TO THE MEMBERS
Your Directors are pleased to present their 42nd Annual Report together with theAudited Accounts for the Financial Year ended 31st March 2017.
FINANCIAL RESULTS :
| ||Year ended 31st March 2017 ||Year ended 31st March 2016 |
| || ||(Rs. in Crores) |
|Net Revenue from Operations ||92.99 ||95.64 |
|Other Income ||0.99 ||0.84 |
|Total Revenue ||93.98 ||96.48 |
|Profit before Depreciation Finance Charges and Tax ||4.16 ||3.88 |
|Finance Costs ||0.02 ||0.02 |
|Depreciation & Amortization Expense ||0.75 ||0.80 |
|Profit for the year ||3.39 ||3.06 |
|Prior period adjustments ||(0.04) ||(0.08) |
|Profit Before Tax ||3.35 ||2.98 |
|Tax Provision || || |
|- Current ||1.10 ||1.06 |
|- Deferred ||0.02 ||(0.12) |
|Profit After Tax ||2.23 ||2.04 |
|Surplus - Opening Balance after adjustment ||5.58 ||5.05 |
|for carrying value of assets || || |
|Surplus available for appropriation ||7.80 ||7.09 |
|Appropriations: || || |
|Proposed Dividend ||- ||0.84 |
|Tax on Dividend ||- ||0.17 |
|Transfer to General Reserve ||- ||0.50 |
|Surplus - Closing Balance ||7.80 ||5.58 |
REVIEW OF OPERATIONS
The auto ancillary sector is heavily dependent on the auto sector which in turn isinfluenced by various factors like economic growth monsoon etc. impacting the purchasingpower of the buyers of the automobiles. Demand swings in any of the segments (carstractors commercial vehicles) have an impact on auto ancillary demand. Demand is derivedfrom original equipment manufacturers (OEM) as well as the replacement market. Theagri-implement segment too is predominantly dependent on monsoon among other factors.
Despite competitive market conditions and factors like demonetization which affectedthe economy of the country as well as automobile industry the Company's tractor andcommercial vehicle seat segment has registered growth of 25% during the year 2016-17.However there has been a de-growth in car seat mechanisms segment and the agri-implementsegment by 15% and 33% respectively during the year.
In the above backdrop total net operating revenue for the financial year 2016-17reduced to Rs. 92.99 crores against the previous year's revenue of Rs. 95.64 crores.However Profit before tax for the year has increased to Rs. 3.35 crores against previousyear PBT of Rs. 2.98 crores which is primarily on account of various cost savinginitiatives taken by the management. Profit after tax for the year was Rs. 2.23 crores(previous year - Rs.2.04 crores) which gives an Earning per Share (EPS) of Rs. 9.31(previous year - Rs. 8.48).
During the year under review your Company has launched Tractor tailor and building upits own dealer network for sale. The Board of Directors has also approved in its meetingheld on 12th May 2017 setting up of new seat frame manufacturing facilities at DharwadKarnataka to serve its clients in the West and South Region. The plant will start itsoperations in the last quarter of 2017-18. Initially it will manufacture seat frames onlyand eventually seats & other products manufacturing will also start at this plant.
Your Directors have recommended a dividend of Rs.4.00 per Equity Share of face value ofRs.10.00 each for the financial year 2016-17 against Rs 3.50 per Equity Share of facevalue of Rs. 10.00 each declared and paid in the previous year. The dividend would bepayable to those Members whose names shall appear in the Register of Members as on BookClosure date. The dividend including dividend distribution tax surcharge and educationcess would absorb a sum of Rs. 1.15 crores (previous year - Rs. 1.01 crores). Further theBoard of your Company has decided not to transfer any amount to the General Reserves forthe year under review.
The fund position of the Company stayed comfortable throughout the financial year2016-17. As a result after meeting routine capital expenditure and working capitalrequirements to support the operations net interest income for the year was Rs.0.65 croreagainst Rs.0.59 crore for the previous year.
CURRENT YEAR'S REVIEW
With optimistic forecast of good monsoon the tractor industry is expected to maintainits growth trends. The automobile industry is also likely to grow with anticipatedfavourable market conditions. The Company's business is expected to move in line withindustry trend and Company is also exploring new business opportunities to generateadditional revenue.
