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Salzer Electronics Ltd.

BSE: 517059 Sector: Engineering
NSE: SALZERELEC ISIN Code: INE457F01013
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OPEN 234.55
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VOLUME 22959
52-Week high 245.00
52-Week low 166.05
P/E 18.98
Mkt Cap.(Rs cr) 331
Buy Price 0.00
Buy Qty 0.00
Sell Price 228.15
Sell Qty 28.00
OPEN 234.55
CLOSE 233.05
VOLUME 22959
52-Week high 245.00
52-Week low 166.05
P/E 18.98
Mkt Cap.(Rs cr) 331
Buy Price 0.00
Buy Qty 0.00
Sell Price 228.15
Sell Qty 28.00

Salzer Electronics Ltd. (SALZERELEC) - Director Report

Company director report

TO

DEAR SHAREHOLDERS

We have pleasure in presenting the Thirty Second Annual Report together with theaudited financial statements of the Company for the Financial Year ended March 31 2017

1. FINANCIAL SUMMARY OF the Company
Particulars For the Year Ended 31/03/2017 For the Year Ended 31/03/2016
I Revenue from operations 38406.20 36113.49
II Other Income 675.43 280.37
III Total Revenue (I + II) 39081.63 36393.86
IV Expenses
Cost of Materials Consumed 30086.61 25179.35
Changes in inventories of finished goods and work in progress (2077.23) 480.06
Employee benefits expenses 1886.63 1768.43
Finance Cost 1459.29 1313.58
Depreciation and amortization expenses 980.48 831.89
Other expenses 4218.16 4396.42
Total Expenses 36553.94 33969.74
V Profit before exceptional and extraordinary items and tax (III-IV) 2527.69 2424.12
VI Exceptional Items - -
VII Profit before tax (V-VI) & extraordinary items 2527.69 2424.12
VIII Extraordinary items - -
IX Profit before tax (VII-VIII) 2527.69 2424.12
X Tax expense:
(1) Current tax (623.68) (521.19)
(2) Deferred tax (194.58) (198.18)
XI Profit for the period - After Tax(IX-X) 1709.43 1704.75
XII Earnings per equity share:
(1) Basic 12.35 13.54
(2) Diluted 11.89 12.87

2. ANALYSIS OF PERFORMANCE

The revenues from the operations were at H384 crores in full year as against H361crores in the corresponding year with a 7% growth. The full year ended EBITDA stood atH42.93 crores giving a flat growth. EBITDA (Earnings Before Interest Tax Depreciation andAmortization) and margin was at 11.17% and remained flat as compared to last year. The PAT(Profit After Tax) also was flat at H17.1 crores in the full year as against H17.04 croresin the corresponding year. Exports for the full year contributed 18% of total revenues ofyour Company.

Industrial switch gear segment

The industrial switch gear segment is one the largest contributors to overall revenuesof your Company. This segment comprises Cam Operated Rotary Switches; ToraidalTransformers Relays Load Break Switches Wire Harness etc.. The market conditions inIndia as well as USA and Europe continue to be very challenging. Despite these challengesthis division managed and posted a growth of 7% on year on year and made 46% contributionto the total revenue of the Company. Going forward your Company is expecting strongrecovery of the demand across the spectrum and also foresee healthy business would comefrom both domestic and international markets and also from the companies like GESchneider Honeywell ABB & Siemens in 2017-18.

Wire and cable segment

Wire and cable segment consisting of copper wires and cables is the second majorbusiness of your Company. On a yearly basis wire and cable business contributed 46% witha year on year growth of 32%. Within this segment your Company's focus has been to dobrand labelling for major brands. Initially it has been started with branding forL&T and today branding is being done for Crompton Greaves Texmo E-Fab and a coupleof other brands. In the last two years this division has started to focus giving valueadded products to various customers like elevator travelling cables wire harnesses andother similar cables in the segment.

Building Product Segment

In respect of Building Product Segment your Company has witnessed a very robust growthalthough the contribution to the total revenue remains small and exploring various optionsto improve its contribution to the extent of 10% level. On a yearly basis the buildingsegment product contributed 6% with a year on year growth of 50%.

Energy management segment

The fourth is the energy management segment and an order driven business. This is a newtechnology oriented business which was developed by your Company's in-house R&D team.This product segment has given a benefit of being the largest ESCO with highest CRISILrating - Grade A in the country for your Company. Energy management business on an annualbasis contributed 2% to the total revenues with a year on year decline of 76%. In thelast year this segment had a revenue of H42 crores coming in from the EPC contractbusiness as against which only H10 Crore revenue recorded in this year.

