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Amara Raja Batteries Ltd.

BSE: 500008 Sector: Auto
NSE: AMARAJABAT ISIN Code: INE885A01032
BSE 00:00 | 19 Sep 624.70 -6.05
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639.00

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NSE 00:00 | 19 Sep 624.65 -7.30
(-1.16%)
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OPEN 634.00
PREVIOUS CLOSE 630.75
VOLUME 5664
52-Week high 807.50
52-Week low 572.60
P/E 20.87
Mkt Cap.(Rs cr) 10,670
Buy Price 622.10
Buy Qty 1.00
Sell Price 632.00
Sell Qty 5.00
OPEN 634.00
CLOSE 630.75
VOLUME 5664
52-Week high 807.50
52-Week low 572.60
P/E 20.87
Mkt Cap.(Rs cr) 10,670
Buy Price 622.10
Buy Qty 1.00
Sell Price 632.00
Sell Qty 5.00

Amara Raja Batteries Ltd. (AMARAJABAT) - Director Report

Company director report

Dear Members

Your Board of Directors are pleased to present their report for the financial yearended March 31 2018.

Summary of financial results

The Company's financial performance for the year ended March 31 2018 is summarizedbelow:

Rs. crores

Parameters 2017-18 2016-17
Revenue from operations 6232.98 5981.39
Other income 66.37 49.24
Total income 6299.35 6030.63
Profit before tax 714.20 702.21
Less: Tax expense (including deferred tax) 242.88 23.72
Profit for the year 471.32 478.49
Total other comprehensive income/(loss) 1.52 (1.29)
Total comprehensive income for the year 472.84 477.20

Share Capital

The paid up equity share capital of the Company as at March 312018 stood at C17.08crores comprising of 170812500 equity shares of C1 each. During the year under reviewthe Company has not issued shares with differential voting rights employee stock optionsand sweat equity shares.

Dividend

Your directors recommend a final dividend of C2.15 per equity share of C1 each (215%)for the financial year ended March 31 2018 subject to the approval of the shareholders.The final dividend if approved would involve a cash outflow of C36.72 crores (excludingcorporate dividend tax). In the month of November 2017 the Board declared and paid aninterim dividend of C2 per equity share of C1 each (200%). The total dividend for thefinancial year ended March 31 2018 including the proposed final dividend amounts toC4.15 per share (415%) which is in line with the dividend policy of the Company.

Pursuant to Regulation 43A of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Board approved and adopted the Dividend DistributionPolicy and the same is available on the Company's website viz. www.amararaia.co.in

Transfer to reserves

Your Directors propose to transfer an amount of C47.13 crores to the general reserve.An amount of C2475.17 crores is retained in the retained earnings.

Material changes and commitments affecting the financial position of the companybetween the end of the financial year and the date of the report

There were no material changes and commitments affecting the financial position of theCompany between the end of the financial year and the date of this Report.

Automotive battery business

The Company's automotive battery business reported double digit revenue growthsupported by good volume increase in both four-wheeler and two-wheeler batteries over theprevious financial year.

During the year the Company fully expanded its capacity of the new four-wheelerbattery plant consolidating its position. In four-wheeler OEM space the Company grew itsshare by growing beyond the 11% increase in automobile production. In the aftermarketsegment the Company's brands grew in both four-wheelers and in two-wheeler batteriesthereby registering growth in market share. The volume growth in both four-wheeler andtwo-wheeler aftermarket business continued during the year due to strong preference forCompany's products supported by complete product offering strengthening of brandsAmaron and PowerZoneTM expansion of channel and leveraging customer relationships.

The volume from export business grew significantly at 30% over previous year. The brandand products of the Company have started gaining recognition in overseas marketsresulting in increased business. The focused market strategy in key markets paid offleading to higher penetration and enhanced business.

The inverter battery segment saw a clear preference towards Tubular batteriesresulting in healthy utilization of the new Tubular plant. Some trading was resorted to inthis segment to meet specific product range requirements.

Industrial battery business

The recent developments in the telecom market with the new entrant had disrupted therevenue models of all Telcos and tower companies forcing to relook at their coststructures and also merging of operations for cost efficiencies. This had impacted thevolume off-take for replacement batteries in the industrial battery business during theyear under review. In addition the increase in lead price presented challenging marketconditions in both Telecom and UPS segments. Under this competitive environment theCompany's industrial battery business achieved a very good growth in volume in industrialbattery business segments like UPS Railways Exports during the year but de-grown inTelecom segment.

