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Bajaj Auto Ltd.

BSE: 532977 Sector: Auto
NSE: BAJAJ-AUTO ISIN Code: INE917I01010
BSE 00:00 | 18 Jul 3105.05 9.80
(0.32%)
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3103.40

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3161.95

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3100.00

NSE 00:00 | 18 Jul 3107.80 13.60
(0.44%)
OPEN

3104.00

HIGH

3160.85

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3101.00

OPEN 3103.40
PREVIOUS CLOSE 3095.25
VOLUME 136516
52-Week high 3472.60
52-Week low 2701.00
P/E 21.97
Mkt Cap.(Rs cr) 89,851
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 3103.40
CLOSE 3095.25
VOLUME 136516
52-Week high 3472.60
52-Week low 2701.00
P/E 21.97
Mkt Cap.(Rs cr) 89,851
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Bajaj Auto Ltd. (BAJAJ-AUTO) - Director Report

Company director report

The Directors present their Eleventh Annual report and Audited Financial Statements forthe year ended 31 March 2018.

Financial results

The financial results of the Company are elaborated in the Management Discussion andAnalysis Report.

The highlights of the Financial Results are as under:

Sales in Numbers FY2018 FY2017
Motorcycles 3369334 3219932
Commercial vehicles 637457 446018
Total 4006791 3665950
Of which Exports 1662577 1411333
(Rs. In Crore )
Particulars FY2018 FY2017
Total revenue 26910.51 24310.00
Total expenses 21095.94 18974.37
Profit before exceptional items and tax 5814.57 5335.63
Exceptional items 32.00
Profit before tax 5782.57 5335.63
Tax expense 1714.47 1508.07
Profit for the year 4068.10 3827.56
Earnings per share (H) 140.6 132.3

Closing balances in reserve/other equity

(Rs. In Crore )
Particulars FY2018 FY2017
General reserve 4453.60 4046.60
Retained earnings 14321.65 12562.56
Cash flow hedging reserve 79.72 200.27
Costs of hedging reserve (40.48) (64.67)
Total 18814.49 16744.76

D) Outgo

The expenditure on research and development during 2017-18 and in the previous yearwas:

Conservation of energy

Company continues its efforts to reduce and optimise the energy consumption at all itsmanufacturing facilities including corporate office at Pune.

Significant reduction in energy consumption has been achieved by:

A) Electrical energy

• Use of energy efficient LED lighting for street lights shops and offices.

• Provision of energy efficient pumps for ETP/STP pumps water supply and firesystems.

• Replacing conventional AHU units with energy efficient AHU units.

• Optimising compressed air pressure by use of portable small compressors onholidays.

• Use of HVLS (High volume and Low speed) fans for fixed load reduction of aircirculators.

• Use of Mid Frequency DC Welding Machine in place of AC Welding Machine for SeamWelding Process.

• Use of active filters for harmonic suppression to reduce energy loss.

• Reduction in energy consumption by providing inverter drives with pressuretransmitter for hydraulic and coolant systems.

• Reduction in hidden loss by providing on-line loss measurement system fortransformer.

• Optimisation of processes and operational control.

B) Water

• Installation of second stage RO (Reverse Osmosis) at paint shop.

• Re-use of treated water for processes like cooling towers central coolantsystems de-sludge pool and incinerator compressor cooling tower and AHU etc.

• Rain water harvesting with Ground Recharge.

• Replacement of underground hydrant and water pipeline with above ground levelpipeline to arrest water leakages.

• Use of one touch water taps in canteen and wash rooms.

C) LPG/propane

• Weight reduction of hangers in paint shop to reduce heat losses.

• Thermal imaging/audit for ovens in paint shop and countermeasure.

• Burner efficiency improvement through efficient burners.

• Recovering heat from the process and using for other process.

• Upgradation of furnace insulation to reduce heat losses.

• Providing teflon coated grills which are easily washable by high-pressure waterjet.

• Providing magnetic resonator in gas train pipeline to increase combustionefficiency.

• Usage of low temperature chemicals for pre-treatment process.

