Your Directors have pleasure in presenting their Sixty Ninth AnnualReport and Audited Accounts for the year ended December 31 2018.
1. Financial Results:
( Rs in Crores)
|Particulars ||For the year ended |
| ||December 31 2018 ||December 31 2017 |
|Profit before tax ||794.24 ||621.76 |
|Tax expense: || || |
| Current tax ||282.05 ||189.90 |
| Deferred tax ||1.30 ||11.91 |
|Profit after tax ||510.89 ||419.95 |
|Other comprehensive income/ (loss) (net of tax) ||1.95 ||2.22 |
|Balance brought forward from previous year ||397.68 ||127.53 |
|Amount available for appropriation ||910.52 ||549.70 |
|Appropriations: || || |
|Equity dividend paid ||93.24 ||84.76 |
|Tax on equity dividend paid ||19.17 ||17.26 |
|Debenture redemption reserve ||- ||50.00 |
|General reserve ||- ||- |
|Balance carried forward ||798.11 ||397.68 |
Your Directors recommend payment of a dividend at the rate of Rs.4.80(Rupees Four and Paisa Eighty only) per share for the year ended December 31 2018 on211908375 equity shares of Rs.2/- each.
3. Performance Review:
During the year orders touched Rs.10115 crore as against Rs.9490crore in the Previous Year. In the year 2018 the orders witnessed a healthy growth of 7%reflecting the technology push and continued traction in transportation and renewableenergy. Services and export-led orders resulted in more comprehensive customerengagements. The order backlog at the end of the year stood at Rs.10111 crore whichcontinued to provide visibility to the future revenue streams. The revenue from operationsfor the Company for the year 2018 stood at Rs.10862 crore as against Rs.9087 crore inthe previous year reflecting stability of operations in an uncertain market situation.Profit before tax was up by 28% at Rs.794.24 crore in 2018 on higher sales as compared toRs.621.76 crore in the previous year mainly due to operational excellence initiativessupply chain efficiencies focus on project management. Net profit after tax was up by 22%at Rs.511 crore for the current year as compared to Rs.420 crore in the previous year.Consequently the earnings per share for the year 2018 stood at Rs.24.11 per share ascompared to Rs.19.82 per share in the year 2017.
For detailed analysis of the performance please refer to theManagement's Discussion and Analysis given in Annexure A forming partof this Report.
4. Extract of Annual Return:
As per provisions of Section 92 (3) of the Act read with Rule 12 of theCompanies (Management and Administration) Rules 2014 as amended from time to time theextract of the Annual Return in the Form MGT-9 is given in Annexure Bforming part of this report.
5. Board Meetings held during the year:
During the year 5 meetings of the Board of Directors were held and onemeeting of Independent Directors was also held. The details of the meetings are furnishedin the Corporate Governance Report.
6. Compliance on criteria of Independence by the IndependentDirectors:
All Independent Directors of the Company have given declarations to theCompany under Section 149 (7) of the Act that they meet the criteria of independence asprovided in Sub-Section 6 of Section 149 of the Act and also under the SEBI (ListingObligation and Disclosure Requirements) Regulations 2015 (Listing Regulations).
7. Remuneration Policy of the Company:
The Remuneration Policy of the Company for appointment and remunerationof the Directors Key Managerial Personnel and Senior Management of the Company along withother related matters have been provided in the Corporate Governance Report.
As and when need arises to appoint Director the Nomination andRemuneration Committee (NRC) of the Company will determine the criteria based on thespecific requirements. NRC while recommending candidature to the Board will take intoconsideration the qualification 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 ofthe Act read with Rule 5(1) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 is given in Annexure C forming part of this report.
8. Dividend Distribution Policy:
As required under the Regulation 43A of the Listing Regulations theCompany has a Policy on Dividend Distribution. This Policy can be accessed on theCompany's website at www.abb.co.in.
9. Particulars of loans guarantees or investments under Section186 of the Act:
During the year under review your Company has not granted any LoanGuarantees or made Investments within the meaning of Section 186 of the Act.
10. Amount if any proposed to be transferred to Reserves:
During the year under review the Company redeemed entireNon-Convertible Debentures consequent to which balance amount in the DebentureRedemption Reserve was transferred to General Reserves. Except this the Company has nottransferred any amount to General Reserves.
