Your Directors have pleasure in presenting their Seventieth Annual Report and AuditedAccounts for the year ended December 31 2019.
1. Financial Results:
| || ||(Rs. in Crores) |
|Particulars || |
For the year ended
| ||December 31 2019 ||December 31 2018* |
|Profit before tax and exceptional items ||515.35 ||794.24 |
|Profit before tax and after exceptional items ||445.65 ||794.24 |
|Tax expense: || || |
|- Current tax ||130.32 ||282.05 |
|- Deferred tax ||11.93 ||1.30 |
|Profit after tax ||303.40 ||510.89 |
|Other comprehensive income/(loss) (net of tax) ||(3.82) ||1.95 |
|Balance brought forward from previous year ||798.11 ||397.68 |
|Amount available for appropriation ||1097.69 ||910.52 |
|Demerger adjustment ||(149.93) ||- |
|Change in Accounting Policy (Net of Tax) Retention discounting ||9.77 ||- |
|Appropriations: || || |
|Equity dividend paid ||101.72 ||93.24 |
|Tax on equity dividend paid ||20.91 ||19.17 |
|Debenture redemption reserve ||- ||- |
|General reserve ||- ||- |
|Balance carried forward ||834.90 ||798.11 |
*Figures of Financial Results for the Year 2018 includes Financial Results of PowerGrids Business for the entire year whereas figures of Financial Results stated for theyear 2019 includes Financial Results of Power Grids Business only till the period endedMarch 31 2019 consequent to transfer of Power Grids Business to ABB Power Products andSystems India Limited (APPSIL) pursuant to Scheme of Arrangement details of which areprovided in this Report.
Your Directors recommend payment of a dividend at the rate of Rs.4.80/- (Rupees fourand paisa eighty only) per share for the year ended December 31 2019 on 211908375equity shares of Rs.2/- each.
3. Performance Review:
During the year orders from continuing operations touched Rs.6970 crore as againstRs.6729 crore in the Previous Year. In the year 2019 the orders witnessed a healthygrowth of 4% reflecting the outcome of intensified customer reach initiatives and strongproduct portfolio incorporating digital technology in its offerings with continuedtraction in opportunities from transportation sector. Services and export-led ordersresulted in more comprehensive customer engagements. The order backlog at the end of theyear stood at Rs.4123 crore which continued to provide visibility to the future revenuestreams. The revenue from continuing operations for the Company for the year 2019 stood atRs.7315 crore as against Rs.6690 crore in the previous year reflecting stability ofoperations in an uncertain market situation. Profit before tax and exceptional items wasup by 30% at Rs.514 crore in 2019 on higher sales as compared to Rs.395 crore in theprevious year mainly due to operational excellence initiatives supply chain efficienciesfocus on project management. Net profit after tax was up by 19% at Rs.302 crore for thecurrent year as compared to Rs.254 crore in the previous year. Consequently the earningsper share from continuing operations for the year 2019 stood at Rs.14.26 per share ascompared to Rs.12.00 per share in the year 2018.
For detailed analysis of the performance please refer to the Management's Discussionand Analysis given in Annexure - A forming part of this Report.
4. Extract of Annual Return:
As per provisions of Section 92 (3) of the Act read with Rule 12 of the Companies(Management and Administration) Rules 2014 as amended from time to time the extract ofthe Annual Return in the Form MGT-9 is given in Annexure-B forming part of this report.
Copy of the Annual Return filed by the Company during the Financial Year 2019 is hostedon the website of the Company. The same can be accessed in web-link:http://search.abb.com/library/Download. aspx Rs.DocumentID=9AKK107680A2571&LanguageCode=en&DocumentPartId=&Action=Launch
5. Board Meetings held during the year:
During the year 9 meetings of the Board of Directors were held and one meeting ofIndependent Directors was also held. The details of the meetings are furnished in theCorporate Governance Report.
6. Compliance on criteria of independence by the Independent Directors:
All Independent Directors of the Company have given declarations to the Company underSection 149 (7) of the Act that they meet the criteria of independence as provided inSub-Section 6 of Section 149 of the Act and also under the SEBI (Listing Obligation andDisclosure Requirements) Regulations 2015 (Listing Regulations).
