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Hindustan Motors Ltd.

BSE: 500500 Sector: Auto
NSE: HINDMOTORS ISIN Code: INE253A01025
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OPEN 7.55
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VOLUME 77118
52-Week high 12.80
52-Week low 6.66
P/E
Mkt Cap.(Rs cr) 156
Buy Price 7.48
Buy Qty 20000.00
Sell Price 0.00
Sell Qty 0.00
OPEN 7.55
CLOSE 7.61
VOLUME 77118
52-Week high 12.80
52-Week low 6.66
P/E
Mkt Cap.(Rs cr) 156
Buy Price 7.48
Buy Qty 20000.00
Sell Price 0.00
Sell Qty 0.00

Hindustan Motors Ltd. (HINDMOTORS) - Director Report

Company director report

To the Members

Your Directors present their seventy-fifth Annual Report together with auditedfinancial statements of the Company for the year ended March 31 2017.

Financial Results/Performance

During the year under review the Company's revenue was Rs.1.13 Crores compared toRs.0.87 Crores in the previous financial year. The following table gives a summary of theperformance.

(Rs. in crores )
Particulars 2016-17

2015-16

Gross Revenue from Operations 1.13

0.87

Net Revenue from Operations 1.02

0.81

Profit/(Loss) before Exceptional items and Tax (20.03)

(32.04)

Exceptional items (Income) 0.93

-

Profit/(Loss) before Tax (19.14)

(32.04)

Tax Expenses -

-

Profit/(Loss) For the Period (19.14)

(32.04)

The revenue account shows a loss of Rs.19.14 Crores after providing Rs.1.56 Crores fordepreciation & amortisation expense. There is a deficit of Rs.252.17 Crores in theStatement of Profit and Loss as at the end of the current year as against Rs.233.05 Croresin the last year.

The losses during this year includes expenses incurred for safeguarding its assetspayments to working employees expenses towards statutory compliances for running itsbusiness and provision for diminishing in the carrying value of inventories postdeclaration of suspension of work at Uttarpara Plant and layoff at Pithampur Plant.

A Cash Flow Statement for the year under review is also attached to the enclosed AnnualAccounts.

Consolidated accounts of the Company have not been prepared since HML USA the onlyone wholly owned subsidiary of the Company which has no business transaction during theyear has been dissolved during the year and not in existence as on 31st March 2017.

Review of Operations

As reported earlier that due to low productivity growing indiscipline shortage offunds and lack of demand for products the Company was compelled to declare"Suspension of work" at its Uttarpara Plant with effect from 24th May 2014 andthe suspension of work is continuing due to no change in the situation. The lay off inCompany's Pithampur Plant with effect from 4th December 2014 due to lack of orders isalso continuing.

No material changes or commitments or any significant and material adverse orders orrulings passed by the regulators or Courts or Tribunals impacting the going concern statusand Company's operations in future have occurred between end of the financial year of thecompany and date of this report.

There has also been no change during the period under review in the nature of businessof the Company or its subsidiary. The subsidiary has been dissolved on 16th February 2017after complying with the laws applicable to dissolution in USA.

There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operations.

A detailed Management Discussion & Analysis Report forms part of this report isannexed as Annexure-1.

Outlook for 2017-18

The suspension of work at Company's Uttarpara Plant and lay off at Company's PithampurPlant are continuing as it is unviable to operate the two plants under present businessconditions.

In an effort to revive operations the Company has started process of rationalising thecost post suspension of work at Uttarpara plant. It has reduced the fixed cost includingemployee cost considerably and continuously working on further reducing its fixed cost.

Also the Company has been engaged in scouting for tie-ups with potentialinvestors/strategic partners who can introduce newer product portfolios in the market andinfuse capital into the Company. The Company is considering various measures to generaterevenue and in this process executed an agreement with Peugeot S.A. on 10th February 2017for the sale of the Ambassador Brand (including the trademarks having application numbers2803570 2803571 and 2821821) and certain related rights (Ambassador Brand) by the Companyto Peugeot S.A. for a consideration of '80 Crores. The sale of the Ambassador Brand shallbe effective upon fulfilment of the terms and conditions as prescribed in theabovementioned agreement and as such the brand consideration will be utilized for theclearance of most of the liabilities of the Company including that of employees.

The Company is also in the process of selling identified assets subject to necessaryapprovals to improve net worth as well as immediate cash generation to meet its financialobligations.

Board for Industrial and Financial Reconstruction

As the accumulated losses of the Company at the end of financial year ended on 30September 2013 exceeded its entire net worth the Company has made reference to the Boardfor Industrial and Financial Reconstruction (BIFR) under Section 15 of the Sick IndustrialCompanies (Special Provisions) Act 1985 (SICA). However SICA has been repealed andsimultaneously Insolvency and Bankruptcy Code 2016 (IBC) came into force with effect from1st December 2016. The Central Government by way of its Notification dated 28th November2016 has notified the Section 4(b) of Sick Industrial Companies (Special Provisions)Repeal Act 2003 and as such all the pending reference before the BIFR or any appeal filedbefore the AAIFR from the date of the aforesaid Notification stands abated.

