Your Directors are pleased to present the Thirty Fifth Annual Report along with theAudited Accounts for the financial year ended 31st March 2017:
|PERFORMANCE || |
(Rs. in Lakhs)
|FINANCIAL RESULTS ||2016-17 ||2015-16 |
|Total Revenue ||57910.44 ||56278.61 |
|PBIDT ||6857.87 ||6601.43 |
|Profit Before Tax (PBT) ||4900.34 ||4619.23 |
|Less: Provision for Tax ||1501.95 ||1432.30 |
|Profit After Tax (PAT) ||3398.39 ||3186.93 |
|Add: Profit brought forwarded from previous years ||4494.59 ||4145.36 |
|Profit Available for Appropriation ||7892.98 ||7332.29 |
|Less: Appropriations || || |
|Interim Dividend on Equity Shares ||- ||348.00 |
|Distribution Tax on Interim Dividend ||- ||70.85 |
|Final Dividend on Equity Shares ||783.01 ||348.00 |
|Distribution Tax on Final Dividend ||159.40 ||70.85 |
|General Reserve ||2000.00 ||2000.00 |
|Surplus Carried to Balance Sheet ||4950.57 ||4494.59 |
Your Directors recommend a final dividend of 45% (' 0.90 per share) for the financialyear 2016-17. Payment of dividend is subject to the approval of shareholders at theensuing Annual General Meeting.
During the year the Company recorded Net Sales of ' 574.56 crores as against ' 560.70crores in 2015-16 an increase of about 2.47%. Profit After Tax made during the year is '33.98 crores compared with ' 31.87 crores in 2015-16 an increase of about 6.62% comparedwith previous year. The production during the year was 73088 MT compared to the previousyear's 73592 MT.
During the year the sales of the Company has increased marginally due to moderateimprovement in Medium and Heavy Commercial Vehicle Industry. However there was nosignificant increase in total sales due to slow down in the Tractor Industry during secondhalf of the year.
Indian automotive industry has registered a moderate growth in the last few years andshowing signs of revival in the coming years. OEMs are launching new models withadditional functionalities and features to attract customers. Long term outlook remainspositive for the automotive industry with all major global players having base in Indiafor manufacturing global sourcing as well as engineering. Regular product launchesplanned by OEMs will keep customer excitement levels and create demand and is favourablefor overall industry growth. India is now a supplier of a range of high value and criticalautomobile components to global auto market.
CONSOLIDATED FINANCIAL STATEMENTS
The Company has prepared Consolidated Financial Statements of Nelcast Limited and itssubsidiary NC Energy Limited as at 31st March 2017 in accordance withAccounting Standard 21 on "Consolidated Financial Statements" issued by theInstitute of Chartered Accountants of India. As required by the Listing Regulations theaudited Consolidated Financial Statements are circulated with the Annual Report.
SUBSIDIARIES ASSOCIATES AND JOINT VENTURES
In terms of Section 129(3) of the Companies Act 2013 read with rule 5 of the Companies(Accounts) Rules 2014 the salient features of the financial statements of subsidiarycompany is set out in the prescribed form AOC-1 which is annexed with this report asAnnexure-B. The Company will make available the audited annual accounts and relatedinformation of its subsidiary upon request by any of its shareholders. The annualaccounts of the subsidiary company will also be kept for inspection by any member at theRegistered Office of the Company and its subsidiary company. The consolidated financialstatements presented by the Company which form part of this annual report includefinancial results of its subsidiary company.
QUALITY AND CUSTOMER SATISFACTION
The Company adheres to the TS 16949 norms and continuously strives to achieve worldclass quality by strictly adhering to the quality standards. The Company has been awardedISO 14001 & 18001 for Environmental Management Systems.
The Company has been receiving continuous support from its OEM customers like TataMotors Ashok Leyland TAFE Eicher Tractors (TMTL) Mahindra & Mahindra Volvo-EicherCommercial Vehicles SAME Tractors Escorts Tractors Daimler India Caterpillar etc.from Tier I customers like Automotive Axles American Axles Dana Rane Madras Rane-TRWZF India Simpson & Co. etc. and export customers like Meritor American AxlesDaimler Dana Comer ZF Industries etc. The Company is closely working with allcustomers in terms of new product development improvement in quality and deliveryperformance etc. to meet their expectations.