D) Utilisation of renewable energy-key initiatives

• Use of solar energy through Roof Top Solar Power System. Akurdi Total Capacity– 1220 KWp Chakan Total Capacity – 2000 KWp

• Installation of natural light transparent roof sheets.

Impact of measures taken

As a result of the initiatives taken for conservation of energy and natural resourcesthe Company has effected an overall reduction in consumption as given in the table below:

Awards and Accolades

Sr. No. Details
1 BAL Waluj Plant clinched National Energy Management Trophy 2017 for 'Excellent Energy Efficient Unit' by Confederation of Indian Industry.
2 BAL Chakan and Pantnagar plants received ISO 14001 Certification for upgraded standard ISO 14001:2015 from ISO 14001:2008.

International Business

Bajaj Auto's 14% growth in motorcycles and 39% in commercial vehicles means that itremains by far India's No.1 exporter of two and three wheelers. It exports to over 70countries including Latin America Africa South Asia Middle East Asia Pacific andEurope. During the year under review exports accounted for 39.3% of the Company's netsales as against 36.9% in FY2017. Detailed information on the International Business isgiven in the Management Discussion and Analysis Report.

Foreign exchange earnings and outgo

The Company continued to be a net foreign exchange earner during the year.

Total foreign exchange earned by the Company during the year under review was H9281.46 crore as compared to H 7336.49 crore during the previous year.

Total foreign exchange outflow during the year under review was H 673.41 crore asagainst H 697.92 crore during the previous year.

Industrial relations

Industrial relations with staff and workmen across all the plants viz. Akurdi WalujChakan and Pantnagar continued to be cordial.

During the year wage settlement has been signed at Waluj Plant on 23 February 2018 fora period of three and half years from 1 February 2018 to 31 July 2021 on expiry ofearlier settlement on 31 January 2018.

Similarly the wage review process for the period from 1 April 2016 to 31 March 2019has also been completed for Akurdi and Chakan plants by signing MoUs with the Union on 23February 2018.

With the active participation and involvement of employees the Company has been ableto inculcate TPM culture for excellence and continuous improvement across all plants.Plants have received many Awards during the year from bodies such as Confederation ofIndian Industry (CII) Quality Circle Forum of India (QCFI) and Indian Institution ofIndustrial Engineering (IIIE).

Chakan Plant received the Gold Award in Safety Improvements and Safety Skit Competitionand Bronze Award in Safety Poster Competition organised by QCFI – Pune Chapter.Chakan Team also won the Certificate of Merit for its efforts in energy conservation inautomobile in the National Energy Conservation Award competition organised by the Ministryof Power Government of India.

The teams from Chakan Plant also received first and second prizes for Kaizen forimproving productivity in Crank Case cell by 'MUDA' elimination and Kaizen for colourchange loss time reduction at the ninth and tenth CII TPM Competitions organised at Delhiand Chennai respectively.

Pantnagar Plant received Gold Silver and Excellence Awards in the TPM CircleCompetition organised by QCFI at Rudrapur and Mysore. The Plant team also got first prizefor Office TPM pillar presentation competition organised by CII at Chennai.

One workman from Engine Assembly (Commercial Vehicle) Waluj has received 'KamgarBhushan Puraskar' and two workmen from Final Assembly (Commercial Vehicle) have beenawarded 'Gunwant Kamgar Puraskar' from Maharashtra Kamgar Kalyan Mandal Mumbai.

Six workmen from Waluj Plant have received Prime Minister's ‘Shram Bhushan''ShramVir' and ‘Shram Shree' Awards at the hands of Vice President of India in New Delhi on26 February 2018 for the years 2012 2013 and 2015.

Subsidiaries and joint ventures

PT. Bajaj Auto Indonesia

Routine business operations of PT. Bajaj Auto Indonesia a 99.25% subsidiary of BajajAuto have currently stopped.

During the year under review in order to bring the capital of PT. Bajaj Auto Indonesiain line with its true net worth PT. Bajaj Auto Indonesia with concurrence of Bajaj AutoLtd. undertook the reduction of its share capital by writing down the par value of sharefrom USD 100 per equity share to USD 3 per equity share.

