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Salzer Electronics Ltd.

BSE: 517059 Sector: Engineering
NSE: SALZERELEC ISIN Code: INE457F01013
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OPEN 186.90
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VOLUME 8329
52-Week high 243.90
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P/E 16.71
Mkt Cap.(Rs cr) 271
Buy Price 187.20
Buy Qty 28.00
Sell Price 188.35
Sell Qty 40.00
OPEN 186.90
CLOSE 184.60
VOLUME 8329
52-Week high 243.90
52-Week low 166.05
P/E 16.71
Mkt Cap.(Rs cr) 271
Buy Price 187.20
Buy Qty 28.00
Sell Price 188.35
Sell Qty 40.00

Salzer Electronics Ltd. (SALZERELEC) - Director Report

Company director report

Your Directors have pleasure in presenting their 31st Annual Report on the business andoperations of the Company and the accounts for the Financial Year ended March 31 2016.

1. Financial Summary of the Company

Rs In Lakhs

PARTICULARS 31-03-2016 31-03-2015
I Revenue from operations: 36113.49 28330.23
II (Less) Operating Expenses
a) Cost of Materials Consumed 25179.35 19869.96
b) Changes in inventories of finished goods and work in progress 480.06 (278.71)
c) Employee benefits expenses 1768.43 1553.79
d) Other expenses 4396.42 3639.61
Total 31824.27 24784.64
III Operating Profit (I-II) 4289.23 3545.59
IV Other Income 280.37 100.25
V Profit before Interest Depreciation & Tax (III+IV) 4569.60 3645.84
VI Finance Costs 1313.58 1234.26
VII Depreciation and amortization expenses 831.89 714.47
Total 2145.47 1948.73
VIII Profit before tax (V-VI-VII) 2424.13 1697.11
IX Less: Tax expense:
a) Current tax 521.19 364.21
b) Deferred tax 198.19 134.83
Total 719.38 499.04
X Profit After Tax (VIII-IX) 1704.75 1198.07
XI Balance in Profit & Loss A/c (b/f) 5222.59 4255.19
XII Total 6927.34 5453.25
XIII Appropriations
a) Transfer to Reserves 45.00 45.00
b) Proposed Dividend (Incl Tax) for 2015-16 264.68 185.66
c) additional Provisions for 2014-15 58.42 -
d) Excess Provision for prior year written back 5.48 -
Closing Balance (c/f) (XIII-a-b-c+d) 6564.72 5222.59
XI Earnings per equity share:
a) Basic (in Rs) 13.54 11.65
b) Diluted (in. Rs) 12.87 10.79

2. Status of Company Performance

Your Company has made significant achievement in 2015-16 almost in line with projectedtarget. Your Company has established substantial share for its products both in thedomestic and international markets. The Company’s export footprint is widening atcompounded annual growth rate of around 30% in the last five years. USA Europe and Someof the Gulf Countries are major export markets for your Company. Your Company has goodsynergy in driving the export market and improving its market share across the Globe. Nowvarious leading players in the international markets such Siemens C3 Controls Schneiderare part of our export business.

In FY 2015-16 revenues from Operations stood at Rs361 Crores as against Rs283 Croresin the corresponding year with a registered growth of 28%. Exports contribution to totalrevenue remained encouraging and constituting around 22% of the revenues in the full yearwith a reported growth of 18% corresponding to the last year.

The revenues have grown in line with our expectation especially from the profitablesegments industrial switchgear business. The breakup of revenues as per the segment forthe full year is as follows.

The industrial Switch Gear business contributed 47% with a growth of 16% correspondingto the last year

The Building segment product business contributed to 4% to the total revenues with ayear-on- year growth of 9%

The Energy Management business contributed 12% to the total revenues with ayear-on-year growth of 600% and

The copper business consisting wire and cables contributed 37% to the total revenuewith a year-on-year growth of 15%.

The full year EBITDA (Earnings before Interest Tax Depreciation and Amortization) wasRs43 Crores as against Rs36 Crores with a year-on-year growth of 21%. The EBITDA marginwas at 12% and remains flat compared to the last year. The Profit after Tax (PAT) is atRs17 Crores in the full FY2016 as against Rs12 Crores in the corresponding year with ayear-on-year growth of 42%.

Net worth stood at Rs191 Crores at the end of FY 16 as against Rs107 Crores last yearand accordingly the Book value of an equity share increased to Rs140.32 in FY 16 fromRs104.12 last year on the expanded capital basis.

