Your Directors are pleased to present the 52nd Annual Report and the Audited FinancialStatements for thefinancial year ended June 30 2017 (FY17).
|FINANCIAL RESULTS || ||( Rs. in Lakhs) |
|Particulars || || |
|Total Revenue ||65771 ||57919 |
|Pro t before Exceptional Items and Tax ||3557 ||3071 |
|Add/Less-Exceptional items Income/(Expense) ||(550) ||- |
|Pro t After Exceptional Items and Before Tax ||3027 ||3071 |
|Less: Provision for Tax || || |
| || ||1085 |
|Current Tax ||791 || |
|Minimum Alternate Tax (MAT) Entitlement ||(446) ||- |
|Tax adjustments relating to earlier years || || |
| ||- ||67 |
|Deferred Tax (credit)/charge ||472 ||(155) |
|Pro t after Tax ||2210 ||2074 |
|Add: Balance brought forward from previous year ||20617 ||19072 |
|Total available for appropriation ||22827 ||21146 |
|Interim Dividend ||(440) ||(440) |
|Dividend Distribution Tax ||(89) ||(89) |
|Balance transferred to Balance Sheet ||22298 ||20617 |
An interim dividend of 2/- per Equity Share of 10/- each
(20%) on the paid up share capital of the Company was declared by the Board forthefinancial year ended June 30 2017 and May 19 2017 was xed as Record Datefor the said purpose. The said interim dividend was paid on May 25 2017. The Board ofDirectors has decided to treat the same as nal dividend and therefore no additionaldividend is recommended for thefinancial year ended June 30 2017.
The Company has not transferred any amounts to reserves for thefinancial year endedJune 30 2017.
The paid up share capital of the Company is 219782400/- divided into 21978240Equity Shares of 10/- each. Your Company has not come out with any issue (public rightsor preferential) during the Financial Year.
Pro t before Tax and before Exceptional items was 3557 Lakhs as compared to 3071 Lakhsin the previous year.
The Company's performance for the year has improved to some extent compared to theprevious year. Your Company does not have any subsidiaries.
MATERIAL CHANGES AND COMMITMENTS
There have been no material changes and commitments affecting thefinancial performanceof the Company which occurred between the end of thefinancial year of the Company to whichthefinancial statements relate and the date of this Report.
During FY17 the total revenue of the Company was 65771 Lakhs compared with 57919 Lakhsin the previousfinancial year.
A Management Discussion and Analysis (MD&A) report is annexed to this report asAnnexure I as required under Regulation 34 of the SEBFI[ListingObligations and Disclosure Requirements (LODR)] Regulations 2015.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
The Board at its meeting held on August 09 2016 approved the appointment of Mr.Alexander Broetz (DIN: 07568713) lling the casual vacancy caused by theresignation of Mr. John H. Jacko Jr. He is eligible for appointment as Director liable toretire by rotation in the ensuing Annual General Meeting. Your Directors recommend thesame for your approval. A notice has been received from a member along with the prescribeddeposit of 1 Lakh proposing his appointment as a Director at the ensuingAnnual GeneralMeeting of the Company.
The Board at its meeting held on August 09 2016 has also approved the appointment of Ms.Colleen Wood Cordova (DIN: 07568701) lling the casual vacancy caused by theresignation of Ms. Michelle R. Keating. She is eligible for appointment as Director liableto retire by rotation in the ensuing Annual General Meeting. Your Directors recommend thesame for your approval. A notice has been received from a member along with the prescribeddeposit of 1 Lakh proposing her appointment as a Director at the ensuing Annual GeneralMeeting of the Company.
Declarations from the Independent Directors:
The Company has received declarations from all the Independent Directors of yourCompany con rming that they meet the criteria of Independence as mentioned undersub-section (6) of Section 149 of the CompaniesAct 2013.
The policy on Directors appointment and remuneration including criteria fordetermining qualfications positive attributes Independence of Director and alsoremuneration for Key Managerial Personnel and other employees forms part of CorporateGovernance Report of this Annual Report.
