(Including Management Discussion & Analysis)
Your Directors present the 46th Annual Report on the business and operations of KineticEngineering Limited and the Audited Financial Accounts for the financial yearended 31stMarch 2017.
I believe that the year 2016 - 2017 is a historic year for your Company. During thisyear your Company which forayed into auto components a few years ago has implementedmajor strategic initiatives to ensure a healthy and bright future in the chosen field. Dueto these initiatives which are explained below your Company now lies at the path ofgrowth and profitability in the coming future. These initiatives include: Initiativestaken towards business growth In the year 2016-2017 your Company has started thesupplies and ramp up formajor business from international customers. It has utilized itsavailable technical expertise to ensure a successful implementation of these high volumeprestigious programmes. The following is the status:
1) Renault-Nissan: Your company has successfully productionised and ramped up sleevesand dog teeth components for global major Renault Nissan. These components are supplied tothe new platform of gearboxes developed by RNTBC and is used in the widely successfulRenault Kwid and the Nissan Redi -Go. Our customer has seen a major success in both thesemodels due to its features styling and value proposition and Your Company is proud tobe a part of a high growing programme. In the year the company has ramped up to 850 setsper day and installed a capacity of 1200 sets per day which is expected to be utilizedin the coming year as RNTBC plans to export the components to various global markets.Overall hence this business shall become a major part of the Company's growth in thecoming years
2) Development of High Value Component for American Axle: Your company has successfullycompleted the development and validation
requirement of a single component that shall be exported (deemed) to the AmericanMajor American Axle. The production and supply of this component has begun and is in highramp up stage. The Company has reached a volume of 45000 per month and is expected toreach a volume of 58000 per month in the coming year.
The Above 2 business alone are expected to ramp up to an annual revenue of 40 - 50crores making them extremely important customers. We also hope to get additional newbusinesses from the prestigious customers and are working towards obtaining such RFQs fromthem.
Your Company has also commenced the mass production for a 380 NM gearbox to be suppliedto Ashok Leyland for one of their important vehicles. This gearbox has been designed underYour Company's technical agreement with Magna Styer India and shall be supplied as a fullyassembled gearbox strengthening your Company's image as the country's fastest growingcommercial vehicle gearbox manufacturer. The IPRfor the said gearboxwill be shared betweenyour company and customer and hence this is the first product available for Your Companyas its own product since the commencement of auto components. Your Company also believesthat successful implementation of the above initiatives shall result in larger businessopportunities from these very premium customers.
The new gearbox being developed for Ashok Leyland
Your Company continues to make products for Indian OEMs including TATA MahindraCarraro India and exporting to BRP (USA) Tomos (Slovenia) which have been the customerswho have supported Your Company since the beginning of its foray into auto components.
Material Cost reduction
Your Company has successfully completed its entire backward integration into forgings.An initiative started 2 years ago today your Company makes more than 95% of itsrequirement of forgings in house compared to previous years where this was a bought outcommodity. The Company now runs 2 hammer forgings and 1 x 1300 ton press forgings which itpurchased during this year. Currently the company has reached a forging production ofabout 300 tons - 400 tons per month and plans to increase the same along with the businessgrowth. Due to this major initiative Your Company continues to reduce its material costwhich has now come down to 51%.
The Company continues to explore avenues offurther reduction of costs by exploringoptions to reduce the fixed overheads including electricity manpower fuels packagingand freight.
KEL has commenced mass production for Renault's highly successful model KWID and NissanRedi - GO. KEL is further developing components for the AMT & 100 NM versions alongwith commencing its exports.
With a quality system set up in tune with the requirements of ISO 9001 and with ISO/TS16949:2002 certification the Company plans to leverage its skills in domestic as well asinternational market by further striving for total customer satisfaction throughrelationship building and providing superior products and technological solutions to itscustomers. The Company has further strengthened its quality systems by an internal qualityassessment system called as"KQAA" (Kinetic Quality Assessment and Awards")which reviews and rewards exceptional practices in Quality at each cell. Various effortsand
initiatives have been taken to have a larger focus on Kaizens Pokayoke QualityAnalysis methodology APQP documentation and other systems that will ensure a sustainableeffort for the business.
The Company is regularly developing its employees by utilising KEDS; atraining center called as Knowledge Enhancement & Development of SkillsCenter for its employees in its Ahmednagar facility which focuses on motivationaland training of its staff and workers at regular intervals.
