Your Directors have pleasure in presenting 25th Annual Report of yourCompany together with the Audited financial Statements for the financial year ended March31 2017.
1. FINANCIAL HIGHLIGHTS
The financial performance of your company for the year ended March 31 2017 issummarized below:
| || ||(Rs. in Lakhs) |
| ||Standalone ||Consolidated |
|Particulars ||2016-17 ||2015-16 ||2016-17* |
|Revenue from Operations ||92648.06 ||111526.25 ||98631.42 |
|Other Income ||449.07 ||485.56 ||538.68 |
|Operating Profit before Finance Costs ||11289.13 ||14642.21 ||12890.07 |
|Depreciation Tax and Extraordinary items || || || |
|Less: Finance Cost ||6091.20 ||7823.71 ||6565.85 |
|Less: Depreciation and amortization expenses ||2145.89 ||1936.48 ||2389.04 |
|Profit before Exceptional Expenses and Tax ||3052.04 ||4882.02 ||3935.18 |
|Profit before tax ||3052.04 ||4882.02 ||3935.18 |
|Less: Tax Expenses ||808.19 ||1177.78 ||1087.87 |
|Profit for the year ||2243.85 ||3704.24 ||2847.31 |
|Add: Brought forward from last year's Account ||23542.41 ||20044.05 || |
|Amount Available for Appropriations ||25786.26 ||23748.29 || |
|Earnings per Share (in Rs.) Not Annualised || || || |
|Basis (Rs.) ||4.05 ||7.98 || |
|Diluted (Rs.) ||4.05 ||7.98 || |
* Since Himachal Energy Pvt Ltd. became subsidiary of the company on May 9 2016(financial year 2016-17) hence consolidated figures of financial year 2015-16 have notbeen furnished.
2. Review of Business Operations
During the year company came out with public issue of Rs. 361 crores which got overwhelming response resulting in over subscription of around 9 times. The business in allsectors was very challenging due to demonitisation & fewer tenders of meters fromElectricity Boards during the year resulting in reduced sales volume as well asprofitability of company. The segementwise revenue share break up as under Metering 41.73% Switchgears15.74% Lighting 19.85% and Wires & Cables-11.72%.To give push to "Make in India" programe of Govt of India your companyhas set up a plant in Guwahati (Assam) during Q4. With this addition HPL now has 7 stateof Art plants. This will take care of the manufacturing requirements & growthopportunities in future.
3. Subsidiaries/ Joint Ventures/ Associates
As on March 31 2017 the Company is having two Joint Ventures (JVs) namely HPLElectric & Power Pvt. Ltd. Shriji Designs (JV) and HPL Electric & PowerPvt. Ltd. Trimurthi Hitech Co. Pvt. Ltd. - Shriji Designs (JV). These JVs areestablished as Association of Person (AOP) and not registered under the Companies Act andaccordingly are not Associate Companies as per section 2(6) of the Companies Act 2013.
During the year under review company's investment in the Debentures subscribed inHimachal Energy Private Limited was converted into equity shares. Post conversion of15000000 (one crore fifty Lakhs) debenture held by the Company in Himachal EnergyPrivate Limited the Company now hold 97.15% of the total equity share capital of HimachalEnergy Private Limited. Accordingly Himachal Energy Private Limited has become subsidiaryof the Company. Himachal Energy Private Limited is engaged in the business ofmanufacturing of energy meters kilowatt meters trivector and multifunction meters andother related activities.
A statement containing the salient feature of the financial statement of a company'ssubsidiary or subsidiaries associate company or joint venture or ventures in Form AOC-1is Enclosed as Annexure-I.
4. Consolidated Financial Statement
The consolidated financial statements of your company for the financial year 2017 areprepared in compliance with the applicable provisions of the Companies Act 2013Accounting Standards and Securities and Exchange Board of India (Listing Obligations andDisclosure Requirements) Regulations 2015 and form part of the Annual Report.
