To The Members
Your Directors are pleased to present the 36th Annual Report on the businessand operations together with Audited Balance Sheet and Profit & Loss Account of yourCompany for the year ended March 31 2017.
Your Company's performance during the year as compared with the previous year issummarized below:
| || ||(Rs. in Million) |
|Particulars ||2016-17 ||2015-16 |
|Net Sales ||12997.81 ||12551.75 |
|EBITDA ||1059.95 ||929.27 |
|Financial Expenses ||114.10 ||134.38 |
|Depreciation/Amortisation/Impairment Loss ||404.25 ||378.99 |
|Profit Before Tax (PBT) ||541.60 ||415.90 |
|Provision for Tax ||89.76 ||42.16 |
|Profit After Tax (PAT) ||451.84 ||373.74 |
|Balance of Profit brought forward ||554.42 ||353.20 |
|Balance Available for Appropriation ||1006.26 ||726.94 |
|Appropriations || || |
|Dividend ||- ||112.17 |
|Corporate Dividend Tax ||- ||22.84 |
|Transfer to General Reserve ||54.20 ||37.50 |
|Balance Carried to Balance Sheet ||952.06 ||554.43 |
| ||1006.26 ||726.94 |
|Dividend (%) ||145 ||120 |
|Basic and Diluted Earning Per Share (EPS) (Rs.) ||48.34 ||39.98 |
The Company continues to deliver progressive returns to the Shareholders. The Board ofDirectors are pleased to recommend a Dividend of 145% (Rs. 14.50/- per Equity Share) forthe Financial Year 2016-17 (Rs. 12/- per Equity Share in the previous year). The totalamount of Dividend proposed to be distributed aggregates to Rs. 163.13 Million (IncludingDividend Tax). The Dividend payout ratio comes to 36.10%.
A sum of Rs. 54.20 Million has been transferred to the General Reserve of the Company.This reaffirms the inherent financial strength of your Company.
The auto sector which saw a revival last year after two years of turbulence is set tocontinue the momentum this year with demand picking up across all segments. The positivesentiment is driven primarily by the rural and semi-urban demand for two-wheelers andcars driven on the back of good monsoons. Another boost up will be the 7th paycommission that will infuse around Rs. 1.02 trillion of disposable income of over 1 croreemployees. Another reason is the aggressive play by the cab aggregators who are expandingtheir operations extensively.
The Indian Auto Component industry is also expected to grow by 8-10% in Financial Year2017-18 based on higher localisation by Original Equipment Manufacturers (OEM) highercomponent content per vehicle and rising exports from India. The Indian auto-componentsindustry is expected to register a turnover of US$ 100 billion by 2020 backed by strongexports ranging between US$ 80- US$ 100 billion by 2026 from the current US$ 11.2billion.
(Source: Icra reports)
During the year under review the Indian Automobile Industry recorded a productiongrowth of 5.41% as compared to 2.58% of the corresponding period last year. The industryproduced around 25.31 Million vehicles of which share of two wheelers were 79% passengervehicles- 15% three wheelers- 3% and commercial vehicles- 3%.
In this backdrop during the year under review your Company recorded a sales turnoverof Rs. 12997.81 Million as against Rs. 12551.75 Million in the corresponding yearregistering a growth of 3.56%. The Profit for the year after tax recorded at Rs. 451.84Million as compared to Rs. 373.74 Million during the previous year registering anexcellent growth of 20.90%.
CAPACITY EXPANSION / MODERNISATION OF FACILITIES
During the year under review the Company has made investment to the tune of Rs. 654million towards up-gradation of its Research and Development facilities modernisation ofits existing manufacturing facilities including Bawal Dharuhera and Chakan plants.
The Company has set-up its first international state-of-the-art Design centre in Taiwanin May 2016 as a strategic move to expand its presence across the globe and strengthenthe synergies of cost and technology.
During the year under review the Company has also approved investment of about Rs. 120crores to its existing plant at Sanand which was set-up in the year 2011 for supplies toTata Nano and which was non-operational due to subdued volumes of Tata Nano. The plant isexpected to commence operations from November 2017 for supplies to Suzuki Motors Gujaratand will also cater to Tata Motors Limited and Honda Motorcycle and Scooter India Limitedat a later stage. The investment will spread over a period of 2 years i.e. Financial Year2017-18 and Financial Year 2018-19.
