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NRB Bearings Ltd.

BSE: 530367 Sector: Engineering
NSE: NRBBEARING ISIN Code: INE349A01021
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OPEN 118.90
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VOLUME 3324
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P/E 23.14
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OPEN 118.90
CLOSE 115.95
VOLUME 3324
52-Week high 157.45
52-Week low 103.00
P/E 23.14
Mkt Cap.(Rs cr) 1,148
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

NRB Bearings Ltd. (NRBBEARING) - Director Report

Company director report

To

The Members

NRB BEARINGS LIMITED

Mumbai

Your Directors have pleasure in presenting their Fifty First Annual Report togetherwith Audited Accounts for the year ended 31st March 2016.

1. Financial Results

Consolidated

Standalone

Year ended 31.03.2016 31.03.2015 31.03.2016 31.03.2015
Rs.lacs Rs.lacs Rs.lacs Rs.lacs
Revenue from operations (Net) 67493.69 67030.87 65919.68 65559.03
Profit before tax 6389.29 7802.80 6381.53 7418.94
Provision for taxation
Current (net) 2124.65 2446.10 1849.16 2239.34
In respect of earlier years (25.26) 17.11 (25.26) 17.11
Deferred tax (28.06) (30.55) (40.67) (43.97)
Profit after taxation 4199.78 5323.09 4598.30 5206.46
Add: Balance brought forward 12303.39 8880.38 14826.90 11323.31
16503.17 14203.47 19425.20 16529.77
Appropriation:
Dividend 1429.15 1453.84 1356.92 1453.84
Tax on distributed profits 290.94 249.03 276.24 249.03
Tax on preference dividend 17.94 47.21
General Reserve -- -- -- --
Debenture Redemption Reserve 750.00 -- 750.00 --
Capital Redemption Reserve 25.00 150.00 -- --
Profit & Loss Account 13990.14 12303.39 17042.04 14826.90
16503.17 14203.47 19425.20 16529.77

2. Appropriation

Dividend

On 10th March 2016 Directors have declared interim dividend of Rs. 1.40/-per equityshare of Rs. 2/- (Rs. 1.50 per share for previous year) payable to members/beneficialowners as per the Register of Members as applicable aggregating Rs. 1356.92 lacs. TheDirectors have not recommended any final dividend and decided that the interim dividend betreated as final.

3. Operations/Outlook

Global growth in 2015 has fallen short of expectations - this is reflected in growthdeceleration in emerging and developing economies lows in commodity prices and subduedglobal trade which has hurt Indian exports.

Indian economic performance has been impacted by a weak monsoon slowdown in exportsdelayed reform initiatives which has resulted in the investment cycle not gaining strengthand a banking system weighed down by poor recovery of loans and low business confidence.Economic growth remains subdued with industrial production remaining lackluster. Theoverall volatility has had a negative influence on consumer sentiment and demand. Whilethere has been growth in the high value 4-wheeler segments of passenger cars driven bynew model launches and of medium/ heavy commercial vehicles mainly on account ofreplacement of aging fleets and pick up in infrastructure demand there has been minimalgrowth in 2/3 wheelers with low farm output impacting rural demand and de-growth in thefarm equipment/off highway segment owing to the weak monsoon and floods in some parts ofthe country. Your Company aggressively pushed sales in the domestic market andsuccessfully increased overall sales in spite of the decline in export sales to achieveits highest ever sales turnover of Rs. 65920 lacs (previous year Rs. 65559 lacs) -domestic sales up by 5% to Rs. 52435 Lacs (previous year Rs. 49748 lacs) and exports ofRs. 13484 lacs (previous year Rs. 15811 lacs). Profit after tax has declined to Rs. 4598lacs (previous year Rs. 5206 lacs) with higher material consumption employee costs andhigher charge on depreciation.