Consequently the total paid-up share capital of PT. Bajaj Auto Indonesia got reducedfrom $ 41500000 to $1245000 without actual repatriation of funds from Indonesia.

Necessary approvals from the regulators in Indonesia and from Reserve Bank of Indiahave been received.

The plan for PT. Bajaj Auto Indonesia is to spearhead the development of KTM and Bajajpartnership and bring the jointly developed products into Indonesia. To take this furtherall the required manufacturing import and business licences have been renewed. Furtherstudies on the product acceptability have been conducted which look favourable.

In addition CKD configurations have been created and the process of seeking clearancesfor these configurations has started. The Company plans to kick off the businessoperations for PT. Bajaj Auto Indonesia in the current year with the CKD production inIndonesia.

Bajaj Auto International Holdings BV Netherlands (BAIH BV)

Bajaj Auto International Holdings BV is a 100% Netherlands-based subsidiary of BajajAuto Ltd.

Over the years through this subsidiary Bajaj Auto has invested a total of €198.1 million

(H 1219 crore) and holds approximately 48% stake in KTM AG of Austria (KTM). Calendaryear 2017 has again been a record year for KTM with highest sales in units and againhighest turnover in the history of the Company. Detailed information on the developmentsat the subsidiary and KTM AG is provided in the Management Discussion and Analysis Report.

During the year dividend received from BAIH BV amounted to H 135 crore.

Signing of anti-corruption initiative of World Economic Forum (WEF)

In support of the initiative taken by WEF with a view to strengthening the efforts tocounter bribery and corruption your Company is a signatory to the 'Commitment toanti-corruption' and is supporting the 'Partnering Against Corruption-Principles forCountering Bribery' derived from Transparency International's Business Principles. Thiscalls for a commitment to two fundamental actions viz. a zero-tolerance policy towardsbribery and development of a practical and effective implementation programme.

Adoption of Confederation of Indian Industry (CII) Charters

Your Company being a member of CII has adopted the following Codes/Charters:

1. CII Code of Conduct for Affirmative Action;

2. Model Code of Conduct for Ethical Business practices;

3. Charters of Fair and Responsible Workplace Guidelines for Collaborative EmployeeRelations; and

4. Charters on Fair and Responsible Workplace Guidelines for Contract Labour.

Extract of Annual Return

The extract of Annual Return as provided under sub-section (3) of section 92 of theCompanies Act 2013 in the prescribed form MGT-9 is annexed to this Report.

Number of meetings of the Board

There were eight meetings of the Board held during the year. Detailed information isgiven in the Corporate Governance Report.

Directors' responsibility statement

As required under clause (c) of sub-section (3) of section 134 of the Companies Act2013 directors to the best of their knowledge and belief state that-

in the preparation of the annual accounts the applicable Accounting Standards had beenfollowed along with proper explanation relating to material departures;

the directors had selected such accounting policies and applied them consistently andmade judgments and estimates that are reasonable and prudent so as to give a true andfair view of the state of affairs of the Company at the end of the financial year and ofthe profit and loss of the Company for that period;

the directors had taken proper and sufficient care for the maintenance of adequateaccounting records in accordance with the provisions of the Companies Act 2013 forsafeguarding the assets of the Company and for preventing and detecting fraud and otherirregularities;

the directors had prepared the annual accounts on a going concern basis;

the directors had laid down internal financial controls to be followed by the Companyand that such internal financial controls were adequate and were operating effectively;and

the directors had devised proper systems to ensure compliance with the provisions ofall applicable laws and that such systems were adequate and were operating effectively.

Details in respect of frauds reported by auditors under section 143(12)

During the year under review there were no frauds reported by the auditors to theAudit Committee or the Board under section 143(12) of the Companies Act 2013.

Declaration by independent directors

The independent directors have submitted the declaration of independence as requiredpursuant to section 149(7) of the Companies Act 2013 stating that they meet the criteriaof independence as provided in section 149 (6) of the said Act.

Directors' Remuneration Policy and criteria for matters under section 178

Information regarding Directors' Remuneration Policy and criteria for determiningqualifications positive attributes independence of a director and other matters providedunder sub-section (3) of section 178 are provided in the Corporate Governance Report.