Without Energy Management business your company has achieved revenue growth of 17%year on year. The EBITDA and PAT also witnessed a growth of 13% and 20% respectively.Overall the revenue growth has been driven by the building segment wire and cablesegment; both of them have grown more than 30% year on year. Through our continuedassociation and increase in orders from our valued customers like GE Schneider Honeywelland ABB your Company has been able to achieve this growth.

Going forward your Company's focus remains to achieve profitable growth by adding newerproducts which are customized and value added in nature exploring newer geographies whichcan yield better margins. With a very competent team in place your Company is quiteconfident of achieving the milestone which it has set for itself.

Your Company has signed a Memorandum of Understanding with Saelzer Electric GmbHGermany for possible co-operation between two companies to leverage on their inherentstrengths for Joint Product Development with cutting edge technologies and exploring JointMarketing for Rotary Cam Switches world-wide.

3. DIVIDEND

The Board of Directors at their meeting held on May 252017 recommended a Dividend at arate of 16% (H1.60 per share) for the financial year ended March 312017 as that of thelast year . The proposal is subject to the approval of shareholders at the ensuing AnnualGeneral Meeting to be held on September 092017.

Dividend (including dividend tax) as a percentage of net profit after tax is 15% onthe expanded capital as compared to 15.23% 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 2016-17 on the expanded capital.

The Register of Members and Share Transfer Book of the Company will remain closed fromSeptember 022017 to September 092017 (both days inclusive) for the purpose of dividendif declared in above AGM will be paid to the members whose names appear in the company'sregister of members on Saturday September 09 2017 and in respect of shares held inelectronic form the dividend will be paid to the beneficial owners of the shares as onthe closing hours of the business on Friday September 01 2017 as per details to befurnished by the depositories for this purpose.

4. SHARE CAPITAL AND OTHER RELATED SECURITIES

a. Equity share Capital

During the year under the review the Company has added 705000 in its issuedsubscribed and paid-up shares by means of allotment under Conversion of share warrantssubscribed by the Promoters group under pre-preferential basis and Exercise of StockOptions by the Employees under Stock Options Scheme. Thereby the total no. of sharesincreased from 13643187 equity shares to 14348187 Equity Shares. The details ofincrease are as under

Particulaers 31-Mar-17 31-Mar-16
No. of Shares Amount No. of Shares Amount
At the Beginning of the Period 13643187 136431870 10283737 102837370
Add: Shares issued during the period
a Issue under conversion of warrants 580000 5800000 420000 4200000
b. Issue under Exercise of Stock Options 125000 1250000 298450 2984500
c Institutional Placement - - 2641000 26410000
Less: Shares bought Back during the year - - - -
Add: Other movements during the year - - - -
Outstanding at the end of the period 14348187 143481870 13643187 136431870

b. Outstanding share warrants

With the approval of the shareholders by means of special resolutions passed at theirExtra Ordinary General Meeting held on July 10 2015 the Company had issued 1000000Share warrants convertible into similar number of equity shares within given period of 18Months from the date of issue –July 14 2015 at an issue price of H251.45 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 2017 furnished hereunder

Descriptions Warrants
Opening as on 01/04/2016 580000
Less Conversion during the year 580000
Outstanding warrants on 31/03/2017 nil

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 2017 furnished hereunder

Descriptions Stock Options
Opening as on 01/04/2016 730450
Less Options exercised during the year 125000
Outstanding vested options on 31/03/2017 604550

5. 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

6. 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 H45.00 lakhs to the GeneralReserve Account.

7. LIQUIDITY

As at March 31 2017 your Company had adequate cash and cash equivalents in its Bookstaking care of all such current liabilities comfortably.

8. 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.

9. 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

There are no material changes and commitments affecting the financial position of theCompany which have occurred between the end of the financial year 2016-17 and the date ofthis report.

10. 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 Company's operations in future.

11. DETAILS IN RESPECT OF ADEQUACY OF INTERNAL FINANCIAL CONTROLS WITH REFERENCE TO THEFINANCIAL STATEMENTS.

The Company has put in place adequate internal financial controls over financialreporting. These are reviewed periodically and made part of work instructions or processesin the Company. The Company continuously tries to automate these controls to increase itsreliability.

The Company has adopted accounting policies which are in line with the IndianAccounting Standards notified under Section 133 of the Companies Act 2013 read togetherwith the Companies (Indian Accounting Standards) Rules 2015. These are in accordance withGenerally Accepted Accounting Principles in India. Changes in policies if any areapproved by the Audit Committee in consultation with the Statutory Auditors.

