Your Directors have pleasure in presenting the 32nd Annual Report and Audited Accountsfor the year ended 31st March 2017.
1. Financial Highlights
| || ||Rs. in Lakhs |
| ||Year ended 31st March '17 ||Year ended 31st March '16 |
|Total Income ||40792 ||38847 |
|Profit before depreciation exceptional items and taxes ||5125 ||4551 |
|Less: Depreciation ||417 ||418 |
|Profit before tax & exceptional items ||4708 ||4133 |
|Exceptional items ||- ||- |
|Profit before tax ||4708 ||4133 |
|Taxation ||1468 ||1075 |
|Profit after tax ||3240 ||3058 |
|Profit brought forward from previous year ||25468 ||24003 |
|Other Comprehensive Income ||321 ||245 |
|Dividends ||1131 ||1527 |
|Dividend distribution tax ||230 ||311 |
|Transfer to general reserve & share capital ||- ||- |
|Retained in profit and loss account ||27668 ||25468 |
2. Financial and Operational Performance
Your Company's sales has gone up as compared to the previous year by 4% in value terms.Profit before tax and exceptional items has increased by around 14.7% over the previousyear because of increased level of sales and cost reduction in material cost despiteincrease in employee cost. Your company also increased production capacity in Pondy totake care of the higher demand from the customers.
3. Management Discussion and Analysis
a. Overall economic view:
Indian economy has witnessed good GDP growth up to 7.9% initially during the first halfof FY17 by showing resilience amidst global economy challenges decline in investments andincreased protectionist measures. The current fiscal has also seen significant gamechanging activities like passing of GST Bill and Bankruptcy Code bills and demonetisation.Repo rates have also fallen from 7.5% to 6.25% in Apr1 7 increasing the liquidity withbanks and exchange rates were stable during the year. Demonetisation impact set the clockback in terms of growth especially in two wheeler market where demand has contractedsignificantly in the last quarter as liquidity remained tight affecting the disposablecash. Customers followed wait and watch policy since elections in big states were aroundthe corner. Exports had lethargic growth.
b. Industry structure and developments:
While the industry enjoyed robust growth early in the year a significant slowdown wasnoticed since the last quarter of last fiscal due to demonetisation. The two wheelerindustry recorded an overall growth
of around 6% led by a 25% and 11 % growth in moped and scooter segment while motorcycle market remained flat and three wheeler registered negative growth of 16% compared tolast year. Industry has witnessed negative growth of 6% in exports. Two wheeler industrygrowth shrank in the later part of the year and was significantly affected by weak ruraldemand after demonetisation and changes in emission standards from BS III to BS IV duringthe last quarter.
c. Performance review:
Your company had a growth of around 42% in moped segment against industry growth of 25%mainly due to higher share of business from the various customers. Sales growth in motorcycle has also increased slightly better than the industry growth. However growth inscooter segment is less than market growth. Your company was able to increase its marketshare by 1 % through planned readiness for launch of BSIV products and introduction of fewelectronic products. The direct sales to aftermarket also scaled a steady growth of around20% by expanding the distributors network in North and East India markets. Exports alsowitnessed about 20% growth compared to last year.
d. Business outlook:
The measures taken by Govt during last fiscal are expected to result in positive trendin the long term. Demonetisation is expected to increase the liquidity among the publicand in banking system helping to lower lending rates and lift economic activity. This willhelp your company to increase the sales from two wheeler market. Implementation of GST isexpected to catapult GDP growth. Moderate inflation and with solid agricultural input frombumper harvests after drought last year will provide fillip. Economy is forecast to regainits momentum with GDP growth rising to 7.4% FY18 from 7.1% in last fiscal. Automotive twowheeler industry is expected to growth between 7~9% in current financial year.