In accordance with Section 129(3) of the companies Act 2013 a statement containingsalient features of the financial statement of subsidiary/associate/joint venturecompanies is provided as annexure in AOC-1 to the consolidated financial statement.
Your directors do not propose to transfer any amount to the general reserve.
Your Directors are pleased to recommend a dividend of Rs. 1.50 per equity share (15%)for the financial year ended March 31 2017 subject to the approval of the shareholdersat the ensuing Annual General Meeting of the Company.
The dividend distribution would results in cash outgo of Rs. 116085831/- (includingtax on dividend of Rs. 19635102/-). The dividend would be payable to all thoseShareholders whose names appear in the Register of Members as on the Book Closure Datesmentioned in the Notice.
7. Share Capital
The authorized share capital of the Company is Rs. 700000000/- (Rupees SeventyCrores) divided into 70000000 (Seven Crore) Equity Shares of Rs. 10/- (Rupees Ten only)each. During the year under review the paid up capital of the company has been increasedfrom Rs. 464291990/- to Rs. 643004860/- after allotment of 17871287 equity sharesunder Initial Public Offerings.
8. Material Changes after the close of the financial year
Save as mentioned elsewhere in the report no material changes and commitmentsaffecting the financial position of the Company has occurred between the end of thefinancial year to which this financial statements relates and the date of this report.
9. Change in the nature of business
During the year under review there was no change in the nature of business of yourCompany.
10. Credit Rating
During the year under review India Rating & Research Pvt. Ltd. has upgraded yourcompany's rating to IND A with positive outlook from IND A- with stable Outlook for longterm debt IND A-1 reaffirmed for short term debt & commercial papers.
11. Public deposits
During the financial year 2016-17 your Company has not accepted any deposit within themeaning of Sections 73 and 74 of the Companies Act 2013 read together with the Companies(Acceptance of Deposits) Rules 2014.
12. Directors and Key Managerial Personnel and change therein
The Company has ten directors with an Executive Chairman. Out of ten directors five areindependent directors including one Woman Director and five are Executive Directors. TheComposition of the Board is in conformity with the provisions of the Companies Act 2013and relevant regulations of SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015.
None of the Directors on the Board is a director in more than 10 Public Companies or amember of more than 10 Committees or a Chairman of more than 5 Committees across alllisted companies in which he/ she is a Director. Necessary disclosures regarding Committeepositions in other Public Limited Companies as on March 31 2017 have been made by all theDirectors of the Company.
None of the Whole-time Key Managerial Personnel (KMP) of the Company is holding officein any other Company as a Key Managerial Personnel.
Further none of the Directors / KMP of the Company is disqualified under any of theprovisions of the Companies Act 2013 and relevant Regulations of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015.
As per Section 152 of the Companies Act 2013 and other applicable provisions of theAct Mr. Gautam Seth (DIN 00203405) Director of the Company who retires by rotation atthe ensuing Annual General Meeting and being eligible offers himself for re-appointment.
During the financial year Mr. Vinod Ratan Gupta has resigned as CFO of the company onMarch 25 2017. Thereafter on the recommendations of Audit Committee Mr. Neeraj Kumar wasappointed by the Board as CFO on May 22 2017 and resigned on August 12 2017 to takecharge as CFO of Himachal Energy Pvt. Ltd. the subsidiary of the Company. Mr. SudhirBarik was appointed as CFO of the company on August 14 2017 on the recommendations ofAudit Committee.
13. Declaration by Independent Directors
Your company has received necessary declarations from all Independent Directors thatthey meet the criteria of independence as laid down under section 149(6) of the CompaniesAct 2013 read with Schedule IV and Rules made thereunder as well as Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015. The Board considered the independence of each of the directors in terms of aboveprovisions and is of the view that they fulfill the criteria of independence.