A detailed discussion on the business performance and future outlook is provided in theChapter on Management Discussion & Analysis Report (MDA).
TECHNOLOGY AND QUALITY
Your Company continues to excel in Design Development and New Product launches inline with its strategy towards delivering competitive advantage to the customer and tomeet its business objectives. The management ensures that the engineers of your Companyare fully aligned with the organisation's strategy and towards this end the Company hasstarted to celebrate September 15th as Innovation day as a tribute to thegreatest engineer Bharat Ratna Late Shri M. Visvesvaraya. This step will ensure buildingin-house engineering and design capability.
In order to continuously create value for our customers in today's intense competitiveenvironment your Company has launched Zero Defect & Zero Effect initiative to deliverproducts first time right to its customers. This will help in improvement in qualityreduction in rejection cost and thereby optimise cost structures across your Company.
DIRECTORS & KEY MANAGERIAL PERSONNEL
In accordance with the Articles of Association of the Company and the Companies Act2013 Mr. Eiichi Hirooka Director is retiring by rotation at the ensuing Annual GeneralMeeting and being eligible offers himself for re-appointment.
The tenure of Mr. Eiichi Hirooka Senior Executive Director is expiring on July 262017. The Board recommends to reappoint Mr. Eiichi Hirooka as Senior Executive Directorfor a further period of 3 years w.e.f. July 27 2017 subject to the approval of themembers in the ensuing Annual General Meeting.
Stanley Electric Co. Ltd. (Stanley) had withdrawn the nomination of Mr. Norihisa SatoExecutive Director from the Board of the Company. Consequently Mr. Norihisa Sato resignedfrom the Board of the Company w.e.f. 08-08-2016. The Board of Directors places on recordits appreciation for the valuable services rendered by Mr. Norihisa Sato during his tenureas Executive Director.
Stanley nominated Mr. Koji Sawada in place of Mr. Norihisa Sato. Pursuant to hisnomination the Board of Directors have appointed Mr. Koji Sawada as additional Directoras well as Executive Director w.e.f. 09-08-2016 for the time being on the Board of theCompany at their meeting held on August 8 2016 subject to his regular appointment in theAnnual General Meeting.
Mr. Koji Sawada aged 54 years is a Graduate from Osaka Institute of TechnologyJapan having over 30 years of rich experience in Quality Control and Lamp assembly. Hejoined Stanley Japan in 1986 and has abundant experience and knowledge in the automobilelighting field.
In accordance with the Articles of Association of the Company and the Companies Act2013 Mr. Koji Sawada holds office till the ensuing Annual General Meeting. The Companyhas received Notice in respect of Mr. Koji Sawada from a member under Section 160 of theCompanies Act 2013 proposing his appointment as Director of the Company liable to retireby rotation.
Mr. Gursaran Singh Independent Director on the Board of the Company since January2003 has resigned from the position of Independent Director due to his other commitmentsw.e.f. April 19 2017. His resignation was accepted and taken on record by the board inits meeting held on May 13 2017.
The Board places on record its sincere appreciation and gratitude for the valuableguidance received from Mr. Gursaran Singh during his tenure as Independent Directoron the board of your Company.
The Board has appointed Mr. Rajeev Kapoor as an additional director w.e.f. May 132017 designated as an Independent Director for the time being on the Board of theCompany at their meeting held on May 13 2017 subject to his regular appointment in theAnnual General Meeting.
Mr. Rajeev Kapoor aged 65 years is a B.E. (Mechanical) (Hons.) from NIT Kurukshetrahaving extensive experience of over 40 years in Automotive Engineering and FMCGCorporations with specific skills in General Management Marketing / Brand ManagementPerformance Analysis HRD Business Development Innovation and Change Management. He iscredited with Launch of Fiat and Copart Businesses from Greenfield stage and developingthem to sustainable level.
In accordance with the Articles of Association of the Company and the Companies Act2013 Mr. Rajeev Kapoor holds office till the ensuing Annual General Meeting. The Companyhas received a Notice in respect of Mr. Rajeev Kapoor from a member under Section 160 ofthe Companies Act 2013 proposing his appointment as Director of the Company for fiveconsecutive years w.e.f. May 13 2017 not liable to retire by rotation.
