To the shareholders
The directors have pleasure in presenting the fifty-fifth annual report and the auditedfinancial statements for the year ended 31st March 2017.
1. FINANCIAL HIGHLIGHTS
(Rs. in Cr)
|Details ||Year ended 31.03.2017 ||Year ended 31.03.2016 |
|Sales (including Excise duty) and other income ||1589.67 ||1633.03 |
|EBITDA ||206.57 ||243.69 |
|Less: Finance Cost ||28.54 ||32.25 |
|Depreciation ||60.64 ||54.95 |
|Profit before tax before exceptional items ||117.39 ||156.49 |
|Add : Exceptional Item (Income) ||2.28 ||6.03 |
|Profit before tax ||119.67 ||162.52 |
|Provision for tax ||14.08 ||18.08 |
|Profit for the year after tax ||105.59 ||144.44 |
|Add: Balance in Statement of Profit and || || |
|Loss including General Reserve ||381.03 ||334.02 |
|Add: Transfer from Other || || |
|Comprehensive Income ||3.66 ||(2.28) |
|Total Comprehensive Income available for appropriation ||490.28 ||476.18 |
|Appropriations: || || |
|Dividend and Dividend Distribution tax ||64.13 ||95.15 |
|Surplus carried forward ||426.15 ||381.03 |
| ||490.28 ||476.18 |
The board of directors of the Company at its meeting held on 3rd November2016 declared a first interim dividend of Rs.15 per share (300%) for the year 2016-2017thereby absorbing a sum of Rs.30.35 Cr. The same was paid to the shareholders on 16thNovember 2016.
The board again at its meeting held on 13th March 2017 declared a secondinterim dividend of Rs.16.50 per share (330%) for the year 2016-2017 thereby absorbing asum of Rs.33.38 Cr. The same was paid to the shareholders on 24th March 2017.
Hence the total amount of both dividends paid for the year ended 31st March2017 will aggregate to Rs.31.50 per share (630%) absorbing a sum of Rs.63.73 Cr on20232085 equity shares of Rs.5/- each.
The Company has set-off its dividend distribution tax payable under Section 115-O(1A)of the Income Tax Act 1961 against the dividend distribution tax paid by one of itssubsidiary company on its dividend declared to the extent available.
The board does not recommend any further dividend for the year under consideration.
The International Monetary Fund (IMF) referred to India as a "bright spot" inthe global economy however 2016-17 was punctuated with several challenging developmentssuch as below normal monsoon demonetization of high value currency notes in India whichcontributed to subdued growth across sectors.
Gross Domestic Product (GDP) in India registered a lower growth of 6.6% in 2016-17(7.8% in 2015-16).
Global economic and geo political environment continued to be volatile during 2016.TheGDP in the U.S. and EU markets registered a growth of 1.6% (2.6% in 2015) and 1.7% (1.5%in 2015) respectively.
The following table highlights the performance of the Company during 2016-17:
|Particulars ||FY ||FY ||Variance |
| ||2016-17 ||2015-16 ||(in %) |
|Sales (Tonnage) ||45676 ||45675 || |
|Sale of goods (Rs. in Cr) ||1295.3 ||1346.4 ||(3.8) |
|Domestic sales (Rs. in Cr) ||793.1 ||799.5 ||(0.8) |
|Export sales (Rs. in Cr) ||502.2 ||546.9 ||(8.2) |
|Profit before Tax (Rs. in Cr) ||119.7 ||162.5 ||(26.3) |
4. MANAGEMENT DISCUSSION AND ANALYSIS REPORT
I. Industry Structure and Development:
The segment wise performance in the Indian automotive industry is given in thefollowing table:
|Category ||FY 2016-17 ||FY 2015-16 ||Growth |
| ||in Nos. ||(in %) |
|Two-wheelers ||19928784 ||18938727 ||5 |
|Passenger Vehicles ||3805557 ||3442261 ||11 |
|Commercial Vehicles ||364458 ||353878 ||3 |
(Source: SIAM+DICV internal estimate)
The Indian auto industry (domestic sales and exports) posted an overall growth of 5%(Source: SIAM). During the second half of FY 2016-17 the industry's performance was mutedowing to various headwinds such as less than average monsoon emission regulations andmajor fiscal reforms.
The following table highlights the North American and European truck registrationfigures in vehicle units: (in Nos)
|Market ||Category ||FY ||FY ||Variance |
| || ||2016-17 ||2015-16 ||(in %) |
|North America ||Class 8 Trucks ||226025 ||297417 ||-24% |
|North America ||Class 4-7 Trucks ||229888 ||237488 ||-3% |
|Europe ||Medium & Heavy || || || |
| ||Trucks ||284002 ||270099 ||5% |
(Source: FTR & ACEA )
As expected the class 8 truck market shifted to a lower but more sustainable level.
II. Business Outlook and Overview
Good fiscal health and higher rural focus rolled out in the central budget 2017-18 islikely to improve demand in markets. However the monsoon forecast of possible 5%shortfall can be a dampener for growth of the agricultural sector.
Positive impetus to fiscal discipline and increased momentum in bringing key economicreforms such as the introduction of Goods and Services Tax (GST) will provide a conduciveecosystem for business growth. Hence the GDP growth rate in India for FY 2017-18 islikely to hover around 7% to 7.3%.
