TO THE MEMBERS
(Pursuant to Section 134(3) of the Companies Act 2013)
The Directors have pleasure in presenting the Thirty Fifth Annual Report together withthe Statement of Accounts for the year ended on March 31 2017.
| ||2016-2017 ||2015-2016 |
| ||(Rs. in lakhs) ||(Rs. in lakhs) |
|Sales ||3684.76 ||5514.98 |
|Earnings before depreciation interest tax ||65.39 ||273.20 |
|Less: || || |
|Depreciation ||89.03 ||104.21 |
|Interest ||86.70 ||102.63 |
|PROFIT/LOSS BEFORE TAX ||-110.36 ||66.36 |
|Less: Provision for Taxation || || |
|Current Tax ||- ||13.00 |
|Deferred Tax ||-13.36 ||-2.46 |
|PROFIT/ LOSS AFTER TAX ||-96.99 ||55.82 |
|Surplus brought forward from Previous Year ||262.65 ||215.78 |
|PROFIT AVAILABLE FOR APPROPRIATION ||165.55 ||271.61 |
|General Reserve ||- ||- |
|Proposed Dividend ||- ||7.49 |
|Tax on Proposed Dividend ||- ||1.57 |
|Surplus Carried Forward ||165.55 ||262.55 |
OPERATIONS / STATE OF COMPANY'S AFFAIRS
The company made a pretax loss of Rs. 110 lakhs as compared to a profit of Rs. 66 lakhsin the prior financial year.
The primary causes of this loss are as follows:
Decrease in Sales: Sales decreased by 33% as compared to the previous financialyear.
Domestic sales decreased by 43%. This was a result of both government policy changesand loss of market share of a major OEM customer. Demonetisation impacted sales for thethird quarter as both commercial vehicle and tractor sales dropped sharply. Fourth quartersales suffered from the introduction of BS IV norms. Commercial vehicle manufacturesslowed down production as they were left with sizeable inventory of BS III vehicles thatneeded to be converted to BS IV. In addition the company lost market share of its largestdomestic OEM customer. Export sales decreased marginally from Rs. 13.0 crores in FY 15-16to Rs. 12.6 crores in FY 16-17. Volume sales increased slightly; however due to weaknessin the EURO and GBP realisation per unit sale reduced.
Increase in material prices: In FY 15-16 the company benefited from the reductionin steel prices. However the trend reversed in the current financial year and the companywas compelled to pass on price increases to raw material suppliers. Despite the company'sbest efforts these price increases were not fully compensated by customers citing marketconditions.
Increase in employee costs: The labour agreement expired on 31st March 2016. Thecompany made a provision for increase in wages which would need to be paid to workmen asarrears even though a final settlement had not been reached.
Total headcount decreased from 207 to 188 and as a result total employee costsdecreased 4% despite the increase in average cost per employee.
Exchange rate fluctuation: The company's exports are in EURO and GBP. Boththese currencies weakened during the year. The EUR/INR exchange rate was Rs. 69.11 at 31stMarch 2017 as compared to Rs. 75.43 at 31st March 2016. The GBP/INR exchange rate was Rs.81.29 at 31st March 2017 compared to Rs. 95.25 at 31st March 2016. Thus exportrealisations per unit sale decreased as compared to the previous year. The companyrecognised a foreign exchange loss of Rs. 28.96 lakhs during FY 16-17 as compared to again of Rs. 55.37 lakhs during FY 15-16.
The company took several steps to reduce expenses and control costs which helped reducethe loss.
Reduction in finance costs: Finance costs reduced from Rs. 102.63 lakhs in theprevious year to Rs. 86.70 lakhs in the current year. The company took advantage of lowerinterest rates offered on export receivables. The company also took steps to decreaseinventory and reduce its working capital cycle.
The company worked with existing vendors and identified new vendors to reducematerial cost and other variable costs.
The company also sharpened its focus on value engineering and continuousimprovement to reduce manufacturing costs.
TRANSFER TO GENERAL RESERVES
There was no transfer made to General Reserve.