The Government and the Indian Automotive industry need to work together to address allthe key issues to take India to its rightful position in the global auto industry'ssweepstakes. India is now counted as a major auto manufacturing hub and has emerged as oneof the most preferred locations in the world for manufacturing high quality automotivecomponents and vehicles of all kinds. Over the next decade the automotive industry atglobal levels is likely to see significant transformation - shift of growth in demand fromdeveloped nations to developing nations (mainly BRICS) dramatic increase in the share ofelectronics in automobiles making them "computer on wheels'' relentless pursuit ofeconomies of scale and in scope of design and engineering of automobiles and componentswhile also pursuing low cost manufacturing destinations.

There is still optimism that economic activity will accelerate - inflation downtrendnarrowing fiscal and current deficits falling interest rates GDP growth pick up to 6.5%forex reserves improving with strong FII/FDI flows food and fuel inflation down. Slowdownin China adds to Inida's comparative charm and value proposition. Domestic consumptionremains a key growth engine for the Indian economy and with significant additions to theworking age population rising disposable incomes particularly in rural areas and thegovernment revived spending on infrastructure and in the social sector to foster inclusivegrowth will help India realize its long term development potential in a sustainable way.Your Company with a clear and dedicated customer focus is investing in and building itsR&D capabilities developing product lines with better profit margins and streamliningits production processes to eliminate waste from operations.

4. Finance

The company has been rated by Crisil A1+ for short term and AA- (stable) for long termborrowings.

The Company continues to focus on judicious management of its working capital.Receivables inventories and other working capital parameters are continuously monitored.

a. Public Deposits

The Company has not taken fixed deposits during the year. There are no unclaimeddeposits.

b. Non convertible debentures

During the year the non convertible debentures aggregating Rs. 30 crores as a firsttranche were issued on private placement basis in August 2015. The funds raised have beenutilized for converting short term loans into long term.

c. Particulars loans guarantees or investments

During the year under review the company has not advanced any fresh loans or givenguarantees or made investments other than NRB Thailand Ltd's trade receivables andadvances aggregating Rs. 1806 lacs converted into inter corporate deposit.

Details of loans guarantees and investments covered under the provisions of section186 of the Companies Act 2013 are given in the notes to the financial statements.

5. Directors

The Board of Directors has on the recommendation of the Nomination & RemunerationCommittee appointed Mr. Ashank D Desai as Additional Director of the Company in thecategory of independent Directors w.e.f. 30th March 2016 to fill the vacancy caused bythe resignation of Mr. S B (Ravi) Pandit on account of work pressures. In the case of Mr.Ashank D Desai the notice for the forthcoming Annual General Meeting (AGM) includes hisappointment as independent Director under the Companies Act 2013 for a period of fiveyears w.e.f. 30th March 2016.

All independent Directors have given declarations that they meet the criteria ofindependence as laid down under section 149(6) of the Companies Act 2013 and theprovisions of the Listing Agreement.

Mr. D.S Sahney retires by rotation pursuant to Article 111 of the Articles ofAssociation and is eligible for reappointment.

The Board decided that considering the age of Mr. T S Sahney (Executive Chairman) onthe expiry of his term on 30th September 2016 Mr. T S Sahney will give up his Executiveposition and operational role in favour of the present Managing Director and President Ms.H S Zaveri who will be re-designated as Vice Chairman & Managing Director withimmediate effect. The Board felt this would send positive signal to all stakeholdersemployees and the market participants about the succession planning in the company. TheBoard considering his stature and recognizing Mr. Sahney's wide experience and knowledgewhich is of immense benefit to the company confirmed he will continue as Chairman of theBoard in Non Executive capacity w.e.f. 1st October 2016.

Familiarisation Programme for Independent Directors

In order to familiarize the Independent Directors with the business the Company makesa presentation covering nature and scope of business nature of industry in which Companyoperates profitability and future scope. Regularly at meetings updates are given to theBoard.