14. Meetings of the Board of Directors.
During the financial year 2016-17 the Board of Directors of the Company met 8 (Eight)times on April 30 2016 June 4 2016 August 30 2016 September 8 2016 September 272016 September 30 2016 November 14 2016 and February 6 2017. Particulars ofattendance of each director are mentioned in the Corporate Governance Report.
15. Formal Annual Evaluation
The evaluation framework for assessing the performance of Directors of your Companycomprises of contributions at the meetings strategic perspective or inputs regarding thegrowth and performance of your Company among others.
Pursuant to the provisions of Section 134 (3) (p) of the Companies Act 2013 and therules made thereunder the Board was required to carry out the Annual Performance ofEvaluation of the Board its Committees and individual Directors. Additionally as perprovision of Regulation 17 (10) of Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 the performance evaluation ofthe independent directors was also to be done by the Board of Directors.
Accordingly the Board has carried out the annual evaluation of the Directorsindividually including the Independent Directors (wherein the concerned director beingevaluated did not participate) Board as a whole and Committees of the Board ofDirectors.
The manner in which the evaluation has been carried out is explained in the CorporateGovernance Report.
16. Policy on Appointment and Remuneration of Directors and Key Managerial Personneland other employees
Your Company has framed a Nomination and Remuneration Policy pursuant to Section 178 ofthe Companies Act 2013 and Regulation 19(4) of Securities and Exchange Board of India(Listing Obligations and Disclosure Requirements) Regulations 2015 (Specified in Part Dof the Schedule II).
The detailed Nomination & Remuneration Policy is annexed as Annexure II andforms part of this Report and is also available on the website of the Company atwww.hplindia.com under Investor Relations Section.
17. Extract of Annual Return
Pursuant to Section 92 of the Act and Rule 12 of The Companies (Management andAdministration) Rules 2014 the extract of Annual Return in Form MGT-9 is provided inAnnexure III.
The Board of Directors of your Company have pleasure in informing that during the yearunder review your Company successfully floated its Initial Public Offer (IPO) for freshissue of 17871287 equity shares. The IPO was a success and consequent to that theequity shares of the Company were got listed on the trading terminals of the NationalStock Exchange of India Limited and the BSE Limited with effect from October 4 2016.
Both these stock exchanges have nation-wide terminals and thereforeshareholders/Investors are not facing any difficulty in trading in the shares of theCompany from any part of the country.
The Company has paid the listing fees to both the Stock Exchanges.
19. Audit Committee
As at March 31 2017 the Audit Committee of the Board of Directors of the companycomprised of 4 (Four) Members namely Mr. Tarun Sehgal as Chairman; Mr. Virender KumarBajaj; Mr. Jatinder Singh Sabharwal and Mr. Gautam Seth. The committee comprises ofmajority of Independent Directors except Mr. Gautam Seth who is a Non-IndependentNon-Executive Director.
Further the details relating to the Audit Committee are provided in the CorporateGovernance report forming part of this Annual Report.
20. Vigil Mechanism
The Company believes in the conduct of the affairs of its constituents in a fair andtransparent manner by adopting highest standards of professionalism honesty integrityand ethical behavior.
Pursuant to Section 177(9) of the Companies Act a vigil mechanism was established fordirectors and employees to report to the management instances of unethical behavioractual or suspected fraud or violation of the Company's code of conduct or ethics policy.A vigil Mechanism policy is uploaded on the website of the company i.e. www.hplindia.comunder Investor Relations Section. During the year under review there was no complaintreceived under this mechanism.
21. Risk Management
The Company has in place a robust risk management policy which identifies and evaluatesbusiness risks and opportunities. The Company recognizes that these risks need to bemanaged and mitigated to protect the interest of the stakeholders to achieve businessobjectives and enable sustainable growth. The risk management framework is aimed ateffectively mitigating the Company's various business and operational risks throughstrategic actions. The risks are reviewed for the change in the nature and extent of themajor risks identified since the last assessment. It also provides control measures forrisk and future action plans.