The Company has identified inherent reporting risks for each major element in thefinancial statements and put in place controls to mitigate the same. These risks and themitigation controls are revisited periodically in the light of changes in business ITsystems regulations and internal policies. Corporate accounts function is involved indesigning large process changes as well as validating changes to IT systems that have abearing on the books of account.

The Company periodically conducts physical verification of inventory fixed assets andcash on hand and matches them with the books of account. Explanations are sought for anyvariance noticed from the respective functional heads and corrective actions taken thenand there if warrants.

The Company in preparing its financial statements makes judgements and estimates basedon sound policies and uses external agencies to verify/validate them as and whenappropriate. The basis of such judgements and estimates are also approved by the AuditCommittee of the Board of Directors of the Company in consultation with the StatutoryAuditors of the Company.

The Company has a Code of Conduct applicable to all its employees along with a WhistleBlower Policy which requires employees to update accounting information accurately and ina timely manner.

12. DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANIES

Your company does not have any subsidiary company and do not have any associate companyas defined under Sec.2(6) of the Companies Act 2013 during the year under review.

13. DETAILS OF SUBSIDIARY/JOINT VENTURES/ASSOCIATE COMPANIES

During Financial year 2016-17 your Company had disinvested the balance 27% stake inSalzer Global Services LLC USA taking into account the business exigencies.

14. DEPOSITS

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

15. 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 statutory auditorof 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 above term necessary resolution ratifying appointment ofM/s.Swamy& Ravi Chartered Accountants Coimbatore as the statutory auditor for thefinancial year 2017-18 is being placed before members for their consideration in thisAnnual 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 022017 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

16. 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 this AnnualReport wherein the Auditors have not made any qualification / adverse remarks based onthe auditing.

17. EXTRACT OF THE ANNUAL RETURN

The extract of the annual return in Form No. MGT – 9 forms part of the Board'sreportgiven as Annexure: 2 herewith in compliance with Rule 12(1) of the Companies(Management and Administration) Rules 2014

18. CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS ANDOUTGO

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

19. CORPORATE SOCIAL RESPONSIBILITY (CSR)

In terms of the provisions of section 135 of the Companies Act 2013 read withCompanies (Corporate Social Responsibility Policy) Rules 2014 the Board of Directors ofyour Company has constituted a Corporate Social Responsibility ("CSR")Committee. The composition and terms of reference of the CSR Committee is provided in theCorporate Governance report which forms part of this report – Annexure: 4. YourCompany has also in place a CSR Policy and the same is available on your Company's websitewww.salzergroup.net /investor.

The Company for the past many years has been fulfilling the objectives of socialnature in the area of education health and other social causes in and aroundPeriyanaickenpalayam Region Coimbatore District. The Company primarily through its Trustis promoting education healthcare etc.. The Company is at the service of the Society ingeneral for up-liftment of literacy and health care.

Accordingly the Company was required to spend H34.92 lakhs towards CSR activities andagainst which spent only H12.45 lakhs in respect of the activities enshrined in ScheduleVII of the Companies Act 2013 and also in Salzer's Corporate Social ResponsibilityPolicy.

20. DIRECTORS:

A) Changes in Directors and Key Managerial Personnel i) During the year under thereview the following changes took place on the composition of the Board of Directors ofyour Company.

Mr. Howard M Gladstone an Independent Director relinquished his office of the Directorfrom the Board of Directors of the Company due to his personal reason. Mr. P RThiruvengadam who was appointed as an alternate director for Mr. Howard M Gladstone hasalso ceased to be a Director of your Company on laying down the office of Director fromthe Board of Directors of the Company by Mr. Howard M Gladstone

Dr. Otto Eggiman was appointed as an additional director by the Board of Directors attheir Board Meeting held on May 252017 in the capacity of the Independent Director for aterm of three years effective May 252017 subject to the approval of the members at theirforthcoming Annual General Meeting in terms of Section 160 of the Companies Act 2013

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. The Boardhas optimum composition of the Independent and Non Independent Directors.

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 andrelationships 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.

Familiarization programme

The Company has put in place an induction and familiarisation programme for all itsDirectors including the Independent Directors. The familiarisation programme forIndependent Directors is in accordance with the provisions of Regulation 46(2) (i) ofSEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 and is uploaded onthe website of the Company.

D) Committees of the Board.

