Schaeffler India Ltd.
|BSE: 505790||Sector: Engineering|
|NSE: SCHAEFFLER||ISIN Code: INE513A01014|
|BSE 15:40 | 23 Mar||5288.60||
|NSE 15:31 | 23 Mar||5208.60||
|Mkt Cap.(Rs cr)||8,790|
|Mkt Cap.(Rs cr)||8789.65|
Schaeffler India Ltd. (SCHAEFFLER) - Director Report
Company director report
Your Directors are pleased to present the 53rd Annual Report of the Companytogether with the audited financial statements of the Company for the year ended December31 2015.
(Rs. in million)
Financial and Operational Performance
Indian business environment showed mixed signals in the year 2015. Forecast foreconomic growth as measured by GVA for the fiscal year 2015-16 is estimated at 7.3%.Growth in industrial production as reflected by development of Index of IndustrialProduction (IIP) is placed much lower at about 3% to 4% during the same year.
Some of the sectors closely related to your Company's business such as agriculturalequipment for example showed a strongly negative trend. Unfavourable developments inrural markets were also reflected in flat demand growth from two wheeler industry.Infrastructure development remained at a very moderate level. On a more positive noteIndian Government announced implementation of key projects to improve rail infrastructurein the country. Developments in Renewable Energy have been positive though India stillhas significantly higher potential compared to current level of production in this sector.
Lower level of capacity utilisation in user industries impacted growth in aftermarketdemand.
Exports business showed moderate growth.
Helped by global decline in prices of crude oil and some other commodities inflationin the country remained well under control.
Slowdown in global economy especially Chinese economy turned many global competitorsto intensify their Indian business activities thus leading to tough competition in localmarkets.
Overall the market environment for your Company's business was moderately positive.
Your Company's total Income (including other income) was placed at M 17806 million inyear 2015 (Year 2014: M 16731 million) representing a growth of 6.4%. Profit before taxwas placed at M 2938 million (Year 2014: M 2324 million) representing a growth of 26.4%.
Reasonable growth in domestic and export markets together with improvement inoperational efficiency led to favourable impact on bottom line. Our Company has beenconsistently practising prudent finance and working capital management. The strong focuson working capital and liquidity management has helped timely generation of sufficientinternal cash flow to invest in long term strategic objectives of the Company.
We consider your Company's performance as satisfactory.
As a member company of Schaeffler Group your Company focuses on quality technologyand innovation as cornerstones of its long term strategy. We continue to invest inexpansion of our manufacturing and engineering capabilities in the country. We keepcustomer at the centre stage of all our actions and get involved in customer projects atan early stage of development. This helps us in our endeavours to position FAG as apreferred partner of our customers.
We believe that efficiency and control on costs are critical factors for success forbusiness in India. Our programmes such as Fit for Quality and MOVE are consistentlyimplemented in all areas to improve operational excellence.
Competence of our people is a key differentiator in competitive Indian market. Wecontinue to vigorously invest in talent development as a core process within our HumanResource Development initiatives.
By consistent implementation of initiatives to improve market excellence operationalexcellence and people excellence your Company strives not only to achieve profitablegrowth but to also improve its long term competitiveness in the business.
The forecast for GVA growth in FY 2016 -17 is likely to improve at 7.6% for the year2016-17.
Government is energetically pushing the Make in India initiative and is taking measuresto accelerate infrastructure projects and rural development while continuing its emphasison fiscal discipline. With commodity prices unlikely to move up much inflation may remainin control.
Above factors suggest further gradual improvement in economic and industrial outlook ofthe country.
Experts however do caution that the economic recovery may be uneven and there aredownside risks. The pick-up in the investment cycle is yet to gain strength the bankingsystem is weighed down by bad loans and the weaker global economy can hit India'sexports.
Your Company believes that long term outlook for Indian economy is very positive whilefor the short term we remain cautiously optimistic.
With our strategy to invest in continued expansion of manufacturing and engineeringfootprint your Company is determined to maintain its focus on profitable growth in theshort and long term. At the same time we will strive to improve organisational agilityand minimise risks that any short term downturn could bring.
