TO THE MEMBERS
Your Directors have pleasure in presenting their 33rd Annual Report together withaudited accounts of the Company for the year ended 31st March 2017.
Beginning of New Era
On February 01 2017 Sona Autocomp Holding Limited (SAHL') one of the Promotersof the Company entered into a Share Purchase Agreement with JTEKT Corporation Japan(JTEKT') a Technical and Financial Collaborator of the Company and a member of thePromoter Group. In terms of the said Share Purchase Agreement on May 18 2017 JTEKTacquired from SAHL 25.12% of the equity shares of the Company on a fully diluted basis.
Consequent to the said transaction JTEKT's shareholding in the Company standsincreased from 20.10% to 45.22% and with this it has taken the position to steer yourCompany to further heights. The said acquisition of shares has triggered an OpenOffer' in terms of Securities and Exchange Board of India (Substantial Acquisition ofShares and Takeovers) Regulations 2011 and subsequent amendments made thereto.Accordingly JTEKT has made an Open Offer' to all the public shareholders of theCompany to acquire up to 51672877 fully paid-up Equity Shares of Face Value of fi1/-each of the Company constituting 26% of the Equity Share Capital of the Company. The saidOpen Offer' is being made at - 84/- per Equity Share.
1) Financial Results
STANDALONE AND CONSOLIDATED PERFORMANCE OF THE COMPANY
| ||Standalone ||Consolidated |
| ||Current Year ||Previous Year ||Current Year ||Previous Year |
| ||31.03.2017 ||31.03.2016 ||31.03.2017 ||31.03.2016 |
|Sales (Net of Excise Duty) and other income ||117220.67 ||109337.55 ||159227.51 ||153427.69 |
|Profit before interest & depreciation ||13445.92 ||13237.50 ||21238.06 ||20993.35 |
|- Interest ||2639.98 ||2822.86 ||2853.93 ||3172.80 |
|- Depreciation & write ofis ||7477.36 ||7190.24 ||10299.59 ||9875.20 |
|Profit before tax ||3328.58 ||3224.40 ||8084.54 ||7945.35 |
|Less : Provision for tax ||1579.68 ||1301.00 ||3566.39 ||3310.86 |
|Provision for deferred tax liability / (assets) ||(573.07) ||(581.94) ||(759.55) ||(785.99) |
|Earlier years excess provision of tax written back ||(36.55) ||5.61 ||(64.39) ||5.44 |
|Minimum alternate tax (MAT) credit entitlement ||- ||- ||- ||- |
|Profit after tax ||2358.52 ||2499.73 ||5342.09 ||5415.04 |
|Less : Share of profit transferred to minority ||- ||- ||1683.27 ||1697.07 |
|Less : Share of loss of an associate ||- ||- ||(10.20) ||(13.37) |
|Consolidated profit for the year ||2358.52 ||2499.73 ||3648.62 ||3704.60 |
|Add : Profit brought forward ||9269.82 ||7966.10 ||16481.06 ||14092.76 |
|Less: Adjustment of depreciation change as per Schedule II of the Companies Act 2013 ||- ||- ||- ||- |
|Profit available for appropriations ||11628.34 ||10465.83 ||20129.68 ||17797.36 |
|Appropriations || || || || |
|Proposed Dividend ||- ||993.71 ||- ||993.71 |
|Tax on Dividend ||- ||202.30 ||- ||322.59 |
|Transfer to General Reserve ||- ||- ||- ||- |
|Corporate Social Responsibility Exp. ||- ||- ||- ||- |
|Balance Carried Forward ||11628.34 ||9269.82 ||20129.68 ||16481.06 |
2) State of Affairs of the Company
Revenue from operations increased by 7.21% to - 11722 million. PBDIT improved by1.57% to - 1345 million. The Company reported PAT of - 236 million. Improvement in PBDITnumbers shows the success of Company's efiorts in controlling the material cost byfollowing aggressive localization program and through backward integration.
Your directors are pleased to recommend a dividend of 50% on equity share capitalof the Company for the financial year 2016-17 same as last financial year.
| || ||(Rs/ Lakhs) |
| ||31-Mar-17 ||31-Mar-16 |
|Balance as per last financial statements ||9269.82 ||7966.10 |
|Add: Profit for the year Less: Appropriations ||2358.52 ||2499.73 |
|Proposed dividend ||- ||993.71 |
|Tax on proposed dividend ||- ||202.30 |
|Net surplus in the statement of profit and loss ||11628.34 ||9269.82 |
5) Change of nature of Business (if any)
There has been no change in the nature of business of the Company during thefinancial year.