Currently the Board has six committees: the Audit Committee the Nomination andRemuneration Committee the Corporate Social Responsibility Committee StakeholdersRelationship Committee the Risk Management Committee the Employees CompensationCommittee. A detailed note on the composition of the Board and its committees is providedin the Corporate governance report section of this Annual Report.

21. LISTING REGULATIONS

Your Company has duly complied with various Regulations as prescribed under SEBI(Listing obligations and Disclosures) Regulations 2015.

22. MEETINGS

The details in respect of the Meeting of the Board of Directors Audit Committee andall other sub Committee are given in the Corporate Governance Report.

23. VIGIL MECHANISM

A vigil Mechanism has been in place providing opportunity to Directors/Employees Toaccess in good faith to the Audit Committee in case they observe unethical and improperpractices or any other wrongful conduct in the Company to prohibit managerial personnelfrom taking any adverse personnel action against those employees and to provide necessarysafeguards for protection of employees from reprisals or victimization

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's code ofconduct or ethics policy

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

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

24. 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.

25. 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 )

26. 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') the terms and conditions are not prima facieprejudicial to the interest of the Company during the course of its business and Theinvestments in other bodies corporate are well within the limit as prescribed underSection 186 of the Companies 2013

27. SALZER EMPLOYEES STOCK OPTIONS SCHEME 2012-13

The shareholders at their 27th Annual General Meeting held on August 112012 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% ofthe paid up capital to such eligible employees with one year vesting period and fiveyears exercise period on November 192013. The Bombay Stock Exchange in its letter datedMay 082014 granted In-principle approval for allotment of 1028000 shares which arelikely to arise on exercise of stock options . Further the Company also on gettinglisted in NSE Limited has got the requisite In-Principle approval for the OutstandingOptions granted under the Scheme.

The aforesaid Committee during the year under review have allotted 125000 Sharesagainst equivalent amount of vested options exercised by the employees.

As on the date of this report 604550 stock options vested upon grantees andoutstanding for exercise.

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 112012. The Certificate would be placed at the AnnualGeneral Meeting for inspection by members.

28. RELATED PARTY TRANSACTIONS

All related party transactions that were entered into during the financial year underreview were on an arm's length basis and were in the ordinary course of business. Duringthe year the Company had material related party transaction with the related parties withdue compliance of the approval accorded by the shareholders under Relevant Regulation.

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 a 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.

29. 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)

30. 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 Managerial Personnel) Rules 2014.

B) The Company does not have such director who is in receipt of any commission from theCompany and who is a Managing Director or Whole-time Director of the Company receiving anyremuneration or commission from any Holding Company or Subsidiary 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.

31. SECRETARIAL AUDIT REPORT

In terms of Section 204 of the Companies Act 2013 the Board of Directors of theCompany at their meeting held on May 25 2017 has appointed Mr. G Vasudevan B.Com LLB& FCS M/s. G V Associates Company Secretaries (Certificate of Practice No. 6522) asthe Secretarial Auditor to conduct an audit of the secretarial records for the financialyear 2017-18.

The Company has received consent from Mr. G Vasudevan B.Com LLB & FCS M/s. G VAssociates Company Secretaries to act as the auditor for conducting audit of theSecretarial records for the financial year ending 31st March 2018 in terms of Section 204of the Companies Act 2013 read with Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014.

The Secretarial Audit Report for the financial year ended 31st March 2017 is set outin the Annexure: 8 to this report. The Secretarial Audit Report does not contain anyqualification reservation or adverse remark.

32. 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 strategic measure to mitigate such identified Risks.

33. 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.

34. COST AUDITOR

Your Board of Directors have appointed CMA Mr. A.R. Ramasubramania Raja as CostAuditor of the Company for the

Financial year 2017-18 to conduct audit of Cost Accounting Records maintained by theCompany for the product(s) covered under relevant heads of Central Excise Tariff Act(CETA) as notified by the Minister of Corporate Affairs vide its notification dated31/12/2014.

35. POLICIES OF THE COMPANY

The Company is committed to good corporate governance and has consistently maintainedits organizational culture as a remarkable confluence of high standards of professionalismand building shareholder equity with principles of fairness integrity and ethics.

The Board of Directors of the Company have from time to time framed and approvedvarious Policies as required by the Companies Act 2013 read with the Rules issuedthereunder and the Listing Regulations. These Policies and Codes are reviewed by the Boardand are updated if required.