Particulars of loans guarantees or investments

Information regarding loans guarantees and investments covered under the provisions ofsection 186 of the Companies Act 2013 are detailed in the Financial Statements.

Related Party Transactions

No Related Party Transactions (RPTs) were entered into by the Company during thefinancial year which attracted the provisions of section 188 of the Companies Act 2013.There being no ‘material' related party transactions as defined under regulation 23of SEBI Listing Regulations 2015 there are no details to be disclosed in Form AOC-2 inthat regard.

During the year 2017-18 pursuant to section 177 of the Companies Act 2013 andregulation 23 of SEBI Listing Regulations 2015 all RPTs were placed before the AuditCommittee for its approval.

The Policy on RPTs as approved by the Board is uploaded on the Company's websitewww.bajajauto.com

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 and the date ofthis Report.

Risk Management Policy

Information on the development and implementation of a Risk Management Policy for theCompany including identification therein of elements of risk which in the opinion of theBoard may threaten the existence of the Company is given in the Corporate GovernanceReport.

Corporate Social Responsibility (CSR)

Detailed information on the Corporate Social Responsibility Policy developed andimplemented by the Company on CSR initiatives taken during the year pursuant to section135 of the Companies Act 2013 is given in the annexed Annual Report on CSR activities.

Formal annual evaluation of the performance of the Board its Committees Chairpersonand Individual Directors

Information on the manner in which formal annual evaluation has been made by the Boardof its own performance and that of its Committees Chairperson and Individual Directors isgiven in the Corporate Governance Report.

Presentation of financial statements

The financial statements of the Company for the year ended 31 March 2018 have beendisclosed as per Division ll of Schedule III to the Companies Act 2013.

Indian Accounting Standards 2015

The annexed financial statements comply in all material aspects with Indian AccountingStandards (Ind AS) notified under section 133 of the Companies Act 2013 (the Act)Companies (Indian Accounting Standards) Rules 2015 as amended from time to time andother relevant provisions of the Act.

Consolidated financial statements

The directors also present the audited consolidated financial statements incorporatingthe duly audited financial statements of the subsidiaries and as prepared in compliancewith the Companies Act 2013 applicable Accounting Standards and SEBI ListingRegulations 2015 as prescribed by SEBI.

Statutory disclosures

The summary of the key financials of the Company's subsidiaries (Form AOC-1) isincluded in this Annual Report. A copy of the audited financial statements for each of thesubsidiary companies will be made available to the members of the Company seeking suchinformation at any point of time.

The audited financial statements for each of the subsidiary companies will be kept forinspection by any member of the Company at its registered office during business hours.The same are placed on the Company's website www.bajajauto.com

Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(1) of Companies (Appointment and Remuneration of Managerial Personnel)Rules 2014 as amended are annexed to this Report.

Details as required under the provisions of section 197(12) of the Companies Act 2013read with rule 5(2) and 5(3) of Companies (Appointment and Remuneration of ManagerialPersonnel) Rules 2014 as amended which form part of the Directors' Report will be madeavailable to any shareholder on request as per provisions of section 136(1) of the saidAct.

A Cash Flow Statement for the year 2017-18 is attached to the Balance Sheet.

Pursuant to the legislation ‘The Sexual Harassment of Women at Workplace(Prevention

Prohibition and Redressal) Act 2013' the Company has a Policy on Prevention of SexualHarassment at Workplace. During the year under review one complaint was received from oneof the employees which was investigated and redressed by the Internal ComplaintsCommittee formed under the aforesaid Act and closed.

There was no other case reported during the year under review under the said Policy.

Directors and Key Managerial Personnel-changes

As informed last year Kantikumar R Podar and J N Godrej independent directorsresigned from the Board w.e.f. 15 March 2017 and 10 April 2017 respectively. In theirplace the Board at its meeting held on 18 May 2017 appointed Dr. Naushad Forbes and Dr.Omkar Goswami as additional directors in the category of non-executive independentdirectors for a period of five years commencing from 18 May 2017. The members at the Tenthannual general meeting held on 20 July 2017 have approved the appointment of Dr. NaushadForbes and Dr. Omkar Goswami as independent directors.