Your Company is quite confident of achieving a double digit growth in the range of 18%- 20% for FY 2017 on the revenues with higher contribution coming from Industrial SwitchGears business which has relatively higher business margin in our portfolio and goingforward more focus and concentration to be given on this segment.

Your Company has signed a distinguished agreement with a company called IPD grouplimited in Australia. IPD is a leading distributor and a wholesaler in Australia forelectrical products and they will be marketing Salzer branded electrical products forsolar photovoltaic applications in Australia and New Zealand. This agreement opens in newlarge market for your Company.

3. Dividend

The Board of Directors at their meeting held on May 26 2016 recommended a Dividend ata rate of 16% (Rs1.60 per share) for the financial year ended March 31 2016. The proposalis subject to the approval of shareholders at the ensuing Annual General Meeting to beheld on August 132016. The total dividend appropriation (excluding dividend tax) for thecurrent year is Rs219.91 Lacs as against Rs202.79 Lacs in the previous year.

Dividend (including dividend tax) as a percentage of net profit after tax is 15.53% onthe expanded capital as compared to 20.40% in the previous year. In order to strengthenthe internal accruals of the Company Your Board of Directors moderated the DividendPayment out of available surplus for the financial year 2015-16 on the expanded capital.

The Register of Members and Share Transfer Book of the company will remain closed from11th June 2016 to 16th June 2016 (both days inclusive) for the purpose of dividend ifdeclared in above AGM will be paid to the members whose names appear in thecompany’s register of members on Friday June 16 2016 and in respect of shares heldin electronic form the dividend will be paid to the beneficial owners of the shares as onthe closing hours of the business on June 10 2016 as per details to be furnished by thedepositories for this purpose.

4. Share Capital and Other Related Securities

a. Equity share Capital

During the year under the review the Company has added 3359450 Equity Shares ofRs10/- each in its issued subscribed and paid- up shares by means of allotment underQualified Institutions Placement Conversion of share warrants issued underpre-preferential basis and Exercise of Stock Options by the Employees. Thereby the totalnumber of shares increased from 10283737 equity shares to 13643187 equity shares.The details of increase are as under:

Description Date of allotment No of shares Face Value Shares
In Rs In Rs
Opening as on 01/04/2015 10283737 10.00 102837370
Add : Allotted 219900 shares under "Salzer Employees 18-04-2015 219900 10.00 2199000
Stock Options Scheme 2012-13" at a grant price of Rs40/
Add : Allotted 375000 Shares on Conversion of share 21-07-2015 375000 10.00 3750000
Warrants at an issue Price of Rs251.45/- per share
Add : Allotted 2641000 Shares under Qualified 24-07-2015 2641000 10.00 26410000
Institutions Placement at an issue Price of Rs 235/- per share
Add: Allotted 78550 Shares under "Salzer Employees 25-01-2016 78550 10.00 785500
Stock Options Scheme 2012-13" at a Grant Price of Rs40/- per share
Add: Allotted 45000 shares under Conversion of share warrants at an issue Price of Rs251.45/- per share 11-03-2016 45000 10.00 450000
Closing as on 31/03/2016 13643187 136431870

b. Outstanding share warrantsW

With the approval of the shareholders by means of special resolutions passed at theirExtra Ordinary General Meeting held on July 10 2015 the Company has issued 1000000Share warrants convertible into similar number of equity shares within given period of 18Months from the date of issue –July 142015 at an issue price of Rs251.45/- to thePromoters and Promoters Bodies Corporate under Chapter VII of SEBI (Issue of Capital andDisclosure Requirements) Regulation 2009. Details of the issue conversion of warrants andbalance outstanding as at March 31 2016 furnished hereunder

Descriptions Date Warrants
Opening as on 01/04/2015
Add Allotment on July 142015 14-07-2015 1000000
Less Conversion of 375000 Warrants on July 212015 21-07-2015 375000
Less Conversion of 45000 Warrants on March 112016 11-03-2016 45000
Outstanding warrants on 31/03/2016 580000

c. Employees Stock Options

Your Company has granted 1028000 Stock Options to eligible employees under SalzerElectronics Limited Employees Stock Options Scheme 2012-13. Details of the grant exerciseand balance options outstanding as at March 31 2016 furnished hereunder