Given the economic outlook the automobiles and auto-component sectors are expected tosee moderate recovery in FY 2017-18.
Over the medium to long term growth in the auto component industry is likely to behigher than the underlying automotive industry growth given the increasing localization byOEMs and higher component content per vehicle. Auto component export is another key growthdriver. The "Make in India" pitch may further boost the growth of the componentindustry.
Globally IMF expects growth to be at 3.4% in 2017 (3.1% in 2016).
In the U.S. macroeconomic factors indicate an upswing in the year ahead. The U.S.Federal Reserve is likely to make measured progress in hiking its benchmark interest rateson the back of strong fundamentals. The GDP is likely to expand between 2.2-2.4% in 2017.
The U.S. truck market (Class 8) volumes are expected to grow at 4% in 2017 leavingbehind two consecutive years of negative growth.
The EU truck markets may not sustain growth rates similar to the past three years. Withseveral markets having already reached cyclical or all-time peaks commercial vehiclesdemand in 2017 is expected to pause and grow by less than 4% (11% in 2016).
III. Opportunities & Threats
The Company supplies aluminium castings in machined condition for commercial vehiclespassenger cars and two wheeler segments of the automotive industry.
The revenue of the Company is derived from Medium & Heavy Commercial Vehicles(MHCV) (50%) followed by car industry (26%) and two wheeler industry (24%).
In the medium to long term the projected growth of domestic auto industry andambitious export plans of the Indian OEMs are likely to benefit the Company.
In view of stringent emission norms and fuel economy regulations the thrust towardslight-weighting is bound to increase leading to higher content of aluminium in all vehicletypes. The Company is well placed to leverage these emerging opportunities. This willprovide for increased growth opportunities since the Company is already a preferredsource for aluminium castings to major OEM's in India and abroad.
India is emerging as one of the major manufacturing hubs thanks to availability ofwell-educated engineers skilled workforce and good supply base.
Several Indian die casting companies and OEMs are either setting up new capacities orexpanding existing capacities resulting in increased competition.
Intense competition makes it extremely difficult to seek price increases to compensatethe effects of inflation bringing the margins under severe pressure. However theCompany's supply contracts provide for periodic price adjustments indexed to theinternational prices of aluminium which offer some protection against volatility ofcommodity prices.
IV. Risks and concerns
There are possible risks on the horizon both external and domestic. Spill-overs fromtense geo-political developments and weak global growth could be disruptive.
Increasingly emerging markets are being confronted by protectionist trade reforms bydeveloping economies which could impact free trade and in turn have repercussions onexports from India.
In India implementation issues during GST roll-out and less than average monsoon couldpose challenges for growth. Also inflation in commodities fueled by a run up in crudeprices could cascade into a weaker overall demand.
The Indian commercial vehicle industry has a strong correlation with the agriculturalgrowth infrastructure development the mining industry and is cyclical.
Competition has increased in the Indian market due to entry of new players andexpansion plans of existing ones. The Company is aware of the increasing competition andis taking customer focused measures to remain competitive in the market place.
Primary aluminium experienced price inflation in 2016-17. Given the developments inChina and expected curtailment of aluminium production prices are further expected tomarginally increase in 2017-18.
With significant exports import of raw materials capital goods and foreign currencyliabilities the Company is always exposed to currency fluctuations. The Company has awell-defined forex hedging policy to mitigate the risks.
The stipulation and requirements of the automobile industry demands high qualityproducts. Robust quality management systems meeting international standards like TS 16949are in place to ensure excellent product quality. However appropriate recall and productliability insurance in line with standard industry practice have been taken.
Just-in-time delivery is another important contractual obligation. Robust quality andproject management systems are in place to avoid delay in deliveries due to quality issuesor project implementation.
The Company adds capacity in existing and new locations to meet the projected demandof customers. The Company closely monitors the progress of customer projects/volumes andappropriately deploys the assets to protect from both underutilization and capacityshortages to meet the demand.
The Board has established a Risk Minimisation Policy which formalizes the Company'sapproach to overview and manage material business risks. The policy is implemented througha top down and bottom up approach identifying assessing monitoring and managing keyrisks across the Company's business units.
Risks and effectiveness of their management are internally reviewed and reportedregularly to the Board. The Management has reported to the Board that the Company's riskmanagement and internal compliance and control system is operating efficiently andeffectively in all material respects.
The board is satisfied that there are adequate systems and procedures in place toidentify assess monitor and manage risks. The Audit and Risk Management Committee alsoreviews reports by members of the management team and recommends suitable action. RiskMinimisation Policy has been approved by the board.
V. Internal control and their adequacy
The Company has a proper and adequate internal control system to ensure that all theassets of the Company are safeguarded and protected against any loss and all thetransactions are properly authorized and recorded. Information provided to management isreliable and timely. The Company ensures adherence to all statutes.
Internal Financial Control
The Company has an established Internal Financial Control framework including internalcontrols over financial reporting operating controls and anti-fraud framework. Theframework is reviewed regularly by the management and tested by internal audit team andpresented to the audit and risk management committee. Based on periodical testing theframework is strengthened from time to time to ensure adequacy and effectiveness ofInternal Financial Control.