OFFER FOR SALE BY PROMOTER
As members are aware b4S solutions Private Limited ("b4S" or "thepromoter") acquired the entire equity stake of 71.19% held by Mahindra & MahindraLimited ("M&M") one of the then promoters of the Company ("theSeller") by entering into Share Purchase Agreement with M&M on 16th October2015. b4S subsequently also acquired the entire equity stake of 2.99% held by the thenother promoter Punjab State Industrial Development Corporation (PSIDC). Thereafterpursuant to SEBI (SAST) Regulations 2011 b4S made an open offer to the shareholders ofthe Company. The entire process completed on 1st February 2016 and b4S's total equityholding in the Company stood at 88.28%. To comply with the requirements applicableregulations to restore public shareholding in the Company to a minimum of 25% thepromoter divested 158359 equity shares to the public via three offers for sale during theperiod December 2016 and January 2017 which has brought down the promoter's shareholdingin the Company to 81.68% as on March 312017. The promoter propose to meet its obligationto divest the remaining 6.68% of its shareholding in near future.
The Issued and Paid-up Share Capital of the Company remained unchanged during the yearand stood at Rs.2.40 crores at the end of the financial year 2016-17.
There were no instances of issue of shares with differential voting right buy back ofshares or bonus issues of shares during the year.
PARTICULARS OF LOANS GUARANTEES AND INVESTMENTS
During the year under review the Company has not extended any loans given guaranteesor provided securities and made investment pursuant to Section 186 of the Companies Act2013.
MANAGEMENT DISCUSSION AND ANALYSIS REPORT
A detailed analysis of the Company's performance is discussed in the ManagementDiscussion and Analysis Report which forms part of this Annual Report.
A report on Corporate Governance along with a certificate from the Auditors of theCompany regarding the compliance of conditions of Corporate Governance as stipulated underSEBI (Listing Obligations and Disclosure Requirements) Regulations 2015 forms part ofthis Annual Report.
Industrial relations were cordial throughout the year under review.
SAFETY HEALTH AND ENVIRONMENTAL PERFORMANCE
Your Company is committed towards excellence in Safety Occupational Health andEnvironment. This is also to ensure sustainable business growth. The Company has awell-established Safety Occupational and Environmental Policy which inter alia ensuressafety of employees plant equipment and public at large by ensuring compliance with allstatutory rules and regulations on regular basis. Your Company also imparts training toits employees as per the predefined training calendar carries out statutory safety auditsof its facilities as per legal requirement and promotes eco-friendly activities. Inreiteration of its commitment to improve the well being of the employees MedicalCheck-ups both curative and preventive have been organized regularly including educatingthe employees on Industrial Hygiene at the work place. The Company's Plant is ISO 14001 :2004 and OHSAS 18001 : 2007 certified.
CORPORATE SOCIAL RESPONSIBILITY
Keeping with the Company's core value of Good Corporate Citizenship your Company iscommitted to display its social responsibility by taking various initiatives benefitingthe society at large. These initiatives include organizing plantation of trees at variouslocations awareness campaign on ill effects of tobacco organizing medicines beds andsheets to destitute people's home etc.
During the year under review the Company was not covered under the provisions ofSection 135 of the Companies Act 2013 related to Corporate Social Responsibility.
Your Company is conscious of its responsibility towards preservation of naturalresources and continuously taking various initiatives to reduce the consumption ofelectricity and water. During the year energy audit was conducted and initiatives has beenplanned for energy savings.
In terms of Section 152 of the Companies Act 2013 Mr. Jamil Ahmad shall retire byrotation at the forthcoming Annual General Meeting and being eligible offer himself forre-appointment.
All the Independent Directors of the Company have submitted declaration under Section149(7) of the Companies Act 2013 that each of them meets the criteria of independence asprovided in Section 149(6) of the Companies Act 2013 and Regulation 16 of SEBI (ListingObligations and Disclosure Requirements) Regulations 2015 and there has been no change inthe circumstances which may affect their status as Independent Director during the year
EVALUATION OF THE BOARD
Pursuant to the provision of the Companies Act 2013 and SEBI (Listing Obligations andDisclosure Requirements) Regulations 2015 a system has been put in place to carry outperformance evaluation of the Board its Committees and individual Directors. Criteria forperformance evaluation are covered in the Corporate Governance Report.
The Board has on the recommendation of the Nomination & Remuneration Committee(NRC) framed policies on appointment of Directors and Senior Management and theirremuneration. The remuneration policy is covered in the Corporate Governance Report.
A calendar of Meetings is prepared and circulated in advance to the Directors. Duringthe year four meetings of Board and Four meetings of the Audit Committee were convenedand held. The details are covered in the Corporate Governance report. The intervening gapbetween the Meetings was within the period prescribed under the Companies Act 2013.