The directors regret to inform about the sad demise of Naresh Chandra an independentdirector of the Company on 9 July 2017. The directors record their very sincereappreciation of the valuable services rendered by him during his long tenure. In hisplace pursuant to section 149 and regulation 17 (1) (b) read with regulation 25 (6) ofSEBI Listing Regulations 2015 Anami Roy was appointed as an additional director in thecategory of non-executive independent director of the Company with effect from 14September 2017 at the meeting of the Board held on 14 September 2017. The members arerequested to approve his appointment in the ensuing annual general meeting.

In light of the provisions of the Companies Act 2013 Niraj Bajaj and Manish Kejriwalretire from the Board by rotation this year and being eligible offer themselves forre-appointment. The information as required to be disclosed under regulation 36(3) of theSEBI Listing Regulations 2015 in case of re-appointment of the directors is provided inthe Notice of the ensuing annual general meeting.

There was no other change in the directors and KMP during the year under review.

Detailed information on the directors is provided in the Corporate Governance Report.

Significant and material orders passed by the regulators or courts

During the year under review there were no significant and material orders passed bythe regulators or courts or tribunals which may impact the going concern status of theCompany and its operations in future.

Details of internal financial controls with reference to the financial statements

The Company has documented its internal financial controls considering the essentialcomponents of various critical processes physical and operational. This includes itsdesign implementation and maintenance along with periodical internal review ofoperational effectiveness and sustenance which are commensurate with the nature of itsbusiness and the size and complexity of its operations.

This ensures orderly and efficient conduct of its business including adherence to the

Company's policies safeguarding of its assets prevention of errors accuracy andcompleteness of the accounting records and the timely preparation of reliable financialinformation.

The internal financial controls with reference to the financial statements wereadequate and operating effectively.

Corporate governance

Pursuant to SEBI Listing Regulations 2015 a separate chapter titled ‘CorporateGovernance' has been included in this Annual Report along with the reports on ManagementDiscussion and Analysis and General Shareholder Information.

All Board members and Senior Management personnel have affirmed compliance with theCode of Conduct for the year 2017-18. A declaration to this effect signed by the ManagingDirector (CEO) of the Company is contained in this Annual Report.

The Managing Director and CFO have certified to the Board with regard to the financialstatements and other matters as required under regulation 17 (8) of the SEBI ListingRegulations 2015.

Certificate from the Auditors of the Company regarding compliance of conditions ofcorporate governance is annexed to this Report.

Business Responsibility Report

Regulation 34(2) of the SEBI Listing Regulations 2015 as amended inter aliaprovides that the annual report of the top 500 listed entities based on marketcapitalisation (calculated as on 31 March of every financial year) shall include aBusiness Responsibility Report.

Since Bajaj Auto Ltd. is one of the top 500 listed entities the Company as in theprevious years has presented its BR Report for the financial year 2017-18 which is partof this Annual Report.

As a green initiative the BR Report has been hosted on the Company's websitewww.bajajauto.com

A physical copy of the BR Report will be made available to any shareholder on request.

Secretarial Standards of ICSI

Pursuant to the approval given on 10 April 2015 by the Central Government to theSecretarial Standards specified by the Institute of Company Secretaries of India theSecretarial Standards on Meetings of the Board of Directors (SS-1) and General Meetings(SS-2) came into effect from 1 July 2015. The said standards were further amended w.e.f. 1October 2017. The Company is in compliance with the same.

Auditors

Statutory Auditor

Pursuant to the provisions of section 139 of the Companies Act 2013 the members atthe Annual General Meeting of the Company held on 20 July 2017 appointed S R B C & COLLP

(Firm Registration No. 324982E/E300003) as statutory auditors of the Company from theconclusion of Tenth Annual General Meeting till the conclusion of Fifteenth Annual GeneralMeeting covering one term of five consecutive years subject to ratification by themembers at each intervening Annual General Meeting.