Your Directors recommend the re-appointment/ appointment of the above Directors at theensuing Annual General Meeting.
The Independent Directors have given declarations that they meet the criteria ofindependence as laid down under Section 149(6) of the Companies Act 2013.
EXTRACT OF ANNUAL RETURN
In accordance with the requirement of Section 92 of Companies Act 2013 read with Rule12 of the Companies (Management and Administration) Rules 2014 the extract of the annualreturn in Form MGT 9 is annexed as Annexure - A.
INVESTOR EDUCATION AND PROTECTION FUND (IEPF)
Pursuant to the applicable provisions of the Companies Act 2013 read with the IEPFAuthority (Accounting Audit Transfer and Refund) Rules 2016 (the Rules') allunpaid or unclaimed dividends are required to be transferred by the Company to the IEPFestablished by the Central Government after the completion of seven years. Furtheraccording to the Rules the shares in respect of which dividend has not been paid orclaimed by the shareholders for seven consecutive years or more shall also be transferredto the demat account of IEPF authority. Accordingly all such shares shall be transferredas per the requirement of IEPF Rules. The details of such shares is available on theCompany's website http://www. lumaxindustries.com/investor/iepf-investor-details.html.
NUMBER OF BOARD MEETINGS
The Board of Directors met 5 (Five) times in the Financial year 2016-17. The details ofthe board meetings and the attendance of the Directors are provided in the CorporateGovernance Report.
DIRECTORS RESPONSIBILITY STATEMENT
As required under Section 134(5) of the Companies Act 2013 the Directors state:
(i) that in the preparation of the Annual Accounts for the Financial Year ended March31 2017 the applicable Accounting Standards have been followed along with properexplanation relating to material departures in the Auditor Report and Notes to Accounts;
(ii) that the Directors have 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 affairs of the company at the end of thefinancial year and of the Profit and loss of the company for that period;
(iii) that the Directors have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Companies Act 2013for safeguarding the assets of the company and for preventing and detecting fraud andother irregularities;
(iv) that the Directors have prepared the Annual Accounts on a "goingconcern" 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.
The Company follows a policy on remuneration of Directors and Senior ManagementEmployees. The Policy is approved by the Nomination & Remuneration Committee and theBoard. The Remuneration Policy is stated in the Corporate Governance Report.
During the year under review the Company has not accepted any Deposit under Section 73of the Companies Act 2013 read with the Companies (Acceptance of Deposits) Rules 2014.
The members in their meeting held on August 22 2014 had appointed M/s S.R. Batliboi& Co. LLP Chartered Accountants as Statutory Auditors of the Company for a period of3 consecutive years in terms of the provisions of Section 139 of the Companies Act 2013read with the Companies (Audit and Auditors) Rules 2014 to hold the office of auditorstill the conclusion of the fourth consecutive Annual General Meeting of the Company to beheld in the year 2017. The tenure of M/s S.R. Batliboi & Co. LLP CharteredAccountants as Statutory Auditors is expiring in the ensuing Annual General Meetingproposed to be held on July 22 2017.
In terms of the provisions of Section 139 of Companies Act 2013 and the Rules madethereunder regarding mandatory retirement of statutory auditors your Directors proposedto appoint BSR & Associates LLP Chartered Accountants (Firm Registration No. 116231W/W-100024) as the Statutory auditors of the Company. BSR & Associates LLP will holdoffice of auditors for a period of 5 consecutive years from the conclusion of 36thAnnual General Meeting of the Company scheduled to be held on July 22 2017 till theconclusion of the 41st Annual General Meeting of the Company to be held in theyear 2022 subject to the approval of shareholders of the Company. They have given theirconsent to act as Auditors of the Company and have further confirmed that theirappointment if made would be in conformity with the provisions of Section 141 of theCompanies Act 2013. The Audit Committee in its meeting held on May 13 2017 has alsorecommended the appointment of BSR & Associates LLP as Statutory Auditors of theCompany. Your Directors also recommend for appointment in the ensuing Annual GeneralMeeting.
During the year all the recommendations of the Audit Committee were accepted by theBoard. Hence there is no need for disclosure of the same in this Report.
