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India Nippon Electricals Ltd.

BSE: 532240 Sector: Auto
NSE: INDNIPPON ISIN Code: INE092B01017
BSE LIVE 15:43 | 17 Aug 794.25 -3.85
(-0.48%)
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798.10

HIGH

815.50

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NSE 15:55 | 17 Aug 791.40 1.00
(0.13%)
OPEN

795.00

HIGH

815.15

LOW

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OPEN 798.10
PREVIOUS CLOSE 798.10
VOLUME 4366
52-Week high 815.50
52-Week low 386.15
P/E 22.71
Mkt Cap.(Rs cr) 898
Buy Price 794.25
Buy Qty 15.00
Sell Price 0.00
Sell Qty 0.00
OPEN 798.10
CLOSE 798.10
VOLUME 4366
52-Week high 815.50
52-Week low 386.15
P/E 22.71
Mkt Cap.(Rs cr) 898
Buy Price 794.25
Buy Qty 15.00
Sell Price 0.00
Sell Qty 0.00

India Nippon Electricals Ltd. (INDNIPPON) - Director Report

Company director report

Your Directors have pleasure in presenting the 31st Annual Report andAudited Accounts for the year ended 31st March 2016.

1. FINANCIAL HIGHLIGHTS

Rs lacs
Year ended 31st Mar ‘16 Year ended 31st Mar‘ 15
Sales (Net of excise duty) 33820 32653
Profit before depreciation exceptional items and taxes 4160 3962
Less:
Depreciation 665 775
Profit before tax & exceptional items 3495 3187
Exceptional items - -
Profit before tax 3495 3187
Taxation 962 921
Profit after tax 2533 2266
Profit brought forward from previous year 1343 1199
Dividends 1018 1018
Dividend distribution tax 209 204
Transfer to general reserve & share capital 1300 900
Retained in profit and loss account 1349 1343

2. FINANCIAL AND OPERATIONAL PERFORMANCE

Your Company’s sales has gone up as compared to the previous year by 3.57% invalue terms. Profit before tax and exceptional items has increased by around 9.7% overthe previous year because of increased level of sales and cost reduction initiativesundertaken.

3. MANAGEMENT DISCUSSION AND ANALYSIS

a. Overall economic view:

The Indian economy continued to battle with many challenges such as muted demand fromindustry rising inflation sagging FDI and contracted consumption from consumers. Thoughthe repo rates have been slashed by RBI banks chose not to pass it on to the customers.This has not spurred the demand from the customers with the hope interest rates will fallin future. Manufacturing and Industrial activities remained sluggish like last year mainlydue to depressed rural demand on account of two consecutive years of poor monsoon.

b. Industry structure and developments:

Two wheeler industry has witnessed moderate growth of 2% as compared to the previousyear. Scooter segment registered a positive growth of 12% whereas the Motor cycle Threewheeler and Moped had registered negative growth of 1.5%1.6% and 2.3% respectivelyagainst the positive growth witnessed last year.

c. Performance Review:

Your company’s sales grew by 4% compared to two/three wheeler industry growth of2% . The company had grown in motor cycle and three wheeler segments mainly due to highershare of business from various customers. However scooter and moped segments have notgrown much in terms of value but the company has retained the share of business with keycustomer. The company was successful in increasing the export business by 54%. The directsales to aftermarket also recorded a growth of 36% by expanding the dealer network and theproduct portfolio.

d. Business Outlook:

The long term prospects for Indian economy are expected to be positive. Manufacturingindustry will have sustained growth in the medium term. In the short term growth inautomotive industry appears to be clouded in view of the unclear market conditions due tointroduction of new strict emission norms. Two factors are expected to boost consumptionviz. increased spending from higher wage levels mainly coming out of implementationof seventh pay commission and expected good monsoon. Downward trend in interest ratesinflation and good governance are also expected to help the growth of industry. IndianGovernment is in advanced stages of preparing for GST implementation which is expected toresult in reduction in manufacturing cost of components. The company stands to gain fromthe improving economic environment and investing in technologies and delivering highervalue to customers by enabling them to stay ahead of global competition.

Your company has been successful in developing and securing the business for EGRcontrollers for small diesel engines to meet forthcoming BS IV emission norms.

Your company has also been identified for development of ECU for the EFI system jointlywith our technical partner by one of the two wheeler manufacturers for their popularmodel of motorcycle as well as by another US based engine manufacturer. The company plansto invest in design and development of these new technology products.