Descriptions Date Stock Options
Opening as on 01/04/2015 1028000
Less Conversion of 219900 Options on April 182015 18-04-2015 219000
Less Conversion of 78550 Options on Jan 252016 25-01-2016 78550
Outstanding warrants on 31/03/2016 730450

5. Capital Raised and its utilization during the year

Capital raised by Rs In Crs Utilized by Rs In Crs
Under Qualified Institutions Placement - 2641000 @ issue price of Rs 235 62.06 Issue expenses 6.50
Allotment of 1000000 share warrants at an issue Price of Rs251.45 and of which 25% of the issue Price received in upfront 6.29 Assets additions 31.65
Conversion of 375000 shares warrants on the payment of 75% of the issue price of Rs251.45 7.07 Intangible assets 0.64
Conversion of 45000 shares warrants on the payment of 75% of the issue price of Rs251.45 0.85 Capital work in progress 7.71
Exercise of 219900 stock options at the grant price of Rs40 per options on April 182015 0.88 Short term investments 15.00
Working capital optimization 15.65
Total 77.15 77.15

6. Corporate Governance

As required under Schedule V(C) of SEBI (Listing Obligations and DisclosureRequirements) Regulations a separate section on corporate governance practices followedby the Company together with a certificate from the Company’s Auditors confirmingcompliance attached with this report Annexure :1

7. Reserves

Your Board of Directors as a prudent policy in the absence specific provisions in theCompanies Act 2013 and Rules made there-under has transferred Rs45.00 Lacs to the GeneralReserve Account.

8. Liquidity

As at March 31 2016 your Company had adequate cash and cash equivalents in its Bookstaking care of all such current liabilities comfortably.

9. Change in the Nature of business if any

During the year the nature of the business of your Company – Manufacturing ofElectrical Installation Products- has not been changed.

10. Material changes and commitments affecting the financial position of the companywhich have occurred between the end of the financial year of the company to which thefinancial statements relate and the date of the report

During the period between closure of the financial year 2015-16 and date of thisreport the following material changes took place:-a. 26500 equity shares allotted onApril 292016 on exercise of stock options by the employees under Salzer Electronics LtdEmployees Stock Options Scheme 2012-13 and b. 50000 equity shares allotted on May 252016 on conversion of share warrants subscribed by the Promoters c. Subject to consent bythe shareholders the Board of Directors at their meeting held on February 10 2016re-appointed Shri Rangaswamynaidu Doraiswamy (DIN:00003131) as Managing Director of theCompany effective from May 022016 for a term of Five years with the following termsinter alia

Salary Rs300000/- per month with an increase of Rs25000/- every year for five yearswith effect from October 01 2016 and

Commission at the rate of 2 % on the net profit of the company after taxation as beingcomputed from time to time within the limit in accordance with Schedule-V and otherapplicable provisions of the Companies Act 2013.

d. Shri Kantilal Vajeshakar Vakharia (DIN: 00003146) a Non Executive and NonIndependent Director passed away on 30/04/2016 and ceased to be Director on the Boardaccordingly.

11. Details of significant and material orders passed by the regulators or courts ortribunals impacting the going concern status and company’s operations in future

No orders passed by any Court in India or by any Regulator or by Tribunals affectingthe going concern status and the Company’s operations in future.

12. Details in respect of adequacy of internal financial controls with reference to thefinancial statements.

Your Company has an adequate Internal Control System in commensuration with the sizescale of its operations. In line with the objectivity and independence the Internal Auditfunction reports to the Chairman of the Audit Committee on the matters affecting themateriality of the transactions taking place in all units of the Company.

The Internal Audit Department monitors and evaluates the efficacy and adequacy ofinternal control system in the Company its compliance with operating systems accountingprocedures and policies at all units of the Company. Based on the report of internal auditfunction respective heads of the Department will undertake corrective action in theirrespective areas and thereby strengthen the controls. Significant audit observations andcorrective actions taken thereon are being presented to the Audit Committee of the Board.

13. Equity stake sale by Larsen & Toubro Limited

During the year Larsen & Toubro Limited which held 2679808 equity sharesconstituting 26.06% of equity stake in your Company sold off its entire holdings as apart of its treasury transactions. Upon which it withdrew its two nominees - ShriSambavar Vadakarai Raja Swaminathan (DIN: 03327098) and Shri Parameswaran Ramakrishnan(DIN: 06374491) from the Board.