Board evaluation

The Board has carried out an annual performance evaluation of its own performance andthe Directors individually. The manner in which the evaluation has been carried out hasbeen explained in the Corporate Governance Report.

The independent Directors have also met separately in March 2016.

Remuneration policy

The Board has on the recommendation of the Nomination & Remuneration Committeeframed a policy for selection and appointment of Directors senior management and theirremuneration. The remuneration policy is posted on the company websitewww.nrbbearings.com. Details of remuneration paid to Executive Directors and KMP and theindependent Directors form part of the Corporate Governance Report attached to thisReport.

Meetings

During the year 5 Board meetings and 6 Audit committee meetings were convened and held(details in Corporate Governance Report). The intervening gap between the meetings wasless than four months. The date for the next meeting is fixed in advance at the previousmeeting both for board and committee meetings.

6. Subsidiaries

As of 31st March 2016 the Company has three subsidiaries viz. SNL Bearings Ltd NRBBearings (Thailand) Ltd and NRB Bearings Europe GmbH. The consolidated results include theworking of these subsidiaries.

SNL Bearings Ltd (SNL) in which your Company holds 73.45% equity has reported PAT ofRs. 567.76 lacs (previous year Rs. 454.96 lacs). Though manufacturing and industrialactivity remained sluggish and demand subdued across most sectors SNL achieved salesgrowth of 13.5% from increased sales volumes from existing and new OEM customers. Profitbefore tax (PBT) has increased by 26.3% from Rs. 673.47 lakhs (Previous year) to Rs.850.83 lakhs on account of improved cost competitiveness arising from the global declinein prices of crude and steel inputs. SNL expects to further capitalize on growthopportunities during the current year and enhance profitability with emphasis on improvingquality and productivity.

NRB Bearings (Thailand) Ltd (NRBT) a wholly owned subsidiary has increased its salesby 20% to THB 136.52 million (Rs. 25.53 crores)(previous year THB 113.57 mill - Rs. 21.8crores) The share of manufacturing revenues out of total revenues has increased to 70% atTHB 95.56 million (Rs. 17.8 crores) (previous year 51% at THB 58.3 million) and tradingrevenues are 30% at THB 40.96 million (Rs. 7.65 crores) (previous year 49% at THB 55.3million). Consequently the Company's EBITDA has grown from THB 1.45 million to THB 13.39million (Rs. 2.5 crores). The loss for the year has been higher at THB 21.35 million (Rs.3.99 crores) mainly due to interest of THB 9.35 million payable to NRB India for its loan(NRBT receivables converted to term loan with respective Central Bank approvals). Newbusiness is being finalized with global European and Japanese customers and manufacture ofnew products as well as enhanced production of needle rollers planned during FY 2016-17will help in improving the financial results during the coming years.

NRB Bearings Europe GmbH a wholly owned subsidiary was set up to support increasingexports to Europe. The Company provides marketing and customer support services. Theincome during the year is EURO 430000 (Rs. 3.25 crores) and the resultant profit aftertax is EURO 12280 (Rs. 9 lacs).

Pursuant to section 129 (3) read with rule 5 of Companies (Accounts) Rules 2014details of financial statements of subsidiary companies has been given in Annexure 1(AOC1) forming part of this statement.

7. Conservation of energy technology absorption foreign exchange earnings and outgo

Information pursuant to Section 134(3)(m) of the Companies Act 2013 and Rule no. 8 ofCompanies (Accounts) Rules 2014 has been given in the Annexure 2 forming part of thisreport.

8. Industrial Relations/Vigil Mechanism and Whistle Blower Policy

During the year the Company maintained cordial relations with the workmen's unions atall plants. Wage agreements relating to Chikalthana and Hyderabad plants have expired on31.5.15 and 30.9.15 respectively. Settlement was signed with the union at Hyderabad plantin conciliation with joint Commissioner of Labour on 27.4.16. The wage increase has beenlinked with productivity improvements (18.5%) with a penalty for non achievement ofquality and productivity as agreed. The new agreement is effective for three years w.e.f.01.04.16 and the total financial impact for FY 2016-17 is estimated at Rs. 1.2 crores.