The company has further identified its electronic range of products as a potentialgrowth segment and offered innovative value propositions to customers which are expectedto fetch more businesses. On the cost front your company is taking aggressive costreduction and productivity improvement initiatives to make its products more competitive.Your company has developed excellent business relationship with the US based customerbecause of sterling performance. On account of this new businesses have been awarded bythe customer which are expected to help the growth of export business in a significantway. e. Human Resources and Industrial Relations:

The long term wage settlement for Hosur and Rewari have been completed successfully.The long term wages settlement at the Pondicherry plant is due and negotiations are underway. The industrial relations in all the units of the company continue to be harmonious.The total number of people employed in the company as on 31st March 2016 was506.

f. Risks and Concerns:

The excessive drought witnessed recently has affected the agricultural production inmost parts of India. This may leave the consumers especially in rural markets with lesssavings resulting in contraction of demand and high inflation in food prices. The effectsof this has already started becoming evident with distinct slow down in the demand of twowheelers in rural market. Expectations of normal monsoon conditions during the currentyear might improve the demand in later half of the year. Economic outlook indicates thatrupee depreciation will continue and correspondingly high oil prices which may affect theautomotive industry. While on one hand the labour costs are going up due to increase inminimum wages in many states the intensifying competition for the range of productsmanufactured by the company on the other hand creates pressure on customer pricing. Thesepose challenges to maintain the profitability as customers may not fully offset the costescalations. Your Company is focussing on development of new technology products whichoffer customers good value propositions improving operational efficiencies and costreduction in every possible area of operation to protect the bottom line.

g. Risk Management Policy:

Your Company takes cognizance of each business risk and has a risk management plan andpolicy in line with the overall objectives of the Company.

The Company tracks the ever changing business risks and evaluates their impact onbusiness results. Mitigation plan and counter measures are prepared and monitored to keepthe impact minimal. Your Company had also formulated Risk Management Policy to identifyand address the various risks.

h. Internal Control System and their adequacy:

Your Company views internal audit as a continuous process to keep the managementregularly appraised on the existence adequacy and effectiveness of the internal controlsystems/processes in the company. Based on the annual review and feedback received fromthe units and statutory auditors audit plan is prepared and updated every year andapproved by the Audit Committee. Internal auditors independently verify and test theadequacy and operating effectiveness of internal control systems and this providesassurance to the Audit Committee of continued compliance. The internal audit reports arealso shared with statutory auditors.

Your Company has started implementing ERP to improve internal control systems andaccuracy of information on costs in real time which will help to analyse and exercisebetter control.

i. Internal financial control:

The company has established internal financial framework including internal controlsover financial reporting and anti-fraud framework. The framework is reviewed regularly bythe management and strengthened from time to time to ensure adequacy and effectiveness ofinternal financial controls.

j. Corporate Social Responsibility

Your Company has constituted the Corporate Social Responsibility Committee (CSRCommittee) and laid down the CSR policy which is available on the Company’s website.Your Company has fully spent the amount it is required to spend on activities listed inSchedule VII of the Companies Act 2013.

The annual report on CSR activities is annexed to this report as ‘Annexure –5‘

k. Cautionary statement

Statements in the Management Discussion and Analysis Report describing yourCompany’s objectives projections estimates and expectations are "forwardlooking statements" within the meaning of applicable securities and regulations.Actual results could differ materially from those expressed or implied. Important factorsthat could make a difference to your Company’s operations include among otherthings economic conditions affecting demand / supply and prices in the domestic andoverseas markets in which your Company operates changes in Government regulations taxlaws other statutes and other incidental factors.

4. SUBSIDIARY COMPANY AND ASSOCIATE COMPANY AND THE CONSOLIDATED FINANCIALSTATEMENTS

4.1 Subsidiary Company

The efforts taken by the subsidiary of your company PT Automotive Systems

Indonesia to get some business opportunities were not fruitful as the manufacturers oftwo wheelers in that country have their own sources for the products in the range of itsmanufacture. As the approval given by the Government authorities of Indonesia is validonly till March 2017 it has been decided to take necessary steps to liquidate thesubsidiary. In this regard attention is drawn to note no.5 under "OtherDisclosure’ against Note no.8 to the accounts. The details relating to the subsidiaryhave been provided in the prescribed form as part of the accounts.

The annual accounts of the subsidiary company will be available at the Registeredoffice of the Company and of the subsidiary company concerned if any member or investorwishes to inspect them during the business hours on any working day.

