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Sundaram Brake Linings Ltd.

BSE: 590072 Sector: Auto
NSE: SUNDRMBRAK ISIN Code: INE073D01013
BSE LIVE 15:40 | 17 Aug 513.60 1.65
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OPEN 513.00
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VOLUME 835
52-Week high 594.00
52-Week low 329.90
P/E 45.41
Mkt Cap.(Rs cr) 202
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 513.00
CLOSE 511.95
VOLUME 835
52-Week high 594.00
52-Week low 329.90
P/E 45.41
Mkt Cap.(Rs cr) 202
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Sundaram Brake Linings Ltd. (SUNDRMBRAK) - Director Report

Company director report

Your Directors have pleasure in presenting the Forty Third Annual Report of the Companytogether with Audited Financial Statements for the year ended 31st March 2017.

FINANCIAL HIGHLIGHTS

The Ministry of Corporate Affairs (MCA) vide Notification dated 16thFebruary 2015 notified the Companies (Indian Accounting Standards) Rules 2015(hereinafter referred as Ind AS). As a standalone entity Ind AS would be applicable to theCompany only w.e.f 1st April 2017. However Your Company being an associate ofT.V.Sundram Iyengar & Sons Private Limited who have adopted Ind AS with effect from 1stApril 2016 Your Company was required to present Ind AS compliant reporting with effectfrom 1st April 2016. Hence Your Company has adopted Ind AS from Financial Year2016-17 & Annual Financial Statements for 2016-17 are presented in accordance with IndAS.

SUMMARY OF FINANCIAL RESULTS:

(Rs. in lakhs)

Details Year ended 31.03.2017 Year ended 31.03.2016
Revenue from Operations 24652.34 24626.83
Profit before interest depreciation and tax 937.00 875.16
Less : Interest 252.59 290.12
Profit before depreciation and tax 684.41 585.04
Less : Depreciation 541.25 554.39
Profit before tax and exceptional items 143.16 30.65
Add : Exceptional item
Profit before tax 143.16 30.65
Less : Provision for Taxation
Current Tax
Prior Period Tax
Deferred Tax Liability / (Asset) (net) (32.67) 71.6
Profit after tax 175.83 (40.95)
Add : Surplus / (Deficit) brought forward 1.40 22.35
General Reserve 20.00
Surplus Carried over 177.23 1.40

DIVIDEND

Though there is an improvement in the performance of the Company in the year underreview given the uncertain domestic and global macro-economic climate the Board ofDirectors would like to ensure stability and improvement in the earnings before payment ofdividend is resumed.

OPERATIONS & EXPORTS

The gross sales for the year 2016-17 were at Rs.242.43 crores as against Rs.242.81crores in the previous year. Net Foreign Exchange earned by your company in the year underreview was Rs 76.06 crores as against Rs.82.22 crores in 2015-16.

Your Company continued the efforts for cost reduction and the steps taken for reductionin Power & Fuel continue to give benefits.

Your Company recognizes that the path to sustained profitability must come from bothincreased sales and reduction in costs and those will be the key focus in the year ahead.

As a part of strategy to match the Employees' cost to production value VoluntaryRetirement Scheme (VRS) was implemented in August 2016 and there was an outgo of Rs.154lacs as VRS compensation. This will be compensated by reduction in costs in the years tocome.

On the export front there is considerable uncertainty about the impact of potentiallyprotectionist trade policies in our key US market. The domestic market faces uncertaintyfrom the fate of the upcoming monsoon as well as a significantly changed tax policy. Whilewe must welcome the potential establishment of a single Indian market a mere seventy yearsafter independence the multiple tax bands and potential for abuse thereof is regrettable.We expect the long term impact of reduced administrative burden of outdated excise andoctroi duties and taxes to be positive but are concerned about the short term impact onaftermarket sales.

Your Company continues to enjoy the status of Star Export House in accordance with theprovisions of the Foreign Trade Policy 2009 - 2014 with a Certificate of Recognitionissued by the Office of the Zonal Joint Director General of Foreign Trade Chennai whichis valid up to 31st March 2018.

Your Company continues to take steps for adding new customers and new products both inDomestic and Export markets.

RESEARCH AND DEVELOPMENT

Your Company's R&D facility located in Padi has been enjoying recognition as anapproved R&D unit by the Department of Scientific & Industrial Research (DSIR)Ministry of Science & Technology Government of India New Delhi and the recognitionis valid up to 31st March 2018.

During the year under review thrust was given for development of new products viz.Commercial Vehicle Linings & Clutch Facings both for new and existing customers.