A brief pro le of the Director being appointed / reappointed as required underRegulation 36(3) of SEBFI(LODR) Regulations 2015 is furnished along with the Noticeconvening 52ndAnnual General Meeting.
No Director was materially interested in any contracts or arrangements existing duringor at the end of the year in relation to the business of the Company. No Director holdsany shares in the Company as on June 30 2017 except Mr. Prakash M. Telang Chairman &Non-Executive Independent
Director who holds 1000 Equity Shares of 10/- each in the Company and Mr. B.AnjanfiKumar Non-Executive Independent Director who holds 10 Equity Shares of 10/- eachin the Company.
DIRECTORS RESPONSIBILITY STATEMENT
Based on the framework of internalfinancial controls and compliance systems establishedand maintained by the Company work performed by the internal statutory cost andsecretarial auditors and external consultant(s) including audit of internalfinancialcontrols overfinancial reporting by the statutory auditors and the reviews performed byManagement and the relevant Board Committees including theAudit Committee and RiskManagement Committee the Board is of the opinion that the Companysinternalfinancial controls were adequate and effective during the FY17.
Accordingly pursuant to the provisions of Section 134 (3) (c) and Section 134 (5) ofthe CompaniesAct 2013 the Board of Directors to the best of its knowledge and abilityreport that:
the applicable accounting standards have been followed in the preparation ofthefinancial statements along with proper explanations relating to material departuresif any;
they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company as at June 30 2017 and of the pro tof the Company for the year ended on that date;
they have taken proper and suf cient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
they have prepared the annual accounts on a going concern basis;
they have laid down internalfinancial controls to be followed by the Company andthat such internalfinancial controls are adequate and were operating effectively; and
they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
During thefinancial year your Company has not invited/ accepted any Public Depositsunder Chapter V of the Companies Act 2013.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS
The details of Loans and Investments covered under the provisions of Section 186 of theCompanies Act 2013 are given in the Notes to the Financial Statements forming part ofAnnual Report. During the year your Company has granted unsecured loan to KennametalShared Services Private Limited a fellow Subsidiary. The Company has not provided anyguarantees during the Financial Year.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS OR TRIBUNALS
During thefinancial year under review there were no signficant and material orderspassed by the Regulators or Courts or Tribunals impacting the going concern status of theCompany and its future operations.
EVALUATFION OF THE BOARD'S PERFORMANCE
Pursuant to the provisions of the Companies Act 2013 and the SEBFI(LODR) Regulations2015 the Board had adopted a formal mechanism for evaluating its performance and that ofits Committees and Directors including the Chairman of the Board. During thefinancialyear the evaluation exercise was carried out through a structured evaluation processcovering various aspects of the functioning of the Board and Committees such as theircomposition experience & competencies performance of specfic duties &obligations governance issues etc. A separate exercise was carried out to evaluate theperformance of each individual Director including the Boards Chairman who wereevaluated on parameters such as contribution at the meetings independent judgmentattendance and other relevant aspects. The Board was satis ed with the evaluation resultswhich re ected the overall engagement of the Board Committees and the Directors of theCompany.
The Company has a structured familiarization programme for Independent Directors of theCompany which is also extended to other Non-Executive Directors to ensure that Directorsare familiarized with their function role rights responsibilities and the nature of theBusiness.
The Board of Directors has complete access to the information within the Company.Presentations are regularly made to the Board of Directors and all Committees of the Boardon various matters where Directors get an opportunity to interact with Senior Management.Presentations made by the Senior Management of the Company inter alia cover theCompany's strategy business model operations markets organization structure productofferingsfinance risk management framework quarterly and annual results humanresources technology quality and such other areas as may arise from time to time.
The Independent Directors of the Company are associated with the Company for many yearsand are very familiar with the Company. During the year the Management provided variousdocuments background notes presentations etc. to have a better insight of the Company.
The Company also issue appointment letters to the Independent Directors whichincorporates their role duties and responsibilities.