14. Details of subsidiary/Joint Ventures/ Associate Companies Your company does nothave any subsidiary company and do not have any associate company as defined underSec.2(6) of the Companies Act 2013 during the year under review.

Foreign investment:

During the Financial year 2015-16 your Company sold out around 13% stake in SalzerGlobal Services LLC USA which is having complete controlling interest in Global TechnicalTalent INC USA which is an outsourcing Firm in IT and ITES providing services to the ITindustry in USA. After such disinvestment your Company is having a strategic investmentof 27% in

Salzer Global Services LLC USA and not having any controlling interest over day today management.

15. Deposits

During the Financial year under the review your Company has not accepted any depositswithin the meaning of Section 73 of the Companies Act 2013 read with Companies(Acceptance of Deposits) Rules 2014.

16. Statutory Auditors

In terms of Proviso to Section 139 (1) of the Companies Act 2013 M/s Swamy & RaviChartered Accountants (FRN: 004317S) Coimbatore has been appointed as a statutoryauditor of the Company for a term five years from 2014-15 subject to ratification by theshareholders at the every general meeting in terms of ordinary resolution passed by theMembers at their 29th Annual General Meeting held on August 9 2014. In pursuance of aboveterm necessary resolution ratifying appointment of M/s Swamy & Ravi CharteredAccountants Coimbatore as the statutory auditor for the financial year 2016-17 is beingplaced before members for their consideration in this Annual General Meeting.

M/s Swamy & Ravi declares and confirms in pursuance of Rule 4(1) of the Companies(Audit and Auditors) Rules 2014 in their letter dated May 02 2015 that:

The firm does not suffer any disqualification under the Companies Act 2013 and theChartered Accountants Act 1949 and the rules or regulations made thereunder;

There is no such proceedings/litigations against the audit firm or any partner of theaudit firm pending with respect to professional matters of conduct.

The Firm is holding the appointment within the limits laid down by or under theauthority of the Act and

17. Auditors’ Report

The Independent Audit Report along with the Annexure as prescribed under Companies(Auditors’ Report) Order 2015 as issued by the Auditors’ are appended in thisAnnual Report wherein the Auditors have not made any qualification / adverse remarksbased on the auditing.

18. Extract of the Annual Return

The extract of the annual return in Form No. MGT – 9 forms part of theBoard’s report given as Annexure 2 herewith in compliance with Rule 12(1) of theCompanies (Management and Administration) Rules 2014.

19. Conservation of Energy Technology Absorption and Foreign Exchange Earnings andOutgo

The details of conservation of energy technology absorption foreign exchange earningsand outgo given as Annexure 3 herewith separately.

20. Corporate Social Responsibility (CSR)

The Company for the past many years fulfills the objectives of social nature in theareas of education health and other social causes in and around PeriyanaickenpalayamRegion Coimbatore District. The Company works primarily through its Trust SalzerEducational Medical Research Trust towards promoting education healthcare etc. TheCompany is at the service of the society in general for uplift of literacy and healthcare.

Accordingly the Company was required to spend Rs25.20 Lacs towards CSR activities andagainst which spent Rs25.40 Lacs in respect of the activities enshrined in Schedule VIIof the Companies Act 2013 and also in Salzer’s Corporate Social ResponsibilityPolicy.

Details of the CSR policy and initiatives adopted by the Company on CSR during the yearis available on our website (https:// www.salzergroup.net/files/CSR%20Policy.pdf). Theannual report on our CSR activities is appended as Annexure 4 to the Board’s report.

21. Directors

A) Changes in Directors and Key Managerial Personnel i) Shri Sambavar Vadakarai RajaSwaminathan (DIN: 03327098) and Shri Parameswaran Ramakrishnan (DIN: 06374491) NomineesDirectors resigned from the Board on August 08 2015 consequent to withdrawal of theirnomination by L&T following its 26.06% equity stake sale in the Company. ii) On therecommendation of Nomination and Remuneration Committee Shri Rangaswamynaidu Doraiswamy(DIN: 00003131) was appointed as Managing Director subject to the provisions of Sections196 197 198 203 and other applicable provisions of the Companies Act 2013 and therules made thereunder. iii) On the recommendation of Nomination and RemunerationCommittee Mr. D Rajesh Kumar (DIN: 00003126) would be re-appointed as Joint ManagingDirector and Chief Financial Officer subject to the provisions of Sections 196 197 198203 and other applicable provisions of the Companies Act 2013 and the rules madethereunder effective from October 01 2016. iv) Appointment of a Director in place of Dr.Mrs. Rajeshkumar Thilagam (DIN: 00006783) who retires by rotation at this Annual GeneralMeeting and being eligible has offered herself for re- appointment. v) Appointment of aDirector in place of Shri Perumal Reddiar Ramachandran (DIN: 01043572) who retires byrotation at this Annual General Meeting and being eligible has offered himself forre-appointment. vi) Consequent to death on April 30 2016 Shri Kantilal VajeshakarVakharia (DIN: 00003146) ceased to be director on the Board accordingly.