In view of the loss during the financial year 2016-2017 your directors do notrecommend dividend on the equity shares of the Company for the financial year 2016-2017.
Sales are forecasted to remain weak for the first two quarters of FY 17-18. Uncertaintyaround the transition to GST will likely impact sales. This uncertainty is expected topersist throughout the second quarter as the industry works through teething problems withthe new tax regime. Additionally the company does not expect to replace the lost volumesof the major OEM customer in the first half of the year.
Export volumes are likely to remain weak as the European economy is showing only slightsigns of improvement. The impact of Brexit on sales to UK customers is as yet unknown. Thecompetition amongst propeller shaft manufacturers is also intensifying which is puttingdownward pressure on margins.
The Company has stepped up its sales and marketing effortsand is expanding its productoffering and targeting new customers. The company has also introduced a new line for theIndian after market. After market sales have been especially impacted by demonetizationand GST; however the company expects its efforts to translate into increased sales in thesecond half of the year.
The company is also continuing its value engineering and continuous improvement effortsto reduce manufacturing costs.
MATERIAL CHANGES AND COMMITMENTS AFTER THE END OF THE FINANCIAL YEAR:
There have been no material changes and commitments affecting the financial positionof the Company which have occurred between the end of the financial year and the date ofthe report
NUMBER OF MEETINGS OF BOARD OF DIRECTORS
4 (Four) meetings of the Board of Directors of the Company were held during the year.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
In accordance with the provisions of Section 152 of the Act and Articles ofAssociation Mr. Sharad Jain (DIN 06988659) Director of the Company retires at theensuing Annual General Meeting and being eligible offers himself for re-appointment.
The Board of Directors at its meeting held on May 19 2017 subject to the approval ofthe Members at the AGM re-appointed Ms. Devaki Saran as Whole time Director designated asExecutive Director & CFO for a further period of One Year with effect from August 142017.
Members are requested to refer to Item No. 4 of the Notice of the AGM and theExplanatory Statement for the terms of re-appointment and remuneration of Ms. DevakiSaran.
In terms of Section 203 of the Act the following are the Key Managerial Personnel(KMP) of the Company: Mr. Ravindra Kale Executive Director & CEO
Ms. Devaki Saran Executive Director & CFO
Apart from Ms. Devaki Saran who is re-appointed as Executive Director & CFO noother KMP has been appointed or has retired or resigned during the year.
DECLARATION FROM INDEPENDENT DIRECTORS
Directors who are independent directors have submitted a declaration as required undersection 149(7) of the Act that each of them meets the criteria of independence as providedin sub Section (6) of Section 149 of the Act and there has been no change in thecircumstances which may affect their status as independent director during the year. Inthe opinion of the Board the independent directors possess appropriate balance of skillsexperience and knowledge as required.
AUDIT COMMITTEE OF BOARD OF DIRECTORS
The Audit committee of the Board of directors of the Company consists of the followingmembers
1. Mr. Shiamak Marshall
2. Mr. Jehangir H. C. Jehangir
3. Mr. S. C. Saran
4. Mr. Richard Koszarek
Four meetings of the Audit committee were held during the financial year.
The Company has formulated and published a Whistle Blower Policy to provide a mechanism("Vigil Mechanism") for employees including directors of the Company to reportgenuine concerns. The provisions of this policy are in line with the provisions of theSection 177 (9) of the Act. The Whistle Blower Policy (Vigil Mechanism) is uploaded on theCompany s website http://www.hhsl. net/Policy.html.
POLICY ON DIRECTORS' APPOINTMENT AND REMUNERATION AND CRITERIA FOR INDEPENDENTDIRECTORS
The Remuneration Policy for directors and senior management and the Criteria forselection of candidates for appointment as directors independent directors seniormanagement as adopted by the Board of Directors are placed on the website of the Company(http://www.hhsl.net/Policy. html). There has been no change in the policies since thelast fiscal year. We affirm that the remuneration paid to the directors is as per theterms laid out in the remuneration policy of the Company.