Pursuant to Regulation 34 (3) read with ScheduleV (c) of the SEBFI(LODR) Regulations2015 a report on Corporate Governance and the certficate as required under Schedule V (E)of the SEBFI(LODR) Regulations 2015 from Mr. Vijayakrishna K T Practising CompanySecretary regarding compliance of conditions of Corporate Governance are annexed as AnnexureII which forms part of this report. Further in compliance with the ListingRegulations your Board has adhered to the Corporate Governance Code.
COMPLIANCE WITH THE CODE OF CONDUCT
A declaration signed by the Managing Director af rming compliance with theCompanys Code of Conduct by your Directors and Senior Management of your Companyfor thefinancial year under review as required under SEBFI(LODR) Regulations 2015 isannexed as Annexure IIA and forms part of this report.
The Kennametal Code of Business Ethics & Conduct is a major component of theKennametalValue Business System (KVBS). The Code addresses the importance of fair dealingand compliance in all aspects of your Companys business and focuses on the conceptof doing the right thing every day.
Your Company insists on its employees to embrace the Code of Business Ethics &Conduct to ensure maintenance of strong ethical culture. The code of conduct is availableon the website of the Company at https://www.kennametal.com/content/dam/kennametal/kennametal/hi/About%20Us/Company%20Pro le/code_of_co nduct_director.pdf
A certficate from the Chief Executive Of cer and the Chief Financial Of cer datedAugust 24 2017 on thefinancial statements and the cash ow statement of the Company forthefinancial year ended June 30 2017 is annexed as Annexure-IIB and forms part ofthis report.
WHISTLE-BLOWER POLICY/VIGIL MECHANISM
Your Company was following a Whistle Blower Policy/ mechanism even prior torequirements of the Companies Act 2013. However pursuant to the provisions of Section177 of the Companies Act 2013 and the provisions of SEBFIListing Regulations yourCompany had taken on record the Vigil Mechanism (Whistle Blower Policy) of the Companysubsequent to the approval of the Board of Directors at its meeting. The Whistle BlowerPolicy provides avenues for employees to raise complaints and to receive feedback onaction taken and seeks to reassure the employees that they will be protected againstvictimization and for any Whistle Blower action taken by them in good faith.Your Company af rms that no personnel has been denied access to the Audit Committee.
The Kennametal Ethics Helpline
Anyone can make a complaint about the violation of the Code of Conduct of the Company.Reports made to the helpline can be done via the phone or the web on a con dential andanonymous basis were allowed by local law. The helpline is administered by an independentthird-party and is available 24 hours a day 7 days a week.
CONSERVATION OF ENERGY
TECHNOLOGY ABSORPTION FOREIGN EXCHANGE ETC.
A report in respect of conservation of energy technology absorption foreign exchangeearnings and outgo as required under Section 134(3)(m) of the Companies Act 2013read with the Rule 8(3) of the Companies (Accounts) Rules 2014 is annexed as AnnexureIII to this report.
AUDITORS & AUDITORS REPORT STATUTORY AUDITORS:
As per the provisions of Section 139 of the Companies Act 2013 read with the rulesmade there under no listed Company and such other companies as prescribed under theCompanies Act 2013 can appoint or re-appoint an audit rm as auditors for more than twoterms of ve consecutive years. In view of the same Messrs. Price Waterhouse & Co.Bangalore LLP Chartered Accountants (FRN: 007567S/S-200012) who were appointed asStatutory Auditors at the Annual General Meeting held on November 04 2014 for a period of3 (three) years from conclusion of the forty-ninth Annual General Meeting until theconclusion of the fty-second Annual General Meeting subject to ratfication at everyAnnual General Meeting of the Company retire as the statutory auditors of the Company atthis 52nd annual general meeting.