B) Declaration by an Independent Director(s) and re- appointment if any

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 Regulation25 of SEBI (Listing Obligations and Disclosure Requirements) Regulation 2015.

C) Formal Annual Evaluation

SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 mandates thatthe Board shall monitor and review the Board evaluation framework. The framework includesthe evaluation of directors on various parameters such as: -

Board dynamics and relationships

Information flows

Decision-making

Relationship with stakeholders

Company performance and strategy

Tracking Board and committees’ effectiveness

Peer evaluation

The Companies Act 2013 states that a formal annual evaluation needs to be made by theBoard of its own performance and that of its committees and individual directors. ScheduleIV of the Companies Act 2013 states that the performance evaluation of independentdirectors shall be done by the entire Board of Directors excluding the director beingevaluated. The evaluation of all the directors and the Board as a whole was conductedbased on the criteria and framework adopted by the Board. The evaluation process has beenexplained in the Corporate Governance report.

D) Committees of the Board.

Currently the Board has eight committees: the Audit Committee the Nomination andRemuneration Committee the Corporate Social Responsibility Committee the Share TransferCommittee The Shareholders / Investors Grievances Committee the Risk ManagementCommittee the Employees Compensation Committee and a Sub Committee for Securities Issue.A detailed note on the composition of the Board and its committees is provided in theCorporate governance report section of this Annual Report.

Considering the objectiveness and functions the Shareholders / Investors GrievancesCommittee and the Share Transfer Committee have been amalgamated and named as StakeholdersRelationship Committee effective May 262016.

Sub Committee for the Securities issue has been constituted for the purpose of issue ofshares under the Qualified Institutions Placement (QIP) Programme and issue of sharewarrants and consequent allotment of shares arising out of conversion of share warrants.After completion of such issues this Sub Committee will stand automatically vacated.

22. Listing Agreement

The Securities and Exchange Board of India (SEBI) on September 2 2015 issued SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 with the aim toconsolidate and streamline the provisions of the Listing Agreement for different segmentsof capital markets to ensure better enforceability. The said regulations were effectiveDecember 01 2015.

Accordingly all listed entities were required to enter into the Listing Agreementwithin six months from the effective date. Your Company has duly complied with thisregulation by entering into Listing Agreement with BSE Limited and the National StockExchange of India Limited.

23. Listing at National Stock Exchange

In addition to Bombay Stock Exchange the shares of your Company have now been listedat National Stock Exchange and begun its trading effective December 02 2015.

24. Meetings

The details in respect of the Meeting of the Board of Directors

Audit Committee and all other sub Committee are given in the Corporate GovernanceReport.

25. Vigil Mechanism

A vigil Mechanism has been in place providing opportunity to Directors/Employees:

To access in good faith to the Audit Committee in case they observe unethical andimproper practices or any other wrongful conduct in the Company

to prohibit managerial personnel from taking any adverse personnel action against thoseemployees and

to provide necessary safeguards for protection of employees from reprisals orvictimization

This policy applies to all directors and employees of the Company to report concernsabout unethical behaviour actual or suspected fraud or violation of the company’scode of conduct or ethics policy

To report such incidents practices etc. the concerned Employees / Directors cancontact / report to

Office of the Audit E-Mail :
Committee (Compliance baskarasubramanian@
Officer) salzergroup.com
Contact No. 0422 4233614
Office of the Managing E-Mail:
Director & Chief Financial rd@salzergroup.com
Officer Contact No. 0422-4233612
Office of Joint Managing E-Mail :
Director rajesh@salzergroup.com
Contact No.0422-4233610

26. Prevention of Sexual harassment at the work place

The Company has in place an Anti-Sexual Harassment Policy in line with the requirementsof The Sexual Harassment of Women at the Workplace (Prevention Prohibition &Redressal) Act 2013. Internal Complaints Committee (ICC) has been set up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary trainees) are covered under this policy. During the year under review theCommittee has not received any such complaint.