VI. Operations Review
The Company has been using Total Quality Management (TQM) as the foundation of itsmanagement. The Company implemented the best practices like Total Productivity Management(TPM) and Lean
Manufacturing in its manufacturing facilities. It also has in place best-in-classpractices for safety pollution control work environment water and energy conservation.
Continuous improvement projects are implemented to improve the product quality andproductivity in all the manufacturing locations. The Company's journey of achievingmanufacturing excellence was recognized and rewarded by the following customers during FY2016-17:
| Cummins - ||Product development support excellence |
| PACCAR/DAF - ||Supplier of the year |
| Hyundai Motors- ||Quality and delivery for powertrain |
| Rotex - ||Best supplier |
| Hanon - ||Best crisis management support |
Achieving customer delight by consistently providing products of excellent quality isthe prime motto of the Company. This is achieved through state-of-the-art technologytraining effective quality system continuous improvement and total employee involvement.
Poka-yokes process audits use of statistical tools for process optimization andonline process controls also contribute towards improving and achieving consistency inproduct quality. The quality system is certified for ISO/ TS 16949 requirements.
TQM is a way of life in the Company. 100% employee involvement has been successfullyachieved for many years.
Employees have completed 905 projects by applying statistical tools through QualityControl Circles (QCC) in 2016-17. The average number of suggestions implemented peremployee was 55.
C. Cost Management
Cost management is a continuous journey and the Company manages the same throughdeployment of costs across all departments. A cross functional team is working on projectsfocussed on Value Added/Value Engineering (VA/VE) and operational efficiency. TPM and leaninitiatives are deployed Company-wide to achieve reduction in manufacturing cost.
D. Information Technology
The Company uses ERP system that integrates all business processes across the Company.Suppliers and customers are also integrated into the system for better planning andexecution. During the year several dashboards were added to improve productivity qualityand to reduce the cost of operations. Projects were also implemented to further enhancethe Information Security.
VII. Human Resource Development
The Company considers employees as vital and most valuable assets. Human ResourceDevelopment (HRD) is aligned to business needs to enhance business performance andresults. HRD is practiced through an overall HRD framework with its constituents asresourcing employee engagement performance & compensation management competencybased development career & succession planning and organization development. Each ofthese constituent has a structured approach and process to deliver.
As part of the long term strategies of the Company collaborative education program hasbeen initiated with three reputed institutes to develop role-ready engineers withCompany-specific knowledge at the entry level.
Career development workshop is conducted to identify high potential employees. Suchemployees are groomed for taking up higher responsibilities. A reward and recognitionsystem is in place to motivate and also provide fast track growth for the high potentialemployees.
Our engineers and executives are sponsored for advanced study offered by both Indianand foreign institutions. Customized technical and leadership competency improvementprograms are developed and delivered through reputed institutions.
The Company continuously measures and reports employee engagement every year andidentifies improvement areas to work on.
An excellent industrial relations environment continues to prevail at all themanufacturing units of the Company.
As on 31st March 2017 the Company had 2161 employees on its rolls.
VIII. Environment & Safety
The Company is fully committed to the ultimate goal of employee safety. Safetymanagement is integrated with the overall Environment Health and Safety (EHS).
The Company has been certified under Integrated Management System (IMS) combining ISO14001 and OHSAS 18001 systems and procedures.
Statements in the management discussion and analysis report describing the Company'sobjectives projections estimates and expectations may be "forward lookingstatements" within the meaning of applicable securities laws and regulations. Actualresults could differ materially from those expressed or implied. Important factors thatcould make a difference to the Company's operations include among others economicconditions affecting demand/supply and price conditions in the domestic and overseasmarket in which the Company operates changes in the Government regulations tax laws andother statutes and incidental factors.
5. DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with the provisions of Section 134(5) of the Act 2013 with respect toDirectors' Responsibility Statement it is hereby stated -i. that in the preparation ofannual accounts for the financial year ended 31st March 2017 the applicableAccounting Standards had been followed along with proper explanation relating to materialdepartures if any; ii. that the directors had selected such accounting policies andapplied them consistently and made judgments and estimates that were reasonable andprudent so as to give a true and fair view of the state of affairs of the Company at theend of the financial year and of the profit of the Company for the year under review; iii.that the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities; iv.that the directors had prepared the annual accounts for the financial year ended 31stMarch 2017 on a "going concern basis"; v. that the directors had laid downinternal financial controls to be followed by the Company and that such internal financialcontrols are adequate and are operating effectively; and vi. that the directors haddevised proper systems to ensure compliance with the provisions of all applicable laws andthat such systems were adequate and operating effectively.
6. CORPORATE SOCIAL RESPONSIBILITY (CSR)
CSR activities have already been textured into the Company's value system throughSrinivasan Services Trust (SST) the CSR arm of the Company established in 1996 with thevision of building self-reliant rural community.
Over 21 years of service SST has played a pivotal role in changing lives of people inrural India by creating self-reliant communities that are models of sustainabledevelopment.
