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LEEL Electricals Ltd.

BSE: 517518 Sector: Engineering
NSE: LEEL ISIN Code: INE245C01019
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VOLUME 249375
52-Week high 340.40
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P/E 14.89
Mkt Cap.(Rs cr) 1,113
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OPEN 267.00
CLOSE 262.95
VOLUME 249375
52-Week high 340.40
52-Week low 168.00
P/E 14.89
Mkt Cap.(Rs cr) 1,113
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

LEEL Electricals Ltd. (LEEL) - Director Report

Company director report

Directors

To

The Members

Your Directors are pleased to present the 27 Annual Report on the business andoperations of your company alongwith the Standalone and Consolidated Audited Accounts forthe financial year ended 31 March 2014.

SUMMARISED FINANCIAL RESULTS

PARTICULARS STANDALONE CONSOLIDATED
for the year ended for the year ended

March 31 2014

March 31 2013

March 31 2014

March 31 2013
Revenue from Operations 1439.69 1169.38 1775.97 1474.31
Operating Profit (EBIDTA) 189.58 145.88 214.29 155.87
Finance Expenses 84.02 50.75 85.50 52.70
Depreciation 23.79 22.26 31.76 31.62
Profit before tax 81.77 72.87 97.03 71.56
Less: Current Tax 17.50 14.72 21.40 15.52
Deferred Tax (11.82) 2.00 (13.49) 3.24
Profit for the year 76.09 56.16 89.12 52.80
Add: Balance brought forward 155.32 110.45 142.75 101.23
Add: Excess FBT provision adjusted 0.02 - 0.02 -
Add: MAT credit receivable 1.36 1.85 1.36 1.85
Amount available for appropriation 232.79 168.45 233.23 155.88
Less: Proposed Dividend 3.53 3.53 3.53 3.53
Corporate Dividend Tax 0.60 0.60 0.60 0.60
General Reserve 23.00 1.50 23.00 1.50
Debenture Redemption Reserve - 7.50 - 7.50
Balance carried forward 205.66 155.33 206.10 142.75

DIVIDEND

Keeping in view the Company’s long-standing history of stable dividend payoutsyour Directors are pleased to recommend payment of dividend of Re 1/- per equity share ofRs. 10/- each for the financial year 2013-2014 subject to the approval of theshareholders. (Previous year Re. 1/- per equity share of Rs. 10/- each).

The total dividend payout would be Rs. 4.13crores including dividend distribution taxof Rs. 0.6 crores.

PERFORMANCE HIGHLIGHTS

The financial year 2013-2014 witnessed another year of sluggish and challenging marketconditions. India’s domestic strength was tested by intensifying globaluncertainties. Declining economic growth high inflation declining fiscal discipline awidening external deficit and diminishing business confidence are hampering India’seconomic outlook. The volatile exchange rate and sharp depreciation of rupees furtheraugmented the economic conditions and business performances.

In the view of this challenging environment your Company managed to record a decentperformance. On standalone basis revenue of the Company stood at Rs. 1439.69 crores asagainst Rs. 1169.38 crores during the previous year registering an increase of 23%.Earnings before Interest tax depreciation and amortization (EBITDA) was Rs. 189.58crores as against Rs. 145.88 crores higher by 30%. The Net Profit before tax was Rs.81.77crores as against Rs. 72.87 crores in the previous year registering a growth of 12%.

On consolidated basis revenue from operations for the financial year 2013-14 at Rs.1775.97 crores was higher by 20% over last year (Rs. 1474.31 crores for FY 12-13).Earnings before Interest tax depreciation and amortization (EBITDA) was Rs. 214.29crores as against Rs. 155.87 crores higher by 37%. The Net Profit before tax was Rs.97.03 crores as against Rs. 71.56 crores in the previous year registering a growth of36%.

OPERATIONS

This year was full of challenges for the HVAC& R Industry. The Forex was at therecord high rendering most products to become un-competitive and curbing the ultimatedemand. Metal Prices (LME) was relatively stable. The Room Air Conditioners market inIndia has experienced a negative to lower growth rates in last 3 years due to weak economyand significant rise in prices. However market is expected to grow at a healthy pace ofCAGR 10-12 % in between FY 2014-15 to 2018-19.Lower market penetration rising incomelevels increasing number of households high temperatures & humidity urbanizationare strong growth drivers for this air conditioning industry.