27. Nomination and Remuneration Committee

The purpose of the committee is to screen and to review individuals qualified to serveas executive directors non-executive directors and independent directors consistent withpolicies approved by the Board and to recommend for approval by the Board nominees forelection at the AGM.

The committee also makes recommendations to the Board on candidates for: (i) nominationfor election or re-election by the shareholders; and (ii) any Board vacancies that are tobe filled.

It also reviews and discusses all matters pertaining to candidates and evaluates thecandidates. The nomination and remuneration committee coordinates and oversees the annualself-evaluation of the Board and of individual directors.

The nomination and remuneration committee charter and policy are available on ourwebsite (https://www.salzergroup. net/files/NRC%20Policy.pdf).

28. Particulars of Loans Guarantees or Investments

During the year under review:

During the year the Company has granted/taken loans unsecured from or to Companiesfirms or other parties listed in the Register maintained under Section 189 of theCompanies Act 2013 (‘the Act’) on the terms and conditions which are not primafacie prejudicial and / or detrimental to the interest of the Company during the course ofits business and

During the year the Company acquired in Market 1243059 equity shares in a ListedCompany Himadri Chemicals and Industries Limited

The investments in other bodies corporate are well within the limit as prescribed underSection 186 of the Companies 2013.

29. Salzer Employees Stock Options Scheme 2012-13

The shareholders at their 27th Annual General Meeting held on August 11 2012 passednecessary resolutions approving "Salzer Employees Stock Option Scheme 2012 -13"for grant of stock options to the eligible employees upto 10% of the paid capital of theCompany as a reward to the employees who are behind the growth of the Company.

Accordingly the Employees Compensation Committee constituted by the Board foradministration of Stock option

Plan granted 1028000 Stock Options constituting 10% of the paid up capital to sucheligible employees with one year vesting period and five years exercise period on November192013. The Bombay Stock Exchange in its letter dated May 082014 granted In-principleapproval for allotment of 1028000 shares which are likely to arise on exercise of stockoptions.

The aforesaid Committee:

On April 182015 allotted 219900 Equity Shares against equivalent amount of optionsexercised by the employees

On January 252016 allotted 78550 Equity Shares against equivalent amount of optionsexercised by the employees

On April 292016 allotted 26500 Equity Shares against equivalent amount of optionsexercised by the employees

As on the date of this report 703050 stock options vested upon grantees and left forexercise.

The relevant disclosures as required SEBI Guidelines are appended herewith as Annexure:5

The Company has received a certificate from the Auditors of the Company that the Schemehas been implemented in accordance with the SEBI Guidelines and the Resolution passed bythe shareholders dated August 11 2012. The Certificate would be placed at the AnnualGeneral Meeting for inspection by members.

30. Related Party Transactions

All related party transactions that were entered into during the financial year were onan arm’s length basis and were in the ordinary course of business. There are nomaterially significant related party transactions made by the Company with PromotersDirectors Key Managerial Personnel or other designated persons which may have a potentialconflict with the interest of the Company at large.

All Related Party Transactions are placed before the Audit Committee as also the Boardfor approval. Prior omnibus approval of the Audit Committee is obtained on an annual basisfor the transactions which are of a foreseen and repetitive nature in compliance withRegulation 23 of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.The transactions entered into pursuant to the omnibus approval so granted are audited anda statement giving details of all related party transactions is placed before the AuditCommittee and the Board of Directors for their approval on a quarterly basis. None of theDirectors has any pecuniary relationships or transactions vis--vis the Company.

In response to Rule 8(2) of Companies (Accounts) Rules 2014 particulars of contractsor arrangements with related parties during the year under review given in the Form AOC-2annexed herewith as Annexure :6.