Industry has never been more uncertain and globalisation of the market and competitionfrom global players continue to drive the industry. Disruptive technological changeselectronic manufacturing services and continuous upgradation of emission standards offerboth the opportunities and challenges. Introduction of BS VI Electric Vehicles are on thecards. Sharing and connected vehicles will dramatically change both the types of vehiclesand how they are used. More digitalisation in automotive industry gives us scope forfurther growth. Few existing products may be phased out in the medium term. Your companyis technologically well geared and ready to take up the challenges and convert intobusiness opportunity.
Your company is planning to focus more on new technology products such as ISGImmobilisers Instrument Clusters Electronic Control Units Electronic Fuel Injectionsystem and Brushless Alternators in coming years. The company stands to gain from theimproving economic environment and investing in technologies and delivering higher valueto customers by enabling them to stay ahead of global competition.
Your company has commercialised new business of EGR controller and Throttle PositionSensor for a Diesel Engine manufacturer for Three wheeler and small commercial vehicleapplication. The company plans to expand its reach in aftermarket through introducing newproducts like smart sensor adding cost benefit to the customer. On the cost front yourcompany is taking aggressive cost reduction measures like e-auction for materialprocurement cost benchmarking low cost automation productivity improvement initiativesto make its products more competitive.
Your company has received new business enquiries from reputed customers in USA. Thecompany is also exploring business opportunities in Asia Pacific region which are atinitial stages.
Kolhapur unit commenced its operations during the year
e. Human resources and industrial relations:
The long term wage settlement for Hosur and Rewari have been completed. Negotiationsfor Pondy are in advanced stages. The industrial relations in all the units of the companycontinue to be harmonious.
f. Risks and concerns:
Uncertain weather conditions continue to influence the rural demand. Similarly risingtrend in raw material prices in steel copper and petroleum products result in increasingproduct costs. Minimum wages policy pushes the cost of operation up. It poses challenge tomaintain the profitability as customers may not fully offset the cost escalations.Frequent changes in emission norms make the customer postpone their purchases and makesfew existing products obsolete.
Your Company is focussing on development of newer range of products which offercustomers good value propositions improving productivity and cost reduction in everypossible 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 everchanging business risks and evaluates their impact on business results. Mitigation planand counter measures are prepared and monitored to keep the impact minimal. Your Companyhad also formulated Risk Management Policy to identify and 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 from the units and statutory auditorsaudit plan is prepared and updated every year and approved by the Audit Committee.Internal auditors independently verify and test the adequacy and operating effectivenessof internal control systems and this provides assurance to the Audit Committee ofcontinued compliance. The internal audit reports are also shared with statutory auditors.
Your Company improves internal control systems and accuracy of information on costs inreal time through the effective use of ERP system 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.
4. 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.
During the year the Company had spent Rs.60 lakhs which is the equivalent of 2% ofaverage net profits for the immediate past three financial years towards CSR activitiesthrough Swami Dayananda Educational Trust an eligible institution undertaking project onactivities listed in Schedule VII of the Companies Act 2013.
The annual report on CSR activities is annexed to this report as 'Annexure -5 '
5. Subsidiary Company and Associate Company and the Consolidated Financial Statements
5.1 Subsidiary company
Your subsidiary company PT Automotive Systems Indonesia has been granted approvalfrom the Capital Investment Coordinating Board (BKPM) on January 19 2017 for a furtherperiod of three years to explore business opportunities. However as mentioned in theprevious report the manufacturers of two wheelers in that country have their own sourcesfor the products in the subsidiary's range of manufacture and it has been decided to takenecessary steps to liquidate the subsidiary
5.2. Associate company
Synergy Shakthi Renewable Energy Private Limited (SSREPL) was not in operation duringthe financial year 2016-17 due to restrictions on sale of power to third parties unviabletariff offered by TNEB and adverse changes in regulatory policies. As a result theassociate company incurred a loss of Rs.661.33 lakhs as against a loss of Rs.389.46 lakhsduring the previous year. SSREPL along with the State Bio mass Industry association hasmade representations to various arms of the government seeking changes in policies tosupport renewable power producers as these projects were set up to reflect commitment tothe cause of sustainable and environment-friendly clean energy. Considering the avowedobjective of the government to promote renewable energy in line with the global trends andthe commitments made in the national energy mission. It is hoped there will be favourablechanges in regulatory policies in the future would enable SSREPL to reestablish operationson a viable scale. The project was aligned to government policy of clean environment andalso through linkages SSREPL established over a period for promotion of social cause ofrural development and employment.