Your Company has invested significantly for technology up gradation new productdevelopment and localization to sustain its market leadership in future years. Newproducts meeting with higher energy efficiency norms of BEE has been developed during theyear in the room air-conditioning segment with R-410A refrigerants. The Company has alsodeveloped innovative and energy efficient range of products for the residential andcommercial segments like inverter air conditioners with environment friendly refrigerantsfor the OEM market 24 K and 48K Cassette/ Floor Standing air conditioners.

The year also saw tremendous rise in the export market of its Heat & Cool productsto Middle East CIS countries meeting with international standards like CB/ESMAcertification

• With the IRIS certification the Company has been able to bagged its firstprestigious order from Bombardier

• Transportation for the supply of Roof Mounted ventilation units for EMU coaches

During the year your company has further strengthen its LLOYD brand product portfolioby adding wide range of room air-conditioners with star ratings Washing Machine LEDTelevisions Water Dispensers Chest freezers etc. Your Company has expanded its branchnetwork to 44 branches and 280 service centres to cope with the growing demand and thishas resulted in a much deeper penetration where almost 85% of districts in India haveLloyd product dealers thus expanding the dealer base to 6000 dealers encompassing Tier 23and rural towns.

SUBSIDIARY COMPANIES

Pursuant to the Accounting Standard AS-21 issued by ICAI Consolidated FinancialStatements presented by the Company includes the financial information of subsidiaryCompanies namely Lloyd Coils Europe s.r.o and Janka Engineering s.r.o.

The Central Government vide Notification no.2/2011 dated 8 February 2011 grantedgeneral exemption to Companies from dispensing with the requirement of attaching theaccounts of the subsidiary companies subject to certain conditions. As the Company hascomplied with all the conditions the annual accounts and other documents of thesubsidiary Companies are not attached with the Balance Sheet of the Company. The AnnualAccounts of the subsidiary Companies are open for inspection by any member/investor andalso available on the website of the Company- www.lloydengg.com. The Company will make thedocuments/details available upon request by any member of the Company or its subsidiariesinterested in obtaining the same.

The Economic condition in Europe continued to be rather unclear with differentdevelopments across the regions. Central Europe showed some signs of recovery and isfinally getting out of long lasting recession. Germany remains to be the engine of EUeconomy benefiting mostly from growing exports.

The operations of both the overseas subsidiaries were significantly impacted by theflood that hit Prague in June 2013 resulting in production and sales loss for nearly onemonth. The total damage caused by flood was Euro 6 Million in both the subsidiaries -Euro 2 Million in Lloyd Coils Europe (LCE) and Euro 4 Million in Janka Engineering(Janka) which were fully indemnified by the insurance company.

On the Operation al front LCE reported Sales of Euro 33.4 Million for the financialyear ended March 31 2014 which was nearly 10% down from the previous year. The mainreason for the decline in Sales was apparently the flood. Whereas the improved productmix increased labour productivity and favourable currency exchange rate boosted theprofit to the record high level in the Company’s history. EBITDA touched all timehigh of Euro 3.9 Million higher by 16% over previous year and PBT increased significantlyto Euro 2.3 Million.

For Janka the year was a turnaround in sales and profit margins. Central Europe hadgradually improved from the recession and construction industry showed few signs ofrecovery.Janka entered into new segment of development of HVAC unit for rolling stockmanufacturer which resulted in increase in sales not only in domestic market but also inRussia Germany and Hungary. The Sales of Janka touched all time high of Euro 12 Millionand delivered positive EBITDA of Euro 0.40 Million as against the previous year loss ofEuro – 1 Million. During the fiscal year it has also developed condensing unit forretro-fitted coaches of local train operator RegioJet and is in advance stage to providesimilar solutions to the Czech Railways.

NON CONVERTIBLE DEBENTURES

During the year Company has fully redeemed 500 nos. of 11.25% Secured Redeemable NonConvertible Debentures (‘NCD’) of the face value of Rs. 1000000/- each issuedby the Company on private placement basis in the financial year 2010-2011 by makingprepayment of Rs. 50 crores. Pursuant to the said redemption the Company had fullycomplied with the requirements pertaining to extinguishment of securities and de-listingof the same from Bombay Stock Exchange (BSE).