Some of the key policies adopted by the Company are as follows: i) Policy onDetermination of materiality of events/ information ii) Policy on prevention of sexualharassment at workplace iii) Code of Conduct for Directors and Employees iv) Code ofPractices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information v)Code of Conduct to Regulate Monitor and Report trading by Insiders vi) Policy on RelatedParty Transactions vii) Whistle Blower Policy viii) Corporate Social Responsibility Policyix) Nomination and Remuneration Policy x) Risk Management Policy

36. 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 2017 the applicable accounting standards have been followed alongwith proper explanation relating to material departures if any; that such accountingpolicies have been selected and applied consistently and judgments and estimates have beenmade that are reasonable and prudent so as to give a true and fair view of the state ofaffairs of the Company as at March 31 2017 and of the profit and loss of the Company forthat period; that proper and sufficient care has been taken 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; that the annual financial statements have been prepared on a goingconcern basis; that internal financial controls are being followed by the Company and thatsuch internal financial controls are adequate and were operating effectively. that systemsto ensure compliance with the provisions of all applicable laws are in place and areadequate and operating effectively

37. CREDIT RATINGS

Your Company's Loan facilities from the Banks are being rated by CRISIL and assignedthe following rating scales as under:

Total Bank Loan Facilities Rated : H1565.8 Million (Enhanced from H1091 Million)

Long Term Rating : CRISIL A-/Positive (revised from ‘CRISIL A-/Stable')

Short Term Rating: 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 adequate financialrisk profile marked by adequate capital structure and debt protection metrics.

38. INDUSTRIAL RELATIONS

During the year under review industrial relations at the Company's units continued toremain cordial and peaceful.

39. CAUTIONARY STATEMENT

Statements in the Annual Report particularly those which relate to ManagementDiscussion and Analysis describing the Company's objectives projections estimates andexpectations may constitute ‘forward looking statements' within the meaning ofapplicable laws and regulations. Although the expectations are based on reasonableassumptions the actual results might differ.

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. Axis Bank M/s. HDFC Bank M/s. Larsen & Toubro Limited - MarketingAssociates CRISIL M/s.GNSA Infotech Ltd (Registrar & Share Transfer agent) fortheir continued support and co-operation. Your Directors also wish to record theirappreciation for the dedicated services being rendered by the employees at all levels.

For and on behalf of the Board
Place : Coimbatore N RANGACHARY
Date : May 252017 CHAIRMAN
(DIN 00054437)

ANNEXURE – 3

Disclosure pursuant to Section 134(3)(m) of the Companies Act 2013 read with Rule 8(3)of the Companies (Accounts) Rules 2014

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUT GO.

A. CONSERVATION OF ENERGY

Your Company being a modest power intensive one continues to ensure measures forconservation of energy wherever possible.

B. PARTICULARSWITH RESPECTTOTECHNOLOGY ABSORPTION:

RESEARCH & DEVELOPMENT:

Research and Development (R&D) plays a critical role in the innovation process.It's essentially an investment in technology and future capabilities which is transformedinto new products processes and services. R&D is essential to keep ahead in theCompetition. R&D would make the products to get transformed frequently in line withchanging needs of the end users. Besides new products with contemporary technologies andnew features are being developed at R&D House so to gain the market share.

As stated in the Directors' Report the recognition of in-house R & D by theGovernment of India Ministry of Science and Technology Department of Scientific andIndustrial Research New Delhi is continuously maintained since 2004 and the presentrenewal of the recognition is valid upto 31.03.2020.

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

The R&D wing of the Company has been working to achieve the following objectives:Sustainability of the quality standards comparable to the international standards.Ensuring process development on continuous basis to be cost effective and costcompetitiveness.

Enlarging the utilities of the product by continuous improvement in specificationsdesign etc. Ensuring technological upgradation and know-how for the products of theCompany.

Developing new products to increase market share & profitability.

2. Benefits derived as a result of the above R&D activities: Major productsdeveloped by R&D and its significant benefits

1. Energy Saver products

Energy Saver products developed by the Company has got good response in the market.Corporations across the country are showing interest to adopt these products in theirstreet lightings in order to save the energy and cut power cost considerably.