The Company has not accepted any public deposits during the year and as such no amounton account of principal or interest on deposits from public was outstanding as at 31stMarch 2017.
DIRECTORS AND KEY MANAGERIAL PERSONNEL
Mr. P. Vijaya Bhaskar Reddy Director is due to retire by rotation and being eligibleoffers himself for re-appointment. He was reappointed as Deputy Managing Director by theboard of directors at their meeting held on 13th February 2017 for a furtherperiod of five years subject to your approval.
Mr. P. Deepak Managing Director Mr. P. Vijaya Bhaskar Reddy Dy. Managing Director& CFO and Mr. S.K. Sivakumar Head - Group Finance & Company Secretary hold theoffice of Key Managerial Personnel.
Declaration of Independent Directors
The Independent Directors have fulfilled the criteria of Independence as defined underSection 149(6) of the Companies Act 2013 and requisite declarations in terms of Section149(7) of the Act have been received.
COMPANY'S POLICY RELATING TO DIRECTORS APPOINTMENT PAYMENT OF REMUNERATION ANDDISCHARGE OF THEIR DUTIES
The provisions of Section 178(1) relating to constitution of Nomination andRemuneration Committee are applicable to the Company and hence the Company has devised apolicy relating to appointment of Directors payment of managerial remuneration Directorsqualifications positive attributes independence of Directors and other related mattersas provided under Section 178(3) of the Companies Act 2013. The said policy is posted inthe website of the Company.
DIRECTORS' RESPONSIBILITY STATEMENT
Your Directors hereby make the following statement in terms of Section 134(3)(c) and134(5) of the Companies Act 2013 with respect to Directors' Responsibility.
We confirm that:
a) in preparation of the annual accounts the applicable accounting standards had beenfollowed along with proper explanations relating to material departures;
b) the Directors had selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year ended 31stMarch 2017 and of the profit of the Company for that period;
c) the Directors had 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 and otherirregularities;
d) the Directors had prepared the annual accounts on a going concern basis;
e) the Directors had laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingeffectively;
f) the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.
The Company has been pro-active in following the principles and practices of goodCorporate Governance. The Company has taken adequate steps to ensure that the conditionsof Corporate Governance as stipulated in the Listing Regulations are complied withinletter and spirit. A certificate issued by the auditors of the Company regardingcompliance of conditions of Corporate Governance is also annexed. The matters relating toCorporate Governance as per the Listing Regulations are attached to this report. Amanagement discussion and analysis report as required by the Listing Regulations is alsoannexed which forms part of this report.
RELATED PARTY TRANSACTIONS
All transactions entered by the Company with related parties were in the ordinarycourse of the business and at Arm's Length basis. There are no materially significantrelated party transactions made by the Company with Promoters Key Managerial Personnel orother designated persons which may have potential conflict with interest of the Company atlarge. The details of the transactions with related parties are given in the financialstatements. The Related Party Transaction Policy is posted in the website of the Company.
During the year four meetings of the Board of Directors were held. The details of themeetings are furnished in the Corporate Governance Report which is attached to thisreport.
VIGIL MECHANISM/ WHISTLE BLOWER POLICY
The Company has adopted a Whistle Blower Policy to provide a formal mechanism to theDirectors and Employees to report their concerns about unethical behavior actual orsuspected fraud or violation of the Company's Code of Conduct or ethics policy. The Policyprovides for adequate safeguards against victimization of employees who avail of themechanism and also provides for direct access to the Chairman of the Audit Committee. Itis affirmed that no personnel of the Company has been denied access to the AuditCommittee.
The Company has adopted a Remuneration Policy for the Directors Key ManagerialPersonnel and other employees pursuant to the provisions of the Act and as per theListing Regulations. The Company affirms remuneration is as per the remuneration policy ofthe Company. The said policy is posted in the website of the Company.
PARTICULARS OF EMPLOYEES RELATED DISCLOSURES
The information required pursuant to Section 197 read with rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect of employeesof the Company will be provided upon request. In terms of Section 136 of the Act thereports and accounts are being sent to the members and others entitled thereto excludingthe information on employees' particulars which is available for inspection by the membersat the Registered office of the company during business hours on working days of thecompany up to the date of ensuing Annual General Meeting.