Management Discussion & Analysis
India has emerged as the fastest growing major economy in the world as per the CentralStatistics Organisation (CSO) and International Monetary Fund (IMF) As per the EconomicSurvey 2016-17 the Indian economy should grow between 6.75 and 7.5 percent in F.Y.2017-18. India has become the sixth largest manufacturing country in the world. India isseen as an engine of global growth.
IMF in April 2017 retained its growth forecast of 7.2% for India for the fiscal year2017-18 in its World Economic Outlook and also estimated that India would grow at 7.7% in2018-19.
The overall Commercial Vehicles segment registered a growth of4.3 percent inApril-March 2017 as compared to the same period last year Medium & Heavy CommercialVehicles (M&HCVs) grew by 2.5 percent and Light Commercial Vehicles grew by 5.5percent during April-March 2017 over the same period last year. The tractor industry hasshowed a positive Growth during F.Y. 2016-17. While domestic volumes increased by 18.2%between April 2016-January 2017 exports remained flat Domestic growth was fuelled byfavourable farm sentiments as the southwest monsoon performance remained healthiercompared to the previous two fiscals Outlook Opportunities and Threat Governmentof India aims to make automobiles manufacturing the main driver of Make in Indiainitiative as it expects India to be the third largest Automotive market and CommercialVehicle production expected to grow to two million by 2026 as highlighted in theAuto Mission Plan 2016-26'.
The proposed 'Voluntary Vehicle Fleet Modernisation Plan' (V-VMP) has received anin-principle approval by the Committee of Secretaries. The proposal will have to becleared by the Union Cabinet for implementation. The proposal provides incentives worth8-12 percent of the cost of a new vehicle in lieu of surrendering the old ones
and looks to get several million over- 15-years-old vehicles off the road therebyreducing vehicular emission. This policy if implemented will give a big boost to theCommercial Vehicles Industry.
A lot is expected to happen in 2017 on the regulatory front and with introduction ofGoods and Service Tax (GST). With so many policy-level developments expected all throughthe year the auto industry is surely expected to face a challenging year as perSociety of Indian Automobile Manufacturers' (SIAM).
ICRA- the Rating Agency has forecast a growth of about 6-7% for the tractor industry(domestic + exports) in F.Y .2018 which is marginally lower than the long term CAGRestimate of 8-9% for the industry. ICRA says the long term industry drivers continue toremain intact.
During the year under review your Company did not accept any deposits within themeaning of provisions of ChapterV - Acceptance of Deposits by Companies of the CompaniesAct 2013 read with the Companies (Acceptance of Deposits) Rules 2014.
The Company has received advance from the Director which disclosed in the Financialstatement for the Fiancial year 2016-17.
Research & Development
Research and development is viewed as crucial for development of the Company. Theseactivities add in expanding and upgrading the product portfolio and improving theofferings to the customers.
Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo Theinformation pertaining to conservation of energy technology absorption foreign exchangeearnings and outgo as required under section 134(3)(m) of the Companies Act 2013 readwith Rule 8(3) of the Companies (Accounts) Rules 2014 is furnished in Annexure I and isattached to this Report.
The Board after review the recommendation of the audit committee hereby recommend thename of M/s Pawan Jain &Associates Chartered Accountants Pune hold office until theconclusion sixth Annual General from this Annual General Meeting to be held in thecalendaryear 2022 and informed that M/s Pawan Jain & Associates CharteredAccountants Pune has submitted his consent and a certificate in terms of Sec. 139(1) ofthe Companies Act 2013 about their eligibility.
The Audit Report does not contain any qualification
reservation or adverse remark.
Pursuant to the provisions of section 204 of the Companies Act 2013 and the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the Company hasappointed Mr. Devendra Deshpande Practicing Company Secretary (Certificate of PracticeNumber: 6515) to undertake the Secretarial Audit of the Company.
In terms of provisions ofsub-section 1 ofsection 204 of the Companies Act 2013 theCompany has annexed to this Board Report as Annexure II a Secretarial Audit Report givenby the Secretarial Auditor.
The Secretarial Audit Report does not contain any qualification reservation or adverseremark.
Key Managerial Personnel (KMP)
The following have been designated as the Key Managerial Personnel of the Companypursuant to sections 2(51) and 203 of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014:
a) Ms. Sulajja Firodia Motwani - Vice Chairperson
b) Mr.AjinkyaA. Firodia-Managing Director&CFO
c) Mr. Sourav Chowdhury-Company Secretary (CS) Mr. Rohit Purandare Company Secretaryof the Company resigned during the year. In his place Mr. Sourav Chowdhury has beenappointed as Company Secretary of the Company.