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 loss of theCompany for that period;
(iii) they have taken proper and sufficient accounting records in accordance with theprovisions of the Act for safeguarding the assets of the Company and for preventing anddetecting fraud and other irregularities; (iv) they have prepared the annual accounts on agoing concern basis; (v) they have laid down internal financial controls to be followed bythe Company and such internal financial controls are adequate and operating
(vi) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating .
ADEQUACY OF INTERNAL FINANCIAL CONTROLS
The Board has adopted policies and procedures for ensuring the orderly and efficientconduct of its business including adherence to the Company's policies the safeguardingof its assets the prevention and detection of frauds and errors the accuracy andcompleteness of the accounting records and the timely preparation of reliable financialdisclosures The internal auditor also regularly reviews the adequacy of internal financialcontrol system.
DETAILS OF SUBSIDIARIES/ JOINT VENTURES/ ASSOCIATES
The Company does not have any subsidiary/ joint ventures/ associates.
EXTRACT OF ANNUAL RETURN
As provided under sub Section (3) of Section 92 of the Act the extract of annualreturn is enclosed which forms part of the directors' report as Annexure I.
As per Section 139 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 the term of M/s. J. L. Bhatt & Co. (Firm Registration No.30170) Chartered Accountants Mumbai as the Statutory Auditors of the Company expires atthe conclusion of the ensuing Annual General Meeting of the Company. M/s. J. L. Bhatt& Co. over many years have maintained the high level of governance ethical standardsrigour and quality in their audit. The Board places on record its appreciation for theservices rendered by M/s. J. L. Bhatt & Co. as the Statutory Auditors of the Company.
The Board of Directors of the Company at their meeting held on May 19 2017 on therecommendation of the Audit Committee have made its recommendation for appointment of M/s.Daga & Chaturmutha Chartered Accountants (ICAI Registration No- 101987W) as theStatutory Auditors of the Company by the Members at the ensuing Annual General Meeting ofthe Company for a term of 5 years. M/s. Daga & Chaturmutha Chartered AccountantsNashik (ICAI Registration No- 101987W) have consented to their appointment as StatutoryAuditors and have confirmed that if appointed their appointment will be in accordancewith Section 139 read with Section 141 of the Act. Accordingly a resolution proposingappointment of M/s. Daga & Chaturmutha Chartered Accountants as the StatutoryAuditors of the Company for a term of fiveconsecutive years i.e. from the conclusion ofthis ensuing Annual General Meeting till the conclusion of 40th Annual General Meeting ofthe Company to be held in year 2022 pursuant to Section 139 of the Companies Act 2013forms part of the Notice of the 35th Annual General Meeting of the Company.
You are requested to appoint Auditors and to fix their remuneration.
Pursuant to the provisions of Section 204 and other applicable provisions if any ofthe Companies Act 2013 M/s. Parikh & Associates Practising Company Secretaries wereappointed as the Secretarial Auditors for auditing the secretarial records of the Companyfor the financial year 2016-17.
The Secretarial Auditors' Report is annexed as Annexure II.
AUDITORS' REPORT AND SECRETARIAL AUDITORS' REPORT
The auditor's' report does not contain any qualifications reservations or adverseremarks
As regards observations of Secretarial Auditors in their report your directors have tostate that constant efforts are being made to identify and appoint a competent andsuitable candidate as the Company Secretary of the Company. In the Meanwhile to ensuretimely compliance of the provisions of the Act the company has been taking theprofessional services of the reputed Practicing Company Secretaries.
CONSERVATION OF ENERGY TECHNOLOGY ABSORBTION FOREIGN EXCHANGE EARNINGS AND OUTGO
Information in accordance with Clause (m) of Sub-section (3) of Section 134 of the Actread with Companies (Accounts) Rules 2014 is annexed to this report as Annexure III.
PARTICULARS OF EMPLOYEES
Pursuant to Section 197 of the Act read with rule 5(1) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014 the particulars of employees areannexed as Annexure IV.
DEPOSITS FROM PUBLIC
The Company has not accepted any deposits from public.