In order to fund this as well as to enable SSREPL restart its operations on a viablemode SSREPL has come up 'rights issue' in the ratio of 2 shares for every one share heldby its existing shareholders at the face value of Rs.10/- each to revive the company repaythe borrowings from banks and also to meet the working capital requirements. Your Companysubscribed '12 Crores for the 'rights issue' proportionate to its existing holding of Rs.6Crores.
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.
5.3. Consolidated financial statements
The Consolidated Financial Statements of the Company prepared in accordance with theprovisions of Section 129 (3) of the Companies Act 2013 read with the Companies (Accounts)Rules 2014 and Regulation 33 of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 along with a separate statement containing salientfeatures of the financial performance of the subsidiary/associate in the prescribedformat form part of the Annual Report.
Pursuant to the provisions of Section 136 of the Companies Act 2013 the auditedfinancial statements of the subsidiary has been placed on the website of the Company atwww.indianippon.com and the same will be made available to the shareholders on receipt ofa request from them. This will also be available for inspection by the shareholders at theregistered office of the company during the business hours.
Your Company had paid two interim dividends of '4 and Rs.6 per share totalling to '10per 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.1131.07laksh besides an additional outgo on dividend distribution tax of Rs.230.30 lakhs.
7. Public Deposits
Your Company has not accepted any deposits falling within the ambit of Section 73 orSection 76 of the Companies Act 2013 read with Companies [Acceptance of Deposits] Rules2014.
8. Conservation of Energy Technology Absorption and Foreign Exchange Outgo andEarnings
Please refer to Annexure-1 to the Directors' Report to the Shareholders.
9. Particulars of Employees
The information required under Section 197 of the Companies Act 2013 and the rule 5(2)made thereunder as amended has been given in Annexure 2. In terms of first proviso toSection 136(1) of the Companies Act 2013 the Annual Report excluding the aforesaidannexure is being sent to the shareholders of the company. The annexure is available forinspection at the registered office of the company during business hours and anyshareholder interested in obtaining a copy of said annexure may write to the CompanySecretary at the registered office of the company.
The Comparative Analysis of the remuneration paid to Directors and Key ManagerialPersonnel with the Company's performance is given in Annexure 3.
10. Annual Return
Extract of Annual Return is given as Annexure 4 to this report.
11. Corporate Governance
Pursuant to the Listing Regulations 2015 the 'Report on Corporate Governance' isenclosed as part of this report.
A certificate from the Auditors of your Company regarding compliance of the conditionsof the Corporate Governance as stipulated by the SEBI (LODR) Regulations 2015 is attachedto this report as Annexure 6.
The certificates required from Managing Director/CFO are also attached to this report.
12. 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 Accounts the applicable accounting standardshad been followed along with proper explanation relating to material departures;
ii. That the Directors had selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of the affairs of the Company at the end of theFinancial Year and of the profit of the Company for that period;
iii. That the Directors had taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets of the Company and for preventing and detecting fraud and other irregularities;
iv. That the Directors had prepared the Annual Accounts on a going- concern basis;
v. That the directors had laid down internal financial controls to be followed by thecompany and that such internal financial controls are adequate and were operatingeffectively;
vi. That the directors had devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
13. Directors & Key Managerial Personnel (KMP)
Mr. T. K. Balaji will be retiring by rotation at the ensuing Annual General Meetingand is eligible for re-appointment. A brief resume of Mr. T K Balaji and other relevantinformation have been furnished in the Notice of the Annual General Meeting including theresolution for his reappointment. The directors recommend his re-appointment.