Particulars of Employees and related disclosures:
In terms of the provisions of Section 197(12) of the Companies Act 2013 read withRules 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 a statement showing the names and other particulars of theemployees drawing remuneration in excess of the limits set out in the said Rules areprovided in the Annexure forming part of theAnnual Report.
Disclosures pertaining to remuneration and other details as required underSection197(12)of the Companies Act
2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules
2014 are provided in the Corporate Governance Report which is attached as Annexure IIIforming part of the Annual Report.
Having regard to the provisions of Section 136(1) read with its relevant provision ofthe CompaniesAct 2013 theAnnual Report excluding the aforesaid information is being sentto the members of the Company. The said
information is available for inspection at the Registered Office of the Company duringworking hours and any member interested in obtaining such information may write to theCompany Secretary and the same will be furnished without any fee and free of cost.
Board Meetings and Annual General Meeting During the year 4 meetings of the Boardof Directors were held. The details of the meetings are furnished in the CorporateGovernance Report which is attached as Annexure-lll to this Report.
A calendar of Meetings is prepared and circulated in advance to the Directors'
During the year 1st April 2016 to 31st March 2017 4 Board Meetings were held on 28thMay 2016 9th August 2016 14th November 2016 13th February 2017. The 45thAnnualGeneral Meeting (AGM) of the Company was held on 30thSeptember 2016.
Meetings of Independent Directors The Independent Directors of the Company meetbefore the Board Meetings without the presence of the Chairman & Managing Director orExecutive Director or other Non-Independent Directors or Chief Financial Officer or anyother Management Personnel.
These Meetings are conducted in an informal and flexible manner to enable theIndependent Directors to discuss matters pertaining to inter alia review of performanceof Non-Independent Directors and the Board as a whole review the performance of theChairman of the Company (taking into account the views of the Executive and Non-ExecutiveDirectors) assess 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.
This Committee comprises of the following Directors viz. Mr. Shirish R. Kotecha(Chairman of the Committee) Mr. Jinendra H. Munot Mr. Ramesh J. Kabra. All the Membersare Independent Directors. All the Members of the Committee possess accounting andfinancial management knowledge. The Company Secretary of the Company is the Secretary ofthe Committee.
All the recommendations of the Audit Committee were accepted by the Board.
Directors and Key Managerial Personnel
During the year under review there was no change in the composition in the Board ofDirectors of the Company.
Mr. Arun H. Firodia Director of the Company retires by rotation at the forthcomingAnnual General Meeting and being eligible offers herself for re-appointment.
The Independent Directors of the Company have declared that they meet the criteria ofIndependence in terms of Section 149(6) of the Companies Act 2013 and that there is nochange in their status of Independence. Mr. Rohit Purandare Company Secretary of theCompany resigned from the post w.e.f. 31st January 2017 and consider at the Board Meetingheld on 13th February 2017. In his place Mr. Sourav Chowdhury was designated as CompanySecretary at the same Board Meeting.
Extract of Annual Return
Pursuant to sub-section 3(a) of section 134 and subsection (3) of section 92 of theCompanies Act 2013 read with Rule 12(1) of the Companies (Management and Administration)Rules 2014 an extract of the Annual Return as on 31st March 2017 in Form No. MGT 9 isattached herewith as Annexure IV and forms part of this Report.
Pursuant to the provisions of the Companies Act 2013 and SEBI (Listing obligation andDisclosure Requirements) Regulation 2015 (hereinafter referred to as LODR)Independent Directors at their meeting without the participation of the Non-independentDirectors and Management considered/evaluated the Boards' performance Performance of theChairman and other Non-independent Directors.
The Board have undergone a formal review which comprised Board effectiveness survey360 degree and review of materials. This was delivered by an external specialist andresulted in a full Board effectiveness report and Directors' feedback. This is furthersupported by the Chairman's Annual Director Performance Review.
The Board subsequently evaluated its own performance the working of its Committees(Audit Nomination and Remuneration and Stakeholders Relationship Committee) andIndependent Directors (without participation of the relevant Director).
The criteria for performance evaluation have been detailed in the Corporate GovernanceReport which is attached as Annexure-lll to this Report.