4.2. Associate Company

Synergy Shakthi Renewable Energy Private Limited (SSREPL) was not in operationsince June 2015 due to restrictions on sale of power to third parties unviable tariffoffered by TNEB and adverse changes in regulatory policies. As a result the associatecompany incurred a loss of Rs 389.46 lakhs as against a profit of Rs 70.52 lakhs duringthe previous year.

Financial position of the subsidiary and the associate company are provided in AOC-1 asrequired under Section 129 (3) of the Companies Act 2013 as part of the financialstatements.

4.3. Consolidated Financial Statements

The Consolidated Financial Statements of the Company prepared in accordance withthe provisions of Section 129 (3) of the Companies Act 2013 and relevant AccountingStandards issued by the Institute of Chartered Accountants of India form part of theAnnual Report.

5. DIVIDEND

Your Company had paid two interim dividends of Rs4 and Rs 5 per share totalling toRs9 per share during the year. Your directors recommend consideration of the same as totaldividend for the year. The total dividend for the year will absorb a sum of Rs 1017.96lacs besides an additional outgo on dividend distribution tax of Rs 209.09 lacs.

6. PUBLIC DEPOSITS

Your Company has not accepted any deposits falling within the ambit of Section 73 ofthe Companies Act 2013 read with Companies [Acceptance of Deposits] Rules 2014.

7. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN ExCHANGE OuTGO ANDEARNINGS

Please refer to Annexure–1 to the Directors’ Report to the Shareholders.

8. PARTICULARS OF EMPLOYEES

The information required under Section 197 (12) of the Companies Act 2013 and therules made thereunder as amended has been given in Annexure 2 appended hereto and formspart of this report.

The comparative analysis of the remuneration paid to Directors and Key ManagerialPersonnel with the Company’s performance is given in Annexure 3.

9. ANNUAL RETURN

Extract of Annual Return is given as Annexure 4 to this report.

10. CORPORATE GOVERNANCE

Pursuant to the Listing Regulations 2015 the ‘Report on CorporateGovernance’ is enclosed as part of this report. A certificate from the Auditors ofYour Company regarding compliance of the conditions of the Corporate Governance asstipulated by the SEBI (LODR) Regulations 2015 is attached to this report as Annexure 6.

The certificate required from Managing Director is also attached to this report.

11. DIRECTORS’ RESPONSIBILITY STATEMENT

As required under Section 134 (5) of the Companies Act 2013 the Board of Directorshereby confirm:-i. That in the preparation of the Annual Accountstheapplicableaccountingstandards had been followed along with proper explanation relating to material departures;ii. That the Directors had 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 the affairs of the Company at the end of the Financial Year andof the profit of the Company for that period; iii. That the Directors had taken proper andsufficient care for the maintenance of adequate 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. That the Directors had prepared the AnnualAccounts on a going-concern basis; v. That the directors had laid down internal financialcontrols to be followed by the company and that such internal financial controls areadequate and were operating effectively; vi. That the directors had devised proper systemsto ensure compliance with the provisions of all applicable laws and that such systems wereadequate and operating effectively.

12. DIRECTORS

Mr. Tadaya Momose will be retiring by rotation at the ensuing Annual General Meetingand is eligible for reappointment. Mr. Mukesh Kumar Somani was inducted into the Board ofDirectors in the Board meeting held on 28th May 2016 in the casual vacancycaused by the resignation of Mr. Masaru Namatame He will be proposed for appointment as anon-retiring Director in the Annual General Meeting. The Company has received a noticefrom a shareholder to appoint Mr. Mukesh Kumar Somani as a Director along with therequisite deposit amount.

The Board places on record its appreciation of the valuable contributions provided byMr. Masaru Namatame during his tenure as Director.

12.1 Declaration by Independent Directors as required u/s 149:

All Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149 of the Companies Act 2013 and SEBI (LODR)Regulations 2015.

12.2 Terms of appointment of Independent Directors of India Nippon Electricals Limited

The terms of appointment is available on the website of the company viz. www.indianippon.com.

12.3 Number of meeting of the Board

Six meetings of the Board were held during the year. For details of the meetings of theBoard please refer to the corporate governance report which forms part of this report.

12.4 Board Evaluation

The Nomination & Remuneration Committee (N&RC) of the company approved anevaluation policy which provides for evaluation of the Board the Committees of the Boardand individual directors.

Pursuant to Sch IV of the Companies Act 2013 the independent directors of the companyconvened on 26th March 2016 an exclusive meeting without the attendance of non-independentDirectors and members of management and reviewed (i) the performance of non-independentDirectors of the Board as a whole; (ii) the performance of the Chairman of the Company;and (iii) Assessed the quality quantity and timeliness of flow of information between theCompany management and the Board that is necessary for the Board to effectively andreasonably perform their duties.