7. Remuneration Policy of the Company:
The Remuneration Policy of the Company for appointment and remuneration of theDirectors Key Managerial Personnel and Senior Management of the Company along with otherrelated matters have been provided in the Corporate Governance Report.
As and when need arises to appoint Director the Nomination and Remuneration Committee(NRC) of the Company will determine the criteria based on the specific requirements. NRCwhile recommending candidature to the Board will take into consideration thequalification attributes experience and independence of the candidate. Director(s)appointment and remuneration will be as per NRC Policy of the Company.
A Statement of Disclosure of Remuneration pursuant to Section 197 of the Act read withRule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014is given in Annexure - C forming part of this report.
8. Dividend Distribution Policy:
As required under the Regulation 43A of the Listing Regulations the Company has aPolicy on Dividend Distribution. This Policy can be accessed on the Company's website atwww.abb.co.in.
9. Particulars of loans guarantees or investments under Section 186 of the Act:
There are no loan guarantees or made investments within the meaning of Section 186 ofthe Act during the year under review except a short-term inter-corporate loan of Rs.500Crore that was extended by the Company to a Group Company i.e. ABB Power Products andSystems India Limited ("APPSIL"). APPSIL is an entity to which Power GridsBusiness of the Company was transferred pursuant to the Order of National Company LawTribunal Bengaluru Bench dated November 27 2019 sanctioning the Scheme of Arrangementbetween the Company APPSIL and respective shareholders & creditors. The said loan hasalready been repaid by APPSIL.
10. Amount if any proposed to be transferred to Reserves:
During the year under review the Company has not proposed to transfer any amount toGeneral Reserves.
11. Material changes and commitment if any affecting financial position of theCompany from the end of Financial Year and till the date of this Report:
There has been no material change and commitment affecting the financial performanceof the Company occurred between the end of the Financial Year of the Company to which theFinancial Statements relate and the date of this Report.
12. Conservation of Energy Technology Absorption Foreign Exchange Earnings and Outgo:
The particulars as prescribed under Section 134 of the Act read with Rule 8 (3) of theCompanies (Accounts) Rules 2014 relating to Conservation of Energy TechnologyAbsorption Foreign Exchange Earnings and Outgo are given in Annexure - D forming part ofthis report.
13. Risk Management Policy:
The Company has a Risk Management Policy and constituted a Risk Management Committee asrequired under Listing Regulations. The Committee oversees the Risk Management processincluding risk identification impact assessment effective implementation of themitigation plans and risk reporting. The purpose of the Committee is to assist the Boardof Directors in fulfilling its oversight responsibilities with regard to enterprise riskmanagement.
The details and the process of Risk Management as implemented in the Company areprovided as part of Management's Discussion and Analysis which forms part of this Report.
14. Corporate Social Responsibility (CSR) initiatives:
The Company has a Policy on Corporate Social Responsibility and has constituted a CSRCommittee as required under the Act for implementing various CSR activities. Compositionof the Committee and other details are provided in Corporate Governance Report. EducationAccess to Electricity Health Care Environment skills enhancement for creatingemployable opportunities for the differently abled personnel etc. are the focal areaunder the CSR Policy.
The Company has implemented various CSR projects directly and / or through implementingpartners and the projects undertaken by the Company are in accordance with Schedule VII ofthe Act. During the year under review the Company has spent the required amount on CSRactivities.
Detailed report on CSR activities as required under the Companies (Corporate SocialResponsibility Policy) Rules 2014 is given in Annexure - E forming part of this report.
15. Annual evaluation of Board its Committees and Individual Directors:
The Board of Directors has carried out an annual evaluation of its own performance itsCommittees and Directors pursuant to the requirements of the Act and the ListingRegulations.
Further the Independent Directors at their exclusive meeting held during the yearreviewed the performance of the Board its Chairman and NonExecutive Directors and otheritems as stipulated under the Listing Regulations.
16. Audit Committee:
The details pertaining to composition of the Audit Committee and terms of reference areincluded in the Corporate Governance Report which forms part of this Report.