Efforts for achieving reduction in energy costs were continued in the year underreview.

The total expenditure for R&D incurred in 2016-17 was Rs.7.69 crores as againstRs.5.94 crores in the previous year.

OUTLOOK FOR 2017-18

With expectation of normal monsoon and implementation of GST it is expected thateconomy may pick up momentum of growth and your company hopes to reap the benefits ofgrowth in automobile sector.

While the results of any protectionist tariff in our key markets the potential fordelays or disruptions from the introduction for GST are causes for concern the efficientand effective execution of your company's plans to lower costs and increase sales willplay a large role in the results for the coming year.

PUBLIC DEPOSITS

Your Company does not hold any deposit from the public.

BOARD MEETINGS

The Board of Directors of the Company met Five times during the financial year.

Audit Committee and Stakeholders' Relationship Committee of the Board of Directors metfive times and four times respectively during the year.

DIRECTORS

Mr. K Mahesh Director of the Company who retires by rotation and being eligible forre-appointment offers himself for re-appointment as Director of the Company subject to theapproval by the Shareholders of the Company by an Ordinary Resolution.

DECLARATION FROM INDEPENDENT DIRECTORS ON ANNUAL BASIS

The Company has received necessary declaration from all Independent Directors of theCompany under Section 149(7) of the Companies Act 2013 that the Independent Directors ofthe Company meet with the criteria of their Independence laid down in Section 149 (6) ofthe Act. The format of the Disclosure is given as Annexure I.

VIGIL MECHANISM

The Company adopted a Whistle Blower Policy establishing vigil mechanism to provide aformal mechanism to the Directors and employees to report their concerns about unethicalbehavior actual or suspected fraud or violation of the Company's Code of Conduct orethics policy. The Policy provides for adequate safeguards against victimization ofemployees who avail the mechanism and also provides for direct access to the Chairman ofthe Audit Committee. It is affirmed that no personnel of the Company has been deniedaccess to the Audit Committee. The policy of Vigil mechanism is available on the Company'swebsite www.tvsbrakelinings.com. No complaint has been received from any employee sinceinception of the vigil mechanism.

MATERIAL CHANGES & COMMITTMENTS

There are no material changes and commitments affecting the financial position of thecompany which have occurred between the end of the financial year (FY 2016-17) of thecompany to which the financial statements relate and date of the report.

DIRECTORS' RESPONSIBILITY STATEMENT

In pursuance of Section 134(5) of the Companies Act 2013 Your Directors confirm :

1. that in the preparation of the annual accounts the applicable Indian AccountingStandards (Ind AS) have been followed;

2. that they have selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give true and fairview of the state of affairs of the Company at the end of the financial year and of theprofit and loss of the Company for that period;

3. that they 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 frauds and other irregularities;

4. that they had prepared the annual accounts on a going concern basis;

5. they had laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and

6. the Directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and operating effectively.

INFORMATION ABOUT THE FINANCIAL PERFORMANCE / FINANCIAL POSITION OF THE SUBSIDIARIES /ASSOCIATES / JV AND INFORMATION ABOUT SUBSIDIARY / JV / ASSOCIATE COMPANY

There is no Subsidiary or Associate Company or JV and hence these are not applicable.

EXTRACT OF ANNUAL RETURN

As required pursuant to Section 92(3) of the Companies Act 2013 and Rule 12 of theCompanies (Management and Administration) Rules 2014 an extract of Annual Return in FormNo. MGT 9 as a part of this Annual Report is given in Annexure II.

STATUTORY AUDITORS

M/s.Sundaram & Srinivasan Chartered Accountants who were appointed as StatutoryAuditors for a transitional period of 3 years till the conclusion of the 43rdAGM will retire at the conclusion of the AGM scheduled on 4th August 2017 inline with the provisions of the Companies Act 2013 for retirement of auditors byrotation.

In view of this the Board of Directors have recommended the appointment of M/s.Brahmayya & Co. Chartered Accountants Chennai having registration number 000511S asStatutory Auditors of the Company for a period of 5 years (subject to ratification at theAGM every year till the conclusion of the 48th AGM) for shareholders' approvalat the 43rd AGM.

The Company has received consent from M/s. Brahmayya & Co. Chartered AccountantsChennai to serve as Statutory Auditors of the company if they are so appointed.

They have also furnished necessary certificate under Section 139 of the Companies Act2013 read with Rule 4 of the Companies (Audit and Auditors) Rules 2014 conveying theireligibility for appointment of statutory auditors of the Company.