The global situation currently is characterised by many challenges and uncertainties.In India despite several chronic issues we still see numerous opportunities in the longterm. Being a leading player in this business we follow strong future orientation in ourapproach and continually work towards improving organisational competitiveness andagility. 'Expect More' epitomises our organisation's spirit of continual improvement as weremain positive raise the bar and strive for innovation and excellence through team workin all areas of operations.
Your Company has a steady dividend payment history and in line with the financialperformance for the year 2015 your Directors recommend for your approval on dividend forthe year ended December 31 2015 at the rate of M 10/- (2014: M 7.5) per equity shareamounting to M 166.2 million. (2014: M 124.6 million). The Company will pay the Income Taxon dividend as per the provisions of the Income-Tax Act 1961.
Transfer to General Reserve
A sum of M 400 million has been transferred to the General Reserves of the Company.This reflects well on the financial strength of the Company.
Transfer to Investor Education and Protection Fund
Pursuant to provisions of Section 205A of the Companies Act 1956 [pursuant to rule 3of the Investor Education and Protection Fund (Awareness and Protection of Investors)Rules 2001] the unpaid/unclaimed dividend pertaining to the year ended on December 312007 amounting to M 264912/- (including interest accrued thereon) which was lying in theCompany's separate unpaid dividend account and remaining unclaimed for a period of sevenyears was transferred to the Investor Education and Protection Fund (IEPF).
Subsidiary and Associate Companies
At the beginning of the year (effective from January 1 2015) 'FAG Roller BearingsPrivate Limited' [CIN: U29130MH 2001PTC134044] became 'wholly owned subsidiary' whichwas amalgamated with the Company during the year.
The High Court of Judicature at Bombay sanctioned the Scheme of Amalgamation (appointeddate: January 1 2015) of 'FAG Roller Bearings Private Limited' with 'FAG Bearings IndiaLimited' and their respective Shareholders and Creditors by passing an order that wasreceived on November 3 2015. The said order has been registered with 'Registrar ofCompanies' Mumbai Maharashtra on November 10 2015 and accordingly the Scheme hasbecome effective from November 10 2015.
The Company does not have any Subsidiary Joint Venture or Associate Companyincorporated in India as on December 31 2015.
Management's Discussion and Analysis
Pursuant to Regulation 34 read with Schedule V of the Securities and Exchange Board ofIndia (Listing Obligations and Disclosure Requirements) Regulations 2015 detailed reviewof operations performance and future outlook of the Company is covered under a separateAnnexure to this report as Management's Discussion & Analysis. (ANNEXURE - A)
A separate section on Corporate Governance is included in the Annual Report and thecertificate from M/s. Samdani Kabra & Associates Company Secretaries Vadodara(Gujarat) the Company's Secretarial Auditors confirming the compliance of conditions onCorporate Governance is annexed thereto. (ANNEXURE - B)
Conservation of Energy Technology Absorption Foreign Exchange Earning and Outgo
The particulars as prescribed under sub-section (3) (m) of Section 134 of the CompaniesAct 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 have been given in theAnnexure forming part of this Report (ANNEXURE -C).
In accordance with the provisions of Section 152 of the Companies Act 2013 read withprovisions of the Articles of Association of the Company Mr. Avinash Gandhi and Mr.Dietmar Heinrich will retire by rotation at the ensuing Annual General Meeting and beingeligible offer themselves for reappointment. A brief resume of and particulars relatingto them are given separately under the report on Corporate Governance.
Key Managerial Personnel (KMP)
Pursuant to provisions of Sections 2(51) and 203 of Companies Act 2013 read with Rule8 of the Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014following persons are acting as Key Managerial Personnel of the Company as on December 312015;
Mr. Rajendra Anandpara Managing Director & Chief Executive Officer
Mr. Satish Patel Chief Financial Officer
Mr. Raj Sarraf Company Secretary
None of the Key Managerial Personnel has resigned during the year ended December 312015.
Policy on Nomination and Remuneration
The Company's policy on Nomination and Remuneration is framed with objectives as under;
1. To formulate criteria and advise the Board in matters of determining qualificationscompetencies positive attributes and independence of Directors and policies relating totheir appointment and removal
2. To review corporate goals and objectives to set norms of performance evaluation andto lay out remuneration principles for Directors KMP and Senior Management linked totheir effort performance and contribution towards achievement of organisational goals
3. To evaluate performance and give recommendations to the Board on remunerationpayable to the Directors KMP and Senior Management and
4. To review and recommend to the Board measures to retain and motivate talentincluding KMP and Senior Management Personnel with a view to ensuring long termsustainability and competitiveness of the organisation.