6) Share Capital
The Paid Up Equity Share Capital of the Company as at March 31 2017 stood at -1987.42 Lakhs. During the year under review the Company has not issued any shares /securities. As on March 31 2017 none of the Directors of the Company hold instrumentsconvertible into equity shares of the Company.
7) Significant and material Orders passed by the Regulators or Courts
There are no significant or material Orders passed by the Regulators or Courts thatwould impact the going concern status of the Company and its future operations.
8) Material changes and commitments if any affecting the financial position ofthe Company
There are no material changes and commitments affecting the financial position ofthe Company which have occurred between the end of the financial year of the Company towhich financial statements relate and the date of the report.
9) Details in respect of adequacy of internal controls
Sona Koyo has an Effective and reliable internal control system commensurate withits size and operations. The internal controls are aligned to global standards andprocesses while also adhering to local statutory requirements. The internal controlssystems are supported through management reviews verification by internal auditors aswell as verification by statutory auditors. Further the audit committee of the Boardreviews the internal audit plan adequacy of internal controls system significant auditobservations and monitors the sustainability of remedial measures.
In addition to policies procedures and guidelines the internal controls system isfacilitated by an automated "Compliance Manager Tool" which enablesself-assessment by process owners on status of all applicable regulatory compliances andInternal Controls including controls relating to adherence to company's policiessafeguarding of its assets prevention and detection of frauds and errors accuracy andcompleteness of the accounting records and timely preparation of reliable financialinformation. The status of each self-assessment is approved by an immediate superior. Thestatus of self-assessment is periodically deliberated and reviewed by the SeniorManagement. Further the accuracy of sample self-assessments is verified through periodicinternal audits.
The aforesaid internal control system provides high degree of assurance with respect toEffectiveness and efficiency of operations adequacy and adherence of internal financialcontrols and compliances with laws and regulations.
10) Details and Performance of Subsidiary Companies / Associate Company
The Company has the following two Subsidiaries and one Associate Company :
a) JTEKT SONA Automotive India Limited (JSAI)
In JSAI the Company is holding 49% of the equity capital but it has the right tonominate majority of Directors on the Board of JSAI. This Joint Venture Company has beenestablished with JTEKT Corporation Japan with a business objective of manufacturingColumn Type Electric Power Steering (C-EPS) Systems. The Plants of JSAI are located inBawal (Haryana) Chennai and Bengaluru. During the year ended 31st March 2017 JSAI hasachieved total revenue of - 61206.28 Lakhs and earned net profit of - 2616.63 Lakhs.
b) Sona Fuji Kiko Automotive Limited (SFAL)
In SFAL the Company is holding 51% of the Equity Capital. This Joint Venture Companyhas been established with FUJI KIKO Co. Ltd. Japan with a business objective ofmanufacturing Columns to be used in the manufacturing of C-EPS by JSAI. The Plant of SFALis located in Bawal Haryana.
During the year ended 31st March 2017 SFAL has achieved total revenue of - 8773.65Lakhs and earned net profit of Rs 711.80 Lakhs. The Board of Directors of SFAL intheir meeting held on 23rd May 2017 has recommended a dividend at the rate of 7.5% forthe financial year ended on 31st March 2017.
a) Sona Skill Development Centre Limited (SSDCL)
SSDCL is a skill development Company which provides skill development and trainingprograms such as TQM Problem Solving Flow Manufacturing (Lean) Safety and Innovationas well as comprehensive training program that includes 5S safety QC 7 toolsmeasurement maintenance Toyota Production System basic conventional machine operationCNC machine operation material selection and soft skills such as team work and conflictmanagement. Sona Koyo Steering Systems Limited has made the investment in the Equity ShareCapital of Sona Skill Development Centre Limited (SSDCL) which is equivalent to 49.99% ofthe paid up share capital of SSDCL. Accordingly SSDCL has been covered in the definitionof Associate Company. During the year ended 31st March 2017 SSDCL has achieved totalincome of - 183.96 Lakhs and has incurred a loss of - 20.39 Lakhs.