Mr. Arvind Balaj Managing Director Mr. Elango Srinivasan Chief Financial Officer andMr. S. Sampath Company Secretary are KMPs in terms of Section 2(51) and Section 203 ofthe Companies Act 2013. There is no change in KMP during the year.
13.1 Declaration by independent directors as required u/s 149:
At the Annual General Meeting held on 27th August 2014 M/S G Chidambar V Balaraman KG Raghavan R Vijayaraghavan and Ms. Jayshree Suresh were appointed as independentdirectors not liable to retire by rotation for a consecutive period of five years.
All Independent Directors have given declarations under Section 149 (7) of theCompanies Act 2013 that they meet the criteria of independence as laid down underSection 149 (6) of the Companies Act 2013 and SEBI (LODR) Regulations 2015.
13.2 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.
13.3 Number of meetings of the board
Five meetings of the Board were held during the year. For details of the meetings ofthe Board please refer to the corporate governance report which forms part of thisreport.
13.4 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 201 3 the independent directors of the companymet without the attendance of non-independent Directors and members of management andreviewed
(i) the performance of nonindependent Directors 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 and also of its ownperformance and that of its committees and individual Directors.
(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 27th August 2014 until theconclusion of the forthcoming 32nd Annual General Meeting thus concluding their term ofappointment. The Board of Directors place on record its appreciation of the servicesrendered by M/S Brahmayya & Co. as statutory auditors of the Company since itsinception.
The Audit Committee and the Board of Directors have recommended the appointment of M/SDeloitte Haskins & Sells LLP (DHS LLP) Chartered Accountants (Firm Registration No.117366W/W- 100018) as the Statutory Auditors of the Company subject to the approval ofthe shareholders. M/S Deloitte Haskins & Sells LLP have consented to the saidappointment and confirmed that in the event of their appointment it would be within thelimits mentioned under the provisions of Section 1 41 of the Companies Act 2013 and theCompanies (Audit and Auditors) Rules 2014.
M/S Deloitte Haskins & Sells LLP Chartered Accountants will hold office asstatutory auditors for the first term of five years from the conclusion of 32nd AnnualGeneral Meeting of the Company subject to ratification of the appointment by members atevery Annual General Meeting held during their tenure.
(ii) Cost auditor
Pursuant to the Companies (Cost Records and Audit) Rules 2014 the Company filed theCost Audit Report with the Ministry of Corporate Affairs for the financial year 2015- 16in XBRL format.
Mr. K Suryanarayanan who was appointed as Cost Auditor for the financial year 2016- 17will be submitting his report within the time limit applicable under the Companies (CostRecord and Audit) Rules 2014.
The Board has re-appointed Mr. K Suryanarayanan as cost auditor for the financial year2017-18 also and a remuneration of Rs.2.50 lakhs 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 reportt
Ms. B Chandra Practicing Company Secretary was appointed as Secretarial Auditor by theBoard of Directors for the financial year 2016-17 whose report is attached separately tothis report (Annexure 7). Ms. B Chardra Practicing Company Secretary was re-appointed asSecretarial Auditor for carrying out the secretarial audit for the financial year 2017-18.
(iv) Qualification/reservation/adverse remark in Audit Report
There were no qualification/reservation/adverse remark in the auditor's report or inthe secretarial audit report.
15. Particulars of contracts or arrangements with related parties
All the transactions with related parties are in the ordinary course of business and onarm's length basis and there are no 'material' related party transactions and thusdisclosure in form AOC - 2 is not required.
15.1 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.
16. Particulars of loans guarantees or investments u/s 186:
The company has not given any loans or guarantee as specified under Section 186 of theCompanies Act 2013.
The details of investments are given in Note no. 6 on Accounts for the financial year2016-17. The same is within the prescribed limits under provisions of Section 186 of theCompanies Act 2013.
17. Employee stock option:
There is no scheme of employees' stock option in your Company.
18. Policy on directors' appointment and remuneration including criteria fordetermining qualifications positive attributes independence of directors key managerialpersonnel and other employees
The Board shall have minimum 3 and maximum 12 Directors.