11. Material changes and commitment if any affecting financialposition of the Company from the end of Financial Year and till the date of this Report:
There has been no material change and commitment affecting thefinancial performance of the Company occurred between the end of the Financial Year of theCompany to which the Financial Statements relate and the date of this Report.
12. Conservation of Energy Technology Absorption Foreign ExchangeEarnings and Outgo:
The particulars as prescribed under Section 134 of the Act read withRule 8 (3) of the Companies (Accounts) Rules 2014 relating to Conservation of EnergyTechnology Absorption Foreign Exchange Earnings and Outgo are given in Annexure D forming part of this report.
13. Risk Management Policy:
The Company has a Risk Management Policy and constituted a RiskManagement Committee as required under Listing Regulations. The Committee oversees theRisk Management process including risk identification impact assessment effectiveimplementation of the mitigation plans and risk reporting. The purpose of the Committee isto assist the Board of Directors in fulfilling its oversight responsibilities with regardto enterprise risk management.
The details and the process of Risk Management as implemented in theCompany are provided as part of Management's Discussion and Analysis which forms partof this Report.
14. Corporate Social Responsibility (CSR) initiatives:
The Company has a Policy on Corporate Social Responsibility and hasconstituted a CSR Committee as required under the Act for implementing various CSRactivities. Composition of the Committee and other details are provided in CorporateGovernance Report. Education Access to Electricity Health Care Environment skillsenhancement for creating employable opportunities for the differently abled personneletc. are the focal area under the CSR Policy.
The Company has implemented various CSR projects directly and / orthrough implementing partners and the projects undertaken by the Company are in accordancewith Schedule VII of the Act. During the year under review the Company has achieved morethan 100% of the amount to be spent by the Company on CSR activities.
Detailed report on CSR activities as required under the Companies(Corporate Social Responsibility Policy) Rules 2014 is given in Annexure Eforming part of this report.
15. Annual evaluation of Board its Committees and IndividualDirectors:
The Board of Directors has carried out an annual evaluation of its ownperformance its Committees and Directors pursuant to the requirements of the Act and theListing Regulations.
Further the Independent Directors at their exclusive meeting heldduring the year reviewed the performance of the Board its Chairman and Non- ExecutiveDirectors and other items as stipulated under the Listing Regulations.
16. Audit Committee:
The details pertaining to composition of the Audit Committee and termsof reference are included in the Corporate Governance Report which forms part of thisReport.
17. Related Party Transactions:
The Board of Directors has adopted a policy on Related PartyTransactions. The objective is to ensure proper approval disclosure and reporting oftransactions as applicable between the Company and any of its related parties. Allcontracts or arrangements with related parties entered into or modified during thefinancial year were at arm's length basis and in the ordinary course of theCompany's business except the one which is reported herein below:
The Company took decision to discontinue its EPC Substation Businesshitherto carried out as a strategy to focus more on technology-based value-added businessofferings thereby improving margin and lowering high risk businesses. Accordingly thediscontinued EPC Substation Business comprising 32 customer contracts with theircorresponding assets and liabilities were transferred to ABB Substations Contracting IndiaPrivate Limited (Buyer Company) a wholly owned Indian Subsidiary of ABB Groupincorporated for this purpose for a total consideration of Rs 30 Crore. The Company andthe Buyer Company executed an "Asset Purchase Agreement" to that effect. Out ofthe 32 customer contracts transferred execution status of about 27 contracts have alreadyreached at a significant level and it is expected the final closure of all these contractsmight be achieved in 2 to 3 years' time. These 27 contracts will stay with the BuyerCompany (ABB Group Company) for completion of execution and handing over the Projects torespective customers.
As the aforesaid transfer of Customer Contracts with their relatedassets and liabilities fall within the ambit of Related Party Transaction within theprovisions of Section 188 of the Companies Act 2013 required disclosure is made in FormNo.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.
The balance 5 Customers Contracts which are new and executionactivities are yet to commence and/or at a starting level will further be transferred bythe Buyer Company to a new Company formed in India for doing the EPC Substation businessby the overseas JV Company in which SNC Levlin and ABB Group would be having equity of 51%and 49% respectively.
All contracts or arrangements were entered into only with priorapproval of the Audit Committee except transactions which qualified under Omnibusapproval as permitted under law.