17. Demerger of Power Grids business:
During the year under review the Bengaluru Bench of National Company Law Tribunal videorder dated November 27 2019 sanctioned the Scheme of Arrangement between the CompanyABB Power Products and Systems India Limited (APPSIL) and respective shareholders &creditors involving the demerger of the power grids business of the Company to APPSILunder the provisions of Sections 230 - 232 and other applicable provisions of theCompanies Act 2013 (Scheme). The Scheme has become effective December 1 2019 consequentto Company filing the Order with Registrar of Companies Karnataka.
Pursuant to the sanctioned Scheme APPSIL has allotted equity shares to theshareholders of the Company on December 24 2019. Consequently as per the Scheme theentire investment of Rs.100000 (50000 equity shares of Rs.2/- each) held by the Companyand its nominee shareholders stand cancelled. Accordingly APPSIL ceased to be aSubsidiary of the Company.
18. Related Party Transactions:
The Board of Directors has adopted a policy on Related Party Transactions. Theobjective is to ensure proper approval disclosure and reporting of transactions asapplicable between the Company and any of its related parties. All contracts orarrangements with related parties entered into or modified during the financial year wereat arm's length basis and in the ordinary course of the Company's business except thetransactions reported herein below:
During the year under review the Scheme of Arrangement for demerger of Power GridsBusiness of the Company to ABB Power Products and Systems India Limited (APPSIL) becameeffective from December 1 2019. To ensure smooth continuation of operations of thedemerged Power Grids business in APPSIL the Company agreed to extend certain services toAPPSIL by entering into some Transitional Agreements and also executed certain LeaseAgreements. These agreements fall within the definition of Related Party Transaction underthe provisions of Section 188 of the Companies Act 2013 requiring disclosures to be madein Form No.AOC-2 pursuant to Section 134 of the Act read with Rule 8 of the Companies(Accounts) Rules 2014 which is attached as Annexure-F.
All contracts or arrangements were entered into only with prior approval of the AuditCommittee except transactions which qualified as Omnibus transactions as permitted underlaw.
Transactions with related parties as per the requirements of Indian AccountingStandard 24 are disclosed in the notes to accounts annexed to the financial statements.Your Company's Policy on Related Party Transactions as adopted by your Board can beaccessed on the Company's website. Link for the same is:http://new.abb.com/docs/librariesprovider19/default-document-library/related-party-transaction-policy.pdfRs.sfvrsn=2
19. Reporting of frauds:
There was no instance of fraud during the year under review which required theStatutory Auditors to report to the Audit Committee and/or Board under Section 143(12) ofthe Act and Rules framed thereunder.
20. Transfer to Investor Education and Protection Fund:
As required under Section 124 of the Act the unclaimed dividend amount aggregating toRs.30.45 lakh lying with the Company for a period of seven years pertaining to thefinancial year ended on December 31 2011 was transferred during the financial year 2019to the Investor Education and Protection Fund established by the Central Government.
21. Particulars of Employees:
The information on employee particulars as required under Section 197(12) of the Actread with Rule 5(2) and 5(3) of the Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended from time to time are given in Annexure-G forming partof this report. In terms of Section 136 of the Act the Report and Financial Statementsare being sent to the Members and others entitled thereto excluding this Annexure. ThisAnnexure shall be provided to Members on a specific request made in writing to theCompany. The said information is available for electronic inspection by the Members on anyworking day of the Company up to the date of the 70th Annual General Meeting.
22. Directors' Responsibility Statement:
To the best of knowledge and belief and according to the information and explanationsobtained by us your Directors make the following statements in terms of Section 134(3)(c)and 134(5) of the Act that:
(a) in the preparation of the annual accounts the applicable accounting standards havebeen followed along with proper explanation relating to material departures;
(b) they had selected such accounting policies and applied them consistently and madejudgments and estimates that are reasonable and prudent so as to give a true and fair viewof the state of affairs of the Company at December 31 2019 and of the profit and loss ofthe Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Act for safeguarding theassets of the Company and for preventing and detecting fraud and other irregularities;
(d) they have prepared the annual accounts on a going concern basis;
(e) they have laid down internal financial controls to be followed by the Company andthat such internal financial controls are adequate and were operating effectively; and
(f) they have devised proper systems to ensure compliance with the provisions of allapplicable laws and that such systems were adequate and operating effectively.