The Company is eligible to spend on their ongoing projects / programmes falling withinthe CSR activities specified under the Act 2013 as mandated by the Ministry of CorporateAffairs for carrying out the CSR activities.
The Committee formulated and recommended a CSR policy in terms of Section 135 of theAct 2013 along with a list of projects / programmes to be undertaken for CSR spending inaccordance with the Companies (Corporate Social Responsibility Policy) Rules 2014.
Based on the recommendation of the CSR Committee the board has approved the projects /programmes carried out as CSR activities by the following non-profitable organizationshaving an established track record for more than the prescribed years in undertakingsimilar programmes / projects constituting more than 2% of average net profits madeduring the three immediately preceding financial years towards CSR spending for thecurrent financial year 2016-2017 amounting to Rs.85 lakhs: (Rs. in Lakhs)
|Name of the Trust ||Amount spent |
|1. Srinivasan Services Trust ||50 |
|2. Sri Sathya Sai Loka Seva Trust ||35 |
|Total ||85 |
Presently SST is working in 5000 villages spread across Tamil Nadu KarnatakaMaharashtra Himachal Pradesh and Andhra Pradesh covering about 3144590 population and719890 families. Its major focus are Economic development health care qualityeducation environment and infrastructure.
Of the 5000 villages 3172 villages (1919952 population and 427048 families) havebeen funded by the Company and its subsidiary during the year.
Achievements in these 3172 villages are:
296003 families living in these villages have a monthly income of aboveRs.15000/- which make them financially secured.
2985 farmers groups have been formed with 42965 members.
Improved agriculture practices enabled 192147 farmers owning 208925 hectaresto increase the yields higher than the state average by 15%.
174958 families earn more than Rs 3500/- per month through livestock.
Formed 8115 Self Help Groups with 122604 women as members.
Out of 122604 members 117762 members are in income generation activities.They earn a minimum income of Rs. 3000/-per month.
63996 children in the age group below 5 are not malnourished.
399710 women are free from anaemia.
287009 households made access to toilet facilities.
The morbidity percentage reduced from 9% to 5%.
Enrolment in anganwadis increased from 86% to 100% and attendance is 99%.
1441 anganwadis have met all the Integrated Child Development Services Scheme(ICDS) standards.
88% involvement of mother volunteers in anganwadis have ensured their properfunctioning.
100% enrolment of children in schools. There are no drop outs in the schools.
Number of percentage of slow learners reduced in schools from 27% to 8%.
Out of 1460 schools 999 schools are now model schools.
93007 illiterate women out of 133505 have been made literate.
Environment and Infrastructure:
265176 households dispose solid waste through individual and common compostpits. 89 tons of vermi compost generated per month from wastes.
Sewage water from 264583 households disposed through soak pits kitchengardens and drain.
Safe drinking water made available to 2994 villages.
Community takes care of their development needs. 8853 social leaders are active inthis effort.
As required under Section 135 of the Act 2013 read with Rule 8 of the Companies(Corporate Social Responsibility Policy) Rules 2014 the annual report on CSR containingthe particulars of the projects / programmes approved and recommended by CSR Committee andapproved by the board for the financial year 2016-17 are given by way of Annexure IVattached to this Report.
7. PERFORMANCE OF SUBSIDIARIES & ASSOCIATES
The following companies and bodies corporate are the subsidiaries and associates of theCompany:
1. TVS Motor Company Limited Chennai;
2. Sundaram-Clayton (USA) Limited USA;
3. Sundaram Auto Components Limited Chennai;
4. TVS Housing Limited Chennai;
5. PT. TVS Motor Company Indonesia Jakarta;
6. TVS Motor Company (Europe) B.V. Amsterdam Netherlands;
7. TVS Motor (Singapore) Pte. Limited Singapore;
8. Sundaram Holding USA Inc. Delaware USA;
9. Green Hills Land holding LLC South Carolina USA; 10. Component Equipment LeasingLLC South Carolina USA; 11. Workspace Project LLC South Carolina USA; and 12. PremierLand Holding LLC South Carolina USA.
1. TVS Training and Services Limited Chennai;
2. Sundram Non-conventional Energy Systems Limited Chennai; and
3. Emerald Haven Realty Limited Chennai.
TVS Motor Company Limited (TVSM)
TVS Motor Company Limited is engaged in the business of manufacture of two and threewheelers. During the year 2016-17 TVSM achieved a turnover of Rs.13363.43 Cr and earneda profit before tax of Rs.698.68 Cr.
TVSM for the year 2016-17 declared first interim dividend of Rs.1.25 per share (125%)absorbing a sum of Rs.70.25 Cr including dividend distribution tax and a second interimdividend of Rs.1.25 per share (125%) absorbing a sum of Rs.71.04 Cr including dividenddistribution tax. The total amount of dividend for the year ended 31st March2017 aggregated to Rs.2.50 per share (250%) on 475087114 equity shares of Re.1 each.
Sundaram Auto Components Limited (SACL)
Sales of SACL grew 5% upto October 2016 but were affected during the period fromNovember 2016 to March 2017 consequent to impact of demonetization. In addition thechange from BS III to BS IV emission norms resulted in OEMs' reducing their inventorywhich lead to lower offtake from SACL. Consequently the turnover of plastic componentsbusiness declined marginally from Rs.552 Cr in 2015-16 to Rs.539 Cr in 2016-17.