The Board upon recommendation of the Audit Committee recommends the appointment ofMessrs Walker Chandiok & Co LLP bearing rm registration no. 001076N/N500013 as theStatutory Auditors of the Company to hold of ce from the conclusion of ensuing (52nd)Annual General Meeting upto the conclusion of the 57th Annual General Meeting of theCompany subject to the approval of the members in the ensuing Annual General Meeting. Therequisite certficate in writing U/s 139 (1) read with section 141 and rule 4 of Chapter Xof the Companies Act 2013 has received from the Statutory Auditors to the effect thatthey would be eligible for such appointment.
The Independent Auditors Report to the Members on the Accounts of the Company forthefinancial year ended June 30 2017 does not contain any qualfication reservation oradverse remarks.The notes onfinancial statements referred to in the IndependentAuditors Report are self-explanatory and do not call for any further comments.
REPORTING OF FRAUDS
There was no instance of fraud during thefinancial year under review which requiredthe Statutory Auditors to report to the Audit Committee and / or the Board as requiredunder Section 143(12) of the Act and Rules framed thereunder.
Mr. Vijayakrishna K. T. Practising Company Secretary (FCS 1788) carried outSecretarial Audit under the provisions of Section 204 of the CompaniesAct 2013 forthefinancial year 2016-17 and submitted his report which is annexed to this report asAnnexureIV.
The Secretarial Audit Report does not contain any qualfication reservation or adverseremark.
Pursuant to the provisions of Section 148 of the Companies Act 2013 read with theCompanies (Cost Records and Audit) Amendment Rules 2014 the Board of Directors of theCompany upon recommendation of Audit Committee has appointed Messrs. K. S. Kamalakara& Co. Cost Accountants (Firm Registration No: 0000296) as the Cost Auditors of theCompany for thefinancial year 2017-18. As required under Section 148 of the Companies Act2013 the Shareholders approval for the remuneration payable to Messrs. K. S.Kamalakara & Co. CostAuditors is being sought at the ensuingAnnual General Meeting.
INTERNAL FINANCIAL CONTROL
Details of internalfinancial control and its adequacy are included in the ManagementDiscussion and Analysis Report which is annexed as Annexure 1 and whichforms part of this Report.
CONTRACTS AND ARRANGEMENTS WITH RELATED PARTIES
Pursuant to the provisions of Section 188 of the Companies Act 2013 and Regulation 23of the SEBFI(LODR) Regulations 2015 the Related Party Transactions (RPTs) which wereentered into during thefinancial year were at arms length basis and in the ordinarycourse of business. Further there are no material related party transactions duringthefinancial year under review with the Directors or Key Managerial Personnel. All relatedparty transactions were placed before the Audit Committee and the Board for approval asapplicable under Section 188 of the Companies Act 2013 and Regulation 23 of theSEBFI(LODR) Regulations 2015.
The policy on RPTs as approved by the Board is uploaded on t h e C o m p a n y sw e b s fit e a t t h e l fin k https://www.kennametal.com/content/dam/kennametal/kennametal/hi/About%20Us/Company%20Pro le/Related%20P arty%20Transaction%20Policy%20.pdf
The Particulars on RPTs in Form AOC 2 is annexed to the Report as AnnexureV.
PARTICULARS OF DISCLOSURES AS REQUIRED UNDER SECTION 197 OF THE COMPANIES ACT 2013
Pursuant to the provisions of Section 197(12) of the Companies Act 2013 read withCompanies (Appointment & Remuneration of Managerial Personnel) Rules 2014 the ratiosof the remuneration of each Director to the median employee's remuneration forthefinancial year and such other details as prescribed are set out in theAnnexure VI.
A statement showing details of employees of the Company throughout the year andemployees employed for part of the year who were in receipt of remuneration of 102 Lakhsor more per annum / 8.5 Lakhs or more per month is annexed herewith asAnnexureVII.
Prevention of Sexual Harassment
Your Company has an Internal Complaints Committee as required under the SexualHarassment of Women at workplace (Prevention Prohibition and Redressal)Act 2013.
There was no complaint lodged by any employee to the Internal Complaint Committee orEthics helpline under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013 with the Company during the year under report.
Your Company has suf cient insurance coverage on all its assets. They are renewed ontime.