GLOBAL DEPOSITORY RECEIPTS (GDRs)

96000 Global Depository Receipts underlying 192000 equity shares were outstandingfor conversion as on March 31 2014. The GDRs are listed on the Professional SecuritiesMarket of London Stock Exchange. The Bank of New York acts as the Depository and ICICIBank as the domestic custodian in respect of GDRs issued.

FIXED DEPOSITS

During the year under review your Company has not accepted any deposits from public asper the provisions of the Companies Act and Rules made there under.

LISTING ARRANGEMENT

The equity shares of the company are listed at Bombay Stock Exchange Ltd. (BSE) andNational Stock Exchange of India Ltd. (NSE)

The GDR’S are listed on London Stock Exchange.

Annual Listing fees to above Exchanges for the Financial Year 2014-15 as applicablehave been paid before the due date.

CORPORATE GOVERNANCE

Your Company fully subscribes to the principles and spirit of good Corporate Governanceand endorses the ideologies and ethics of independence integrity accountability andtransparency into the value system driving the Company. We keep our governance practicesunder continuous review and benchmark ourselves to the best governed Companies across theglobe.

A detailed report on Corporate Governance with respect to compliance with theprovisions of Clause 49 of the Listing

Agreement forms a part of this Annual Report.

DIRECTORS

Mr. KrishanLall has ceased to be a director of the Company w.e.f. 9 March 2014 due tohis death which has been taken on record by the Board of Directors at their meeting heldon 29 May 2014. The Board of Directors condole the untimely demise of Mr. Lall and took onrecord the invaluable contributions made by Mr. K.Lall towards the progress of theCompany.

Mr. Gopal Kacker was appointed as an Additional Director to be designated as NonExecutive Independent Director on the Board of the Company w.e.f. May 29 2014 and heholds office upto the date of the ensuing Annual General Meeting. The company has receivedrequisite notice in writing from the member proposing appointment of Mr. Kacker asIndependent Director.

Mr. Brij Raj Punj was re-appointed as the Managing Director of the Company for a periodof five years effective from October 31 2013 subject to the approval of the shareholdersat the ensuing Annual General Meeting.

Mr. Achin Kumar Roy was re-appointed as Whole Time Director of the Company for a periodof two years effective April 28 2014 subject to the approval of the shareholders at theensuing Annual General Meeting.

In accordance with the provisions of the Companies Act 2013 and the Articles ofAssociation of the Company Mr. Mukat Behari Sharma retire by rotation at the ensuingAnnual General Meeting and being eligible offer himself for reappointment.

Brief profile of the Directors seeking appointment and re-appointment is given in thenotice of the ensuing Annual General Meeting.

AUDITORS & AUDITORS’ REPORT

Statutory Auditor

M/s Suresh C. Mathur& Co. Chartered Accountants (Membership no.: 083540 and Firmregistration no. 000891N) retires as statutory Auditors at the forthcoming Annual generalMeeting and has given their consent for re-appointment. Pursuant to the provisions of theCompanies Act 2013 the Company has obtained a written certificate from M/s Suresh C.Mathur& Co. Chartered Accountants to the effect that their appointment if madewould be in conformity with the limits specified in the said Act. The Board recommendstheir re-appointment as Statutory Auditors for a period of three years from the conclusionof ensuing Annual General Meeting up till the conclusion of Thirtieth Annual GeneralMeeting subject to ratification by the shareholders of the Company at each Annual GeneralMeeting.

The Observations made in the Auditors’ Report are self-explanatory and thereforedo not call for any further comments under Section 217(3) of the Companies Act 1956.

Cost Auditor

In pursuance to the provisions of Section 148(2) of the Companies Act 2013(corresponding to Section 233B of the companies Act 1956)and with the approval of theCentral Government M/s Jain Sharma & Associates Cost Accountants (Membership no.:18592 and Firm registration no. 000270) has been re-appointed as the Cost Auditor of theCompany to conduct Audit of the Cost records for the financial year 2014-2015.

The Cost Audit Report for the financial year 2012-2013 was filed with the Ministry ofCorporate Affairs within the prescribed time limit and Cost Audit Report for the year2013-2014 will be submitted on or before due date i.e. September 30 2014.