At Chikalthana workers have demanded a high increase and discussions are ongoing foran early settlement again linked with productivity improvements.

Our people approach is reflected in the team work and the implementation of the numberof initiatives involving employees and their families to share and promote organizationalvalues. Regular training programmes are conducted for imparting understanding of bearingand engineering principles modern manufacturing practices and in attitudinal andbehavioural aspects.

The Company has a Vigil Mechanism and Whistle Blower Policy. Details of the same givenin Annexure 3 forming part of this report are posted on the website of the Company.

9. Safety Health and Environment

The Company is committed to establish and maintain safe working environment thatpromotes good health and high performance of the employees and simultaneously takesmeasures to protect the environment. We also ensure that safety behavior is welldemonstrated by our employees while working on the shop floor by using personal protectiveequipments as required.

Company has been accredited with internationally acclaimed certification viz.ISO14001:2004 to identify and control environmental impact and constantly improve theenvironmental performance; OHSAS: 18001:2007 occupational health and safety managementsystems; and ISO/TS: 16949:2009 for Quality Management Systems.

The commitment towards the environment preservation extends beyond regulatorycompliances as per MPCB norms and ambient air and noise levels waste monitoring throughETP/STP treatment is being done. Initiatives are taken across the Company to conservenatural resources reduction & recycling of wastes; and adherence to emission norms.

There have been numerous initiatives by NRB towards safety and environment awarenessamong employees:

1. Awareness on environment preservation and protection through regular monitoring ofenvironment parameters and employees engagement activities like tree plantation anddrawing competitions.

2. "Safety first and always first" is the highest priority of the Company.The Safety policy inter alia ensures safety of public employees plant equipment andbusiness associates ensuring compliance with all statutory rules and regulations as anon-going process.

Special initiatives have been taken up such as mock drills up-gradation of Fireprotection systems safety training to employees reporting of near-miss incidents andfirst aid awareness. We strive to achieve "Zero-Accident Tolerance".

3. Setting up of Solar Lights and LED lights to replace existing CFLs in factorypremises and air ventilators on factory roof to save electricity improve air quality andprotect usage of natural resources.

4. Significant reductions have been achieved across all locations in minimizing therequirement of electricity use of less petrochemicals grease turpentine etc.Turpentine has been replaced with stansol to prevent vapour spreading for improved healthof employees.

5. Water conservation through re-use of waste water and rain water harvesting at plants- capacity to harvest upto 50 lac ltrs rain water every year to increase ground waterlevels.

6. Vermiculture for making Vermicompost as nutrient-rich organic fertilizer and soilconditioner

7. Strict policy for non-consumption of tobacco and intoxicating materials to protectthe mental and physical health of employees. Regular awareness programs like "VyasanMukti" & "Yoga Classes" conducted to educate employees to get rid ofevils of intoxication and stressful work life; and embrace good health and work-lifebalance.

10. Corporate social responsibility

NRB has always believed in and worked towards "inclusive growth'- improving thequality of life of the people we touch and in the communities where we operate.

During the year your Company has encouraged and supported young engineers and buddingtechnology/automotive enthusiasts through the following sponsorships:

1 IIT Bombay Racing team launched "Car EVO -4" with technical support fromNRB on 16.5.2015 and participated in global racing competition held at Silverstone UK.NRB is the title sponsor for the official website of the IIT Bombay racing team. Anamount of Rs. 18 lacs has been committed for this project of which Rs. 6 lacs was paidduring the year and the balance will be paid during the current financial year.

2 On a regular basis we conduct Blood Donation camps across locations to help thesociety to donate blood in case of any emergency.

3 NRB Hyderabad & Chikalthana plants have taken a special step by starting a"Summer Water Camp" to help the needy and poor people to provide water in thescorching heat.