Disclosures pertaining to remuneration and other details as required under Section 197of the Companies Act 2013 read with Rule 5 of the Companies (Appointment and Remunerationof Managerial Personnel) Rules 2014 are provided in the Annexure forming part of theAnnual Report.
Having regard to the provisions of Section 136(1) read with its relevant provision ofthe Companies Act 2013 the Annual Report excluding the aforesaid information is beingsent to the members of the Company. The said information is available for inspection atthe Registered Office of the Company during working hours and any member interested inobtaining such information may write to the Company Secretary and the same will befurnished without any fee and free of cost.
The Company's auditors M/s. Reddy A V & Co Chartered Accountants (FirmRegistration No. 003256S) have already completed more than ten years as Statutory Auditorsof the Company. In view of the mandatory requirement of rotation of auditor under Section139 of the Companies Act 2013 and the Companies (Audit and Auditors) Rules 2014 it isproposed to appoint M/s. K. Nagaraju & Associates Chartered Accountants (FirmRegistration No.002270S) as Statutory Auditors of the Company from conclusion of thisAnnual General Meeting till the conclusion of the 40th Annual General Meeting.The Company has received a letter from M/s. K. Nagaraju & Associates CharteredAccountants stating that their appointment as Statutory Auditors if made would be inaccordance with Section 139 read with Section 141 of the Companies Act 2013.
The Company has appointed M/s. L.D. Reddy & Co. Practicing Company Secretaries toconduct Secretarial Audit for the year 2016-17. The Secretarial Audit Report for thefinancial year ended 31st March 2017 is annexed with this report in Annexure-D.
As per Section 148 and other applicable provisions if any of the Companies Act 2013read with Companies (Audit & Auditors) Rules 2014 the Board of Directors of yourCompany has appointed M/s. Jayaram & Associates Cost Accountants as the Cost Auditorsof the Company for the year 2017-18 on the recommendations made by the Audit Committee.
INTERNAL CONTROL SYSTEMS AND THEIR ADEQUACY
The details are provided in the Management Discussion and Analysis Report attached tothis report.
The Internal Auditors reviews the efficiency and effectiveness of the systems andprocedures. The Audit Committee approves and reviews the internal audit plan for the year.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in form MGT-9 is annexedwith this report in Annexure-E.
The employee relations have remained cordial throughout the year and industrial harmonywas maintained. Measures for the safety training and development of the employeescontinued to receive top priority. The Directors wish to place on record theirappreciation of the valuable contribution made by the employees of the Company at alllevels towards the performance and growth of the Company.
RISK MANAGEMENT POLICY
The Company has an adequate Risk Management Policy commensurate with its size andoperations. Risk Management is an essential element in achieving business goals andderiving benefits from market opportunities. The Risk Management includes identifyingtypes of risks and its assessment risk handling monitoring and reporting.
PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS MADE UNDER SECTION 186 OF THE COMPANIESACT 2013
The Company has not given any loans or guarantees covered under the provisions ofSection 186 of the Companies Act 2013. The details of the investments made by Company aregiven in the financial statements.
CORPORATE SOCIAL RESPONSIBILITIES (CSR)
The CSR Policy of the Company and details about the initiatives taken by the Company onCSR during the year as per the Companies (Corporate Social Responsibility Policy) Rules2014 have been disclosed as part of this report in Annexure-C. Further details ofcomposition of the Corporate Social Responsibility Committee and other details areprovided in the Corporate Governance Report which forms part of this report.
Pursuant to the provisions of the Companies Act 2013 and under regulation 25 of theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Board hascarried out an evaluation of its own performance performance of the Directors as well asthe evaluation of the working of its Committees.
The Nomination and Remuneration Committee has defined the evaluation criteriaprocedure and time schedule for the Performance Evaluation process for the Board itsCommittees and Directors.
Directors were evaluated on aspects such as attendance and contribution at Board/Committee Meetings and guidance/ support to the management outside Board/ CommitteeMeetings.
Areas on which the Committees of the Board were assessed included degree of fulfillmentof key responsibilities adequacy of Committee composition and effectiveness of meetings.