No company has become / ceased to be a Subsidiary or Associate during the financialyear 2016-17. However on 18th May 2017 the Company has disposed off its entireinvestment in SSDCL. Since the said disinvestment was made after 31st March 2017 theCompany is required to consolidate the financials of SSDCL with its financial statementsfor the year ended 31st March 2017.
11) Subsidiary Companies Accounts
During the year the Board of Directors reviewed the Affairs of the subsidiaries andassociate companies. In accordance with Section 129(3) of the Companies Act 2013 theconsolidated financial statements of the Company forms part of the Annual Report. Furthera statement containing the salient features of the financial statement of the subsidiariesand associate company in the prescribed Form AOC-1 is attached along with financialstatement. The statement also provides the details of performance financial position ofeach of the subsidiaries and associate company.
In accordance with Section 136 of the Companies Act 2013 the audited financialstatements including the consolidated financial statements and related information of theCompany and audited accounts of each of its subsidiaries and associate company areavailable on Company's website www.sonakoyosteering.com. These documents will also beavailable for inspection during business hours at Company's registered office. The Companyshall provide the copy of financial statements of its subsidiaries and associate companyto the shareholders upon their request.
In accordance with the Accounting Standard AS-21' on Consolidated FinancialStatements read with Accounting Standard AS-27' on Financial Reporting of interestin Joint Ventures the Audited Consolidated Financial Statements are provided in theAnnual Report.
12) Extract of Annual Return
The extract of Annual Return as provided under sub-section (3) of Section 92 of theCompanies Act 2013 is enclosed as Annexure I in the prescribed form MGT-9 andforms part of this Report.
13) Corporate Social Responsibility
In compliance with Section 135 of the Companies Act 2013 read with the Companies(Corporate Social Responsibility Policy) Rules 2014 the Company has established CorporateSocial Responsibility (CSR) Committee and statutory disclosures with respect to the CSRCommittee and an Annual Report on CSR Activities forms part of this Report as Annexure II.
14) Number of meetings of the Board of Directors
The Board of Directors met 4 (four) times in the year ended 31st March 2017. Thedetails of the board meetings and the attendance of the Directors are provided in theCorporate Governance Report.
15) Nomination & Remuneration Committee and its policy
The Board of Directors had constituted a Nomination & Remuneration Committee toreview formulation of the criteria for determining qualifications positive attributes andindependence of a director and recommend to the Board a policy relating to theremuneration of the directors key managerial personnel and other employees and such otherancillary functions as may be required.
The Company follows a policy on remuneration of Directors and Senior ManagementEmployees. The policy is approved by the Nomination & Remuneration Committee and theBoard.
16) Particulars of contracts or arrangements with related parties
The Company has entered into contracts / arrangements with the related parties in theordinary course of business and on arm's length basis. Thus provisions of Section 188(1)of the Act are not applicable.
However in terms of the SEBI (Listing Obligations and Disclosure Requirements)Regulations 2015 all transactions with related parties which are of material in natureare subject to the approval of the Members of the Company.
17) Secretarial Audit Report
Pursuant to Section 204 of the Companies Act 2013 the Company had appointed Mr. S.SGupta Company Secretaries in Practice as its Secretarial Auditors to conduct thesecretarial audit of the Company for the FY 2016-17. The Company provided all assistanceand facilities to the Secretarial Auditors for conducting their audit. The Report ofSecretarial Auditors for the FY 2016-17 is annexed to this report as Annexure III.The report does not contain any qualification.
18) Risk Management Policy
The Board of Directors of the Company had constituted a Risk Management Committee tooversee the risk management process in the Company.
The Company has laid down a well-defined risk management mechanism covering the riskmapping and trend analysis risk exposure potential impact and risk mitigation process. Adetailed exercise is being carried out to identify evaluate manage and monitoring ofboth business and non-business risks. The Risk Management Committee periodically reviewsthe risks and suggests the steps to be taken to control and mitigate the same through aproperly defined framework.
19) Corporate Governance
The Company has complied with the corporate governance requirements under the CompaniesAct 2013 and as stipulated under the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 (hereinafter referred to as Listing Regulations'). Aseparate section on corporate governance under the Listing Regulations along with acertificate from the auditors confirming the compliance is annexed and forms part of thisAnnual Report.
20) Vigil Mechanism
The Company has established a vigil mechanism for Directors and employees to reporttheir genuine concerns. For details please refer to the Corporate Governance Reportattached to this Report.
The Securities of your Company are listed at National Stock Exchange and Bombay StockExchange and the Company has paid the Listing Fee due to them.