4 NRB believes in "Go Green" policy. NRB takes initiatives in planting treesand plants in and around the NRB factories.

In line with the activities specified in schedule VII relating to the provisions ofsections 135 of the Companies Act 2013 NRB has decided to focus on :

Promotion of education

Promoting gender equality and empowering woman Employment enhancing vocational skills

Ensuring environmental sustainability ecological balance protection of flora andfauna animal welfare conservation of natural resources

In terms of the above the Company has been contributing for primary educationsecondary education (study of sciences maths and engineering) and to engineeringcolleges. The company also has an appropriate proportion for smaller NGOs and naturaldisasters and calamities (during the year the company contributed towards flood relief inChennai through NGO "Teach to Lead'') and supports social causes and impactfulprojects.

Company has supported a Pune based NGO - Gyan Prakash Foundation (GPF). GPF which isfocused on improving learning outcomes in Maharashtra and transforming the quality ofeducation by substantially improving last mile connectivity to village schools andreducing school drop out rates. During FY 2015-18 GPF will focus on curriculumdevelopment finalising content for interventions and developing effective trainingmodules in the Pune district.

The Company has contributed to the Ashoka University which is devoted to transformingindian higher education based on the principles of multidisciplinary education deliveredby exceptional faculty members and providing ivy-league quality education at an affordableprice. The liberal education helps develop intellect nurture critical thinking andprovides specialisation with a broader foundation of knowledge.

The Company supported Aseema an NGO who partners with Mumbai Municipal Corporation toimprove the quality of education in municipal schools in Mumbai by making the curriculumtaught in a way that makes it meaningful and fun and encourages expression and creativityin the children. At Igatpuri Aseema's centre provides holistic learning to tribalchildren between 2 yrs and 17 yrs of age and also provides vocational training to helpthem join mainstream society.

The company supported social causes like Indian Cancer Society and the Rotary Club ofMumbai to support their project in partnership with International Woman's Association(IWA) to provide free maternal and child care at its clinic in South Mumbai whichprovides primary care and medicines at highly subsidised rates to the poorest of citizens.

The average of the last 3 years profits works out to Rs. 6131.68 lacs and @ 2% theamount to be spent by the Company on CSR activities works out to Rs. 122.6 lacs during FY2015-16. The Company has actually spent Rs. 123 lacs during FY 2015-16 on the identifiedactivities. The requisite format for such expenditure has been enclosed as Annexure 4 tothe Directors' Report.

11. Corporate governance

Pursuant to clause 27 of the Listing Regulations with the stock exchanges a ManagementDiscussion and Analysis Corporate Governance Report and Auditors' Certificate regardingcompliance of conditions of Corporate Governance are made part of the AnnualReport.Details of Board meetings held during the year under review and the composition ofthe various committees are included therein.

The Code of Conduct for Directors and Senior Management personnel of the Company asapproved by the Board has been affirmed on an annual basis by all the Directors and theSenior Management personnel of the Company.

The relevant certification on the various matters specified under Regulation 17(8) ofSEBI (LODR) Regulations 2015 has been done by the Managing Director and the VP: CFO ofthe Company.

Members desirous of receiving the full Report and Accounts of the subsidiaries will beprovided the same on receipt of a written request from them or on submission of theire-mail IDs for forwarding documents through electronic mode. This will help saveconsiderable cost in connection with printing and mailing of the Report and Accounts. Thismeasure would be in line with the MCAs Green initiative for paperless communications. Thesame shall also be kept for inspection by any Members at the registered office of theCompany and of the respective subsidiary Company concerned and shall also be posted on theweb site of the Company viz.www.nrbbearings.com.