On the same day the performance evaluation of the independent directors was also doneby the entire Board excluding the directors being evaluated.

13. AUDITORS

(i) Statutory Auditors

Pursuant to Section 139 of the Companies Act 2013 and Rules made thereunder M/sBrahmayya & Co. Chartered Accountants were appointed for a period of three yearsfrom the conclusion of the 29th Annual General Meeting held on 27thAugust 2014 until the conclusion of the 32nd Annual General Meeting. Theircontinuation in the appointment is placed for ratification in the ensuing Annual GeneralMeeting as required under the Act.

(ii) Cost Auditor

Mr. K Suryanarayanan who was appointed as Cost Auditor for the financial year 2015-16will be submitting his report within the time limit applicable under the Companies (Auditand Auditors) Rules 2014. He has been appointed as cost auditor for the financial year2016-17 also and a remuneration of Rs 2.20 lacs has been fixed for the audit. Theratification of his remuneration is included as an item in the Notice of the AnnualGeneral Meeting as required under Section 148 (3) of the Companies Act 2013 read with Rule14 of the Companies (Audit and Auditors) Rules 2014.

(iii) Secretarial Auditor & the Secretarial Audit Report

Ms. B Chandra Practicing Company Secretary was appointed as Secretarial Auditor by theBoard of Directors for the financial year 2015-16 whose report is attached separately tothis report (Annexure 7).

(iv) qualification/reservation/adverse remark in Audit Report

There were no qualification / reservation / adverse remark in the auditor’s reportor in the secretarial audit report.

14. Particulars of Contracts or Arrangements with Related Parties

All the transactions with related parties are in the ordinary course of businessand on arm’s length basis and there are no ‘material’ contracts orarrangements or transactions at arm’s length basis and thus disclosure in form AOC– 2 is not required.

14.1 Policy on Related Party Transactions of the Company

The Company has a policy on Related Party Transactions and the same is displayed on theCompany’s website viz. www.indianippon.com.

15. PARTICULARS OF LOANS GUARANTEES U/S 186:

The company has not given any loans or guarantee as specified under Section 186 ofthe Companies Act 2013.

16. PARTICULARS OF INVESTMENTS U/S 186

The investments made by the company during the period 2015-16 are depicted below.The same is well within the prescribed limits under provisions of Section 186 of theCompanies Act 2013.

Investments made in Amount (In Rs lacs) 60% of Paid up capital and Free Reserves 100% of Free Reserves Remarks
1 Equity instruments 4632.06
2 Bonds 2162.54
3 Venture capital funds 901.93
4 Mutual funds 7999.77
Total 15696.30 13275 20993

17. EMPLOYEE STOCK OPTION:

There is no scheme of employees’ stock option in your Company.

18. PREVENTION OF sexual HARASSMENT OF women AT workplace:

As per the requirements of the Sexual Harassment of women at workplace (PreventionProhibition & Redressal) Act 2013 and Rules made thereunder your Company hasconstituted Internal Complaints Committee. During the year under review your Company hasnot received any complaints of sexual harassment from any of the women employees of theCompany.

19. POLICY ON DIRECTORS’ APPOINTMENT ANDREMUNERATIONINCLUDINGCRITERIA FORDETERMINING QUALIFICATIONS POSITIVE ATTRIBUTES INDEPENDENCE OF DIRECTORS KEY MANAGERIALPERSONNEL AND OTHER EMPLOYEES

The Board shall have minimum 3 and maximum 12 Directors. The Nomination andRemuneration Committee of your Company has laid down criteria and qualification forappointment of Directors and Key

Managerial Personnel. The person for such appointment should possess adequatequalification expertise experience and integrity. Some of the additional reports asrequired under the Companies Act 2013 and forming part of the Directors Report areattached to this report.

20. ACKNOWLEDGEMENTS

Your Directors wish to place on record their appreciation for the good work of all theemployees of the Company.

Your Directors also acknowledge the continued support received from Lucas IndianService Ltd Chennai Mahle Electric Drives Japan Corporation Japan and also wish tothank the Governments at the Centre and in the States of Tamil Nadu Haryana andPuducherry Bank of Baroda ICICI Bank Ltd Axis Bank Ltd and SIPCOT for the assistancerendered by them from time to time.

For and on behalf of the Board of Directors
Chennai T K BALAJI
28th May 2016 DIN No.:00002010
Chairman