An extensive program of internal audits and regular reviews by the Audit Committee iscarried out to ensure compliance with the best practices.
22. Policy on Material Subsidiary
The Company has framed a Policy on Material Subsidiary under Regulations 16(c) of SEBI(Listing Obligations and Disclosures Requirements) Regulations 2015 which is available onthe website of the company i.e. www.hplindia.com under Investor Relations Section.
23. Corporate Social Responsibility (CSR)
The Corporate Social Responsibility committee comprises Mr. Lalit Seth as Chairman; Mr.Rishi Seth (Joint Managing Director); Mr. Jainul Haque (Independent Director) and Mrs.Madhu Bala Nath (Independent Director) as members of the committee.
The CSR Committee has formulated and recommended to the Board a Corporate SocialResponsibility Policy which is available on the website of the company i.e.www.hplindia.com under Investor Relations Section.
Your company has formed the Trust and got the same registered with the concernedRegistrar for carry out the CSR activities. However the activities to operationalise thetrust functioning was under process during the financial year 2016-17.
The company has identified some areas for CSR activities like providing food medicinesand clothing to the poor & needy.
A report on Corporate Social Responsibility is enclosed in Annexure IV.
24. Contracts or Arrangements with related Parties
All transactions entered into with related parties as defined under the Companies Act2013 and Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 during the financial year were in the ordinary course ofbusiness and at arm's length basis. As per the provisions of
Section 188 of the Companies Act 2013 and Rules made thereunder read with Regulation23 of Securities and Exchange Board of India (Listing Obligations and DisclosureRequirements) Regulations 2015 your Company had obtained the necessary approval of theAudit Committee before entering into such transactions.
None of the transactions with any of the related parties were in conflict with theinterest of the Company rather they synchronize and synergies with the Company'soperations.
Your Company has framed a Policy on Related Party Transactions in accordance withSecurities and Exchange Board of India (Listing Obligations and Disclosure Requirements)Regulations 2015 and as per the amended provisions of the Companies Act 2013. The Policyintends to ensure that proper reporting; approval and disclosure processes are in placefor all transactions between the Company and related parties. The policy is available onthe website of the company i.e. www.hplindia.com under Investor Relations Section and theDetails of Related Party Transactions are enclosed as per AOC-2 in Annexure V.
A) Statutory Auditors
M/s. Sahni Mehra & Co. Chartered Accountants was the statutory auditors of thecompany and has completed the tenure as permissible under the Companies Act 2013.Therefore your Board based on the recommendation received from the Audit Committeerecommends the appointment of M/s. Kharbanda Associates Chartered Accountants (FirmRegistration No. 003456N) as the Statutory Auditors of the Company to hold office for aperiod of five years from the conclusion of this Annual General Meeting until theconclusion of the 30th Annual General Meeting subject to ratification by the Shareholdersat every Annual General Meeting.
The Company has received a letter from M/s. Kharbanda Associates Chartered Accountantsto the effect that their appointment if made would be in accordance with the provisionsof the Companies Act 2013 and the Companies (Audit and Auditors) Rules 2014. YourDirectors recommend their appointment.
Statutory Auditors Report
There are no observations (including any qualification reservation adverse remark ordisclaimer) of the Auditors in their Audit Report that may call for any explanation fromthe Directors. Further the notes to accounts referred to in the Auditors' Report areself-explanatory.
B) Cost Auditors
Your Board of Directors has re-appointed M/s Bikram Jain & Associates CostAccountants (Firm Registration No. 101610) as Cost Auditor of the Company to conductaudit of Cost Records maintained by the Company for the financial year 2017-18 inaccordance with Section 148 and the Companies (Cost Records and Audit) Rules 2014 afterobtaining his consent and certificate under Section 139 141 and 148 of the Companies Act2013 read with the Companies (Audit and Auditors) Rules 2014.