Particulars of Loans Guarantees or Investments

There are no Loans Guarantees and Investments made under the provisions of Section 186of the Companies Act 2013 during the year under review. The Company has sold 30000Shares of Birla Buildings Ltd on 1st October 2016 to Ranchi Enterprises and PropertiesLtd at a consideration of Rs.9300000/-. Details of Loans Guarantees and Investments asat the year end are given in the notes to the Financial Statements.

Related Party Transactions

There are no contracts or arrangements with related parties referred to in Section188(1) of the Companies Act 2013. The details of other transactions entered into with theRelated Parties are given in the note -36 to the Financial Statements.

Deposits

Your Company has not accepted any deposit within the meaning of Section 73 of theCompanies Act 2013 and the Rules made thereunder and therefore no amount of principal orinterest was outstanding as on the date of Balance Sheet.

Debentures

On 29th September 2014 the Company allotted 205300000-10.25% SecuredNon-Convertible Debentures of 1 each to Lenders (Banks/Financial Institutions). The saidDebentures are redeemable in three equal annual instalments along with interest startingfrom September 29 2015. The Company has redeemed the first instalment of the saidDebentures. The Second Instalment of the said Debentures became due on 29th September2016. The Company is in the process of making the 2nd instalment of the Debenturepayments.

Corporate Social Responsibility Initiatives

In view of the continuing losses the Company is not in a position to make anyexpenditure under Corporate Social Responsibility as per the provisions of Companies Act2013.

Risks and Concerns and its Management

The Company is exposed to have some internal risks to generate liquidity to meet theexisting liability of the Company and day to day activities as the Uttarpara Plant of theCompany is still under suspension of work and Pithampur Plant of the Company is stillunder layoff.

In order to identify and mitigate risks the Company has constituted a Corporate RiskManagement Committee. The details of Committee and its terms of reference are set out inthe Corporate Governance Report forming part of the Board's Report. The Company has aCorporate Risk Management Charter to identify the nature and magnitude of risk associatedwith the Company and to take steps for mitigating the impact of such risks. The CorporateRisk Management Committee continuously identify and prioritize the risks associated withthe functioning of the Company lays down mitigation plan for identified risks withassigning responsibilities and adequately monitoring and managing the same. These arereviewed periodically and placed before the Board.

Industrial Relations

As reported earlier the Company has declared "Suspension of Work" at itsUttarpara Plant in Hooghly District of West Bengal with effect from 24th May 2014. AtPithampur Plant the eight staff and technician grade employees have been laid off witheffect from 4th December 2014. The general industrial relation at both the plants issensitive but being managed. The number of employees as on 31st March 2017 is 663.

Extract of Annual Return

The extract of the Annual Return in form MGT 9 is annexed herewith as Annexure-2.

Meetings of the Board and Audit Committee

During the year four Board Meetings and four Audit Committee Meetings were convenedand held. The intervening gap between the Meetings was within the period prescribed underthe Companies Act 2013. The Audit Committee comprises Independent Directors namely Smt.Mou Mukherjee (Chairperson) Shri Raj Kamal Johri and Shri A. Sankaranarayanan as othermember. All the recommendations made by the Audit Committee were accepted by Board.Further details regarding Board Meetings and Audit Committee Meetings are given in theCorporate Governance Report which forms part of the Board's Report.

Corporate Governance

The Company continues to remain committed to high standards of corporate governance.The report on corporate governance as per the requirement of the SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 forms part of this report is annexed as Annexure-3.The Company has complied with all the requirements of corporate governance. Thecertificate from the Auditors of the Company confirming compliance to the conditions ofthe corporate governance requirements is also annexed.

Directors Rs.Responsibility Statement

In terms of the requirement of Section 134 of the Companies Act 2013 DirectorsRs.Responsibility Statement is annexed as Annexure-4 to this report.

Information on Remuneration

Information as per the provisions of Section 197(12) of the Companies Act 2013 readwith Rule 5(1) 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are annexed as Annexure-5 and Annexure-6 to thisreport.

Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo

Additional Information relating to conservation of energy technology absorptionforeign exchange earnings and outgo as required under Section 134(3)(m) of the CompaniesAct 2013 is annexed as Annexure-7 to this report.