Transactions with related parties as per requirements of IndianAccounting Standard 24 are disclosed in the notes to accounts annexed to the financialstatements. Your Company's Policy on Related Party Transactions as adopted by yourBoard can be accessed on the Company's website. Link for the same ishttp://new.abb.com/ docs/ librariesprovider19/default- document- library/related-party-transaction-policy.pdfsfvrsn=2
18. Reporting of frauds:
There was no instance of fraud during the year under review whichrequired the Statutory Auditors to report to the Audit Committee and/or Board underSection 143(12) of the Act and Rules framed thereunder.
19. Transfer to Investor Education and Protection Fund:
As required under Section 124 of the Act the unclaimed dividend amountaggregating to Rs.21.46 lakh lying with the Company for a period of seven years pertainingto the financial year ended on December 31 2010 was transferred during the financialyear 2018 to the Investor Education and Protection Fund established by the CentralGovernment.
20. Particulars of Employees:
The information on employee particulars as required under Section197(12) of the Act read with Rule 5(2) and 5(3) of the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 as amended from time to time are givenin AnnexureG forming part of this report. In terms of
Section 136 of the Act the Report and Financial Statements are beingsent to the Members and others entitled thereto excluding this Annexure. This Annexureshall be provided to Members on a specific request made in writing to the Company. Thesaid information is available for inspection by the Members at the Registered Office ofthe Company on any working day of the Company up to the date of the 69th Annual GeneralMeeting.
21. Demerger of Power Grids business:
The Board of Directors of the Company at their meeting held on February13 2019 has granted in-principle approval for the segregation of the Company's PowerGrids business from the Company's other businesses. The Board has also determinedthat a court-approved demerger is the preferred option. In this regard your Company hasincorporated a wholly owned subsidiary Company i.e. ABB Power Products and Systems IndiaLimited. Necessary approvals as may be required under the law including approval fromMembers will be initiated at appropriate time.
22. Directors' Responsibility Statement:
To the best of knowledge and belief and according to the informationand explanations obtained by us your Directors make the following statements in terms ofSection 134(3)(c) and 134(5) of the Act that:
(a) in the preparation of the annual accounts the applicableaccounting standards have been followed along with proper explanation relating to materialdepartures;
(b) they have selected such accounting policies and applied themconsistently and made judgments and estimates that are reasonable and prudent so as togive a true and fair view of the state of affairs of the Company at December 31 2018 andof the profit and loss of the Company for the year ended on that date;
(c) they have taken proper and sufficient care for the maintenance ofadequate accounting records in accordance with the provisions of the Act for safeguardingthe assets 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 bythe Company and that such internal financial controls are adequate and were operatingeffectively; and
(f) they have devised proper systems to ensure compliance with theprovisions of all applicable laws and that such systems were adequate and operatingeffectively.
23. Disclosure on confirmation with the Secretarial Standards:
Your Directors confirm that the Secretarial Standards issued by theInstitute of Company 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 theListing Regulations a report on Corporate Governance and the certificate as requiredunder Schedule V (E) of the Listing Regulations from
Messrs V. Sreedharan & Associates Practicing Company Secretariesregarding compliance of conditions of Corporate Governance are 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 ofthe Companies (Appointment and Remuneration of Managerial Personnel) Rules 2014 andamendments thereto your Company engaged the services of Messrs BMP & Co. LLP CompanySecretaries Bengaluru to conduct the Secretarial Audit of the Company for the financialyear ended December 31 2018. The Secretarial Audit Report in Form MR-3 is given in Annexure J forming part of this report.
26. Business Responsibility Report:
As required under Regulation 34 of the Listing Regulations theBusiness Responsibility Report forms part of the Annual Report.
27. Whistle Blower Policy:
The Company has a Vigil Mechanism for Directors and Employees to reporttheir concerns about unethical behavior actual or suspected fraud or violation of theCompany's Code of conduct. The mechanism provides for adequate safeguards againstvictimization of Director(s) and Employee(s) who avail of the mechanism.
The Whistle Blower Policy is available on Company's website atwww.abb.co.in.
28. Directors and Key Managerial Personnel:
On the recommendation of the Nomination and Remuneration Committee theBoard of Directors of the Company at its meeting held on October 30 2018 has approved
(a) the re-appointment of Mr. Sanjeev Sharma as Managing Director ofthe Company for a period of three years commencing from January 01 2019 to December 312021;
(b) for continuation of Directorship beyond March 31 2019 by Mr.Darius E. Udwadia Non-executive Director who has attained the age of 75 years and incompliance with SEBI (Listing Obligations Disclosure Requirements) Regulations 2015 asamended subject to approval of Shareholders by way of Special Resolution.