SIGNIFICANT & MATERIAL ORDERS PASSED BY THE REGULATORY/ JUDICIAL AUTHORITY
No significant or material orders were passed by any regulator or court that wouldimpact the going concern status of the Company and its future operations.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The Company has not given any loans or guarantees or made investments during the yearended March 31 2017.
RISK MANAGEMENT POLICY
The Board of Directors of the Company has framed a risk management policy and isresponsible for reviewing the risk management plan and ensuring its effectiveness. Theaudit committee has additional oversight in the area of financial risks and controls.Major risks identified by the businesses and functions are systematically addressedthrough mitigating actions on a continuing basis. The company conducts a monthly review ofmajor risks and actions to minimize these in its Monthly Management Meeting.
RELATED PARTY TRANSACTIONS
Particulars of transactions with related parties pursuant to Section 134(3) (h) of theAct read with rule 8(2) of the Companies (Accounts) Rules 2014 are given in Form AOC-2and the same forms part of this report as Annexure V.
EVALUATION OF BOARD ITS COMMITTEES AND INDIVIDUAL DIRECTORS
An annual evaluation of the Board's own performance Board committees and individualdirectors was carried out pursuant to the provisions of the Act in the following manner:
|Sr. No. ||Performance evaluation of ||Performance evaluation performed by ||Criteria |
|1. ||Each Individual directors ||Nomination and Remuneration Committee ||Attendance Contribution to the Board and committee meetings like preparedness on the issues to be discussed meaningful and constructive contribution and guidance provided key performance aspects in case of executive directors etc. |
|2. ||Independent directors; ||Entire Board of Directors excluding the director who is being evaluated ||Attendance Contribution to the Board and committee meetings like preparedness on the issues to be discussed meaningful and constructive contribution and guidance provided etc. |
|3. ||Board its committees and individual directors ||All directors ||Board composition and structure; effectivenessof Board processes information and functioning fulfillment of key responsibilities performance of specific duties and obligations timely flow of information etc. The assessment of committees based on the terms of reference of the committees and effectiveness of the meetings. |
DISCLOSURE UNDER THE SEXUAL HARRASMENT OF WOMEN AT WORKPLACE (PREVENTION PROHIBITIONAND REDRESSAL) ACT 2013
The company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of women at Workplace (Prevention Prohibition and Redressal)Act 2013 and rules made thereunder. All employees (permanent contractual temporarytrainees) are covered under this policy.
The Company has not received any complaint of sexual harassment during the financialyear 2016-17.
LISTING AGREEMENT AND LISTING FEES
The Company entered into Listing Agreement with BSE Limited in terms of the SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 issued on September 22015 effective from December 1 2015.
The Company has paid the listing fees to BSE Limited for the year 2017-18.
INSIDER TRADING REGULATIONS AND CODE OF DISCLOSURE
The Board of Directors has adopted the Code of Practices and Procedures for FairDisclosure of Unpublished Price Sensitive Information and Code of Internal Procedures andConduct for Regulating Monitoring and reporting of Trading by Insiders in accordance withthe requirements of the SEBI (Prohibition of Insider Trading) Regulation 2015 and isavailable on our website (http://www.hhsl.net/Policy.html)
As a part of Green initiative Electronic copies of the Annual Report 2016-17 andNotice of the 35th Annual General Meeting of the Company are sent to all members whoseemail addresses are registered with the Company / Depository Participant(s). For memberswho have not registered their email addresses physical copies are sent in the permittedmode.
MANAGEMENT'S DISCUSSION AND ANALYSIS
In terms of the provisions of Regulation 34 of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 theManagement's discussion and analysis is set out in this Annual Report.
CORPORATE GOVERNANCE REPORT
As per SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015Corporate Governance is not mandatory to the Company.
The directors thank the Company's employees customers vendors investors and academicinstitutions for their continuous support.
The directors also thank the government of various countries government of India thegovernments of various states in India and concerned government departments/agencies fortheir co-operation.