31. Insider Trading

The Board of Directors has adopted the Insider Trading Policy in accordance with therequirements of the SEBI (Prohibition of Insider Trading) Regulation 2015. The InsiderTrading Policy of the Company lays down guidelines and procedures to be followed anddisclosures to be made while dealing with shares of the Company as well as theconsequences of violation. The policy has been formulated to regulate monitor and ensurereporting of deals by employees and to maintain the highest ethical standards of dealingin Company securities. The Insider Trading Policy of the Company covering code ofpractices and procedures for fair disclosure of unpublished price sensitive informationand code of conduct for the prevention of insider trading is available on our website(https://www. salzergroup.net/files/Salzer%20-%20Insider%20Trading%20%20Regulations%202015.pdf)

32. Managerial Remuneration

A) The Company has not employed any individual whose remuneration falls within thepurview of the limits prescribed under the provisions of Section 197 of the Companies Act2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014. B) The Company does not have such director who is in receipt ofany commission from the company and who is a Managing Director or Whole-time Director ofthe Company receiving any remuneration or commission from any Holding Company orSubsidiary Company of such Company

Details pursuant to section 197(12) of the Companies Act 2013 read with the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 form part of thisReport and are annexed herewith as Annexure - 7.

33. Secretarial Audit Report

A Secretarial Audit Report given by M/s. G V Associates a company secretary inpractice annexed with the report as Annexure : 8.

34. Risk Management Policy

Risk management is attempting to identify and then manage threats that could severelyimpact or bring down the organization. Generally this involves reviewing operations ofthe organization identifying potential threats to the firm and the likelihood of theiroccurrence and then taking appropriate actions to address the most likely threats. Inorder to tackle such risks emanating during the course of business operation the Board ofDirectors constituted Risk Management Committee with an objective of identifying thepotential threats that are likely to impact the growth of the organization and evolvesuitable strategical measure to mitigate such identified Risks.

35. Management’s Discussion and Analysis Report

In terms of the provisions of Regulation 34 of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 theManagement’s discussion and analysis is set out in this Annual Report as Annexure :9.

36. Cost Auditor

Your Board of Directors have appointed CMA Mr. A.R. Ramasubramania Raja as CostAuditor of the Company for the Financial year 2015-16 to conduct audit of Cost AccountingRecords maintained by the Company for the product(s) covered under relevant heads ofCentral Excise Tariff Act (CETA) as notified by the Minister of Corporate Affairs vide itsnotification dated 31/12/2014.

37. Directors’ Responsibility Statement

In terms of Section 134(5) of the Companies Act 2013 your Directors make thefollowing statements: that in the preparation of the annual financial statements for theyear ended March 31 2016 the applicable accounting standards have been followed alongwith proper explanation relating to material departures if any;

that such accounting policies have been selected and applied consistently and judgmentsand estimates have been made that are reasonable and prudent so as to give a true and fairview of the state of affairs of the Company as at March 31 2016 and of the profit andloss of the company for that period;

that proper and sufficient care has been taken 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;

that the annual financial statements have been prepared on a going concern basis;

that internal financial controls are being followed by the company and that suchinternal financial controls are adequate and were operating effectively.

that systems to ensure compliance with the provisions of all applicable laws are inplace and are adequate and operating effectively

38. Credit Ratings

Your Company’s Loan facilities from the Banks are being rated by CRISIL andassigned the following rating scales as under:

Total Bank Loan Facilities Rated: Rs1565.8 Million (Enhanced from Rs1091 Million) LongTerm Rating : CRISIL A-/Positive (revised from ‘CRISIL A-/ Stable’) Short TermRating : CRISIL A1 (Upgraded from ‘CRISIL A2+’)

CRISIL observed while assigning the rating that your Company’s Banks facilitiescontinue to reflect the benefits that Salzer derives from its leading market position inthe domestic rotary switches market its marketing tie-up with Larsen & Toubro Ltd andits sustained focus on research and development which facilitates product improvement andresource optimization. This rating continues to reflect the company’s adequatefinancial risk profile marked by adequate capital structure and debt protection metrics.

39. Industrial Relations

During the year under review industrial relations at the Company’s unit continuedto remain cordial and peaceful.

40. Acknowledgements

Your Directors place on record their deep sense of appreciation and gratitude to theShareholders various Government Agencies Canara Bank Union Bank of India ICICI BankCiti Bank NA M/s. HDFC Bank M/s. Larsen & Toubro Limited - Marketing Associates M/sPlitron Manufacturing Inc Canada (Collaborators) CRISIL M/s GNSA Infotech Ltd(Registrar & Share Transfer agent) for their continued support and cooperation. YourDirectors also wish to record their appreciation for the dedicated services being renderedby the employees at all levels.

For and on behalf of the Board
Place: Coimbatore N Rangachary
Date: May 262016 Chairman