Total turnover of SACL including Two wheeler distribution business grew by 4% andrevenue increased from Rs.2795 Cr to Rs. 2915.95 Cr. SACL earned a profit before tax ofRs.34.93 Cr during the year 2016-17.
SACL was recognized and awarded certificates in the areas of new product developmentsupport innovation and material handling from Takata Daimler India and HannonAutomotive respectively during the year.
SACL at their meeting held on 22nd October 2016 declared first interimdividend of Rs.5 per share on 12050000 equity shares of Rs.10 each absorbing a sum ofRs.7.25 Cr including dividend distribution tax. SACL at their meeting held on 3rdMarch 2017 declared second interim dividend of Rs.1.50 per share on 14550000 equityshares of Rs.10 each absorbing a sum of Rs.2.63 Cr including dividend distribution tax.Hence the total amount of dividend paid per share aggregated to Rs.6.50 (65%) for theyear ended 31st March 2017 thereby absorbing a sum of Rs.9.88 Cr includingdividend distribution tax.
TVS Housing Limited (TVSH) / Emerald Haven Realty Limited (EHRL)
EHRL is the developer of Nedungundram Chennai project of TVSH. Phase 1 was developedas apartments and all the 448 apartments have been sold and customers have takenpossession. Phase 2 was launched as villas and row houses and as of 31st March2017 98% of the 120 villas and row houses have been sold and customers have takenpossession of the same. During the year EHRL launched 15 Public Purpose Plots andsuccessfully sold over 73% of the plots and construction of villas are in full progress.
PT.TVS Motor Company Indonesia (PT TVSM)
The industry for the year 2016-17 has suffered a decline of 8%. The bebek segmentdeclined by 26% the sports motorcycle segment dropped by 12% and the matic segment wasthe least affected with a marginal decline of 4%.
The segment share of matic has now gone upto 78%. The continued decline of two-wheelerindustry was attributed to slower economic growth due to subdued commodity prices andfurther tightening of credit by multi finance companies.
PT TVSM focus to improve export of products from Indonesia has been successful. Thetotal two-wheeler sales increased from 17100 vehicles in 2015-16 to 26750 vehicles in2016-17.
Export of two-wheeler sales increased from 15000 to 25000 numbers registering agrowth of 67% over previous year. PT TVSM continues to focus on African LATAM and ASEANcountries. The increased sales and focus on cost reduction helped PT TVSM to reduce EBITDAloss from 6.42 Mn USD in 2015-16 to 3.15 Mn USD in 2016-17.
TVS Motor Company (Europe) B.V & TVS Motor (Singapore) Pte. Limited
TVSM had earlier incorporated both these entities with a view to serve as specialpurpose vehicles for making and protecting the investments made in overseas operations ofPT TVSM.
Sundaram-Clayton (USA) Limited
Sundaram-Clayton (USA) Limited a wholly owned subsidiary of the Company is engaged inthe business of providing Professional Employer Organisation ("PEO") services tothe employees of the Company. The Company earned revenue of USD 10064 and net incomeafter adjustment of expenses amounted to USD 387 for the year ended 31st March2017.
Sundaram Holding USA Inc (SHUI) and its subsidiaries
The Company alongwith its subsidiary viz. SACL has made an investment of 5.3 Mn USD inSHUI a Company established under the applicable provisions of Laws of United States ofAmerica for carring out the business of the Company. SHUI's wholly owned subsidiaries are:
1. Green Hills Land Holding LLC South Carolina USA;
2. Component Equipment Leasing LLC South Carolina USA;
3. Workspace Project LLC South Carolina USA; and
4. Premier Land Holding LLC South Carolina USA.
SHUI has acquired land in Dorchester County USA for its plant where it willmanufacture High Pressure Die Cast and Gravity Cast parts. Construction at the site isexpected to begin during the first half of 2017-18 and commercial production expected tocommence towards the end of 2018-19.
TVS Training and Services Limited (TVS TSL)
TVS TSL is engaged in the business of establishing and providing vocational trainingservices to various industries and is participating in the National Skill DevelopmentProjects. During the year ended 31st March 2017 the Company had an income ofRs. 15.17 Cr and loss of Rs.0.42 Cr.
Sundram Non-Conventional Energy Systems Limited (SNCES)
SNCES is engaged in the business of generation of power. During the year SNCES earnedrevenue of Rs.3.64 Cr and profit before tax was Rs.2.90 Cr.
Financial position of all subsidiaries and associate companies are provided as part ofconsolidated financial statements in Form AOC-1 in the manner required under Section 129read with the Companies (Accounts) Rules 2014 of the Act 2013.
8. CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements of the Company are prepared in accordance withthe provisions of Section 129 of the Act 2013 read with the Companies (Accounts) Rules2014 and Regulation 33 of SEBI (LODR) Regulations along with a separate statementcontaining the salient features of the financial performance of subsidiaries / associatesin the prescribed form. The audited consolidated financial statements together withAuditors' Report form part of the Annual Report.