23. Disclosure on confirmation with the Secretarial Standards:
Your Directors confirm that the Secretarial Standards issued by the Institute ofCompany Secretaries of India have been duly complied with.
24. Corporate Governance Report and Certificate:
As required under Regulation 34 (3) read with Schedule V (C) of the ListingRegulations a report on Corporate Governance and the certificate as required underSchedule V (E) of the Listing Regulations from Messrs V. Sreedharan & AssociatesPracticing Company Secretaries regarding compliance of conditions of Corporate Governanceare given in Annexure - H and Annexure - I respectively forming part of this report.
25. Secretarial Audit:
Pursuant to provisions of Section 204 of the Act read with Rule 9 of the Companies(Appointment and Remuneration of Managerial Personnel) Rules 2014 and amendments theretoand SEBI Listing Regulations your Company engaged the services of Messrs BMP & Co.LLP Company Secretaries Bengaluru to conduct the Secretarial Audit of the Company forthe financial year ended December 31 2019. The Secretarial Audit Report is given inAnnexure - J forming part of this report.
26. Business Responsibility Report:
As required under Regulation 34 of the Listing Regulations the Business ResponsibilityReport forms part of the Annual Report.
27. Whistle Blower Policy:
The Company has a Vigil Mechanism for Directors and Employees to report their concernsabout unethical behavior actual or suspected fraud or violation of the Company's Code ofconduct. The mechanism provides for adequate safeguards against victimization ofDirector(s) and Employee(s) who avail of the mechanism.
The Whistle Blower Policy is available on Company's website at www.abb.co.in.
28. Directors and Key Managerial Personnel:
The Board of Directors of the Company at its meeting held on November 13 2019appointed Mr V K Viswanathan (DIN: 01782934) as Additional Director (Non-Executive andIndependent) of the Company for a term of 3 years effective November 13 2019 subject toapproval of the Shareholders. Accordingly the proposal for his appointment is included inthe Notice of Annual General Meeting for approval of the Shareholders of the Company.
The Board of Directors of the Company at its meeting held on November 13 2019 alsoappointed Ms. Diane de Saint Victor (DIN: 08560043) as Additional Director (Non-Executiveand Non Independent) of the Company effective November 13 2019 liable to retire byrotation. Ms. Diane has not opted to seek her appointment in the ensuing 70th AnnualGeneral Meeting (AGM). Hence the proposal for her appointment is not being placed in theNotice of Annual General Meeting.
Mr. Nasser Munjee (DIN: 00010180) Mr. Darius E. Udwadia (DIN: 00009755) and Mrs. RenuSud Karnad (DIN: 00008064) were appointed as Independent Directors of the Company in theSixty Fifth Annual General Meeting held on May 6 2015 to hold office for a term of 5(five) consecutive years with effect from May 6 2015. Accordingly the term ofappointment of these Directors has expired on May 5 2020.
The Board of Directors however at its meeting held on February 12 2020 proposed there-appointment of Mr. Darius E. Udwadia and Mrs. Renu Sud Karnad as Independent Directorsof the Company for another term of three consecutive years effective May 6 2020 subjectto approval of the Members at ensuing Annual General Meeting by way of a SpecialResolution. The Company has received the necessary consents and declarations from Mr.Udwadia and Mrs. Karnad to act as Independent Directors of the Company and also that theymeet the critieria prescribed under Section 149 of the Companies Act 2013.
Further the Board at its meeting held on May 13 2020 re-appointed Mr. Nasser Munjee(DIN: 00010180) as an Additional Director (Non-Executive and Independent) of the Companyeffective May 13 2020 to hold office up to the conclusion of the 70th Annual GeneralMeeting to be held during the year 2020 consequent to expiry of his earlier term ofappointment on May 5 2020. As Mr. Nasser Munjee has not opted to seek appointment at theensuing 70th AGM he would be holding office only up to the conclusion of said 70th AGM.
Mr. Tarak Mehta (DIN: 06995639) Director liable to retire by rotation has tenderedresignation effective June 19 2020 before expiry of his term. Consequently the Board atits meeting held on June 19 2020 appointed Mr. Morten Wierod (DIN: 08753868) as Director(Non-Executive and Non-Independent) of the Company with effect from June 19 2020 liableto retire by rotation in the casual vacancy caused due to the resignation of Mr. TarakMehta. His proposal of appointment is included in the Notice of Annual General Meeting forapproval of the Shareholders of the Company.