Criteria and Qualification for Nomination & Appointment
A person to be appointed as Director KMP or at Senior Management level should possessadequate and relevant qualification expertise and experience for the position that he /she is being considered for. The Nomination & Remuneration Committee (NRC) willevaluate whether qualification expertise and experience possessed by a person issufficient / satisfactory for the concerned position and the NRC will make appropriaterecommendations to the Board of Directors.
Policy on Remuneration
1. The remuneration (including revisions) to Directors is recommended by NRC to theBoard for approval. The remuneration (including increments) to the Directors sorecommended by NRC to the Board should be within the limits under the Companies Act 2013read with the Rules thereunder and as approved by the shareholders of the Company.
2. None of the Directors (including Independent Directors) shall be entitled to anystock option of the Company.
3. Non-executive directors who are in whole-time employment with other AssociateCompanies of the Schaeffler Group will not be entitled to any remuneration profitrelated commission or sitting fees.
4. While determining Remuneration to KMP Senior Management Personnel and otheremployees the Company encourages and rewards; merit and superior performance. Theobjective is to set the total remuneration at levels to attract motivate and retainhigh-calibre and high potential personnel in a competitive global market.
Formal Annual Evaluation
Your Company believes that systematic evaluation contributes significantly to improvedperformance at three levels - Organisational Board and Individual Board Member. Itencourages the leadership teamwork accountability decisionmaking communication andefficiency of the Board. Evaluation also ensures teamwork by creating better understatingof Board dynamics board-management relations and thinking as a group within the Board.
The process includes multi-layered evaluation based on well defined criteria consistingof relevant parameters.
For the year 2015 the Board has carried out an annual performance evaluation of itsown and that of its Committees and individual Directors.
Performance evaluation criteria for the Board its Committees the Directors and theChairman of the Company were circulated to and responded by the Directors. A consolidatedsummary of the ratings as provided by the Directors was prepared by the CompanySecretary. Independent Directors in their meeting have evaluated performance of the'Board' the 'Non-independent Directors' as well as the 'Chairman' of the Company andsubmitted their recommendation to the Board. The Nomination and Remuneration Committee hasfurther carried out evaluation of all Directors including Independent Directors. Thereport of performance evaluation so arrived at was then noted and discussed by theNomination and Remuneration Committee and the Board in their respective meetings.
Independent Director's Declaration
The Company has received the declarations in the prescribed format from eachIndependent Director confirming that they meet the criteria of independence as envisagedin the provisions of Section 149 of the Companies Act 2013 read with Regulation 16 ofSecurities and Exchange Board of India (Listing Obligations & Disclosure Requirements)Regulations 2015.
The Statutory Auditors M/s. B S R & Co LLP Chartered Accountants Mumbai (FirmRegistration Number: 101248 W / W-100022) were appointed as Statutory Auditor of theCompany in the 52nd Annual General Meeting of Company held on April 24 2015for a period of five consecutive years subject to ratification by members every year inthe AGM. Based upon the declaration on their eligibility consent and terms of engagementyour Directors propose ratification of their appointment in 53rd Annual GeneralMeeting until conclusion of 54th Annual General Meeting of the Company.
M/s. Samdani Kabra & Associates a firm of Company Secretaries in practice wasappointed as Secretarial Auditors to carry out Secretarial Audit of the Company. In termsof provisions of section 204 of the Companies Act 2013 a Secretarial Audit Report hasbeen annexed to this Report. (ANNEXURE -H)
M/s Y. S. Thakar & Co. Cost Accountants were appointed as Cost Auditors to carryout the audit of the cost records of the Company for the Financial Year ending December31 2015. Based upon the declaration on their eligibility consent and terms ofengagement your Directors propose their appointment for the year 2016.
Explanation or Comments on disqualifications reservations adverse remarks ordisclaimers in the auditor's reports;
There have been no disqualifications reservations adverse remarks or disclaimers inthe auditor's reports requiring explanation or comments by the Board.
