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Hindustan Motors Ltd.

BSE: 500500 Sector: Auto
NSE: HINDMOTORS ISIN Code: INE253A01025
BSE LIVE 14:07 | 23 Aug 8.16 -0.03
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NSE 14:13 | 23 Aug 8.25 0.10
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OPEN 8.30
PREVIOUS CLOSE 8.19
VOLUME 22923
52-Week high 12.80
52-Week low 5.06
P/E
Mkt Cap.(Rs cr) 170
Buy Price 8.16
Buy Qty 86.00
Sell Price 8.24
Sell Qty 200.00
OPEN 8.30
CLOSE 8.19
VOLUME 22923
52-Week high 12.80
52-Week low 5.06
P/E
Mkt Cap.(Rs cr) 170
Buy Price 8.16
Buy Qty 86.00
Sell Price 8.24
Sell Qty 200.00

Hindustan Motors Ltd. (HINDMOTORS) - Director Report

Company director report

To the Members

Your Directors present their seventy-fourth Annual Report together with auditedfinancial statements of the Company for the year ended March 31 2016.

Financial Results/Performance

The figures for the year under review is not comparable with the previous financialyear 2014-15 due to the fact that during the financial year 2014-15 the Uttarpara Plantwas under suspension of work since 24th May 2014 and the Plant was under operation onlyfrom 1st April 2014 to 23rd May 2014 and for the financial year 2015-16 the UttarparaPlant was under suspension of work for the whole year.

During the year under review the Company’s revenue was Rs. 0.87 Crores comparedto Rs. 16.95 Crores in the previous financial year. The following table gives a summary ofthe performance.

(Rs. in Crores)

Particulars

Standalone

Consolidated

2015-16

2014-15

2015-16

2014-15

Gross Revenue from Operations 0.87

16.95

0.87

16.95

Net Revenue from Operations 0.81

15.10

0.81

15.10

Profit/(Loss) before Exceptional items and Tax (32.04)

(41.90)

(31.66)

(41.90)

Exceptional items (Income)

-

-

Profit / (Loss) before Tax (32.04)

(41.90)

(31.66)

(41.90)

Tax Expenses

-

-

Profit / (Loss) For the Period (32.04)

(41.90)

(31.66)

(41.90)

Standalone

The revenue account shows a loss of Rs. 32.04 Crores after providing Rs. 1.89 Croresfor depreciation & amortisation expense. There is a deficit of Rs. 233.05 Crores as atthe end of the current year as against Rs. 201.00 Crores in the last year.

The losses during this year includes expenses incurred towards voluntary retirementscheme opted by 645 employees and provision for diminishing in the carrying value ofinventories post declaration of suspension of work at Uttarpara Plant and layoff atPithampur Plant.

Consolidated

The revenue account shows a loss of Rs. 31.66 Crores after providing Rs. 1.89 Croresfor depreciation & amortisation expense. There is a deficit of Rs. 232.86 Crores as atthe end of the current year as against Rs. 201.19 Crores in the last year.

The losses during this year includes expenses incurred towards voluntary retirementscheme opted by 645 employees and provision for diminishing in the carrying value ofinventories post declaration of suspension of work at Uttarpara Plant and layoff atPithampur Plant.

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 ordersis also 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 ofthe company 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. Steps are being taken to close the business ofCompany’s subsidiary in USA subject to necessary compliances and approvals.

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 2016-17

The suspension of work at Company’s Uttarpara Plant and lay off at Company’sPithampur Plant are continuing as it is unviable to operate the two plants under presentbusiness conditions.

In an effort to revive operations the Company has been engaged in scouting for tie-upswith potential investors/strategic partners who can introduce newer product portfolios inthe market and infuse capital into the Company.

The Company has started process of rationalising the cost post suspension of work atUttarpara plant and in the process has provided Voluntary retirement to employees. It hasreduced the fixed cost including employee cost considerably and continuously working onfurther reducing its fixed cost.

The Company is 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. The reference has been registered by BIFR andproceedings are going on.

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. Details of Loans Guarantees andInvestments as at 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 -37 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 Rs. 1 each to Lenders (Banks/Financial Institutions). Thesaid Debentures are redeemable in three equal annual instalments along with intereststarting from September 29 2015. The Company is in the process of making such payment.

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. Duringthe year 645 nos. of employees opted Voluntary Retirement Scheme (VRS) by giving a lumpsum amount on such early retirement. At Pithampur Plant the eight staff and techniciangrade employees have been laid off with effect from 4th December 2014. The generalindustrial relation at both the plants is very sensitive but being managed. The number ofemployees as on 31st March 2016 is 677.

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 Sanjay Basu (upto 16thSeptember 2015) and Shri A. Sankaranarayanan as other member. All the recommendationsmade by the Audit Committee were accepted by Board. Further details regarding BoardMeetings and Audit Committee are given in the Corporate Governance Report which forms partof 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' Responsibility Statement

In terms of the requirement of Section 134 of the Companies Act 2013 Directors’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 Systems

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 theAuditors’ Report which the management has responded in Note-43 to the auditedfinancial statements for the year ended 31st March 2016.

Secretarial Audit

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 subsidiary Hindustan Motors Limited USA. Hindustan MotorsLimited USA was mainly engaged in the business of providing engineering services inautomotive and other industrial sectors in USA. The subsidiary has not done any businesssince 2009-10. Steps are being taken to close the business of Company’s subsidiary inUSA subject to necessary compliances and approvals.

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

Shri Sanjay Basu resigned as Director of the Company with effect from 17th September2015. The Board places on record its high appreciation for the valuable services renderedby Shri Sanjay Basu during his tenure as Director of your Company.

At the ensuing Annual General Meeting Shri Uttam Bose Director of the Companyretires 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 Moloy Chowdhury Manager designated as Chief Executive Officer of the Companyresigned from the services of the Company with effect from 16th June 2015.

Shri Ajay Kumar Bansal has been appointed as Chief Executive Officer of the Companywith effect from 2nd November 2015 for a period of two years.

Shri Ajay Kumar Bansal has resigned from the services of the Company with effect fromthe close of business hours on 13th May 2016.

Shri Tarun Kumar Kabra Company Secretary resigned from the services of the Companywith effect from the close of business hours on 31st December 2015.

Ms. Sanu Agarwal has been appointed as Secretary of the Company with effect from 25thMay 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.Approval of 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 15th December 2015 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 2015-16.

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
25th May 2016 Director Director