RESEARCH & DEVELOPMENT (R & D)
The Research Development and Engineering (RD&E) works on new Product and ProcessDevelopments with specfic focus on materials coatings and design. RD&E Bangaloreworks on the market requirements in terms of new products custom solutions cost savingprojects and basic research. It is also recognized by the Ministry of Science &Technology - Department of Scientfic and Industrial Research - Government of India.
ENVIRONMENT HEALTHAND SAFETY (EHS)
Environmental Health and Safety (EHS) are fundamentals to your Companysbusiness and its ability to Deliver The Promise to all the stakeholders includingits employees customers shareholders and the public. Every day employees are empoweredto demonstrate Kennametal EHS commitment by striving for:
100% Safe-pursuing a goal of zero injuries illnesses and incidents by living thebelief that all are preventable. Your Company is pursuing the goal of zero incidentsthrough senior leader ownership of safety preventative actions and processes and byestablishing leadership roles for employees in safety.
Protecting Our Planet - providing sustainable solutions by reducing the totalenvironmental impact of our products and operations. Your Company has been working towardsprotecting our planet by continuously improving the management of energy and naturalresources promoting recycling and recovery of materials and preventing pollution. Amongother things the following EHS activities / improvements were undertaken during the year:
Safety performance in FY17 showed slight decrease and hence Total Incident rate (TIR)increased from 0.15 to 0.36 compared to FY16.
Reduced electrical re incidents from 10 incidents in FY16 to 2 in incidents FY17 (80%reduction).
Competence Training and Awareness: A total 4500 hours were spent on EHStraining by employees of your Company.
Wellness Awareness programme was conducted covering 200 man-hours to create awarenessand improve good health of the employees of the Company.
540 Find and Fix actions were implemented through
employee involvement which helped in eliminating hazards provide a safe workingenvironment.
Annual medical examination of employees was conducted to assess the health status andimprove in good health.
Your Company continued to monitor the hazardous and non-hazardous waste according towaste stream and disposal route with performance assessed on the basis of wasteintensity.
Your Company continued the Management Based Safety (MBS) programme a standard globalsafety process that has been the cornerstone of great improvement in safety culture.
A Risk Finder Tool and an improved Daily Safety Checklist are designed to strengthenevery employees ability to identify document and eliminate hazards at theirworkplace.
To minimize risk and further improve safe working environment through the Hazardidentfication and Risk assessment tool the following EHS Improvements were completed inFY17:
Laser Radiation Hazard Installed fully enclosed laser marking machine to minimize therisk laser radiation.
Up-gradation of Substation done - Improvement in Electrical Safety The Thermographyresults after up gradation shows No abnormalities Fire Detection & Suppression helpsin Fire Risk Mitigation and Type tested panels conforming to IEC 61439 with internal FormB Separation helps in containing the Energy release during any unforeseenArc Flash.
Fully Automatic Gas cabinets installed to store and use the Hydrogen Chloride Gas inCoating plant to minimize the toxic gas exposure to employees.
Fire Sprinkler system was installed for Hydrogen gas storage area in Coating Plant tominimize the re risk and property damage.
Fire Alarm system is upgraded by installing Smoke detector in Hazardous waste storagearea
Acetone vapor leak detection and alarming system is installed to minimize the risk ofre and explosion in Acetone storage area.
Thermography survey conducted for electrical system by an external agency andcorrective actions are taken to minimize the electrical re incidents.
To improve safe material storage handling and to utilize space in PU 7 a verticalstorage system is installed.
Installed Rollamatic CNC Wheel Dresser to improve safety standard and avoid seriousinjuries.
To improve the work environment and to enhance the energy ef ciency in PU-1 a newVentilation system is installed.
Recognition to employees
Recognition program organized on 19th July 2017 for the employees for LongestAccident (DART) Free period of 2500 days.