Contracts and Arrangements with Related Parties
The transactions with the related parties are governed by prevailing regulatoryrequirements and Company's policy on dealing with such transactions. During the year alltransactions with the related parties have been carried out in normal course of businessand based upon well set principles of arm's length. A separate report containing detailsof 'Material Related Party Transactions' carried out during the year is annexed to thisreport. (ANNEXURE - D)
Corporate Social Responsibility (CSR)
Being an Indian company we are equally motivated by the Indian ethos of Dharma as akey plank for organisational selfrealisation. Guided by the prevailing regulatoryrequirements the Company has constituted a 'Corporate Social Responsibility (CSR)Committee' and framed a Policy on CSR summary of which together with details of CSRactivities undertaken by the Company during the year 2015 have been covered in separatereport on CSR annexed to this report. (ANNEXURE - E)
Whistle Blower Policy/ Vigil Mechanism
Your Company has a well-defined 'Whistle Blower Policy' and established Vigil Mechanismto provide for adequate safeguard against victimisation of Directors and employees whofollow such mechanism and also make provisions for direct access to the chairperson ofAudit Committee in appropriate cases.
Whistle Blower Policy of the Company is available on the Company's website at theweb-link:
Particulars of Loans given Investments made Guarantees given and Securities provided
The particulars of loans have been disclosed in notes to the financial statements.Except prolongation of existing intercorporate loans there have been no fresh loansgiven investments made or guarantees given during the year.
During the year the Company has not accepted any deposits under the Companies Act2013.
Particulars of Employees and related disclosures
In terms of the provisions of Section 197(12) of the Companies Act 2013 read with Rule5(2) and 5(3) of Companies (Appointment and Remuneration of Managerial Personnel) Rules2014 the names of employees drawing remuneration in excess of the limits set out in thesaid rules forming part of this Report is given in the Annexure to this Report. Howeverpursuant to provisions of Section 136(1) of Companies Act 2013 all reports and accountsare sent to all the shareholders of the Company except this annexure. Any shareholderinterested in inspecting this report can visit to our registered office or write to theCompany Secretary for a copy of it.
Disclosures pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 have been appended to this Report.(ANNEXURE - F).
Disclosure under the Sexual Harassment of Women at Workplace (Prevention Prohibitionand Redressal) Act 2013
The Company has in place a Policy against Sexual Harassment at workplace in line withthe requirement of Sexual Harassment ofWomen at Workplace (Prevention Prohibition andRedressal) Act 2013. Internal Complaints Committee (ICC) has been set-up to redresscomplaints received regarding sexual harassment. All employees (permanent contractualtemporary and trainees) are covered under this Policy. No complaint received by theCommittee during the year.
Extract of Annual Return
As per regulatory requirements 'Extract of Annual Return' is provided in a separatereport annexed to this Report. (ANNEXURE - G).
Orders passed by the Regulators or the Courts or the Tribunals
There are no significant and material orders passed by the Regulators or Courts orTribunals impacting the going concern status of the Company's operation.
Directors' Responsibility Statement
Pursuant to the requirement under Section 134(3) (c) of the Companies Act 2013 yourDirectors hereby state that:
a) In the preparation of the annual accounts the applicable accounting standards havebeen followed and there are no material departures from the same;
b) The accounting policies have been selected and these have been applied consistentlyand judgments and estimates made thereon are reasonable and prudent so as to give a trueand fair view of the state of affairs of the Company as at December 31 2015 and of theprofit of the Company for that period;
c) Proper and sufficient care has been taken for the maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) Annual accounts of the Company have been prepared on a 'going concern' basis;
e) Internal financial controls have been laid down and being followed by the Companyand that such internal financial controls are adequate and were operating effectively; and
f) Proper systems to ensure compliance with the provisions of all applicable laws havebeen devised.
Based on the framework of internal financial controls and compliance systemsestablished and maintained by the Company work performed by the internal statutory andsecretarial auditors and external consultants and the reviews performed by management andthe Audit Committee the Board is of the opinion that the Company's internal financialcontrols were adequate and effective during the financial year ended December 31 2015.
Your Directors wish to place on record their sincere appreciation for the wholeheartedand continued support extended by the Shareholders Schaeffler Group SuppliersCustomers Stockists & Importers Banks and all Employees of the Company during theyear under report.
For and on behalf of the Board
February 12 2016