Internal Financial Controls System

The Company has comprehensive and adequate internal financial controls system for allmajor processes including financial statements to ensure reliability of reporting. Thesystem also helps management to have timely data/feedback on various operationalparameters for effective review. It also ensures proper safeguarding of assets across theCompany and its economical use. The internal financial controls system of the Company iscommensurate with the size scale and complexity of its operations. The systems andcontrols are periodically reviewed and modified based on the requirement. The Company hasan internal audit function which is empowered to examine the adequacy and compliance withpolicies plans and statutory requirements. It is also responsible for assessing andimproving the effectiveness of risk management control and governance process. The scopeof Internal Audit is well defined and documented and the audit committee reviews theobservations of the Internal Audit critically. The composition and working of the auditcommittee forms part of the Corporate Governance Report.

Auditors

The Report by the Auditors is self-explanatory. Your Directors request you to ratifythe appointment of auditors for another term beginning the conclusion of the ensuingAnnual General Meeting till the conclusion of the subsequent Annual General Meeting andfix their remuneration as specified in the proposed resolution attached to the notice.

Further with regard to preparation of accounts on going concern basis the Auditorshave made some observations under "Emphasis of Matter" appearing in the AuditorsRs.Report which the management has responded in note-40 to the audited financialstatements for the year ended 31st March 2017.

Secretarial Audit

Pursuant to the provisions of Section 204 of the Companies Act 2013 and The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Messrs. R.B.M. & Associates a firm of Company Secretaries in Practise (CPNo.8659) to undertake the Secretarial Audit of the Company.

The Report of the Secretarial Auditor is annexed herewith as Annexure-8. Thereare no qualifications or observations or remarks made by Secretarial Auditor in hisreport.

Subsidiary

The Company has only one wholly owned foreign subsidiary i.e. Hindustan MotorsLimited USA which has not done any business since 2009-10 and has been dissolved on 16thFebruary 2017 after complying with the laws applicable in USA.

As required salient features of financial statements of Hindustan Motors Limited USAhave been disclosed in Annexure-9 to this report.

Declaration by Independent Directors

Shri Raj Kamal Johri and Smt. Mou Mukherjee are Independent Directors on the Board ofyour Company. In the opinion of the Board and as confirmed by these Directors they fulfilthe conditions specified in Section 149 of the Companies Act 2013 and the Rules madethereunder about their status as Independent Directors of the Company.

Directors

There is no change in the Directorship during the year.

At the ensuing Annual General Meeting Shri A. Sankaranarayanan Director of theCompany retires by rotation and being eligible offers himself for re-appointment.

Information about the Director proposed to be reappointed as stipulated under SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 is provided in theReport on Corporate Governance forming part of this Report.

Key Managerial Personnel

Shri Ajay Kumar Bansal the Chief Executive Officer of the Company has resigned fromthe services of the Company with effect from the close of business hours on 13th May2016.

Shri Asim Kumar Basu has been appointed as Chief Executive Officer of the Company witheffect from 5th August 2016 for a period of two years.

Ms. Sanu Agarwal has been appointed as Secretary of the Company with effect from 25thMay 2016.

Shri Bhikam Chand Mishra ceased and reappointed as the Chief Financial officer of theCompany for a period of two years with effect from 11th November 2016.

Policy on Appointment of Director and Remuneration

The Nomination and Remuneration Committee identifies and ascertains the integrityqualification expertise skills knowledge and experience of the person for appointmentas Director and Key Managerial Personnel. The appointment of a Director as recommended bythe Nomination and Remuneration Committee requires approval of the Board.

The remuneration/compensation/commission etc. to the Directors and Key ManagerialPersonnel is proposed by the Nomination and Remuneration Committee in compliance withrequirements of the Companies Act and recommended to the Board for it's approval. Approvalof Shareholders is obtained if required.

The Directors receive remuneration by way of fees for attending meetings of the Boardor committees thereof.

At the time of appointing an Independent Director a formal letter of appointment isgiven to the candidate which inter-alia explains the role functions duties andresponsibilities expected of the person as an Independent Director of the Company. TheIndependent Director is also explained in detail the compliance required from him underthe Companies Act 2013 and other relevant regulations. The independence of Director isdecided as per provisions of the Companies Act 2013.

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for remuneration of Directors Key Managerial Personnel and SeniorManagement. The said Remuneration Policy is annexed as Annexure-10 to this report.

Board Evaluation

The Board of Directors evaluated the annual performance of the Board as a whole itscommittees and the directors individually in accordance with the provisions of theCompanies Act 2013 and SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 in the following manner :-

i. Structured evaluation forms as recommended by the Nomination and RemunerationCommittee after taking into consideration inputs received from the Directors coveringvarious aspects of the Board's functioning such as adequacy of the composition of theBoard and its Committees Board culture execution and performance of specific dutiesobligations and governance for evaluation of the performance of the Board its Committeesand each director were provided to all the members of the Board.

ii. The members of the Board were requested to evaluate by filling the evaluation formsand the duly filled in evaluation forms were required to be sent to the Company Secretaryin a sealed envelope or personally submitted to the Chairman at the concerned meeting.

iii. Based on the individual evaluation of the Directors the Board initiated adetailed discussion at the concerned meeting on the performance of theBoard/Committee/Individual Director and formulated a final collective evaluation of theBoard. The Board also provided an individual feedback to the concerned director on areasof improvement if any.