Benefits

Guaranteed operating efficiency of 97% (higher than industry standards) with the use ofhighly efficient Toroidal transformers Dynamic Voltage reduction: provides stabilizedvoltage to the lamps Automatic On/Off based on Sunrise/Sunset or on programmed timingsWireless control and monitoring through sophisticated web-based software Automatic bypassin case of tripping with manual changeover in case of maintenance or emergency Reducesoperational maintenance and running cost Reliable and safe changeover with On-Load tapchanging Completely remote programmable ON/OFF timings alert and energy saving settingsInstantaneous alerts for critical fault conditions to your mobile phone Energy savingreports and lamp failure reports on daily weekly and monthly basis for single multipleor all devices Detection of Energy theft or leakage Maintains a high power factor of above0.85 Guaranteed operating life of 10 years: No moving parts ensuring long lifeEco-friendly - First in India to adhere to RoHS compliance Reduces public inconvenienceLighting levels conforming to ISI Standards

2. Automated Meter Reading Benefits.

All consumer lines (Energy Meters) are connected with AMR modules All the AMR moduleswill communicate to a single IP i.e. all the readings shall terminate at the centralstation

Unpaid consumer accounts can be disconnected & reconnected from the central stationitself Any tampering / fault occurrence of the meter can be found from the central stationitself Hardware can be retrofitted to existing static energy meters Real-time dataconfigurable for a frequency as less than 15/30 minutes is available in the ControlStation Low implementation costs & Low Maintenance / Operating Cost AMR System becomesinherently expandable i.e. addition of a new service at any point in the power linebecomes plug n play Real-time data available

3. Other Products – Train Warning System Energy saving Fan regulator CeilingMount movement sensor Touch cum remote switch GE Earth Terminal Bimetallic OverloadRelay Contactors and Overloaded relays upto 105 A Motor protection circuit breakers DCisolators for PV applications Tinned Copper Wires etc. are developed by your R&D andare in different stage of testing and approval which will give considerable benefits onits usage.

TECHNOLOGY ABSORPTION ADAPTATION & INNOVATION

1. Efforts in brief made towards technology absorption adaptation and innovation:During the year:

The Company has signed technical licensing agreement with Austria-based TrafomodernAustria so to use former technology and design and assistance to manufacture dry type aircooled transformers Chokes and inductors in India. Dry type transformers is a highlyspecialised and technical product with applications in Medium & large UPS renewableenergy business railways power generation and the marine industry. Trafomodern is one ofthe leading manufacturers of dry type transformers in Europe.

The Company has set up state of the art manufacturing facility and commenced theproduction during the Third quarter in 2016-17.

The Company has signed a Distribution Agreement with IPD Group Limited of Australia– a Leading Electrical distributor/ Wholesaler and manufacturer in Australia formarketing and selling of Salzer Branded Electrical products for Solar PhotovoltaicApplications in Australia and Newzland. This understanding with IPD opens to the Company aLarge New Market for its internationally tested and approved products.

Your Company has also undertaken the development of Contactors for C3 Controls USA whois one of the reputed manufacturer and supplier of the electrical goods worldwide.

The Company has signed a Memorandum of Understanding with Saelzer Electric GmbHGermany for possible co-operation between two companies to leverage on their inherentstrengths for Joint Product Development with cutting edge technologies and exploring JointMarketing for Rotary Cam Switches world-wide.

2. During the year under review the following expenditures were incurred with regard toR & D:

Capital Expenditure as additions to Plant & Machineries Tools Dies etc. H150.01 Lakhs
New Products and Process development H177.02 Lakhs
Salary and other expenses for R&D personnel H69.19 Lakhs

3. Details of Imported Technology:

Technology Imported For the manufacture of
(i) CAM Operated Rotary Switches
(ii) Toroidal Transformers
(iii) Three phase dry type transformer
Year of Import (i) 1985 (ii) 1995 / 2005 (iii) 2015
Has the technology been fully absorbed Yes Fully absorbed.

C. FOREIGN EXCHANGE EARNINGS AND OUTGO:

a) Foreign Exchange earned during the year (Direct export H5778.98 lakhs Merchant Export H1554.88 lakhs & H38.19 lakhs for technical services) 5817.17 Lakhs
b) Foreign Exchange outgo 8031.82 Lakhs

 

For and on behalf of the Board
Place : Coimbatore N.RANGACHARY
Date : May 252017 CHAIRMAN
(DIN: 00054437)

ANNEXURE – 5

DISCLOSURES UNDER RULE 12(9) OF COMPANIES (SHARE CAPITAL AND DEBENTURES) RULES 2014READ WITH REGULATION 14 OF SEBI (SHARE BASED EMPLOYEES BENEFITS) REGULATIONS 2014.

Details of the Scheme

Your Company believes that appropriate appreciations and rewards to the employees fortheir contribution all these years would enable the Company to take its growth objectivesforward with strong aspirations.

In this directions a Scheme by name "Salzer Employees Stock option Scheme2012-13" (shortly "Salzer ESOS 2012-13") was instituted with the approvalof the shareholders by means of special resolutions passed at their 27th Annual GeneralMeeting held on August 112012. The Scheme is in compliance with SEBI (Share BasedEmployees Benefits) Regulations 2014. The Scheme is administered by Employees CompensationCommittee.