The Independent Directors of the Company meet at least once in every financial yearwithout the presence of Non-Independent Directors Executive Directors and any othermanagement personnel. The meeting(s) is conducted in an informal manner to enable theIndependent Directors to discuss matter pertaining to inter alia review of performanceof Non-Independent Directors and the Board as a whole assess the quality quantity andtimeliness of flow of information between the Company's management and the Board that isnecessary for the Board to effectively and reasonably perform their duties. During theyear one meeting of Independent Directors was held.
DIRECTORS' RESPONSIBILITY STATEMENT
To the best of their knowledge and belief and according to the information andexplanations obtained by them your Directors in terms of Section 134(5) of the CompaniesAct 2013 state that:
a) in the preparation of Annual Accounts for the financial year 31 st March 2017 theapplicable accounting standards have been followed along with proper explanation relatingto material departure if any;
b) in the selection of the accounting policies consulted the Statutory Auditors andapplied them consistently and made judgment and estimates that are reasonable and prudentso as to give a true and fair view of the state of affairs of the Company as at 31stMarch 2017 and of the profit of the Company for the year ended on that date;
c) proper and sufficient care has been taken for maintenance of adequate accountingrecords in accordance with the provisions of the Companies Act 2013 for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
d) the Annual Accounts have been prepared on a going concern basis;
e) internal financial controls to be followed by the Company have been laid down whichare adequate and operating effectively;
f) proper systems have been devised to ensure compliance with the provisions of allapplicable laws and such systems are adequate and operating effectively.
The Audit Committee comprises of the following Directors viz. Mr. Jai Bhagwan Kapil(Chairman of the Committee) Mr. Rajiv Sharma and Mr. Jeevan Mahaldar. Except Mr. JeevanMahaldar all the members are
Independent Directors. The Company Secretary of the Company is the Secretary of theCommittee. All the recommendations made by the Audit Committee were accepted by the Board.
KEY MANAGERIAL PERSONNEL
Mr. Rama Kant Sharma Managing Director Mr. Jeevan Mahaldar Executive Director Mr.Gagan Kaushik Company Secretary and Mr. Jagdish Lal Chief Financial Officer are the KeyManagerial Personnel (KMP) of the Company as per Companies Act 2013.
There was no change in KMPs during FY 2016-17.
INTERNAL FINANCIAL CONTROL SYSTEMS
The Company has laid down adequate internal financial controls with reference tofinancial statements commensurate with the size scale and complexity of its operations.During the year such controls were tested and no reportable material weakness in theiroperating effectiveness was observed. Pursuant to the requirement of Regulation 17 of SEBI(Listing Obligations and Disclosure Requirements) Regulations 2015 the Company is havingrisk management framework covering identification evaluation and control measures tomitigate the identified business risk.
VIGIL MECHANISM / WHISTLE BLOWER POLICY
The Company has a vigil mechanism through Whistle Blower Policy to deal with instanceof fraud and mismanagement if any. The detail of the policy is explained in the CorporateGovernance Report and the policy is also posted on the website of the Company.
RELATED PARTY TRANSACTIONS
All related party transactions that were entered during the financial year 2016-17 werein the ordinary course of the business and were on arm's length basis. There were nomaterially significant related party transactions made by the Company which may have apotential conflict of the interest with its Promoters Directors Key Managerial Personnelor other persons. All such Related Party Transactions are placed before the AuditCommittee for approval wherever applicable. The policy on materiality of and dealing withrelated party transactions as approved by the Audit Committee and the Board of Directorsis uploaded on the website of the Company and the link for the same ishttp://swarajautomotive.com/policies/ . Details of related parties and transactions withthem during the year are covered at Note 2.28 of the Annual Accounts.
M/s J.S. Chopra & Associates Chartered Accountants (FRN:008849N) StatutoryAuditors of the Company hold office till the conclusion of the ensuing Annual GeneralMeeting.
Pursuant to Section 139 of the Companies Act 2013 the Board of Directors on therecommendation of Audit Committee has appointed M/s Mangla Associates CharteredAccountants (ICAI Registration No. 006796C) as the Statutory Auditors of the Company tohold office from the conclusion of the forthcoming Annual General Meeting (AGM) until theconclusion of the fifth consecutive AGM of the Company (subject to ratification of theirappointment by the Members at every AGM held after the ensuing AGM).