The Board has re-appointed M/s Jitender Navneet & Co. as the Cost Auditors of theCompany in accordance with Section 148 and other applicable provisions if any of theCompanies Act 2013 for the audit of the cost accounts of the Company for the FinancialYear 2016-17. The Cost Audit Report for the Financial Year 2015-16 has been filed with theCentral Government within the stipulated time on September 6 2016.
Pursuant to the provisions of Section 204 of the Companies Act 2013 read with theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 the Companyhas appointed Mr. Maneesh Gupta Practising Company Secretary as the Secretarial Auditorof the Company to undertake the Secretarial Audit for the financial year 2016-17. TheReport of the Secretarial Audit is annexed herewith as Annexure - B.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
The particulars of loans guarantees and investments covered under the provisions ofSection 186 of Companies Act 2013 are given in the Notes to financial statements.
CONSOLIDATED FINANCIAL STATEMENTS
The company has consolidated the Financial Statements of its Associate Company SL LumaxLimited with its financials in accordance with the provisions of Companies Act 2013. TheConsolidated Financial Statements of the Company are prepared in accordance with theAccounting Standards Companies Act 2013 SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 and all other applicable laws for the time being in forceand the same forms part of this Annual Report.
The Audited Financial Statements including the Consolidated Financial Statements andrelated information are available on the website of the Company i.e.www.lumaxindustries.com. These documents shall also be available for inspection by anyshareholder at the registered office of the Company.
RELATED PARTY TRANSACTION AND POLICY
In accordance with the provisions of the Companies Act 2013 and SEBI (ListingObligations And Disclosure Requirements) Regulations 2015 the company has formulated apolicy on Related Party Transactions which is available on the Company's website athttp://www. lumaxindustries.com/pdf/related-party-transaction-policy. pdf. All RelatedParty Transactions which are foreseen and repetitive in nature are placed before theAudit Committee on a yearly basis for obtaining prior omnibus approval of the committee.The transactions entered into pursuant to the omnibus approval are placed before the AuditCommittee for review and approval. All Related Party Transactions are subjected toindependent review by a reputed accounting firm to establish compliance with theprovisions of Companies Act 2013 and Listing Regulations.
All related party transactions entered during the financial year were in the ordinarycourse of business and on arm's length basis. There have been no material related partytransactions undertaken by the Company during the year. Accordingly no transactions arebeing reported in Form No. AOC-2 in terms of Section 134 of the Companies Act 2013.
The Company has established a vigil mechanism named Whistle Blower Policy fordirectors employees and business associates to report to the management concerns aboutunethical behaviour actual or suspected fraud or violation of the Company's code ofconduct or ethics policy in accordance with the provisions of Companies Act 2013 andSEBI (Listing Obligations And Disclosure Requirements) Regulations 2015. The mechanismprovides for adequate safeguards against unfair treatment of whistle blower who wishes toraise a concern and also provides for direct access to the Chairman of the Audit committeein appropriate/ exceptional cases. The Whistle Blower Policy is uploaded on the website ofthe Company.
MATERIAL CHANGES AND COMMITMENTS
No other material changes and commitments affecting the Financial position of theCompany have occurred between April 1 2017 and the date on which this Report has beensigned.
INFORMATION ON CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGSAND OUTGO
Disclosure of information regarding Conservation of Energy Research & DevelopmentTechnology Absorption and Foreign Exchange Earning and Outgo etc. under Section 134(3)(m)of the Companies Act 2013 read with the Companies (Accounts) Rules 2014 is annexedseparately as Annexure C.
RISK MANAGEMENT POLICY
The Company has adopted an enterprise risk management policy and established a riskmanagement framework with an objective of timely identification mitigation and control ofthe risks which may threaten the existence of the Company in accordance with theprovisions of Companies Act 2013 and SEBI (Listing Obligations And DisclosureRequirements) Regulations 2015. The Company has also constituted a Risk ManagementCommittee to review the risk trend exposure potential impact and their mitigation plansand periodically the key risks are also discussed at the Audit Committee.