Material changes and commitments affecting the financial position of the Company whichhave occurred between March 31 2017 and August 31 2017 (date of the Report)
There were no material changes and commitments affecting the financial position of theCompany between
the end of financial year (March 312017) and the date of the Report (August 312017).
GOVERNANCE Corporate Governance
Your Company has a rich legacy of ethical governance practices many of which wereimplemented by the Company even before they were mandated by law. Your Company iscommitted to transparency in all its dealings and places high emphasis on business ethics.A Report on Corporate Governance along with a Certificate from the Statutory Auditors ofthe Company regarding compliance with the conditions of Corporate Governance as stipulatedunder the provision of SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 which is attached asAnnexure III to this Annual Report.
The Vigil Mechanism as envisaged in the Companies Act 2013 the Rules prescribedthereunder and the LODR is implemented through the Company's Whistle Blower Policy toenable the Directors and employees of the Company to report genuine concerns to providefor adequate safeguards against victimisation of persons who use such mechanism and makeprovision fordirect access to the Chairman of the Audit Committee.
Whistle Blower Policy of the Company is available on the Company's website at theweb-link: www.kineticindia.com/investors Further details are available in the Report onCorporate Governance that forms part of this Annual Report. Contracts or Arrangementswith Related Parties All Related Party Transactions entered into during the year werein the Ordinary Course of Business and on Arm's Length basis. No Material Related PartyTransactions i.e. transactions exceeding ten percent of the annual financial turnover asper last audited financial statements were entered during the year by your Company.Accordingly the disclosure of Related Party Transactions to be provided under section134(3)(h)ofthe Companies Act 2013 in FormAOC-2 is notapplicable.
The policy on Related Party Transactions as approved by the Board is uploaded on theCompany's website and can be accessed at web link: www.kineticindia.com/investors InternalControl System
The Company has adequate internal control system commensurate with its size and natureof business for ensuring efficiency of operations adherence to
management policies and protection of Company's assets. The Company's Audit Committeeperiodically reviews the internal control systems and compliance with Company's policiesprocedures and laws.
The report contains estimates and expectations which could be 'forward looking'.Actual results however might differ from estimates and expectations expressed or impliedin this report as the same are affected by many other uncertainties including rawmaterial availability & prices changes in Government regulations tax regimeseconomic developments and other incidental factors. Directors responsibility statement Pursuantto section 134(5) of the Companies Act 2013 your Directors based on the representationsreceived from the Operating Management and after due enquiry confirm that:
(a) in the preparation of the annual accounts for the Financial Year ended 31st March2017 the applicable accounting standards have been followed along with proper explanationrelating to material departures;
(b) the Directors had in consultation with Statutory Auditors selected accountingpolicies and applied them consistently and made judgments and estimates that arereasonable and prudent so as to give a true and fair view of the state of affairs of theCompany as at 31st March 2017 and of the profit of the Company for the year ended on thatdate;
(c) the Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud andirregularities;
(d) the Directors have prepared the annual accounts on a going concern basis;
(e) the Directors have laid down adequate Internal Financial Controls to be followed bythe Company and such Internal Financial Controls were operating effectively during theFinancial Year ended 31st March 2017;
(f) the Directors had devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating effectivelythroughout the Financial Year ended 31st March 2017.
Remuneration Policy of the Company
The Remuneration policy of the Company comprising
the appointment and remuneration of the Directors Key Managerial Personnel and SeniorExecutives of the Company including criteria for determining qualifications positiveattributes independence of a Director and other related matters has been provided in theCorporate Governance Report which is attached as Annexure-lll to this Report.
Particulars of loans guarantees or investments under Section 186 of the Companies Act2013
Details of loans guarantees and investments covered under the provisions of Section186 of the Companies Act 2013 are given in Note A-11 of the Notes to the financialstatements.
Significant and Material Orders Passed by the Regulators or Courts or Tribunalsimpacting the Going Concern status of the Company
There are no significant and material orders passed by
the Regulators or Courts or Tribunals which would impact the going concern status ofthe Company. Acknowledgement
The directors express their sincere thanks to Central & State GovernmentsFinancial Institutions banks who have extended their support in form of CreditFacilities suppliers and stakeholders for the support extended to the Company and alsowish to place on record their appreciation of the dedicated services rendered by theemployees of the Company.
For and on behalf of the Board of Directors
| ||A. H. Firodia |
| ||Chairman |
|Pune August312017 || |
|Regd.Off. :D1 Block Plot No.18/2 || |
|MIDC Chinchwad Pune-411019. || |