M/s Mangla Associates have confirmed that their appointment if approved will bewithin the limits of Section 141 (3)(g) of the Companies Act 2013 and have also certifiedthat they are free from disqualification specified under Section 141(3) of the CompaniesAct 2013. The Members are requested to appoint Auditors and fix their remuneration.
The Audit Report issued by the Auditors of the Company forms part of the Annual Reportand does not contain any qualification reservation or adverse remark.
Pursuant to Section 148(3) of the Companies Act 2013 read with The Companies (CostRecords and Audit) Amendment Rules 2014 the Board of Directors on the recommendation ofAudit Committee has appointed M/s Aggarwal Vimal & Associates Cost Accountants (FRN:000350) as the Cost Auditors of the Company for the financial year ending on 31st March2018. M/s Aggarwal Vimal & Associates have confirmed that their appointment ifapproved will be within the limits of Section 141 (3)(g) of the Companies Act 2013 andhave also certified that they are free from disqualification specified under Section141(3) of the Companies Act 2013. The Audit Committee has also received a certificatefrom the Cost Auditors certifying their independence and arm's length relationship withthe Company. As per the provisions of the Companies Act 2013 the remuneration payable tothe Cost Auditor is required to be placed before the members in a General Meeting fortheir ratification. Accordingly a resolution seeking members ratification for theremuneration payable to M/s Aggarwal Vimal & Associates Cost Accountants is includedin the Notice convening the Annual General Meeting.
Pursuant to Section 204 of the Companies Act 2013 and the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company has appointed M/s A. Arora& Co. Company Secretaries in practice (CP No. 993) to undertake the Secretarial Auditof the Company. The Report of the Secretarial Audit is annexed herewith as Annexure A. TheSecretarial Audit Report does not contain any qualification reservation or adverseremark except Minimum Public Shareholding criteria under Regulation 38 of SEBI (ListingObligations and Disclosure requirements) Regulations 2015. The Promoter in compliance ofSEBI Circular CIR/CFD/CMD/14/2015 dated November 30 2015 via offer for sale sold their6.60% shareholding as detailed above. Further The Promotor propose to meet its obligationto divest the remaining 6.68% of its shareholding in near future.
The Company has not accepted deposit from the public falling within the ambit ofSection 73 of the Companies Act 2013 and the Companies (Acceptance of Deposits) Rules2014.
The Company has not made any loans/advances and investment in its own sharesassociates etc. during the year.
EXTRACT OF ANNUAL RETURN
The details forming part of the extract of the Annual Return in Form MGT-9 is annexedherewith as Annexure B.
ENERGY CONSERVATION TECHNOLOGY ABSORPTION AND FOREIGN EXCHANGE EARNINGS AND OUTGO
Particulars in respect of the above activities stipulated under Section 134(3)(m) ofthe Companies Act 2013 read with Rule 8 of the Companies (Accounts) Rules 2014 isannexed herewith as Annexure C.
PARTICULARS OF EMPLOYEES
The information required pursuant to Section 197 read with Rule 5(1) of The Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexed herewith asAnnexure D. There was no employee who was in receipt of remuneration of not less than Rs.10200000 during the year ended 31st March 2017 or not less than Rs. 850000 per monthduring any part of the year.
The Managing Director and the Executive Director are not receiving any commissionneither from the Company nor from its Holding Company.
The Company has no subsidiary/Associate/Joint Venture Company in accordance with theprovisions of the Companies act 2013.
Your Directors state that no disclosure or reporting is required in respect of thefollowing items as there were no transactions/events happened on these items during theyear under review:
a. issue of equity shares with deferential voting rights or sweat equity or stockoptions.
b. significant or material orders passed by the Regulators / Courts/ Tribunal whichimpact the going concern status of the Company and its future operations.
c. Material changes in commitments affecting the financial position of the company.
d. Changes in the nature of business activities
e. voting rights which are not directly exercise by the employees in respect of sharesfor the subscription/ purchase for which loan was given by the Company (as there is noscheme pursuant to which such person can beneficially hold shares as envisaged undersection 67(3)(c) of the Companies Act 2013).
f. Fraud reporting by the auditors.
Your Directors would like to thank various Government Authorities and Banks for thecooperation extended by them and also take this opportunity to express their deep sense ofappreciation to all the stakeholders of the Company for the support provided by themduring the year. The Directors also place on record the appreciation to all the employeesof the Company for the efforts put in by them.
| ||FOR AND ON BEHALF OF THE BOARD |
|Place : Ghaziabad ||J.B. KAPIL |
|Date : 12th May 2017 ||Chairman |