The Nomination and Remuneration Committee of your Company has laid down criteria andqualification for appointment of Directors and Key Managerial Personnel. The person forsuch appointment should possess adequate qualification expertise experience andintegrity.
The Managing Director of the Company is entitled to monthly remuneration and commissionbased on the profit computed in the manner prescribed under the Companies Act 2013 andsubject to the overall ceiling specified in Section 198 of the Act. All other Directorsare entitled to sitting fees for attending the meetings of the Board of Directors and itsCommittees and also to commission based on the profit subject to the ceiling as specifiedin Section 198 of the Companies Act 2013.
Some of the additional reports as required under the Companies Act 2013 and formingpart of the Boards Report are attached to this report.
19. 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.
20. Material changes and commitments
There have been no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year to which thefinancial statements relate and the date of the report.
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 Maharashtraand Puducherry Bank of Baroda ICICI Bank Ltd Axis Bank Ltd and SIPCOT for theassistance rendered by them from time to time.
For and on behalf of the Board of Directors
|Chennai ||T K BALAJI |
|18th May 2017 ||DIN No.:00002010 |
| ||Chairman |
Annexure 1 to Boards Report to the Shareholders
Information as required under Section 134 of the Companies Act 2013:
1. Conservation of Energy
a) The results of energy conservation measures taken up during the year under revieware:
The power consumed per Standard Unit of Production is being monitored as a part ofenergy conservation measures and maintained the targeted level of 0.85 EU by implementingvarious activities like
1. Provided an UV treated Polycarbonate sheets to the shop floor roofing in Hosur &Puducherry units for availing excellent natural lighting in day time.
2. Replaced the 5.0HP Hydraulic Power pack in the Rotor "A" line broachingmachine with 3.0HP VFD controlled drive system.
3. Provided highly energy efficient LED lamps in Admin office Canteen TrainingCenter Engineering Lab & etc.
4. Replaced 3.0HP hot water circulation pump in the Rotor "C" washing machinewith 0.5HP high pressure pump to save energy.
5. Provided a control system to maintain Unity Power factor in the 11KV/440V system.
6. Consumed around 71.0% green power from Solar & Wind energy.
b) Future plans for energy conservation:
The company is aiming at greater energy conservation by implementing measure like wasteheat recovery system in Air compressors installing solar water system for washingmachines installing bio gas plant in kitchen for cooking purpose which will reduce thepower consumption in our electrical steam boilers. Also planning to provide a dedicatedportable air compressor to the critical process machines on Sundays & holidays toavoid running centralized air compressors.
2. Technology Absorption Adaptation and Innovation:
2016-17 saw two significant new product launches.
a) Successful introduction of our Patent pending Integrated Ignition controller over1.9 million pieces have been shipped within a year of launch.
b) Mass production of EGR controller cum Regulator a unique product to aid meetingBharat IV norm has started
We are actively pursuing introduction of Brushless Alternator Integrated StarterGenerator & high efficiency generation system which are in various stages ofdevelopment with Customers.
Considering introduction of BSVI emission norms we are reviewing productiontechnologies and upgrading to meet requirement. We are also partnering with potentialtechnology providers to bridge knowledge gap and leapfrog to meet market expectations.
Expenditure on R&D:
Rs. in Lakhs
|Capital ||36.02 |
|Revenue ||546.63 |
|Total ||582.65 |
|% on net turnover ||1.43% |
3. Foreign Exchange Outgo and Earnings: Export Activities
Exports during the year ended 31st March 2017 amounted to Rs.21.12 crores as againstRs.17.79 crores of the previous year.
Total foreign exchange used and earned:
The foreign exchange outgo and earnings for the Company for the period under reviewwere Rs.4021 lakhs and Rs.2144 lakhs respectively
For and on behalf of the Board of Directors
|Chennai ||T K BALAJI |
|18th May 2017 ||DIN No.:00002010 |
| ||Chairman |