During the year the Company has not invited any deposits covered under Chapter V of theCompanies Act 2013.
23) Loans Guarantees and Investments
Details of Loans Guarantees and Investments covered under the provisions of Section186 of the Companies Act 2013 are given in the notes to Financial Statements which areself explanatory.
24) Directors & Key Managerial Personnel
As on 31st March 2017 your Company has Twelve (12) Directors consisting of six (6)Independent Directors three (3) Non-executive Directors a Non-executive Chairman anExecutive Vice Chairman and a Dy. Managing Director.
In terms of the definition of Independence' of Directors as prescribed under theSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 and Section149(6) of the Companies Act 2013 and based on the confirmation / disclosures receivedfrom the Directors the following Non-Executive Directors were the Independent Directors:-
1) Mr. Ravi Bhoothalingam
2) Mr. Prem Kumar Chadha
3) Lt.Gen.(Retd.) Shamsher Singh Mehta
4) Mr. Ramesh Suri
5) Mrs. Ramni Nirula
6) Mr. Prasan Abhaykumar Firodia
The Company has received declarations from all the Independent Directors of the Companyconfirming that they meet the criteria of independence as prescribed both under theCompanies Act 2013 and Listing Regulations.
During the year under review our colleague Mr. Kazuhiko Ayabe Nominee of MarutiSuzuki India Limited (MSIL') has ceased to be a Director of the Company due towithdrawal of his nomination by MSIL. Consequent upon cessation of Mr. Kazuhiko Ayabe fromthe office of Board of Directors of the Company MSIL has nominated Mr. Toshiya Miki whohas been appointed as an Additional Director of the Company Effective from 5th August2016.
Mr. Sunjay Kapur Mrs. Rani Kapur and Mr. Kiran Manohar Deshmukh have resigned from theBoard of the Company by close of the business hours of 18th May 2017
Your Directors take this opportunity to place on record the appreciation of servicesrendered by Mr. Sunjay Kapur Mrs. Rani Kapur Mr. Kiran Manohar Deshmukh and Mr. KazuhikoAyabe during their association with the Company.
The Board of Directors in their meeting held on 18th May 2017 have appointed Mr.Hidekazu Omura as Chairman of the Board and General Meetings and Mr. Seiho Kawakami as anadditional director of the Company with Effect from the close of business hours of 18thMay 2017. The Board of Directors in their meeting held on 10th February 2017 havere-appointed Mr. Kiyozumi
Kamiki as Dy. Managing Director with remuneration for a period of three years withEffect from 1st April 2017 who was further elevated to the office of Managing DirectorsEffective from the close of business hours of 18th May 2017 for the remaining period ofhis tenure till 31st March 2020. Mr. Sudhir Chopra has been elevated as Director(Corporate Affairs) & Company Secretary of the Company with remuneration by theBoard of Directors in their meeting held on 18th May 2017 for a period of three yearswith Effect from the close of business hours of 18th May 2017.
Further consequent upon resignation of Mr. Kiran Manohar Deshmukh the Board ofDirectors of the Company appointed Mr. Kiyozumi Kamiki Managing Director as one of thewhole-time Key Managerial Personnel of the Company Effective from the close of businesshours of 18th May 2017.
The Executive Vice Chairman and Dy. Managing Director of the Company have not receivedany remuneration or commission except Sitting Fee if any from any of the subsidiariesof the Company.
Pursuant to the provisions of Section 152(6) and Articles of Association of theCompany Mr. Kiyozumi Kamiki (DIN: 06536243) will retire by rotation at the forthcomingAnnual General Meeting and being eligible offers himself for reappointment.
25) Board Evaluation
The Company has devised a Policy for performance evaluation of Independent Directorsthe Board its Committees and other individual Directors which include criteria forperformance evaluation of the non-executive directors and executive directors.
The performance evaluation of the Board its Committees and individual directors wasconducted and the same was based on questionnaire and feedback from all the Directors onthe Board as a whole Committees and self-evaluation.
Based on the questionnaire and feedback the performance of every director wasevaluated in the meeting of the Nomination and Remuneration Committee. A separate meetingof the independent directors was convened which reviewed the performance of the Board (asa whole) the non-independent directors and the Chairman. Post the Annual IndependentDirectors' meeting the collective feedback of each of the Independent Directors wasdiscussed by the Chairman of the Nomination & Remuneration Committee with the Board'sChairman covering performance of the Board as a whole; performance of the non-independentdirectors and performance of the Board's Chairman.