The industrial battery business improved the overall performance by virtue of its"preferred supplier status" with all major customers efficient after salesservice customer relationship management and consistent product performance of itsflagship brands PowerStack Quanta and QRS Series batteries.

The Company has initiated necessary measures in all key customer segments to provideintegrated solution offering for backup power requirements to its customer.

Promoters and their shareholding

The individual promoters ('Galla Family') in the month of February 2017 as a part ofconsolidation of their shareholding in various Companies constituted a partnership firmnamely M/s. RNGalla Family & Co. (Firm) and contributed inter-alia their shares heldin the Company i.e 41400702 equity shares of C1 each as capital to the said firm. Duringthe year under review the said firm was converted into a Company i.e RNGalla FamilyPrivate Limited under part I of Chapter XXI of the Companies Act 2013. At presentRNGalla Family Private Limited holds 41400702 equity shares of C1 each constituting24.24% of the paid-up share captial of the Company.

Subsidiaries Associates and Joint Ventures

There are no subsidiaries associates and joint venture companies.

Directors and Key Managerial Personnel

Mr. Nagarjun Valluripalli Mr. N Sri Vishnu Raju Mr. T R Narayanaswamy and Ms.Bhairavi Tushar Jani are the present Independent Directors of the Company appointedpursuant to the provisions of Section 149 of the Companies Act 2013 ("theAct"). They have submitted a declaration that each of them meet the criteria ofindependence as provided in Section 149(6) of the Act and there has been no change in thecircumstances which may affect their status as an Independent Director during the yearwhich had been considered and taken on record by the Board.

In accordance with the provisions of Section 152 of the Act Dr. Ramachandra N GallaDirector (DIN: 00133761) is liable to retire by rotation at the ensuing annual generalmeeting and being eligible offers himself for re-appointment.

Mr. Raphael John Shemanski (DIN: 07462586) and Mr. Trent M Nevill (DIN: 07699463)nominees of Johnson Controls resigned from the Board with effect from November 9 2017 andMay 18 2018 respectively. The Board of Directors wishes to place on record their sincereappreciation of the valuable services rendered by them during their tenure as a directorof the Company.

Mr. Marc D Andraca (DIN: 08032189) was appointed as an Additional Director on the Boardwith effect from February 10 2018 who holds office upto the date of the ensuing annualgeneral meeting. The resolutions seeking your approval for the re-appointment of Dr.Ramachandra N Galla Director and appointment of Mr. Marc D Andraca as a Director areincluded in the notice of the ensuing annual general meeting along with brief detailsabout them.

Pursuant to the provisions of Section 203 of the Act Mr. Jayadev Galla Vice Chairmanand Managing Director Mr. S Vijayanand Chief Executive Officer Mr. S V RaghavendraChief Financial Officer and Mr. M R Rajaram Company Secretary are the key managerialpersonnel of the Company.

Auditors and Auditors' Report

M/s. Brahmayya & Co. Chartered Accountants and M/s. Deloitte Haskins & SellsLLP Chartered Accountants were appointed as the joint statutory auditors at the AnnualGeneral Meeting held on August 14 2015 for a term of five (5) years from the conclusionof the 30th annual general meeting till the conclusion of 35thannual general meeting. The Auditors' report does not contain any qualificationreservation or adverse remark.

As per Section 148 of the Act read with the Companies (Cost Records and Audit) Rulesas amended from time to time the cost records are required to be audited. Based on therecommendation of the Audit Committee your Board has appointed M/s. Sagar &Associates Cost Accountants Hyderabad as cost auditors for the financial year 2018-19.Necessary resolution for ratification of their remuneration is being placed for yourapproval.

Pursuant to Section 204 of the Act read with the Companies (Appointment andRemuneration of Managerial Personnel) Rules 2014 the Company had appointed M/s. R.Sridharan & Associates Company Secretaries to undertake the secretarial audit of theCompany for the financial year 2017-18. The Secretarial Audit Report in Form MR-3 receivedfrom them is annexed herewith as Annexure I. The Secretarial Audit Report does not containany qualification reservation or adverse remark.

Corporate Governance

The report on corporate governance for the year ended March 31 2018 pursuant toRegulation 34 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations2015 is annexed hereto as Annexure II. The certificate from practicing company secretaryregarding the compliance of conditions of corporate governance is attached to the reporton corporate governance.