Some Salient Features of the Scheme

1) The total number of options to be granted under this Scheme shall not exceed 10% ofthe Paid-up Share Capital of the Company as on 31.03.2012 i.e. 1028374 Options (10% of10283737 Equity Shares)

2) One Option entitles the holder of the options to apply for and be allotted oneequity share of H10/- of the Company

3) Chief Executive Officer / President (not being the Promoter / Promoter Group) /Whole Time Director (not being the Promoter / Promoter Group)/ Independent Director andother key senior management personnel posted in India or outside India and otheremployees who are in regular role of the company as may be determined by EmployeesCompensation Committee

4) Employee(s) / Director(s) as stated above in respect of the wholly-ownedsubsidiary(ies) / holding Company(ies) of the company whether in India or outside

5) The scheme shall not apply to : an employee who is a promoter or belongs to thePromoter Group.

Director who either by himself or through his relative(s) or through any BodyCorporate(s) directly or indirectly holds more than 10% of the outstanding equity sharesof the company. Nominee Director and Independent Directors

6) There shall be minimum period of one year between the grant of the options and thevesting of options.

Status of the Scheme.

1) In accordance with the Scheme 1028000 options granted on November 192013 toeligible employees at a grant price of H40/- against closing price of H48.60/- prevailedon November 182013 with a discount of H8.60 per share constituting 22% of the grantprice.

2) The vesting period of options is one year from the date of grant and exercise periodis five years from the date of vesting.

3) The shares so allotted upon exercise of stock options by the employees shall belocked in for a period of two years from the date of allotment.

4) As on the date of this Report - 423450 stock options have been allotted on theexercise of the vested stock options.

Information under Rule 12(9) of Companies (Share Capital and Debentures) Rules 2014

1 Scheme Name Salzer Employees Stock option Scheme 2012-13
2 options granted 1028000 Options @ grant price of H40/- per Options
3 options vested 1028000 Options on November 192014
4 options exercised 423450 Options as at March 312017
5 the total number of shares arising as a result of exercise of option 423450 Equity shares of H10/- each
6 options lapsed NIL
7 the exercise price H 40/- per share
8 variation of terms of options NIL
9 money realized by exercise of options H16938000/-
10 total number of options in force 604550options as at March 31 2017
11 Employee wise details of options granted to

key managerial personnel as at March 31 2017

Sr. No. Name Grade Options granted Options exercised
a S Baskarasubramanian Director (Corporate Affairs) & Company Secretary 15000 10000

any other employee who receives a grant of options in any one year of option amountingto five percent or more of options granted during that yea : NA

identified employees who were granted option during any one year equal to orexceeding one percent of the issued capital (excluding outstanding warrants andconversions) of the company at the time of grant : NA

12. Diluted Earnings per share (EPS) pursuant to the issue of shares on the exercise ofoptions calculated in accordance with Accounting Standard 20 " Earning pershare" : H11.89 per share in FY 2016-17 against H12.87 per share in FY 2015-16.

For and on behalf of the Board
Place : Coimbatore N RANGACHARY
Date : May 252017 CHAIRMAN
(DIN: 00054437)

ANNEXURE – 6

Form No. AOC-2

(Pursuant to clause (h) of sub-section (3)of section 134 of the Act and Rule 8(2) ofthe Companies (Accounts) Rules 2014)

Form for disclosure of particulars of contracts/arrangements entered into by thecompany with related parties referred to in sub-section (1) of section 188 of theCompanies Act 2013 including certain arms length transactions under third proviso thereto

1 Details of contracts or arrangements or transactions not at arm's length basis
a Name(s) of the related party and nature of relationship NIL
b Nature of contracts/arrangements/transactions NIL
c Duration of the contracts / arrangements/ transactions NIL
d Salient terms of the contracts or arrangements or transactions including the value if any NIL
e Justification for entering into such contracts or arrangements or transactions NIL
f date(s) of approval by the Board NIL
g Amount paid as advances if any NIL
h Date on which the special resolution was passed in general meeting as NIL
required under first proviso to section 188
2 Details of material contracts or arrangement or transactions at arm's length basis
a Name(s) of the related party and nature of relationship Salzer Magnet Wires Limited and Salzer Exports Limited related parties within the meaning of Section 2 (76)(v) of the Companies Act 2013
b Nature of contracts/arrangements/transactions Sale and Purchase of Materials etc. in the normal course of business and at arm length basis
c Duration of the contracts / arrangements/transactions Regular
d Salient terms of the contracts or arrangements or transactions including the value if any In 2016-17 the Company had :-
a) Total transaction value of H 59.79 Crs with Salzer Magnet Wires Limited representing 14% of the gross turnover of the Company &
b) Total transaction value of H15.24 Crs with Salzer Exports Limited representing 3% of the gross turnover of the Company.
e Date(s) of approval by the Board if any or such other approvals The Company is effecting the Transactions with Salzer Magnet Wires Limited and Salzer Exports Limited upon the approval of the shareholders at their 31st AGM held on August 132016
f Amount paid as advances if any: NIL