The performance evaluation of the Independent Directors was carried out by the entireBoard excluding the Director being evaluated. The performance evaluation of NonIndependent Directors was carried out by the Independent Directors who also reviewed theperformance of the Board as a whole. The Nomination and Remuneration Committee alsoreviewed the performance of the Board its Committees and of the Directors.
CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION RESEARCH AND DEVELOPMENT FOREIGNEXCHANGE EARNINGS AND OUTGO
The information pertaining to conservation of energy technology absorption researchand development foreign exchange earnings and outgo as required under Section 134(3)(m)of the Companies Act 2013 read with Rule 8(3) of The Companies (Accounts) Rules 2014 isgiven in the Annexure-A forming part of this Report.
The Directors place on record their sincere appreciation for the dedicated efforts ofthe employees and cooperation of associates suppliers and customers. We also express oursincere thanks to Company's Bankers namely State Bank of India Standard Chartered BankThe Hongkong and Shanghai Banking Corporation Ltd. Kotak Mahindra Bank Ltd. and HDFC BankLtd. for their trust and continued support.
| ||For and on behalf of the Board |
|Place: Chennai ||D. Sesha Reddy |
|Date : 24th May 2017 ||Chairman |
[Pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3) of theCompanies (Accounts) Rules 2014]
|A. CONSERVATION OF ENERGY: || |
|(a) Energy conservation measures undertaken ||The Company continues its efforts to improve energy conservation based on recommendations arising out of the Energy Audit |
|(b) Additional investments and proposals if any being implemented for the reduction of consumption of energy ||Investment is being made to improve Power Factor |
|(c) Impact of measures at (a) and (b) above for the reduction of energy consumption and consequent impact on the cost ||Energy Savings |
|(d) Total energy consumption and energy consumption per unit of production as per Form A of the Annexure in respect of industries specified in the Schedule ||Not Applicable |
B. TECHNOLOGICAL ABSORPTION:
Research & Development (R & D)
1. Specific areas in which R & D is carried out by the Company:
The Company has been continuously putting effort to develop new products for newapplications to Commercial Vehicle & Tractor segments. The Company is committed tointroducing new products and improving existing products to have better performancelevels. During the year the Company has developed several new products for Heavy TruckArmy Construction & Mining Applications. The Company is doing many researchactivities in the areas of component weight reduction core cost reduction core weightreduction process design process improvement etc.
2. Benefits derived as a result of R & D:
(a) Market expansion and improved competitive position through significantly improvedproducts for new markets.
(b) New opportunities in global markets by introducing new range of products.
(c) Improved competency for designing process & products for global customers.
(d) Acquiring competency in new areas like Machined Castings & sub-assemblies.
(e) Reduced product development lead time and improved product quality due toadvancement of simulation capabilities.
(f) Improved surface finish of the products helped to obtain new business opportunitieswith global customers.
(g) Upgradation of technical skill of employees for higher productivity & moreconsistent quality.
3. Future plan of action:
(i) Development of optimized methods of melting metal to reduce energy consumption.
(ii) Expanding market for automotive applications & conversion of components fromother processes & materials to Iron Castings.
(iii) New materials development for innovative next generation products likeAustempered Ductile Iron applications.
(iv) Development of new production processes to create competitive advantage on certainrange of components. Continued expansion of product range to serve the local and globalmarket needs.
(v) Development of new surface coating processes for Iron castings.
(vi) To co-develop components closely with our customers to improve product performance& manufacturability.
|4. Expenditure on R & D: ||Rs. in Lakhs |
|Capital expenditure : ||56.63 |
|Revenue expenditure : ||704.79 |
|Total : ||761.42 |
|Total expenditure as percentage of net sales : ||1.33% |
|C. FOREIGN EXCHANGE EARNING AND OUTGO: || |
|a) Activities relating to export initiatives : taken to increase development of new export markets ||Ongoing marketing campaign in the USA and Europe is expected to yield results in the coming years. |
|b) Total Foreign Exchange Used : ||' 353.35 Lakhs |
|Total Foreign Exchange Earned : ||' 3696.22 Lakhs |
| ||For and on behalf of the Board |
|Place : Chennai ||D. Sesha Reddy |
|Date : 24th May 2017 ||Chairman |