The audited financial statements of the subsidiary companies will be made available tothe shareholders on receipt of a request from any shareholder and it has also been placedon the website of the Company. This will also be available for inspection by theshareholders at the registered office during business hours.
The consolidated profit after tax of the Company and its subsidiaries & associatesamounted to Rs. 547.07 Cr for the financial year 2016-17 as compared to Rs.472.40 Cr inthe previous year.
9. DIRECTORS & KEY MANAGERIAL PERSONNEL
Independent Directors (IDs)
At the annual general meeting held on 21st August 2014 M/s. Vice Admiral PJ Jacob (Retd.) V Subramanian S Santhanakrishnan R Vijayaraghavan and Kamlesh Gandhiwere appointed as IDs for the first term of five consecutive years from the conclusion ofthe fifty-second Annual General Meeting and to receive remuneration by way of feesreimbursement of expenses for participation in the meetings of the board and / orcommittees and profit related commission in terms of applicable provisions of the Act2013 as determined by the board from time to time.
During the year Mr R Gopalan was appointed as a Non-executive independent directoreffective 21st June 2016 through postal ballot and he shall hold office tillthe conclusion of the 57th Annual General Meeting (to be held in 2019).
On appointment each ID has acknowledged the terms of appointment as set out in theirletter of appointment. The terms cover inter alia duties right to access informationdisclosure of their interest / concern dealing in Company's shares remuneration andexpenses insurance and indemnity. The IDs are provided with copies of the Company'spolicies and charters of various committees of the board.
In accordance with Section 149(7) of the Act 2013 all IDs have declared that theymeet the criteria of independence as provided under Section 149(6) of the Act 2013.
The detailed terms of appointment of IDs are disclosed on the Company's website in thefollowing link: www.sundaram-clayton.com/Web%20files/Terms%20of%20IDs.pdf.
Separate meeting of Independent Directors
During the year under review a separate meeting of IDs was held on 13thMarch 2017 and all the Independent Directors were present at the Meeting.
Complete feedback on Non-Independent Directors and details of various activitiesundertaken by the Company were provided to them to facilitate their review / evaluationthrough a set of questionnaire.
Non-Independent Directors (Non-IDs) and their evaluation
The Independent Directors (IDs) used various criteria and methodology as practiced inIndustry for evaluation of Non-IDs viz. M/s. Venu Srinivasan Chairman and ManagingDirector Dr. Lakshmi Venu and Sudarshan Venu Joint Managing Directors T K Balaji KMahesh and Gopal Srinivasan Directors.
IDs evaluated the performance of all Non-IDs individually through a set ofquestionnaires. They reviewed their interaction during the board / committee meetings andstrategic inputs given by them to improve risk management internal controls andcontribution to the Company's growth.
IDs were satisfied with the performance of all Non-IDs.
The IDs reviewed the performance of Chairman of the Board by benchmarking theachievement of the Company with industry under his stewardship. The IDs appreciated theprobity quality and leadership of Chairman and his proactive role on strategic issues andpassion for customer centricity improving the quality of the products and for guardingthe values of the Company.
The IDs also evaluated board's composition size mix of skills and experience itsmeeting sequence effectiveness of discussion decision making follow up action so as toimprove governance and enhance personal effectiveness of directors.
The board upon evaluation concluded that it is well balanced in terms of diversity ofexperience with expert in each domain viz. Engineering Finance Legal andAdministration. The Company has a board with wide range of expertise in all aspects ofbusiness.
The IDs unanimously evaluated the prerequisites of the board viz. formulation ofstrategy acquisition & allocation of overall resources setting up policiesdirectors' selection process including sucession planning and cohesiveness on key issues.
They were satisfied with the Company's performance in all fronts and finally concludedthat the board operates with best global practices.
Quality Quantity and Timeliness of flow of Information between the Company Managementand the Board
All IDs have expressed their overall satisfaction with the support received from themanagement and the excellent work done by the management during the last year.
The IDs appreciated the management for their hard work and commitment to meet thecorporate goals and also expressed that the relationship between the top management andboard is smooth and seamless.
Directors retirement by rotation
In terms of Section 152 of the Act 2013 two-thirds of the total number of directorsi.e. excluding IDs are liable to retire by rotation and out of which one-third areliable to retire by rotation at every annual general meeting.
Mr Sudarshan Venu Joint Managing Director and Mr K Mahesh director are liable toretire by rotation at the ensuing AGM and being eligible offer themselves forre-appointment.
The nomination and remuneration committee of directors and the board recommended theirre-appointment. Their brief resumes have been furnished in the Notice convening the AGM ofthe Company. Appropriate resolutions for their re-appointment are being placed forapproval of the shareholders at the ensuing AGM.
Key Managerial Personnel (KMP)
During the year Mr M Muthuraj President was appointed as Chief Executive Officer ofthe Company in place of Mr C N Prasad effective 7th February 2017.
Mr Venu Srinivasan Chairman and Managing Director Dr. Lakshmi Venu and Mr SudarshanVenu Joint Managing Directors Mr M Muthuraj Chief Executive Officer Mr V NVenkatanathan Chief Financial Officer and Mr R Raja Prakash Company Secretary are 'KeyManagerial Personnel' of the Company in terms of Section 2(51) and Section 203 of theAct 2013.