A separate meeting of Independent Directors was held on 9th December 2016 to evaluatethe performance evaluation of the Chairman of the meeting of Board of Directors (as thereis no chairman of the Board) the Non-Independent Directors the Board and flow ofinformation from management.

Vigil Mechanism/Whistle Blower Policy

As per Section 177(9) of the Companies Act 2013 read with Rule 7 of Companies(Meetings of Board and its Powers) Rules 2014 and Clause 49 of the Equity ListingAgreement the Company has established an effective vigil mechanism named Whistle BlowerPolicy ("the Policy") which is also in conformity with the Regulation 22 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 with a view toprovide a mechanism for Directors and Employees of the Company inter alia to raise genuineconcerns of any violations of legal or regulatory requirements incorrect ormisrepresentation of any financial statements and reports etc. The Company encourages itsemployees to use the mechanism and has made provision for direct access to the Chairman ofthe Audit Committee in appropriate and exceptional cases. Adequate safeguards againstvictimization of the persons who use such mechanism are provided in the policy. The policyis posted on the website of the Company www.hindmotor.com.

Disclosure under The Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013

The Company has in place a policy for prevention of sexual harassment in accordancewith the requirements of the Sexual Harassment of Women at Workplace (PreventionProhibition & Redressal) Act 2013. Internal Complaints Committee has been set up toredress complaints received regarding sexual harassment. All employees (permanentcontractual temporary trainees) are covered under this policy. The Company did notreceive any complaint during the year 2016-17.

Appreciation

Your Directors acknowledge and thank the Company's customers shareholders stategovernment authorities business associates banks and financial institutions for thesupport extended to the Company. Your Directors also record their appreciation for thecommitment and dedication of the employees of your Company.

For and on behalf of the Board of Directors

Kolkata Uttam Bose A. Sankaranarayanan
29th May 2017 Director Director

Annexure-4 to the Directors' Report

Directors' Responsibility Statement

The Board of Directors confirms that :

A. In the preparation of the annual accounts for the financial year ended 31st March2017 all the applicable accounting standards have been followed;

B The Directors have adopted such accounting policies and have applied themconsistently and have made judgements and estimates that are reasonable and prudent so asto give a true and fair view of the state of affairs of the Company at the end of thefinancial year and of the loss of the Company for that period;

C The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

D The Directors have prepared the annual accounts on a going concern basis;

E The Directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and are operatingeffectively; and

F The Directors have devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems are adequate and operating effectively.

For and on behalf of the Board of Directors

Kolkata Uttam Bose A. Sankaranarayanan
29th May 2017 Director Director

Annexure-7 to the Directors Rs.Report

Details of conservation of energy technology absorption foreign exchange earnings andoutgo.

(a) Conservation of energy

(i) The steps taken or impact on conservation of energy a. The Uttarpara Plant of the Company is under suspension of work with effect from 24th May 2014. The following steps have been taken post suspension of work to conserve energy and reduce electricity expenses.
i) Reduction in demand load from 8000KVA to 3000 KVA for the period September 2014 to December 2014.
ii) Electricity connection was disconnected with effect from 3rd December 2014 to save the payment of minimum demand charges.
b. The Pithampur Plant of the Company is under layoff with effect from 4th December 2014. Electricity connection was disconnected with effect from 29th October 2014 to save the payment of minimum demand charges.
(ii) The steps taken by the Company for utilizing alternate sources of energy NIL
(iii) The capital investment on energy conservation equipment NIL
(b) Technology absorption
(i) The efforts made towards technology absorption All research and development efforts towards redesign and upgrading of product at Uttarpara Plant were put on hold due to
(ii) The benefits derived like product improvement cost reduction product development or import substitution suspension of work
(iii) in case of imported technology (imported during the last three years reckoned from the beginning of the financial year) Not Applicable
(a) the details of technology imported
(b) the year of import;
(c) whether the technology been fully absorbed
(d) if not fully absorbed areas where absorption has not taken place and the reasons thereof
(iv) The expenditure incurred on Research and Development NIL

(c) Foreign Exchange Earnings and Outgo

(i) Foreign exchange earned Rs.NIL
(ii) Foreign exchange outgo
a) CIF value of imports Rs.NIL
b) Others Rs.6.86 lacs

 

For and on behalf of the Board of Directors

Kolkata Uttam Bose A. Sankaranarayanan
29th May 2017 Director Director