12. Directors' responsibility statement

In accordance with Section 134 of the Companies Act 2013 the Directors state that:

i. in the preparation of annual accounts all applicable accounting standards have beenfollowed and no material departures have been made from the same;

ii. accounting policies selected were consistently applied. Reasonable and prudentjudgements and estimates have been made so as to give a true and fair view of the state ofaffairs of the Company as on 31st March 2016 and of the profit of the Company for theaccounting year ended on that day;

iii. proper and sufficient care for maintenance of adequate accounting records has beentaken in accordance with the provisions of the Act so as to safeguard the assets of theCompany and to prevent and detect fraud and other irregularities;

iv. the Annual Accounts have been prepared on a going concern basis.

v. the internal financial controls to be followed by the Company have been laid downand are adequate and were operating effectively.

vi. proper systems have been devised to ensure compliance with the provisions of allapplicable laws and all such systems were adequate and operating effectively.

13. Related Party transactions (RPT)

All RPT that were entered into during the financial year were on an arms length basisand were in the ordinary course of business. There are no materially significant RPT bythe Company with promoters Directors key managerial personnel or other designatedpersons which may have a potential conflict with the interest of the Company at large.

All RPT are placed before the audit committee as also the board for approval. Priorapproval of the audit committee is obtained on a quarterly basis for transactions whichare foreseen and repetitive in nature. The compliance of the transfer pricing norms inrelation to such transactions is certified by the tax advisors.

The policy on RPTs as approved by the board is uploaded on the Company's website. Formfor disclosure of particulars of contracts has been enclosed as Annexure 5.

14. Auditors Statutory Auditors

M/s Deloitte Haskins & Sells Chartered Accountants retire at the ensuing AnnualGeneral Meeting and offer themselves for re-appointment. In terms of Clause 41(1)(h) ofthe Listing Agreement the statutory auditors are subjected to the Peer Review process ofthe ICAI and hold a valid certificate issued by the Peer review Board of ICAI.

A certificate from the auditors has been received to the effect that their appointmentif made would be within the limits prescribed under section 139 of the Companies Act2013.

Cost Auditors

Pursuant to the Rules issued by MCA under Companies (Cost records and Audit) AmendmentRules 2014 your company is subject to cost audit during the year FY 2015-16 and M/s.RNanabhoy & Co Cost Accountants was appointed to undertake the same. Since the costaudit for the year ended 31st March 2015 was not applicable to your company it was notrequired to file the cost audit report with MCA during the year.

Secretarial Audit

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. U C Shukla Practicing Company Secretary to undertake the Secretarial Auditof the Company. The report is annexed as Annexure 6.

Explanation or Comments on disqualifications reservations adverse remarks ordisclaimers in the Auditors' Reports.

There have been on disqualifications reservations adverse remarks or disclaimers inthe Auditors' Reports other than the comment in the Independent Auditor's certificate oncorporate governance and in the Secretarial Audit Report:

i. about the strength of the independent directors falling below the requisite strengthduring the period July 24 2015 to March 29 2016 which the company has remedied on March30 2016 and

ii. non publication of notice of Board Meeting for approval of Financial Results forthe quarters ended 31st December 2015 and 31st March 2016. The company has beenintimating the stock exchanges well in advance about the board meetings so thatinformation has been disseminated to all stakeholders.

16. Extract of Annual Return

The details forming part of the extract of the Annual Return in form MGT 9 is annexedherewith as Annexure 7.

17. Particulars of employees

The information required pursuant to section 197(12) read with Rule 5(1) of theCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 in respect ofemployees of the Company will be provided upon request. In terms of Section 136 of the Actthe Report and Accounts are being sent to the Members excluding this information.

18. Acknowledgement

The Directors wish to convey their appreciation for the tremendous support of ourworkforce- both unionized and management and the confidence and loyalty shown by ourcustomers. The Directors also wish to thank the shareholders suppliers bankers and allother business associates for the continuous support given by them to the Company andtheir confidence in its management.

On behalf of the Board
(Ms) H S Zaveri S C Rangani
Mumbai: 24th May 2016 Vice Chairman & Managing Director Executive Director & Co.Secretary