneration of KMP (as % of PBT) 9.28

g. Variations in the market capitalisation of the Company price earnings ratio as atthe closing date of the current financial year and previous financial year:

Particulars March 312016 March 312015 % Change
Market capitalisation (H crores) 919.65 1290.30 (28.73)
Price Earnings Ratio 47.20 87.93 (46.32)

h. Comparison of each remuneration of the key managerial personnel against theperformance of the Company:

(Rs. In Lakhs)
Particulars Dr. AJ Prasad Mr. MSS Srinath Mrs. Kavita Prasad Mr. MVSS Kumar Mr. K Mahidhar
Designation CMD Executive Director Executive Director (Non-Board) Company Secretary Vice President Finance
Remuneration in FY 2015-16 67.20 36.45 16.92 23.00 30.92
Commission on profit 129.77 - - - -
Revenue (net) 128835.87 128835.87 128835.87 128835.87 128835.87
Profit before Tax (PBT) 3277.43 3277.43 3277.43 3277.43 3277.43
Remuneration as % of Revenue 0.15 0.03 0.01 0.02 0.02
Remuneration (as % of PBT) 6.01 1.11 0.52 0.72 0.94

i. The key parameters for any variable component of remuneration availed by thedirectors:

Only commission on net profits was paid to Chairman and Managing Director in additionto the monthly remuneration. The remuneration paid to Dr. A J Prasad Chairman andManaging Director is restricted to aggregate of basic pay of H60 lakhs plus perquisitesbenefits and allowances as approved by the members in their meeting held on September 292015.

j. The ratio of the remuneration of the highest paid director to that of the employeeswho are not directors but receive remuneration in excess of the highest paid directorduring the year: Not applicable

Disclosure requirements

As required under SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 report on corporate governance and auditors' certificate thereon and managementdiscussion and analysis are attached which form part of this report.

The Company has formulated and published a whistle blower policy to provide a vigilmechanism for employees including directors of the Company to report genuine concerns. Theprovisions of this policy are in line with the provisions of the Section 177(9) of the Actand SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

Deposits from public

The Company has not accepted any deposits from public and as such no amount on accountof principal or interest on deposits from public was outstanding as on the date of thebalance sheet.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings &Outgo:

Information relating to conservation of energy technology absorption and foreignexchange earnings and outgo as required under Section 134(3)(m) read with Rule 8(3) ofthe Companies (Accounts) Rules 2014 is given in the Annexure hereto.

Corporate governance:

Pursuant to Regulation 34 read with Schedule V of the SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a separate section titled "Report onCorporate Governance" is attached to the annual report.

Cost auditors:

Your Board has appointed M/s K. Narashima Murthy & Co. Cost AccountantsHyderabad as cost auditors of the Company for conducting the audit of cost records of theCompany for the financial year 2015-16. Your Board proposes to re-appoint them as costauditors for 2016-17 subject to the approval from the Central Government.

Secretarial auditor:

Your Board has appointed Mr. CN Kranthi Kumar (CP No: 13889) Practicing CompanySecretary as a secretarial auditor for the financial year 2015-16 and his secretarialaudit report is attached to this report as Annexure IV.

Acknowledgements:

Your Board of Directors places on record its sincere appreciation towards the Company'svalued customers and esteemed shareholders for the support and confidence reposed by themin the management of the Company and look forward to continuance of this mutuallysupportive relationship in future.

Your Directors take this opportunity to thank all the Company's Bankers and FinancialInstitutions the concerned Central and State Government Departments and Agencies fortheir support and cooperation to the Company.

The Board has special appreciation for the employees for their dedicated services andtheir ability to deliver good results.

For and on behalf of the Board
Place: Hyderabad Dr. A J Prasad
Date : August 112016 Chairman and Managing Director

ANNEXURE TO THE DIRECTORS' REPORT FOR THE YEAR 2015-16

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

A. Conservation of Energy: Energy saving devices such as re-cycling of heat and use ofalternate sources of energy like solar energy/fuel oil are being implemented whereverpossible.

B. Technology Absorption: We have in-house R&D facilities. We may avail theconsultancy services from overseas experts for strengthening our technology as and whenneeded. We are in the process of absorbing the technology so developed and improvedfurther.

C. Foreign Exchange Earnings and Outgo:

(Rs. In Lakhs)
Particulars 2015-16 2014-15
1 Value of imports (on CIF basis)
Raw materials components & spares 17825.07 22479.84
Capital items/ equipment - 21.34
2 Expenditure in foreign currency
Commission 263.90 166.40
Traveling expenses 162.83 52.84
Professional charges 94.52 21.48
Marketing expenses 467.13 314.03
Others 374.24 37.43
3 Investment in subsidiary 99.03 -
4 Foreign exchange earnings
Export sales (on FOB basis) 17323.37 17812.24
Services 44.80 77.72

 

For and on behalf of the Board
Place: Hyderabad Dr. A J Prasad
Date : August 112016 Chairman and Managing Director