CORPORATE SOCIAL RESPONSIBILITY

Driven by the desire to create a meaningful difference in society; at Lloyd we makeconscious efforts to achieve higher socio-economic goals. Over the years we have alignedour business processes and goals to make a more deep-rooted impact on the societydirectly. There is an absolute belief that the transformational projects undertaken by usare contributing towards strengthening trust of all our stakeholders. We believe thatbringing the benefits of education basic healthcare sustainable livelihoodinfrastructure and espousing social reform support to the needy suffering from physicaldisabilities employability community service for the aged and girl child welfare willmake a difference to the lives of the poor.

Details on the initiatives taken by the Company towards CSR activities are provided inthe Corporate Social Responsibility section of the Annual Report.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION RESEARCH & DEVELOPMENT AND FOREIGNEXCHANGE EARNINGS AND OUTGO:

In accordance with the requirements of Section 217(1)(e) of the Companies Act 1956read with the Companies (Disclosure of particulars in the report of the Board ofDirectors) Rules 1988 statement showing particulars with respect to Conservation ofEnergy Technology Absorption Foreign Exchange Earnings and Outgo and Research andDevelopment activities undertaken by the Company are annexed hereto(Annexure to Director'sReport) and form part of this report.

PARTICULARS OF EMPLOYEES

In accordance with the provisions of Section 217(2A) of the Act read with the Companies(Particulars of Employees) Rules 1975 the names and other particulars of employees areto be set out in the Directors’ Report as an addendum thereto. However in line withthe provisions of Section 219(1)(b)(iv) of the Companies Act 1956 the Directors’Report is being sent to all members of the Company excluding the aforesaid information.Any member interested in obtaining such particulars may write to the Company Secretary atthe Corporate Office of the Company.

DIRECTORS’ RESPONSIBILITY STATEMENT

The Audited Accounts for the financial year ended March 31 2014 are in conformity withthe requirements of the Companies Act 2013 (to the extent notified) and the CompaniesAct 1956 (to the extent applicable). Pursuant to Section 217(2AA)your directors herebyconfirm that:

1. In preparation of the annual accounts for the year ended March 31 2014 theapplicable accounting standards have been followed;

2. The accounting policies are consistently applied and reasonable prudent judgmentand estimates are made so as to give a true and fair view of the state of affairs of theCompany at the end of the financial year and of the profits of the Company for thatperiod;

3. The Directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for providing and detecting frauds and other irregularities;

4. The Directors have prepared the Annual Accounts on a going concern basis.

ACKNOWLEDGEMENT

We thank our customers vendors investors and bankers for their continued supportduring the year. We place on record our appreciation for the contribution made by ouremployees at all levels. Our consistent growth was made possible by their hard worksolidarity cooperation and support.

We also place on record deep appreciation to various statutory authorities Central andState Governments and Government of various countries where we operate for their continuedassistance co-operation and encouragement they have extended to the Company and lookforward to their continued support in future.

For and on behalf of the Board of Directors
Date: May 29 2014 Brij Raj Punj
Place: New Delhi Chairman & Managing Director

Annexure to Directors’ Report

Information pursuant to Section 217(1) (e) of the Companies Act 1956 relating to theCompanies (Disclosure of Particulars in the Report of Board of Directors) Rules 1988 areas follows:

A. CONSERVATION OF ENERGY

Sustainability at Lloyd involves the awareness that a greener healthier planet is thebest legacy we can leave for our future generations and for our business. Company hasembedded a policy of reduce reuse and recycle across all its processes. Company’stechnical staff and engineers are trained to identify energy-saving opportunities andconsistent efforts to improve performances have resulted in considerable reduction in theuse of energy and natural resources. Your Company has taken appropriate measures forenvironment protection by adopting green and clean technologies and designing pollutioncontrol infrastructure to achieve discharge and emissions within the statutory limits.

A few initiativestaken by your Company towards energy conservation during the yearunder review:

• Use of high masks light of 250w to CFL of 85 W.

• Use of electrical equipment’s with high energy efficiency and low antienvironment emissions

• Enhancement of Paint facility automatic reciprocator installed to improve powderpaint quality save wastages of powder paint and save on human resources

• Transparent FRP Roofing sheets for better lighting during day time for energyconservation.