26) Audit Committee
The Audit Committee of Directors of the Company presently consists of the followingmembers:
1) Mr. Ravi Bhoothalingam Chairman
2) Mr. Prem Kumar Chadha Member
3) Lt. Gen. (Retd.) Shamsher Singh Mehta Member
4) Mr. Kiyozumi Kamiki Member
More details on the Audit Committee are given in the Corporate Governance Report.
27) Directors' Responsibility Statement
Pursuant to clause (c) of sub-section (3) of Section 134 of the Companies Act 2013the directors confirm that:
a) in the preparation of the annual accounts for the financial year 2016-17 theapplicable accounting standards have been followed along with proper explanation relatingto material departures;
b) the directors have selected such accounting policies and applied them consistentlyand made judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of Affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;
c) the directors have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of this Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the directors have prepared the annual accounts on a going concern basis;
e) the directors have laid down internal financial controls to be followed by theCompany and that such internal financial controls are adequate and were operatingEffectively; and
f) the directors have devised proper systems to ensure compliance with the provisionsof all applicable laws and that such systems were adequate and operating Effectively.
28) Statutory Auditors and their Report
As per Section 139 of the Companies Act 2013 read with the Companies (Audit andAuditors) Rules 2014 the term of M/s. S.P. Puri & Co. (Firm Registration No.001152N) Chartered Accountants New Delhi as the Statutory Auditors of the Company expiresat the conclusion of the ensuing Annual General Meeting of the Company. The Board ofDirectors of the Company at their meeting held on 24th May 2017 on the recommendation ofthe Audit Committee have made its recommendation for appointment of M/s. B.S.R. & Co.LLP Chartered Accountants (ICAI Registration No. 101248W/W-100022) as the StatutoryAuditors of the Company by the Members at the 33rd Annual General Meeting of the Companyfor an initial term of 5 years. Accordingly a resolution proposing appointment of M/s.B.S.R. & Co. LLP Chartered Accountants as the Statutory Auditors of the Company fora term of five consecutive years i.e. from the conclusion of 33rd Annual General Meetingtill the conclusion of 38th Annual General Meeting of the Company pursuant to Section 139of the Companies Act 2013 forms part of the Notice of the 33rd Annual General Meeting ofthe Company. The Company has received their written consent and a certificate that theysatisfy the criteria provided under Section 141 of the Act and that the appointment ifmade shall be in accordance with the applicable provisions of the Act and rules framedthereunder.
The Notes on financial statement referred to in the Auditors' Report areself-explanatory and do not call for any further comments. The Auditors' Report does notcontain any qualification reservation or adverse remark.
M/s. S.P. Puri & Co. over many years have successfully met the challenge that thesize and scale of the Company's operations pose for auditors and have maintained thehighest level of governance ethical standards rigour and quality in their audit. TheBoard place on record its appreciation for the services rendered by M/s. S.P. Puri &Co. as the Statutory Auditors of the Company.
29) Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo.
A statement containing the necessary information on conservation of energy technologyabsorption foreign exchange earnings and outgo as required to be given pursuant toprovisions of Section 134 of the Companies Act 2013 read with the rules made there underis annexed as Annexure IV and forms part of this report.
Disclosure pertaining to remuneration and other details as required under Section197(12) of the Companies Act 2013 read with Rule 5(1) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 are provided in Annexure - V(a) to thisReport.
A statement containing the names of every employee employed throughout the financialyear and in receipt of remuneration of
fi 102 Lakhs or more or employed for part of the year and in receipt of - 8.5 Lakhs ormore a month under Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is enclosed as Annexure - V(b) to this Report.
Your Directors acknowledge with gratitude the co-operation and support extended bySONA's customers namely Maruti Suzuki Mahindra & Mahindra Tata Motors Honda FiatIndia Toyota Kirloskar General Motors John Deere Club Car E-z-go Renault-Nissan andIsuzu the Financial Institutions Banks various agencies of the Government.
Your Directors also wish to place on record their sincere appreciation of the servicesrendered by all the employees of the Company and are thankful to the Shareholders fortheir continued patronage.
| ||For and on behalf of the Board |
|Place : Gurugram ||Hidekazu Omura |
|Dated : 24th May 2017 ||Chairman |