Nomination and Remuneration Policy
The Nomination and Remuneration Committee of Directors (NRC) reviews the composition ofthe board to ensure an appropriate mix of abilities experience and diversity to serve theinterests of all shareholders of the Company.
Nomination and Remuneration Policy was approved by the board at its meeting held on 24thSeptember 2014 in terms of Section 178 of the Act 2013. The objective of such policyshall be to attract retain and motivate executive management and remuneration structuredto link to Company's strategic long term goals appropriateness relevance and riskappetite of the Company.
The process of appointing a director / KMP / SMP is that when there is a need or avacancy arises or is expected the NRC will identify ascertain the integrityqualification appropriate expertise and experience having regard to the skills that thecandidate will bring to the board / Company in addition to what the existing members hold.
Criteria for performance evaluation disclosures on the remuneration of directorscriteria of making payments to non-executive directors have been disclosed as part ofCorporate Governance Report attached herewith.
Remuneration payable to Non-executive Independent Directors
The shareholders through postal ballot on 22nd June 2016 approved theremuneration by way of commission not exceeding 1% of the net profits in aggregate payableto non-executive and independent directors of the Company (NE-IDs) for every year for aperiod of 5 years commencing from 1st April 2016.
NE-IDs devote considerable time in deliberating the operational and other issues of theCompany and provide valuable advice in regard to the management of the Company from timeto time and the Company also derives substantial benefit through their expertise andadvice.
Evaluation of the Independent Directors and committees of directors
In terms of Section 134 of the Act 2013 and the Corporate Governance requirements asprescribed under SEBI (LODR) Regulations the board reviewed and evaluated Independentdirectors and its committees viz. Audit & Risk Management Committee Nomination andRemuneration Committee Corporate Social Responsibility Committee and StakeholdersRelationship Committee based on the evaluation criteria laid down by the NRC.
The performance of all Independent directors (IDs) was assessed against a range ofcriteria such as contribution to the development of business strategy and performance ofthe Company understanding the major risks affecting the Company clear direction to themanagement and contribution to the board cohesion. The performance evaluation has beendone by the entire board of directors except the director concerned being evaluated.
The board noted that all IDs have understood the opportunities and risks to theCompany's strategy and are supportive of the direction articulated by the management teamtowards consistent improvement.
Board delegates specific mandates to its various committees to optimize directors'skills and talents besides complying with key regulatory aspects.
- Audit and Risk Management Committee for overseeing financial reporting and riskminimisation;
- Nomination and Remuneration Committee for selecting and compensating directors /employees;
- Stakeholders' Relationship Committee for redressing investors grievances; and
- Corporate Social Responsibility Committee for overseeing CSR initiatives.
The performance of each committee was evaluated by the board after seeking inputs fromits members on the basis of the specific terms of reference its charter time spent bythe committees in considering key issues major recommendations action plans and work ofeach committee.
The board is satisfied with overall effectiveness and decision making of allcommittees. The board reviewed each committee's terms of reference to ensure that theCompany's existing practices remain appropriate. Recommendations from each committee areconsidered and approved by the board prior to implementation.
Number of board meetings held:
The number of board meetings held during the financial year 2016-17 are provided aspart of Corporate Governance Report prepared in terms of SEBI (LODR) Regulations.
As per the provisions of Section 139 of the Act 2013 the transitional period of officeof M/s Sundaram & Srinivasan Chartered Accountants Chennai as Statutory Auditors ofthe Company will conclude from the close of the ensuing Annual General Meeting of theCompany.
The Board of Directors place on record their appreciation and gratitude for theservices rendered by M/s Sundaram & Srinivasan Chartered Accountants Chennai duringtheir tenure as the Statutory Auditors of the Company for over five decades.
The Audit and Risk Management Committee and the Board of Directors of the Company haverecommended the appointment of M/s. Raghavan Chaudhuri and Narayanan CharteredAccountants Bengaluru (ICAI Firm Registration Number 007761S) as Statutory Auditors ofthe Company subject to the approval of the shareholders. They have given their consentfor the said appointment and confirmed that their appointment if made would be withinthe limits mentioned under the provisions of Section 141 of the Act 2013 and theCompanies (Audit and Auditors) Rules 2014.
They will hold office as statutory auditors for the first term of five years from theconclusion of the 55th Annual General Meeting till the conclusion of 60thAnnual General Meeting of the Company subject to ratification of their appointment byMembers at every Annual General Meeting held during their tenure of office as statutoryauditors.
The Auditors' Report for the financial year 2016-17 does not contain any qualificationreservation or adverse remark and the same is attached with the annual financialstatements.
Ms B Chandra Practising Company Secretary Chennai was appointed as SecretarialAuditor for carrying out the secretarial audit for the financial year 2016-17.
As required under Section 204 of the Act 2013 the Secretarial Audit Report for theyear 2016-17 given by her is attached to this report. The Secretarial Audit Report doesnot contain any qualifications reservations or other remarks.
The Board at its meeting held on 3rd May 2017 has re-appointed Ms B ChandraPractising Company Secretary as Secretarial Auditor for the financial year 2017-18.