Shareholders of the Company have approved both aforesaid proposals withrequisite majority through Postal Ballot held during January/ February 2019.
Apart from aforesaid changes there are no changes in Directors and KeyManagerial Personnel of the Company during the rest of the year. Details of Directors KeyManagerial Personnel and Composition of various Committees of the Board are provided inthe Corporate Governance Report forming part of this report.
In accordance with the provisions of the Companies Act 2013 read withArticle 157 of the Articles of Association of the Company Mr. Tarak Mehta (DIN:06995639) Director retire by rotation at the ensuing Annual General Meeting of theCompany and being eligible offers himself for re-appointment.
Necessary resolution relating to Mr. Tarak Mehta Director who isseeking re-appointment as a Director is included in the Notice of Annual General Meeting.The relevant details of Mr. Mehta are given in the annexure to the Notice of the AnnualGeneral Meeting.
As on date Mr. Sanjeev Sharma Managing Director Mr. B. GururajCompany Secretary and Mr. T.K. Sridhar Chief Financial Officer are the Key ManagerialPersonnel of the Company.
During the year under review your Company did not accept any depositwithin the meaning of the provisions of Chapter V Acceptance of Deposits byCompanies read with the Companies (Acceptance of Deposits) Rules 2014.
During the year under review the Company has redeemed the entire 600Unsecured Redeemable Non Convertible Debentures of face value of Rs.10000000/-each i.e. on September 4 2018.
31. Significant and Material Orders Passed by the Regulators or Courtsor Tribunals impacting the going concern status of the Company:
There has been no significant and material order passed by theRegulators or Courts or Tribunals impacting the going concern status and Company'soperations.
32. Internal Control Systems and their adequacy:
The details on Internal Control Systems and their adequacy are providedin the Management's Discussion and Analysis which forms part of this Report.
33. Disclosure as per the Sexual Harassment of Women at Workplace(Prevention Prohibition and Redressal) Act 2013:
The Company has zero tolerance towards sexual harassment at theworkplace and has adopted a policy on prevention prohibition and redressal of sexualharassment at workplace in line with the provisions of the Sexual Harassment of Women atWorkplace (Prevention Prohibition and Redressal) Act 2013 and the Rules thereunder. Asrequired under law an Internal Complaints Committee has been constituted for reportingand conducting inquiry into the complaints made by the victim on the harassments at thework place. During the year 2018 two complaints of sexual harassment were received. Thesecomplaints were investigated by the Internal Complaints Committee and Report is awaited.
34. Statutory Auditors:
Pursuant to provisions of Section 139 of the Act read with theCompanies (Audit and Auditors) Rules 2014 Messrs B S R & Co. LLP CharteredAccountants (Firm Registration No.101248W/W-100022) were appointed as Statutory Auditorsof the Company for a term of 5 years to hold office from the conclusion of 67th AnnualGeneral Meeting held on May 9 2017 until the conclusion of 72nd Annual General Meeting.
35. Cost Auditor:
In terms of the provisions of Section 148 of the Act read with theCompanies (Cost Records and Audit) Rules 2014 as amended from time to time the Board ofDirectors on the recommendation of the Audit Committee has appointed Messrs AshwinSolanki & Associates Cost Accountants (Registration No: 100392) as Cost Auditor ofthe Company for the financial year ending December 31 2019 on a remuneration asmentioned in the Notice convening the 69th Annual General Meeting for conducting the auditof the cost records maintained by the Company.
A Certificate from Messrs Ashwin Solanki & Associates CostAccountants has been received to the effect that their appointment as Cost Auditor of theCompany if made would be in accordance with the limits specified under Section 141 ofthe Act and Rules framed thereunder.
A resolution seeking Members' approval for remuneration payable toCost Auditor forms part of the Notice of the 69th Annual General Meeting of the Companyand same is recommended for your consideration.
Cost Audit and Compliance reports for the year 2018 were filed with theRegistrar of Companies within the prescribed time limit.
The Board of Directors take this opportunity to thank theCompany's parent company customers members suppliers bankers associates Centraland State Governments and employees at all levels for their support and co-operationextended to the Company during the year.
For and on behalf of the Board
J C Deslarzes Chairman DIN: 08064621
Date: March 1 2019