Management discussion and analysis

Management discussion and analysis report highlighting the performance and prospectsof the Company's business is provided in a separate section and forms an integral part ofthis report.

Business Responsibility Report

Pursuant to Regulation 34(2)(f) of the SEBI (Listing Obligations and DisclosureRequirements) Regulations 2015 the Business

Responsibility Report (BRR) initiatives taken from an environmental social andgovernance perspective is annexed hereto as "Annexure III."

Directors' responsibility statement

Pursuant to Section 134(3)(c) and 134(5) of the Act the Board of Directors of theCompany confirm to the best of their knowledge and belief that in the preparation ofannual financial statements for the year ended March 31 2018;

i) applicable accounting standards and Schedule III of the Act have been followed;

ii) appropriate accounting policies have been selected and applied consistently andsuch judgements and estimates that are reasonable and prudent have been made so as to givea true and fair view of the state of affairs of the Company as at March 31 2018 and ofthe profit of the Company for the financial year ended March 31 2018;

iii) proper and sufficient care has been taken 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. Toensure this the Company has established internal control systems consistent with itssize and nature of operations subject to the inherent limitations that should berecognised in weighing the assurance provided by any such system of internal controls.These systems are reviewed and updated on an on-going basis. Periodic internal audits areconducted to provide reasonable assurance of compliance with these systems. The auditcommittee meets at regular intervals to review the internal audit function;

iv) financial statements have been prepared on a going concern basis;

v) proper internal financial controls are in place and that such internal financialcontrols were adequate and were operating effectively;

vi) systems to ensure compliance with the provisions of all applicable laws are inplace and were adequate and operating effectively.

Information and Disclosures under the Act Extract of the Annual Return

The extract of the Annual Return pursuant to Section 134(3)(a) and Section 92(3) of theAct read with Companies (Management and Administration) Rules 2014 in the prescribed formMGT-9 is annexed herewith as Annexure IV.

Number of Meetings of the Board

During the year five meetings of the Board of the Directors of the Company wereconvened and held in accordance with the provisions of the Act. The date(s) of the BoardMeeting attendance by the directors are given in the Corporate Governance Report formingan integral part of this report.

Committees of the Board

In compliance with the provisions of Sections 135 177 178 of the Act the Boardconstituted Corporate Social Responsibility Committee Audit Committee Nomination andRemuneration Committee and Share Transfer and Stakeholders Relationship Committee(Committees). The details of composition of the Committees their meeting and attendanceof the members are given in the Corporate Governance Report forming an integral part ofthis report.

Corporate Social Responsibility (CSR)

The brief outline of the CSR Policy of the Company and the initiatives undertaken bythe Company on CSR activities during the year are given in Annexure V to this report inthe format prescribed in Companies (Corporate Social Responsibility Policy) Rules 2014.The said policy is available on the Company's website at http://www.amararaia.co.in/policies/ARBL-Corporate-Social-Responsibilitv-Policv.pdf

Nomination and Remuneration Policy

The Board has on the recommendation of Nomination and Remuneration Committee framed apolicy for selection and appointment of Directors Senior Management Personnel and theirremuneration. The Nomination and Remuneration Policy adopted by the Board is available onthe Company's website at https://amararaia.co.in/policies/ARBL%20%20Nomination%20and%20Remuneration%20Policy.pdf

Evaluation of the Board

Pursuant to the provisions of the Act and Regulation 17 of SEBI (Listing Obligationsand Disclosure Requirements) Regulations 2015 the Board had carried out an annualevaluation of its own performance the Directors individually and of the committees of theBoard.

A structured questionnaire was prepared after taking into consideration inputs receivedfrom the Directors covering aspects of the Board's functioning such as adequacy of thecomposition of the Board and its committees execution and performance of specific dutiesobligations and governance.

A separate exercise was carried out to evaluate the performance of Individual Directorsincluding the Chairman of the Board. The Directors performance was evaluated on parameterssuch as level of engagement and contribution in safeguarding the interest of the Companyetc.

The performance evaluation of all Directors including the Independent Directors wascarried out by the entire Board. Further the performance evaluation of the Chairman andthe Non Independent Directors was carried out by the Independent Directors.

Mr. Marc D Andraca additional director did not participate in the evaluation processor being evaluated as he was appointed towards the end of the financial year 2017-18.