Directors place on record their sincere appreciation of the valuable services renderedby M/s.Sundaram & Srinivasan Chartered Accountants Chennai since inception of theCompany as its Statutory Auditors.

SECRETARIAL AUDITOR

Pursuant to the provisions of Section 204 of the Companies Act 2013 read with Rule 9 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 theCompany has appointed Mr. V Suresh Practising Company Secretary to undertake theSecretarial Audit. The Secretarial Audit Report for the Financial Year 2016-17 is annexedto this report as an Annexure III.

QUALIFICATIONS IN AUDIT REPORTS

Explanations or comments by the Board on every qualification reservation or adverseremark or disclaimer made -

(a) by the Statutory auditor in his report; and

(b) by the Company Secretary in practice in his Secretarial audit Report.

Not applicable as there are no qualifications in Statutory Auditors' Report and inSecretarial Auditors' report.

COST AUDIT

Cost audit is not applicable to the Company from the Financial Year 2014-15 based onthe amended Companies (Cost Audit & Record) Rules 2014 dated 31st December2014 issued by the Ministry of Corporate Affairs Govt. of India.

CONSERVATION OF ENERGY TECHNOLOGY ABSORPTION FOREIGN EXCHANGE EARNINGS AND OUTGO

A. CONSERVATION OF ENERGY

(a) Energy conservation measures taken during 2016-17:

• Appropriate tailoring of motor power to reduce the Electrical energyconsumption.

• Optimization of the heating and insulation methods of the individual cavities toreduce cost of energy per piece.

• Study initiated to refine press cycle times to reduce the energy required percycle

(b) Impact of the above measures:

• The measures taken above have helped in reducing electrical energy and Fuel costand would continue to help in reducing the energy cost in the months to come.

B. TECHNOLOGY ABSORPTION

Research & Development (R & D)

(1) Specific areas in which R&D carried out by the Company

(a) Developed and obtained OEM approval for Drum Brake Linings for Heavy Truck and Busapplications.

(b) Developed and obtained OEM approval for Drum Brake Lining for Light commercialvehicle applications.

(c) Developed and obtained OEM approval for New grade Woven clutch facings forCommercial vehicle application.

(d) Developed & improved an affordable vehicle data acquisition system - DEFCON(Driver's Experience of Friction Conditions) and collected actual field duty cycle datafor understanding and improving our new and existing product performance.

(2) Benefits derived as a result of the above

(a) Continued recognition of in-house R&D by Department of Scientific andIndustrial Research Government of India (valid up to 31.03.2018).

(b) Reduction in Raw material costs through upgradation in quality and yieldimprovement. (c) Resolved noise and poor braking complaints reported by customers oncompetitor linings which helped the company to get new business.

(3) Future plan of action

(a) Development of Disc Pads and Drum Brake Linings for various new vehicle applicationfor Domestic OEM & Export Market.

(4) Expenditure on R&D

(Rs. in lakhs)

Sl. No. Particulars Financial Year
2016-17 2015-16
a Capital 10.99 26.00
b Recurring 757.58 567.91
c Total 768.57 593.92
d Total R & D expenses as % of total turnover 3.4 2.6

C. Technology absorption adaptation and innovation

1. Efforts in brief made towards technology absorption adaptation and innovation

(a) SBL developed Embedded Granular Material Matrix Technology for meeting end user NVH(Noise Vibration & Harshness) requirements without compromising performance and life.

(b) Process optimization for Quality Improvement.

(c) Product and Process improvement by bench marking the product against globalleaders.

2. Benefits derived as a result of the above efforts

(a) Development of superior and competitive products for export and domestic markets.

(b) Quality up-gradation and optimal use of resources leading to substantial savings.

D. FOREIGN EXCHANGE EARNINGS AND OUTGO

(Rs. in lakhs)

Sl. No. Particulars Financial Year
2016-17 2015-16
a Foreign Exchange earned 10531.38 11226.16
b Foreign Exchange used 2925.83 3004.35
c Net Foreign Exchange earned (a-b) 7605.55 8221.81

SIGNIFICANT AND MATERIAL ORDERS PASSED BY THE REGULATORS / COURTS / TRIBUNALS

During the year 2016-17 no significant and material orders were passed by theRegulators or Courts or Tribunals impacting the going concern status and company'soperations in future.

INTERNAL FINANCIAL CONTROLS

The Board and the Audit Committee have been reviewing the Internal Financial controlsand strengthening the same. Further Audit Committee periodically reviews the InternalAudit Reports and suggestions and corrective actions are implemented.