The directors appreciate and value the contributions made by every member of theHindustan Hardy Spicer family.
| ||For and on behalf of the Board |
|Date : 19.05.2017 ||S. C. Saran |
|Place : Mumbai ||Chairman |
HINDUSTAN HARDY SPICER LIMITED
A. A. Conservation of energy technology absorption foreign exchange earnings andoutgo: [Rule9.10(3)]
1. Conservation of energy:
i. Steps taken / impact on conservation of energy with special reference to thefollowing:
Installation of LED lightbulbs in place of CFL lightbulbs both of the shop floorand the office. This is an ongoing process as fused lightbulbs are being replaced by LEDpowered ones.
High horse power motors on old machines are being replaced by Variable FrequencyDrive motors on an ongoing basis.
Paperless initiative to reduce printing and conserve paper.
Skylights in the factory ceiling eliminate the need for lighting during the dayas far as possible ii. Steps taken by the company for utilizing alternate sources ofenergy including waste generated
Installation of Solar Powered LED Streetlight fixtures
Installation of 400 LPD Solar Hot water System at Canteen. iii. Capitalinvestment on energy conservation equipment Rs. NIL
2. Technology :
i) Our technology had been imported from our Collaborators Spicer GelenkwellenbauGmbH Germany in 1984. Since then upgradation has continued in consultation with variousAgencies.
|3. Foreign exchange earnings and Outgo || |
|The Foreign Exchange earnings and outgo are as under ||(Rs. in lacs) |
|1. Foreign Exchange Earnings ||1236.84 |
|2. Foreign Exchange Outgo on account of import ||14.72 |
|3. Foreign Exchange Outgo on account of travel ||8.16 |
|Total Foreign Exchange outgo ||22.88 |
|Net Foreign Exchange earnings ||1213.96 |
| ||For and on behalf of the Board |
|Date : 19.05.2017 ||S. C. Saran |
|Place : Mumbai ||Chairman |
PARTICULARS OF EMPLOYEES
B. I] Remuneration of Directors [Section197(12) and Rule 5(1) of Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014
(a) The ratio of the remuneration of each director to the median remuneration of theemployees of the Company for the financial year:
| ||Ratio to median remuneration |
|Chairman ||5.63 |
|Executive Director & CEO ||13.46 |
|Executive Director & CFO ||10.98 |
(b) The percentage increase in remuneration of each director chief executive officerchief financial officer company secretary in the financial year:
|Directors Chief Executive Officer Chief Financial Officer and Company Secretary ||% increase/decrease in remuneration in the financial year |
|Chairman ||0.00 |
|Executive Director & Chief Operation Officer ||0.00 |
|Executive Director & Chief Financial Officer ||0.54 |
** Previous year's Remuneration is annualized for calculating the percentage.
(c) The percentage increase in the average remuneration of employees in the financialyear: 5.75%.
(d) The number of permanent employees on the rolls of company: 188
(e) Average percentile increase already made in the salaries of employees other thanthe managerial personnel in the last financial year and its comparison with the percentileincrease in the managerial remuneration and justification thereof and point out if thereare any exceptional circumstances for increase in the managerial remuneration Increase inthe managerial remuneration in the last financial year is 0.18% as against 5.80% averageremuneration increase of the employees. This is because managerial remuneration isgoverned by contract and remains fixed for the duration of the The remuneration of otherstaff is revised yearly and also impacted by changes in the Dearness Allowance.
(f) Affirmation that the remuneration is as per the remuneration policy of the TheCompany affirms remuneration is as per the remuneration policy of the Company.