CORPORATE SOCIAL RESPONSIBILITY (CSR)
Pursuant to the provisions of Section 134(3)(o) of the Companies Act 2013 and rulesmade thereunder the Corporate Social Responsibility policy of the Company and initiativesundertaken by the Company on CSR activities during thefinancial year ended June 30 2017are set out in Annexure VIII to this report in the format prescribedunder the Companies (Corporate Social Responsibility Policy) Rules 2014.
VOLUNTARY RETIREMENT SCHEME
During thefinancial year your Company implemented a Voluntary Retirement Scheme foremployees with a view to effect cost savings apart from other measures to optimize costsin the business. The compensation paid to the employees under the Voluntary RetirementScheme was 239 Lakhs.Your Company has also separated certain of cers and associates inline with the Separation Compensation Design for India Salaried Employeespolicy dated April 27 2015.The aggregate compensation paid to employees under the saidpolicy is amounting to Rs. 311 Lakhs has also been charged to and disclosed separately inthe Statement of Pro t and LossAccount.
PERSONNEL / INDUSTRIAL RELATIONS
During thefinancial year under review your Company maintained cordial industrialrelations at all levels. Your Directors record their appreciation for employeescontribution.
Enterprise Risk Management (ERM) at the Company is driven by the Risk ManagementCommittee and Board of Directors through its routine oversight responsibilities. TheManagement team plays a primary role in identfication monitoring and minimizing risks asalso to identify business opportunities and threats. As a process the risk associatedwith the business is identfied and prioritized based on severity occurrence andeffectiveness of detection.
The Risks are being reviewed by the Management team periodically and reported to theRisk Management Committee bi-annually for their review. The department leaders have theresponsibility to monitor and implement the ERM framework approved by the Risk ManagementCommittee.
The Company has formulated a Risk Management Charter and a mechanism to inform the RiskManagement Committee of the Board about risk assessment.The detailed Risk Managementmechanism is provided in the Management Discussion andAnalysis (MD&A) Report.
The Risk Management Committee is constituted with the Directors and senior executivesas its members. Mr. Prakash M.Telang is the Chairman of the Committee.
As an established practice the Board of Directors is being updated on risksidentfication and steps taken to mitigate the same. Risk Management Charter is uploaded onthe C o m p a n y s w e b s fit e a t t h e l fin khttps://www.kennametal.com/content/dam/kennametal/ken nametal/hi/About%20Us/Company%20Prole/Risk%20man agement%20committee%20charter.pdf
DISCLOSURES UNDERTHE COMPANIES ACT 2013
Extract of theAnnual Return
An extract of the annual return as per Form MGT - 9 is enclosed in AnnexureIX to the Boards report.
Number of Board Meetings
The Board of Directors met Four times during FY17. The details of the Board meetingsand the attendance of the Directors are provided in the Corporate Governance Report.
Committees of Board of Directors
Details of memberships and attendance of various committee meetings of the Company aregiven in Corporate Governance Report.
Electronic copies of the Annual Report and the notice of the Fifty-SecondAGM are beingsent to all such Members whose e-mail addresses are registered with the Company/ itsRegistrar andTransferAgent.
To the other Members physical copies of the Annual Report and Notice of the Fifty-Second AGM are being sent through the permitted modes of dispatch. However Members whohave received the said documents in electronic mode but seek physical copies of the samecan send their requests to the Company Secretary. The remote e-voting facility is beingprovided to the Members to enable them to cast their votes electronically on allresolutions set forth in the notice pursuant to the provisions of Section 108 of theCompanies Act 2013 read with the Companies (Management and Administration) AmendmentRules 2015. The instructions for the remote e-voting are provided in the notice.
Your Directors place on record their appreciation for the support and assistancereceived from customers investors business associates bankers vendors regulatory andgovernmental authorities.Your Directors also wish to place on record their gratitude tothe Members for their continued trust con dence and express its sincere appreciation toall employees for their teamwork and contributions during the year.
| ||For and on behalf of the Board of Directors of |
| ||Kennametal India Limited |
|Bengaluru ||Prakash M. Telang |
|August 24 2017 ||Chairman |
| ||DIN: 00012562 |