The remuneration payable to the Cost Auditor of the Company has been proposed for theratification by the members of the Company and shall form part of the notice of the 25thAnnual General Meeting.
C) Secretarial Auditors
The Board of Directors has re-appointed M/s. AVA Associates Company Secretaries asSecretarial Auditors of the Company pursuant to the provisions of Section 204 of theCompanies Act 2013 read with corresponding rules made thereunder for conductingSecretarial Audit of the Company for the financial year 2017-18.
Secretarial Audit Report
The Secretarial Audit Report for the FY 2016-17 as submitted by Secretarial Auditors inForm MR-3 is annexed to this Report as Annexure VI.
There are no observations (including any qualification reservation adverse remark ordisclaimer) of the Secretarial Auditors in their Secretarial Audit Report that may callfor any explanation from the Directors.
26. Particulars of Loans Guarantees or investments
The Company has made an investment of 15000.000 Equity shares of Rs. 10 each inHimachal Energy Pvt Ltd. for a total consideration of Rs. 54 Crores with this HimachalEnergy Pvt Ltd. has become 97.15% subsidiary of HPL Electric & Power Ltd. The companyhas not given any loans guarantees or provided any security as per section 186 of theCompany Act 2013 during the period under review.
27. Particulars of remuneration of Directors/ KMP/ Employees
The information required to be disclosed in the Board's Report pursuant to Section 197of the Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 is set out in Annexure VII to this report.
28. Research and Development
HPL with its passion for innovation has under taken many initiatives to accelerate thebusiness growth curve in the upward direction. Company has been regularly investing ininfrastructure and its R&D centers to make word class products meeting stringentQuality standards. All the R&D labs in various units have been focusing on design anddevelopment of innovative products in the field of Switchgear Lighting and Metering etc.to meet the growing technological challenges of the times.
During the year a new product namely Automatic Transfer Switch was added in its bucketof Switchgear products. The product is user friendly from application point of view &easy to service. As such this product was a "Star of attraction" in HPL stallduring Elecrama exhibition held last. The team has been continuously working on improvingthe reliability and life cycle of HPL products. Most of the products are "CE"marked. All the plants are RoHS complaint to meet the demands of the new era of businessglobally.
Timely delivery of new products under development is of primary focus of R&Ddepartment. It works on a cohesive approach to narrow the gap between Design andManufacturing by investing money in 3D model prototyes before commencing toolmanufacturing. This saves lot of time energy and money while developing new productsthereby increasing the efficiency of the company.
Company is continuously working on many more smart engineering electrical products tomeet the future demand.
29. Conservation of Energy Technology Absorption foreign Exchange Earnings and Outgo
The information on conservation of energy technology absorption and foreign exchangeearnings and outgo as stipulated under Section 134(3)(m) of the Companies Act 2013 readwith Rule 8 of the Companies (Accounts) Rules 2014 is attached as Annexure VIII tothis report.
30. Corporate Governance Report
Your Company is committed to maintain the highest standards of Corporate Governance andadhere to the Corporate Governance requirements set out by Securities and Exchange Boardof India. The Company has also implemented several best corporate governance practices asprevalent globally. The report on Corporate Governance as stipulated under the Securitiesand Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 forms an integral part of this Annual Report. The requisite certificate from M/s.Sahni Mehra & Co. Statutory Auditors of the Company regarding compliance ofconditions of corporate governance is also annexed to the Corporate Governance Report.
31. Directors' Responsibility Statement
Pursuant to Section 134(3) (c) and 134(5) of the Companies Act 2013 the Directorsconfirm that:
a. in the preparation of the annual accounts for the financial year ended March 312017 the applicable accounting standards and Schedule III of the Companies Act 2013have been followed and there are no material departures from the same;
b. the Directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of your Company as at March 31 2017 and of the profitand loss of the Company for the financial year ended March 31 2017;
c. proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d. the annual accounts have been prepared 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. that proper systems to ensure compliance with the provisions of all applicable lawswere in place and that such systems were adequate and operating effectively.