Familiarisation Programme for Directors

A handbook covering the role function duties and responsibilities and the details ofthe compliance requirements expected from the Directors under the Act and relevantRegulations of SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015were given and explained to the new Directors.

The newly appointed Directors are given induction and orientation with respect toCompany's Vision Core purpose Core Values and business operations. In addition detailedpresentations are made by Senior Management Personnel on business environment performanceof the Company at every Board Meeting.

The above initiatives help the Directors to understand the Company its business andthe regulatory framework in which the Company operates and enables the Directors tofulfill their role/responsibility. The details of the familiarization programme areavailable on the Company's website www.amararaia.co.in.

Particulars of loans guarantees and investments

The Company has not given any loans guarantees or security in connection with loans ormade any investments falling within the ambit of Section 186 of the Act.

Transactions with the Related Parties

All related party transactions that were entered into during the financial year were onarm's length basis and were in the ordinary course of business. During the financial year2017-18 there were no materially significant transactions with the related parties whichmight be deemed to have had a potential material conflict with the interest of the Companyat large.

In line with the provisions of Section 177 of the Act read with the Companies(Meetings of the Board and its Powers) Rules 2014 omnibus approval for the estimatedvalue of transactions with the related parties for the financial year is obtained from theAudit Committee. The transactions with the related parties are routine and repetitive innature.

The summary statement of transactions entered into with the related parties pursuant tothe omnibus approval so granted are reviewed and approved by the Audit Committee and theBoard of Directors on a quarterly basis. The summary statements are supported by anindependent audit report certifying that the transactions are at an arm's length basis andin the ordinary course of business.

The members at the annual general meeting held on August 7 2017 approved andauthorised the Board to enter into transactions with Mangal Industries Limited (MIL) uptoa cumulative value of transactions of C1000 crores in each financial year. During thefinancial year 2017-18 the transactions with MIL amounted to C721.16 crores (includingdividend paid) a material transaction under the Regulation 23 of the SEBI(ListingObligations and Disclosure Requirements) Regulations 2015 ("Regulations") andthe policy adopted by the Company under the said Regulations.

The Form AOC- 2 pursuant to Section 134 (3)(h) of the Act read with Rule 8(2) of theCompanies (Accounts) Rules 2014 is set out as Annexure VI to this Report.

Internal Controls

The Company has put in place adequate system of internal controls commensurate with itssize and the nature of its operations. The Company's internal control system covers thefollowing aspects:

• Financial propriety of business transactions.

• Safeguarding the assets of the Company.

• Compliance with prevalent statues regulations management authorisationpolicies and procedures.

The Audit Committee of the Board periodically reviews audit plans observations andrecommendations of the internal and external auditors with reference to the significantrisk areas and adequacy of internal controls and keeps the Board of Directors informed ofits observations if any from time to time.

Risk Management

During the year the risk assessment parameters were reviewed and modified. The auditcommittee reviewed the element of risks and the steps taken to mitigate the risks. In theopinion of the Board there are no major elements of risk which has the potential ofthreatening the existence of the Company.

Whistle Blower Policy /Vigil Mechanism

The Company has established a whistle blower policy/vigil mechanism to provide anavenue to raise concerns. The mechanism provides for adequate safeguards againstvictimization of employees who avail of it and also for appointment of an Ombudsperson whowill deal with the complaints received. The policy also lays down the process to befollowed for dealing with the complaints and in exceptional cases also provides fordirect appeal to the Chairperson of the Audit Committee. The Whistle Blower Policyestablished by the Board is available on the Company's website at http://www.amararaia.co.in/ policies/ARBL-Whistle-Blower-Policv.pdf

Deposits from Public

The Company has not accepted any deposits from the public falling within the ambit ofSections 73 and 74 of the read with and the Companies (Acceptance of Deposits) Rules 2014during the year under review. There are no outstanding deposits as on March 31 2018.

Conservation of Energy Technology Absorption and Foreign Exchange Earnings and Outgo

The information on conservation of energy technology absorption foreign exchangeearnings and outgo as per Section 134(3)(m) of the Act read with Rule 8 of The Companies(Accounts) Rules 2014 are annexed hereto as Annexure VII and forms an integral part ofthis report.

Particulars of Remuneration

The information required pursuant to Section 197(12) of the Act read with Rule 5 of TheCompanies (Appointment and Remuneration of Managerial Personnel) Rules 2014 is annexedhereto as Annexure VIII.