 

Place : Coimbatore N RANGACHARY
Date : May 252017 CHAIRMAN
(DIN: 00054437)

ANNEXURE – 7

DETAILS PURSUANT TO THE PROVISIONS OF SECTION 197(12) OF THE COMPANIES ACT 2013 READWITH RULE 5(1) OF THE COMPANIES (APPOINTMENT AND REMUNERATION OF MANAGERIAL PERSONNEL)RULES 2014

(i) The ratio of the remuneration of each executive director to the median remunerationof the employees of the company for the financial year;

Name of the Director Position Total Remuneration Ratio of Remuneration of director to the Median remuneration
1 Mr. N Rangachary Non-Executive & Independent Chairman 1.60 0.71
2 Mr. R Doraiswamy Managing Director 55.46
3 Mr. D Rajesh Kumar Joint Managing Director and Chief Financial Officer 51.21 24.78
4 Mr. P Ramachandran Whole Time Director (Marketing) 3.97 22.88
5 Mr.R Damodharaswamy Non executive Director 0.80
6 Dr. Thilagam Rajesh Non executive Director 0.80 1.77
7 Mr. N Jayabal Independent Director 0.80
8 Mr. Nirmal Kumar Chandria Independent Director 0.60 0.36
9 Mr. V Sankaran Independent Director 1.75 0.36
10 Mr. P K Shah Independent Director 0.80 0.36
11 Mr. L Venkatapathy Independent Director 1.75 0.27
12 Mr. Baskarasubramanian Director (Corporate Affairs) & Company 18.99 0.78
Secretary

Remuneration includes sitting fees

Non-executive Directors and Independent Directors have been paid sitting fees forattending the Board Meetings and Committee thereof

(ii) The percentage increase in remuneration of each director Chief Financial OfficerChief Executive Officer Company Secretary or Manager if any in the financial year; H( in lakhs)

Name of the Director Position Remuneration Increase %
2016-17 2015-16
1 Mr. N Rangachary Non-Executive & Independent Chairman 1.60 2.4 -33%
2 Mr. R Doraiswamy Managing Director 55.46 45.32 22%
3 Mr. D Rajesh Kumar Joint Managing Director and Chief Financial Officer 51.21 44.78 14%
4 Mr. P Ramachandran Whole Time Director (Marketing) 3.97 3.97 0%
5 Mr.R Damodharaswamy Non executive Director 0.80 0.80 0%
6 Dr. Thilagam Rajesh Non executive Director 0.80 0.80 0%
7 Mr. N Jayabal Independent Director 0.80 0.80 0%
8 Mr. Nirmal Kumar Chandria Independent Director 0.60 0.80 -25%
9 Mr. V Sankaran Independent Director 1.75 2.40 -27%
10 Mr. P K Shah Independent Director 0.80 0.60 33%
11 Mr. L Venkatapathy Independent Director 1.75 2.40 -27%
12 Mr. Baskarasubramanian Director (Corporate Affairs) & Company Secretary 18.99 13.28 43%
138.53 118.35 17%

(iii) The percentage increase in the median remuneration of employees in the financialyear – 7%

(iv) The number of permanent employees on the rolls of company as at March 312017 -465

(v) Average Percentile increase already made in the salaries of employees other thanthe managerial personnel in the last Financial year and its Comparison with the percentileincrease in the managerial Remuneration and justification thereof and point out if thereare any exceptional Circumstances for increase in the managerial remuneration;

The average increase granted to employees other than managerial personnel is 9%

The increase granted to managerial personnel is 12%

(vi) Affirmation that the remuneration is as per the remuneration policy of the Company

It is hereby affirmed that the remuneration paid during the year is as per theRemuneration Policy of the Company.

For and on behalf of the Board
Place : Coimbatore N RANGACHARY
Date : May 252017 CHAIRMAN
(DIN: 00054437)