PARTICULARS OF LOANS GUARANTEES OR INVESTMENTS

During the year the Company has not given any loan (Secured or Unsecured) and had notgiven any guarantee or provided any security to any person.

RISK MANAGEMENT

The Risk Management policy adopted by the Board formalizes the Company's approach tooverview and manage material business risks.

All the risks associated with the business of the Company have been taken care of bytaking adequate measures by the Company which have been reviewed by the Audit committeeand the Board in their meetings held from time to time.

CORPORATE SOCIAL RESPONSIBILITY(CSR)

CSR is not applicable to the Company as the average net profits of the Company for thepreceding three years is NIL as the Company has incurred losses in the past years.

REASON FOR NOT SPENDING FOR CSR

CSR is not applicable to the Company as the average net profits of the Company for thepreceding three years is NIL as the Company has incurred losses in the past years.

ANNUAL REPORT ON CSR

Annual Report on CSR in the prescribed format has been enclosed as Annexure IV.

RELATED PARTY TRANSACTIONS

All the related party transactions entered by the Company are normal businesstransactions entered in the ordinary course of business and are on arm's length basis. Thecompany has been following a policy of getting omnibus approval for the Related PartyTransactions (RPTs) from the Audit Committee.

The actual RPTs entered were approved by the Audit Committee and by the Board at thequarterly meetings during the Financial Year 2016-17. The policy on Related PartyTransactions as approved by the Board is uploaded on the Company's website.

Particulars of Contracts or Arrangements with Related parties referred to in Section188(1) in form AOC-2 are furnished as Annexure V.

JUSTIFICATION FOR ENTERING INTO RELATED PARTY TRANSACTIONS

The Company's Related Party Transactions have been made to meet the requirements ofoperations and at an arm's length basis and have been entered in the ordinary course ofbusiness.

BOARD EVALUATION

In terms of Section 134 (3) (p) of the Companies Act 2013 and Regulation 4(2)(f) ofthe SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 the Boardreviewed and evaluated its own performance from the following perspectives:

(a) Company Performance;

(b) Risk management;

(c) Corporate Ethics;

(d) Performance of the Individual Directors; and

(e) Performance of the Committees viz. Audit Committee Nomination and RemunerationCommittee (NRC) and Stakeholders' Relationship Committee (SRC).

The Board upon evaluation considered that the board is well balanced in terms ofdiversity of experience covering all the activities of the Company.

The Board after discussion and review noted with satisfaction of its own performanceand that of its committees and individual Directors.

RATIO OF REMUNERATION OF DIRECTOR

As per Section 197 (12) of the Companies Act 2013 read with Rule 5 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 the details of Ratio ofRemuneration to each Director to the median employee's remuneration is furnished asAnnexure VI.

PARTICULARS OF EMPLOYEES

No employee of the Company was in receipt of remuneration of not less than Rs.1.02crores during the year or Rs.8.50 lakhs per month during any part of the said year as perSection 197 of the Companies Act 2013 read with Rule 5 (2) of the Companies (Appointmentand Remuneration of Managerial Personnel) Rules 2014.

LISTING WITH STOCK EXCHANGES

The Company confirms that it has paid the Annual Listing Fees for the year 2017-18 toNational Stock Exchange where the company's shares are listed.

CORPORATE GOVERNANCE

Your company has taken adequate steps to adhere to all the conditions laid down in SEBI(Listing obligations and disclosure requirements) regulations 2015 with respect toCorporate Governance. A report on Corporate Governance is included as a part of thisannual report as Annexure VII.

A Certificate from the Statutory Auditors of the Company confirming the compliance ofconditions of Corporate Governance as stipulated in SEBI (Listing obligations anddisclosure requirements) regulations 2015 forms part of this Annual report.

The Managing Director and the Chief Financial officer of the Company have certified tothe Board the financial statements and other matters in accordance with the Regulation17(8) of the SEBI (Listing obligations and disclosure requirements) regulations 2015pertaining to CEO/CFO certification for the financial year ended 31st March2017.

ACKNOWLEDGEMENT

Your Directors wish to thank State Bank of India and Export-Import Bank of India fortheir continued support and assistance.

Your Directors also wish to thank all the Customers the Wholesalers both in India andworldwide for their continued support.

Yours Directors wish to place on record their sincere appreciation for the good work ofall the employees.

For and on behalf of the Board
Place: Chennai K MAHESH KRISHNA MAHESH
Date : May 29 2017 Chairman Managing Director