CORPORATE SOCIAL RESPONSIBILITY (CSR) POLICY AND INITIATIVES
Your Company's Corporate Social Responsibility (CSR) initiative is about achievingorganisation excellence in ways that honor ethical values and respect people andcommunities. The Company's CSR programmes are being implemented through its CSR arm LumaxCharitable Foundation. The key focus areas of your Company are education promotion ofgirl chid and the healthcare for disadvantaged section of the society. During the yearyour Company's spend on CSR activities is 1.80% of the average net Profits during thethree immediately preceding financial years. Your Company endeavoured to meet the budgetedexpenditure in its CSR activities and has committed to incur expenditure for CSRinitiatives however discontinuance of support to one school has resulted into ashortfall as such in the CSR expenditure as compared to the stipulated 2% of the averagenet Profits of the last three financial years. The Company is committed to spend 2% of theaverage net Profits of the last three financial years on CSR activities and it shallensure compliance of the same going forward.
The Company has constituted a CSR Committee of the Board and also developed &implemented a CSR Policy in accordance with the provisions of Companies Act 2013. TheCommittee monitors and oversees various CSR initiatives and activities of the Company. Thedetails of CSR Policy is available on the Company's websitehttp://www.lumaxindustries.com/pdf/CSR-policy.pdf. The annual report on Corporate SocialResponsibility activities is annexed herewith as Annexure-D.
PERFORMANCE EVALUATION OF BOARD COMMITTEE AND DIRECTORS
During the year the evaluation of the Board as a whole committees and all theDirectors conducted as per the internally designed evaluation process approved by theBoard. The evaluation tested key areas of the Board's work including strategy businessperformance risk and governance processes. The evaluation considers the balance ofskills experience independence and knowledge of the management and the Board itsoverall diversity and analysis of the Board and its Directors' functioning. The feedbackof the evaluation exercise was collated and presented to the Board.
MANAGEMENT DISCUSSION & ANALYSIS REPORT
Pursuant to the provisions of Regulation 34 of the SEBI (Listing Obligations AndDisclosure Requirements) Regulations 2015 Management Discussion & Analysis Report isannexed as part of this report separately as Annexure E.
SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS OR COURTS
There are no significant and material orders passed by the Regulators / Courts /Tribunals which would impact the going concern status of the Company and its futureoperations.
INTERNAL FINANCIAL CONTROL
The Company has a comprehensive internal control system in place for ensuringreliability of financial reporting orderly and efficient conduct of business compliancewith policies procedures safeguarding of assets and economical and efficient use ofresources. Appropriate review and control mechanisms are built in place to ensure thatsuch control systems are adequate and operate effectively.
The monitoring and reporting of finance systems is supported by a web-based system SAPwhich helps in obtaining accurate and complete accounting records and timely preparationof reliable financial disclosures.
The report on Corporate Governance together with the Auditor's Certificate regardingthe Compliance of conditions of Corporate Governance as stipulated in SEBI (ListingObligations And Disclosure Requirements) Regulations 2015 is annexed and forms part ofthis Annual Report as Annexure F.
PARTICULARS OF EMPLOYEES
Information on Particulars of Employees as required under Section 197 of the CompaniesAct 2013 read with Rule 5(1) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 forms an integral part of this report as Annexure-G. Theinformation required pursuant to Section 197 of the Companies Act 2013 read with Rules5(2) and 5(3) of the Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 in respect of employees of your Company is available for inspection by themembers at the registered office of the Company during business hours on working days upto the date of ensuing Annual General Meeting. If any member is interested in obtaining acopy thereof such member may write to the Company Secretary whereupon a copy would besent.
It is our belief that we have a leadership team with the right experience and skills totake us into the next decade of growth. We continue to build our skills and addappropriate resources which will help the company deliver solid results in the years tocome. We want to recognize employees at all levels for their efforts which has allowed usto successfully navigate a tough economy and continue to achieve growth. Your Directorswish to place on record their sincere thanks to all its highly valued customers itsTechnical and Financial Collaborator- M/s Stanley Electric Co. Ltd. Japan all otherbusiness partners all the shareholders financial institutions banks vendors andvarious Government agencies for their continued support and patronage.
| ||For and on behalf of the Board of Directors |
| ||D.K. Jain |
|Place : Gurugram ||Chairman |
|Dated : May 13 2017 ||DIN: 00085848 |