In terms of the Companies (Cost Records and Audit) Amendment Rules 2014 the boardre-appointed Mr A N Raman Cost Accountant Chennai holding Certificate of practice No.5359 allotted by The Institute of Cost Accountants of India as a Cost Auditor forconducting Audit of cost records for the financial year 2016-17.
The Company has also received necessary certificate under Section 141 of the Act 2013from him conveying his eligibility. A sum of Rs.3 lakhs has been fixed by the board asremuneration in addition to reimbursement of all applicable taxes travelling andout-of-pocket expenses payable to him and is also required to be ratified by the membersat the ensuing AGM as per Section 148(3) of the Act 2013.
The Company has filed the Cost Audit Report of 2015-16 on 13th September2016.
11. CORPORATE GOVERNANCE
The Company has been practicing the principles of good corporate governance over theyears and lays strong emphasis on transparency accountability and integrity.
A separate section on the Company's Corporate Governance and a certificate from thestatutory auditors of the Company regarding compliance of conditions of CorporateGovernance as stipulated under SEBI (LODR) Regulations forms part of this Annual Report.
The chairman and managing director and the chief financial officer of the Company havecertified to the board on financial statements and other matters in accordance withRegulation 17(8) of SEBI (LODR) Regulations pertaining to CEO & CFO certification forthe financial year ended 31st March 2017.
12. BUSINESS RESPONSIBILITY REPORT
In terms of Regulation 34 of SEBI (LODR) Regulations the Business ResponsibilityReport for the year 2016-17 describing the initiatives taken from environment social andgovernance perspectives in the prescribed format is given as Annexure - VI.
13. POLICY ON VIGIL MECHANISM
The Audit and Risk Management Committee has adopted a Policy on Vigil Mechanism inaccordance with the provisions of the Act 2013 and Regulation 22 of SEBI (LODR)Regulations which provides a formal mechanism for all directors employees and otherstakeholders of the Company to report to the management their genuine concerns orgrievances about unethical behaviour actual or suspected fraud and any violation of theCompany's Code of conduct or ethics policy.
The policy also provides a direct access to the Chairperson of the Audit and RiskManagement Committee to make protective disclosures to the management about grievances orviolation of the Company's Code of Conduct.
The policy is disclosed on the Company's website in the following link:www.sundaram-clayton.com/Web%20files/Investors/Whistle%20Blower%20Policy.pdf.
14. PUBLIC DEPOSITS
The Company has not accepted any deposit from the public within the meaning of Section76 of the Act 2013 for the year ended 31st March 2017.
15. STATUTORY STATEMENTS
Information on conservation of energy technology absorption foreign exchange etc.
Relevant information is given in Annexure I to this report in terms of therequirements of Section 134(3)(m) of the Act 2013 read with the Companies (Accounts)Rules 2014.
Material changes and commitments
There have been 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 the financial statements relate and the date of this report.
Significant and material orders passed by the Regulators or Courts or Tribunalsimpacting the going concern status of the Company
There are no significant and material orders passed by the regulators or courts ortribunals which would impact the going concern status of the Company and its futureoperations.
Extract of Annual Return in the prescribed form is given as Annexure II to this reportin terms of the requirement of Section 134(3)(a) of Act 2013 read with the Companies(Accounts) Rules 2014.
Details of employees receiving the remuneration as prescribed under Section 197 of theAct 2013 read with Rule 5(2) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 are given in Annexure III. In terms of first proviso to Section136(1) of the Act 2013 the Annual Report excluding the aforesaid annexure is being sentto the shareholders of the Company. The annexure is available for inspection at theRegistered Office of the Company during business hours and any shareholder interested inobtaining a copy of the said annexure may write to the Company Secretary at the RegisteredOffice of the Company.
Comparative analysis of remuneration paid
A comparative analysis of remuneration paid to Directors and employees with theCompany's performance is given as Annexure V to this report .
Details of material related party transactions
There were no material related party transactions under Section 188 of the Act 2013read with Companies (Meetings of Board and its Powers) Rules 2014.
Details of loans / guarantees / investments made
During the year under review the Company had not granted any loans or guaranteescovered under Section 186 of the Act 2013.
Please refer note number - 3 to Notes on accounts for the financial year 2016-17 fordetails of investments made by the Company.
Reporting of fraud
The auditors of the Company have not reported any fraud as specified under Section143(12) of the Act 2013.
During the year under review the Company has not received any complaints of sexualharassment from any of the women employees of the Company in terms of Sexual Harassment ofWomen at Workplace (Prevention Prohibition and Redressal) Act 2013.
The directors gratefully acknowledge the continued support and co-operation receivedfrom the promoters of the Company viz. T V Sundram Iyengar & Sons Private LimitedSouthern Roadways Limited Sundaram Industries Private Limited and Sundaram FinanceLimited.
The directors thank the vehicle manufacturers vendors and bankers for their continuedsupport and assistance.
The directors wish to place on record their appreciation of the excellent work done byall the employees of the Company during the year.
The directors specially thank the shareholders for their continued faith in theCompany.
| || |
For and on behalf of the board
|Chennai ||VENU ||SRINIVASAN |
|3rd May 2017 || ||Chairman |