• Planned use CFL/ LED bulbs in shop floor and use of street lights.

• Use of energy efficient wielding machines for TIG welding to reduce powerconsumption.

• Switch off utility machines during off times.

• Use of portable air compressor during partial load condition to conserve energy.

• Rain water harvesting continues to be a focused activity at our manufacturingplants.

• Reduced carbon footprints and initiatives taken to continuously monitor wastegeneration and constantly improve effluent waste treatment plants across all ourmanufacturing units.

Benefits derived as a result of above efforts:

Your company has taken few significant steps to reduce energy consumption to ensurelesser impact on the environment and as a consequence of these measures your companyisable to reduce electrical and fuel consumption and curb the impact of increase in cost ofenergy thereby savings in the cost of production of the goods to that magnitude. Companyis progressing well towards its key goal of carbon dioxide emission reduction.

B. TECHNOLOGY ABSORPTION ADAPTATION AND INNOVATION

Technology and innovation continue to be one of the key focus areas to drive growth ofLloyd group besides ensuring sustainability and helping the Company take a leap intransformation. Consistent with Lloyd’s aspiration to become a best in classtechnology ‘Lloyd Technology Team’ is working as a focal point to integrateResearch and Technology initiatives across the Organization. In addition to developing newproducts and technologies for existing businesses/ manufacturing facilities the group isalso working on building capabilities to develop breakthrough technologies that willcreate new business for Lloyd. Training is imparted to technical staff as an ongoingprocess.

C. RESEARCH AND DEVELOPMENT

In order to meet with the growing demand for latest technology products and to competein the market place your Company continued its efforts in strengthening the R&Dactivities. Efforts continued to enhance the in-house capabilities to bring in operationalefficiencies and product up-gradation to meet the customer needs at both domestic andinternational front.

Specific areas in which R & D carried out by the Company

To bring innovation and improve upon its area of operation to be at par withInternational Standards during the year under review Our R&D team has contributed todesign optimization of standard range of products for several customers.

Highlights of products and processes developed by your Company during the year underreview include:

• Development of energy efficient models ranging from 2/3/5 star rated split airconditioners as per the new BEE standards.

• Development of 24K & 48K Cassette/ Floor standing AC

• Development of DC inverter airconditioner for OEM market.

• Developed and qualified Window AC product with CB certification for UAE market

• Development of new generation PLC based controllers for metro rail HVAC units

• Roof Mounted Ventilation unit for EMU coaches of MRVC II project for Bombardier

• Switch Board Cabinet for LHB Coaches

• Oil Cooling Unit for electric loco engines of CLW

• Development of Heat Exchangers (condensers) using micro channel technology.

• Development of Heat and Cool Split AC with R-410A refrigerant for CIS countries

• Development of Split AC with scroll compressor

• Up gradation of Ac test lab standards as per ISO 17025

• Development of Roof Mounted packaged Units with environment friendlyrefrigerants for LHB and conventional coaches of Indian Railways.

Benefits derived as a result of above R&D

The development of new products has helped the company to remain at the top of cuttingedge technology and has resulted in continuity of our relationship with key customers.Havinga diverse product portfolio with star rated products; helped the Company inimproving the market share. Your Company enhanced its customer base with some of theleading Indian and Overseas brands.

Future Plan of Action

Towards optimizing energy consumption your Company continues its efforts to enhancethe in-house capabilities to bring in operational efficiencies and product up-gradation tomeet the customers’ need. We will continue to focus on and collaborate with leadingnational and international universities product vendors and technology start upcompanies.

Expenditure incurred on Research and Development

Capital Expenditure: Taken as Fixed Assets and depreciation is provided accordingly.

Revenue Expenditure: Charged out of expenses through the respective heads of accounts.

D. FOREIGN EXCHANGE EARNING AND OUTGO

a. Activities relating to exports initiatives taken to increase exports; developmentof new export markets for products and services and export plans:

Discussed in detail in the‘Management Discussion and Analysis Report’

b. Total Foreign Exchange used and earned:

2013-2014

2012-2013
Foreign Exchange Earnings 185.18 90.16
Foreign Exchange Outgo 623.90 423.89