A statement showing names and other particulars of the top ten employees and employeesdrawing remuneration in excess of the limits prescribed under Rule 5(2) of the said rulesis also annexed to the Directors' Report as Annexure IX. However as per the provisions ofSection 136(1) of Companies Act 2013 the annual report is being sent to all the membersexcluding the aforesaid statement. The statement is available for inspection at theregistered office of the Company during working hours.

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)of the Act and the rules made there under.

Regulatory Orders

There are no significant material orders passed by the Regulators/Courts which wouldimpact the going concern status of the Company and its future operations.

Compliance of Secretarial Standards

The Company has complied with the Secretarial Standards with respect to Meetings ofBoard of Directors (SS-1) and General Meetings (SS-2) issued by the Institute of CompanySecretaries of India and approved by the Central Government.

Investor Education and Protection Fund (IEPF)

In terms of Section 124 (5) of the Companies Act 2013 a total amount of Rs. 3964451being unclaimed dividend(s) pertaining to the financial year 2009-10 and interim dividendfor the financial year 2010-11 were transferred to IEPF on September 1 5 2017 and March22 2018 respectively.

Flealth Safety and Environmental protection (HSE)

The Company has complied with all applicable environmental and labour laws. The Companycontinues to be certified under ISO-14001 and OHSAS 18001-2007 for its environmentmanagement systems and occupational health and safety management systems respectively.

Prevention of Sexual Harassment at workplace policy

The Company has in place a policy on prevention of Sexual Harassment and hasconstituted an Internal Complaints Committee (ICC) in line with the requirements of theSexual Harassment of women at the workplace (Prevention Prohibition and Redressal) Act2013 and Rules made thereunder. During the year the Company received one (1) complaintwhich was investigated and resolved as per the provisions of the aforesaid Act.

Awards and Recognitions

Your Company continues to get accolades and awards from its customers and otherprestigious domestic/international forums. Some of the awards and recognitions yourCompany received during the year under review:

• Featured in Forbes Magazine's August 2017 issue India's Super 50 Companies forthe second time in a row.

• Received "First Award" under the category "Private -Manufacturing (Large)" at the 14th National Awards for Excellence in Cost Management201 6 from The Institute of Cost Accountants of India.

• Received the Quality award and Q1 award from Tata Motors Limited and Bajaj AutoLimited respectively in recognition for our excellence in the field of QCDM parameters(Excellence in Quality Delivery and relationship Building)

• Received "Gold award" under infra equipment's category from IndusTowers Limited.

• Received the "Overall Performance" award from Bosch Limited Bangalore.

• Received "Environmental Leadership" award from Cummins India Limited.

• Supply Chain team won the 'Best-in-class Supply Chain Innovation Award' at theAsia Logistics & Supply Chain Leadership Conclave held at Mumbai.

• Two-wheeler automotive battery plant team won the 1st runner award inEleventh Cl I Six Sigma National Conference and Competition under the "ManufacturingIndustry (Discrete and Assembly Line)" category.

• Bestowed with prestigious ABK AOTS awards in following three differentcategories

i. Model 5S Company award for MVRLA Battery Plant Chittoor and Automotive BatteryPlant Tirupati

ii. Platinum award under Excellence category for LVRLA Battery Plant Tirupati TubularBattery Plant and Automotive Battery plant II Chittoor

• Four teams won Gold awards in ICQCC (International Convention of Quality ControlCircles) 2017 competition held in Manila Philippines.

• Adjudged as winner for its presentation on "Nava Prathibha -Talent buildingat the Entry Level" under the category of "Most Effective RecruitmentEngagement & Innovative Retention strategy" at the Cll -First National HR CircleCompetition.

Industrial relations

During the year under review industrial relations remained cordial and stable. Thedirectors wish to place on record their sincere appreciation for the co-operation receivedfrom employees at all levels.

Acknowledgement

The Board of Directors takes this opportunity to place on record their appreciation forthe unstinted co-operation commitment and dedication of all the employees of the Companyand the support extended by the channel partners customers vendors business associatesbanks government authorities and all concerned without which it would not have beenpossible to achieve all round growth of the Company.

Your Directors also take this opportunity to thank the joint venture partner JohnsonControls for their valuable assistance and support. The Directors are thankful to theshareholders for their continued patronage.

On behalf of the Board
Place: Milwaukee USA Dr. Ramachandra N Gal la
Date: May 18 2018 Chairman