II] The names of the top ten employees in terms of remuneration drawn is as under:
|Name of employee ||Designation ||Remuneration received ||Nature of employment ||Qualifications ||Experience ||Age ||Last employment ||Percentage of equity shares held |
|Mr. Ravindra Kale ||Executive Director & CEO ||43.07 ||Contractual ||BE (Mechanical) ||31 Years ||54 ||Curtiss Wright Pune ||NIL |
|Ms. Devaki Saran ||Executive Director & CFO ||35.12 ||Contractual ||B.S. (Mechanical Engg.); M.B.A ||3 years ||32 ||UBS Investment Bank New York ||NIL |
|Murgunde N R ||Sr. Manager Business Development & Purchase ||9.07 ||Regular ||DME ||20 Years ||41 ||Spicer India Ltd. Satara ||NIL |
|Nilkanth S J ||Sr. Manager Engineering ||8.57 ||Regular ||ME (Design) ||13 Years ||35 ||Atlas Copco (I) Ltd. Nashik-7. ||NIL |
|Sambhus M S ||Sr. Manager QA ||8.31 ||Regular ||DME ||34 Years ||54 ||Associated Manufacturing LLP Pune ||NIL |
|Sonawane B J ||Sr. Manager Metallurgy ||7.06 ||Regular ||DME DBM MMS ||20 Years ||41 ||Taparia Tools Ltd. Nashik-7 ||NIL |
|Taskar AS ||Sr. Manager Production ||4.98 ||Regular ||DME ||26 Years ||48 ||Started his career in Hindustan Hardy ||NIL |
|Tarle SF ||Sr. Manager QA ||4.63 ||Regular ||DME ||28 Years ||49 ||Started his career in Hindustan Hardy ||NIL |
|Patil MS ||Sr. Manager TR ||4.53 ||Regular ||DME ||28 Years ||50 ||Started his career in Hindustan Hardy ||NIL |
|Mulay DS ||Sr. Manager Production ||4.53 ||Regular ||DME ||28 Years ||49 ||Started his career in Hindustan Hardy ||NIL |
Note: The employees falling in the management cadre are being considered for the abovepurpose.
There are no employees who are in receipt of remuneration in aggregate of Rupees OneCrore and two Lakh for the year or Rupees EightLakhfiftythousand per month if employedfor part of the year.
| || ||For and on behalf of the Board |
|Date ||: 19.05.2017 ||S. C. Saran |
|Place : Mumbai ||Chairman |
(Pursuant to clause (h) of sub-section (3) of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014) Form for disclosure of particulars ofcontracts/arrangements entered into by the company with related parties referred to insub-section (1) of section 188 of the Companies Act 2013 including certain arms lengthtransactions under third proviso thereto.
1. Details of contracts or arrangements or transactions not at arm's lengthbasis
|Name(s) of the related party and nature of relationship ||Nature of contracts/ arrangements/ transactions ||Duration of the contracts / arrangements/ transactions ||Salient terms of the contracts or arrangements or transactions including the value if any ||Justification for entering into such contracts or arrangements or transactions ||Date(s) of approval by the Board ||Amount paid as advances if any: ||Date on which the special resolution was passed in general meeting as required under first proviso to section 188 |
|Mr. S.C. Saran Director ||Professional Fees ||Continuous ||A sum not exceeding Rs. 18.00 per annum to be paid on quarterly basis ||He is highly qualified having both an BSc in Mechanical Engineering from Carnegie Mellon University (USA) and an MBA from Columbia University (USA). Under his leadership the Company has earned a very good reputation both in the domestic and international markets. He has thorough knowledge of the product and of the automotive component industry as a whole. He also has very good relationships with domestic and global customers. The technical expertise and guidance of Mr. Sanjaya Saran is invaluable to the Company. ||12.02.2016 ||- ||N.A. |
|XLO India Limited Directorship and Shareholding ||The Company will use the registered trademark of XLO XLO Value to market its products in the Indian aftermarket. ||Continuous ||payment of 1% royalty on sales value to be paid on quarterly basis ||XLO brand already has good brand recognition in the Indian aftermarket and it would be beneficial to the business of the Company ||01.08.2016 ||- ||N.A. |
2. Details of material contracts or arrangement or transactions at arm's lengthbasis
(a) Name(s) of the related party and nature of relationship NIL
(b) Nature of contracts/arrangements/transactions Not Applicable
(c) Duration of the contracts / arrangements/transactions Not Applicable
(d) Salient terms of the contracts or arrangements or transactions including the valueif any: Not Applicable
(e) Date(s) of approval by the Board if any: - Not Applicable
(f) Amount paid as advances if any: - None
| ||For and on behalf of the Board |
|Date : 19.05.2017 ||S. C. Saran |
|Place : Mumbai ||Chairman |