In view of the amendment to the said section 139 through the Companies (Amendment) Act2017 notified on 7 May 2018 ratification of auditors' appointment is no longer required.However as required under section 142 of the Companies Act 2013 a proposal is put upfor approval of members for authorising the Board of Directors of the Company to fixAuditors' remuneration for the year 2018-19 and thereafter. The members are requested toapprove the same.

The statutory audit report for the year 2017-18 does not contain any qualificationreservation or adverse remark or disclaimer made by statutory auditor.

Secretarial Auditor

Pursuant to the provisions of section 204 of the Companies Act 2013 and rules madethereunder the Company has re-appointed Shyamprasad D Limaye Practising CompanySecretary (Membership No.1587) to undertake the secretarial audit of the Company.Secretarial audit report for the year 2017-18 issued by him in the prescribed form MR-3 isannexed to this Report.

The said secretarial audit report does not contain any qualification reservation oradverse remark or disclaimer made by the Secretarial Auditor.

On behalf of the Board of Directors

Rahul Bajaj Chairman

Pune: 18 May 2018

Annexure to Directors' Report

Remuneration Details under Rule 5 (1) of Companies (Appointment & Remuneration ofManagerial Personnel) Rules 2014 (as amended) for the year ended 31 March 2018

Sr. No. Name of Director/KMP Ratio of Remuneration of director to Median Remuneration of employees % increase in the financial year
(A) Whole-time directors/Managerial Personnel
Rahul Bajaj Chairman 167.36 1.35
Rajiv Bajaj Managing Director 409.30 10.67
Pradeep Shrivastava Executive Director 60.87 (4.11)
Whole-time Directors in aggregate 6.53
(B) Non-executive directors1
Madhur Bajaj2 1.73 (98.58)
Sanjiv Bajaj 1.73 14.29
D S Mehta 1.30 (14.29)
Shekhar Bajaj 1.52 75.00
D J Balaji Rao 3.25 15.38
Naresh Chandra3 0.65 (78.57)
Nanoo Pamnani4 5.27 (3.95)
Manish Kejriwal 1.52 75.00
P Murari 0.65 (40.00)
Niraj Bajaj 1.73 33.33
Dr. Gita Piramal 3.25 66.67
Dr. Naushad Forbes5 1.95
Dr. Omkar Goswami6 1.73
Anami Roy7 1.30
(C) Key Managerial Personnel
Rajiv Bajaj Managing Director 10.67
Kevin D'sa CFO (4.66)
Dr. J Sridhar Company Secretary (6.90)
(D) Remuneration of Median Employee (other than whole-time directors) 41.22
(E) Permanent employees as on 31 March 20188: 8013

1. (a) Remuneration payable to Non-executive directors is based on the number ofmeetings of the Board and its Committees attended by them as members during the year. (b)Remuneration to directors does not include sitting fees paid to them for attendingboard/committee meetings.

2. Madhur Bajaj ceased to be executive Vice Chairman w.e.f. 1 April 2017. He continuesas Vice Chairman but in non-executive capacity. His remuneration for 2017-18 is thus notcomparable with that for 2016-17.

3. Naresh Chandra an independent director on the Board passed away on 9 July 2017.Figures in his case are therefore not comparable.

4. As approved by the Board Nanoo Pamnani is being paid an additional commission of H20 lakh for certain additional services rendered by him during the year at the requestof the Management.

5. Dr. Naushad Forbes was appointed w.e.f. 18 May 2017. Figures in his case aretherefore not comparable.

6. Dr. Omkar Goswami was appointed w.e.f. 18 May 2017. Figures in his case aretherefore not comparable.

7. Anami Roy was appointed w.e.f. 14 September 2017. Figures in his case are thereforenot comparable.

8. The term 'Permanent Employees' does not include trainees probationers and contractemployees.

Notes on Disclosures under Rule 5

1. In 2017-18 the remuneration of median employee other than whole-time Directorsincreased by 41.22% over the previous year.

2. Increase in the remuneration of the Managerial Personnel which in the aggregate was6.53% during the year under review was given keeping in view the trends of remunerationin industry.

3. The remuneration paid as above was as per the Remuneration Policy of the Company.