32. Employees Stock Option Scheme
Board of Directors has recommended and members of the Company have approved anEmployees Stock Option Scheme for the benefit of the Employees (referred as HPL EmployeesStock Option Scheme 2016 (HPL ESOS 2016/ Scheme) to reward the eligible employees fortheir contribution to the success of the Company and to provide an incentive to continuecontributing to the success of the Company. It is envisaged that the Scheme is to attractreward motivate and retain its employees for high levels of individual performance whichwill ultimately contribute to the success of the Company. However the Scheme has not beenimplemented yet.
The relevant particulars relating to HPL ESOS 2016 in terms of Rule 12 of theCompanies (Share Capital & Debentures) Rules 2014 are as below:
|(a) Options Granted ||Nil |
|(b) Options Vested ||Nil |
|(c) Options Exercised ||Nil |
|(d) Total number of shares arising as a re- sult of exercise of option ||Nil |
|(e) Options Lapsed ||Nil |
|(f) Exercise Price ||N.A. |
|(g) Variation in the terms of Options ||Nil |
|(h) Money realized by exercise of options ||Nil |
|(i) Total number of options in force ||Nil |
|(j) Employee wise details of options granted to || |
|(i) Key managerial personnel ||Nil |
|(ii) Any other employee who receives a grant of options in any one year of op- tion amounting to five percent or more of options granted during that year ||Nil |
|(iii) Identified employees who were granted option during any one year equal to or exceeding one percent of the issued capital (excluding outstanding warrants and conversions) of the company at the time of grant ||Nil |
33. Disclosure under the sexual harassment of women at workplace (PreventionProhibition And Redressal) Act 2013
Your Company has always believed in providing a safe and harassment free workplace forevery individual working in the Company premises through various interventions andpractices. The Company always endeavors to create and provide an environment that is freefrom discrimination and harassment including sexual harassment.
Your Company has in place robust policy on prevention of sexual harassment at workplacewhich is applicable to all employees of your company as per the provisions of SexualHarassment of woman at work place (Prevention prohibition and Redressal) Act2013.
During the year ended March 31 2017 your company did not receive any complaintspertaining to sexual harassment.
34. Significant/material orders passed by the regulators
There are no significant/material orders passed by the Regulators or Courts orTribunals impacting the going concern status of your Company and its operations in future.
35. Internal Control Systems and adequacy of Internal Financial Controls
The Company has a proper and adequate system of internal controls. This ensures thatall transactions are authorized recorded and reported correctly and assets aresafeguarded and protected against loss from unauthorized use or disposition. Your Companyhas an Internal Control System commensurate with the size scale and complexity of itsoperations.
36. Management Discussion and Analysis Report
Management Discussion and Analysis Report for the year under review as stipulatedunder the Companies Act 2013 and Securities and Exchange Board of India (ListingObligations and Disclosure Requirements) Regulations 2015 is also presented in a separatesection forming part of the Annual Report.
37. CEO and CFO Certificate
CEO and CFO Certificate as prescribed under Schedule II Part B of Securities andExchange Board of India (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed to the Corporate Governance Report forming part of this Annual Report.
38. Disclosure of commission paid to Managing or Whole time Directors
There is no commission paid or payable by your company to the managing director or thewhole time directors.
Your Directors take this opportunity to place on record their sincere appreciation forthe co-operation and assistance the Company has received from various GovernmentDepartments Banks/ financial Institutions and shareholders. The Board also places onrecord its appreciation of the devoted services of the employees support and co-operationextended by the valued business associates and the continuous patronage of the customersof the Company.
| ||For and on Behalf of the Board |
| ||For HPL Electric & Power Limited |
| ||Lalit Seth |
|Date: August 14 2017 ||Chairman and Managing Director |
|Place: Gurugram ||DIN: 00312007 |