Necessary Notices under Section 160 of the Act have been received from Membersproposing the candidature of the aforesaid Directors of the Company.
In accordance with the provisions of the Companies Act 2013 read with Article 157 ofthe Articles of Association of the Company Mr. J C Deslarzes (DIN: 08064621) Directorwill retire by rotation at the ensuing Annual General Meeting of the Company and beingeligible offers himself for re-appointment.
Apart from aforesaid changes there are no changes in Directors and Key ManagerialPersonnel of the Company. Details of Directors Key Managerial Personnel and compositionof various Committees of the Board are provided in the Corporate Governance Report formingpart of this report.
The Board places on record its appreciation for the valuable services support andguidance provided by Mr. Nasser Munjee Mr. Tarak Mehta and Ms Diane de Saint Victor tothe Company during their tenure as the Directors of the Company.
As on date Mr. Sanjeev Sharma Managing Director Mr. B. Gururaj Company Secretaryand Mr. T.K. Sridhar Chief Financial Officer are the Key Managerial Personnel of theCompany.
During the year under review your Company did not accept any deposit within themeaning of the provisions of Chapter V - Acceptance of Deposits by Companies read with theCompanies (Acceptance of Deposits) Rules 2014.
30. Significant and Material Orders Passed by the Regulators or Courts or Tribunalsimpacting the going concern status of the Company:
There has been no significant and material order passed by the Regulators or Courts orTribunals impacting the going concern status and Company's operations.
31. Internal Control Systems and their adequacy:
The details on Internal Control Systems and their adequacy are provided in theManagement's Discussion and Analysis which forms part of this Report.
32. Disclosure as per the Sexual Harassment of Women at Workplace (PreventionProhibition and Redressal) Act 2013:
The Company has zero tolerance towards sexual harassment at the workplace and hasadopted a policy on prevention prohibition and redressal of sexual harassment atworkplace in line with the provisions of the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder. As requiredunder law an Internal Complaints Committee has been constituted for reporting andconducting inquiry into the complaints made by the victim on the harassments at the workplace. During the year 2019 two complaints of sexual harassment were received. As at theend of the Financial Year these complaints were investigated by the Internal ComplaintsCommittee and Report is awaited.
33. Statutory Auditors:
Pursuant to provisions of Section 139 of the Act read with the Companies (Audit andAuditors) Rules 2014 Messrs B S R & Co. LLP Chartered Accountants (FirmRegistration No.101248W/W-100022) were appointed as Statutory Auditors of the Company fora term of 5 years to hold office from the conclusion of 67th Annual General Meeting heldon May 9 2017 until the conclusion of 72nd Annual General Meeting.
34. Cost Auditor:
In terms of the provisions of Section 148 of the Act read with the Companies (CostRecords and Audit) Rules 2014 as amended from time to time the Board of Directors onthe recommendation of the Audit Committee has appointed Messrs Ashwin Solanki &Associates Cost Accountants (Registration No: 100392) as Cost Auditor of the Company forthe financial year ending December 31 2019 on a remuneration as mentioned in the Noticeconvening the 69th Annual General Meeting for conducting the audit of the cost recordsmaintained by the Company.
A Certificate from Messrs Ashwin Solanki & Associates Cost Accountants has beenreceived to the effect that their appointment as Cost Auditor of the Company if madewould be in accordance with the limits specified under Section 141 of the Act and Rulesframed thereunder.
A resolution seeking Members' approval for remuneration payable to Cost Auditor formspart of the Notice of the 70th Annual General Meeting of the Company and same isrecommended for your consideration.
Cost Audit and Compliance reports for the year 2018 were filed with the Registrar ofCompanies within the prescribed time limit.
The Board of Directors take this opportunity to thank the Company's parent companycustomers members suppliers bankers associates Central and State Governments andemployees at all levels for their support and co-operation extended to the Company duringthe year.
| ||For and on behalf of the Board |
| ||J C Deslarzes |
| ||Chairman |
| ||DIN:08064621 |
|Place: Bengaluru || |
|Date: June 19 2020 || |